2019 Annual Report. VISION. TO ENRICH RELATIONSHIPS AND SIMPLIFY ADVERTISING. CONTENTS. 2 Chairman’s Report 6 CEO’S Message 8 Directors’ Report 15 Remuneration Report 26 Auditors Independence Declaration 27 Consolidated Statement of Profit or Loss and Other Comprehensive Income 28 Consolidated Statement of Financial Position 29 Consolidated Statement of Changes in Equity 30 Consolidated Statement of Cash Flows 31 Notes to the Financial Statements 83 Directors’ Declaration 84 Independent Audit Report to the Members 88 Corporate Governance Statement 88 Shareholder Information 89 Corporate Directory CHAIRMAN’S REPORT. Dear Shareholder, As most of you know, the Company narrowed the strategy of the business to focus on three key strategic priorities in FY19. Specif ically, in relation to the f irst objective, I am delighted to report that following a full year of Licence Fees from GroupM India and further successful deployments of Symphony into Thailand, Indonesia, the The f irst was to turn around the Philippines and South Africa in FY19, Company’s enterprise SaaS business, Symphony Licence Fees exceeded Symphony, which had actually guidance, growing 58% from $3.8M declined in FY18, and return it to to $6.1M in FY19. Overall (combined) strong growth in Licence Fee revenue. Licence Fees grew 49% to $6.7M This would be achieved by focussing on more efficient deployments of (exceeding guidance of 43.1% Licence Fee growth). the Symphony platform to GroupM In regards to the second objective, I agencies around the world. am also pleased to report that Adslot The second objective was to focus on the US and UK markets, to validate and grow the value of media traded on the Adslot Media stand- alone platform, driving Trading Fee revenue. And the third was to implement a cost reduction program to reduce the Company’s operating cost base and quarterly cash burn. I am pleased to report that FY19 saw successful execution on all key objectives, and we saw a turnaround of the business, with the Company delivering strong revenue growth and increased business performance across all strategic revenue Media successfully achieved pilot validation with large agencies in the US and UK markets, with the value of media traded via the stand alone Adslot Media platform growing 295% from $3.9M in FY18 to $15.4M in FY19. It was also a record year for the number of transactions booked via the Adslot Media platform, which grew 396% from 143 to 709 campaign bookings. As a result, Trading Fees were up 104% in FY19 versus the prior corresponding period. Adslot Media’s ecosystem also strengthened both in terms of the number and quality of demand and supply participants. segments, compared to the prior Combined with a 10% reduction financial year. This, in combination with a reduced cost base, also saw the Company achieve signif icant reductions in in operating costs, the Company’s EBITDA loss reduced by 59% f rom ($6.34M) in FY18 to ($2.62M) in FY19, with a 40% improvement in NPAT. EBITDA and NPAT losses, which had FY19 also saw a significant increase been steadily increasing up until the in cash receipts, which grew 110% end of FY18. from $8.3M in FY18 to $17.4M in FY19. 2 Adslot 2019 Annual Report Net operating cash outflows reduced And the third is to continue our focus by 79% from ($5.3M) in FY18 to ($1.1M) on cost management due to capital in FY19. constraints. The Company held a closing cash balance of $8.2M at year end, supplemented by two small capital raisings supported by key major shareholders during the year. Despite the Company’s turnaround and vastly improved financial results in FY19, there is still much to do. In summary, we adopted new business disciplines across the organisation in FY19 which allowed us to execute efficiently and effectively on our strategic objectives. We successfully turned the business around, and set it back on the right path. In doing so, we have positioned the Company in readiness to realise material trading fees f rom Adslot Media in FY20 via the execution of MSAs with agency holding companies, and the subsequent activation of demand f rom those agencies. In closing, I’d like to take this opportunity to f irst thank all our loyal shareholders who have continued to support the Company through further investment via the placements and on-market buying. I would also like to acknowledge the commitment of the board and the In FY20, the Company is now focused executive team, who are singularly on three new key strategic objectives. focussed and committed to realising With meaningful pilot validation achieved in FY19, the first objective is to execute Master Service Agreements (MSAs) with as many of the six global agency holding companies as possible, and activate their demand on the Adslot Media platform. The second objective is to expand sources of supply (premium strong Trading Fee revenue growth in the Adslot Media business in the year ahead. Yours sincerely, publisher inventory) on the Adslot Media platform to meet that growing Andrew Barlow Executive Chairman, Adslot Ltd demand. 09 October 2019 Adslot 2019 Annual Report 3 “ I am pleased to report that FY19 saw successful execution on all key objectives” PERFORMANCE. GROUP. GROUP REVENUE $10.3m ↑ 28% TRADING TECHNOLOGY REVENUES $8.0m ↑ 56% LICENCE FEE REVENUES $6.7m ↑ 49% TRADING FEES $1.4m ↑ 104% EBITDA LOSS $2.6m ↓ 59% 2019 results including comparison to prior period 4 Adslot 2019 Annual Report ADSLOT MEDIA. MEDIA TRADED $15.4m ↑ 295% TRADING FEE REVENUE $1.1m ↑ 153% TRANSACTIONS BOOKED 709 ↑ 396% SYMPHONY. LICENCE FEE REVENUE $6.1m ↑ 58% Four new markets - Thailand, Indonesia, Philippines and South Africa Currently deployed to 83 individual agencies Deployed in 17 countries $4.1b campaigns managed on the platform Adslot 2019 Annual Report 5 CEO’S MESSAGE. 2019 was a year of considerable This has undeniably provided progress for the Company. Our benef its for certain use cases, in objectives of returning Symphony to particular the monetisation of unsold revenue growth and focussing on the (remnant) inventory by publishers. US market for trading fee revenues It has however created a number has begun to show progress. The of fundamental challenges for both focus for the Company in the coming buyers and sellers, particularly for year is to continue this trajectory of premium media sold under a forward growth with a continuing focus on guaranteed model. the US to drive trading fees. • Many of the key value propositions Critical to executing against this of media agencies – scale, strategy is the Company’s relationship buying power, strategic insight with the large global agency holding – are reduced in a world of companies. These six organisations anonymous auctions and multiple account for a substantial portion of intermediaries. digital advertising spend and are best positioned to adopt transformative technology solutions such as the Adslot Media platform. • Publishers’ yield is reduced as a significant percentage of the media value is absorbed by the various intermediaries. In the case of Fortunately, the Company is well media purchased under a forward positioned to take advantage of guaranteed model, the value a number of dynamics that are provided by these intermediaries emerging in the digital media can be negligible despite the cost. landscape globally. As a result of the above, there is a strong • The maintenance of direct desire for agencies and publishers to relationships between buyers and maintain direct relationships between sellers • Automation of media trading via platforms • Commercial transparency in media transactions Direct Relationships The emergence of programmatic and real time bidding (RTB) media buying has seen a preponderance of intermediaries inserted in to the transactional workflow between a buyer and seller of media. Rather than an agency simply purchasing each other; despite an increasingly fragmented landscape. The Adslot Media platform maintains the direct relationship between buyers and sellers. Automation via Platforms In an increasingly competitive world, agencies are looking for ways of bringing greater eff iciency and effectiveness to their operations. A key focus of this is the use of platforms to manage media buying and other internal processes. media f rom a publisher, the Firstly, the use of platforms offers transaction is routed via a series of greater efficiency by automating many demand side platforms, sell side of the manual processes associated platforms and exchanges. with media buying including the 6 Adslot 2019 Annual Report interactions between buyers and process. This includes the various sellers. This reduction in manual costs and fees associated with process allows either a reduction in agencies, data providers, media headcount or a re-focus of resources exchanges, demand and sell side to activities providing greater value to platforms, etc. clients. In addition, platforms can be used to apply greater standardisation and process to the agency’s workflow. This includes the creation of valuable data assets by virtue of the consistent manner in which buying activity is classified and recorded. When applied across an There has historically been considerable transparency in media purchased under a forward guaranteed model, although this has usually come without the benefits of addressability and platform buying. By contrast, the RTB ecosystem provides considerable addressability and efficiency benefits, but with a commercial framework that might best be described as opaque. Advertisers are increasingly demanding that the transparency of forward guaranteed buying, and the addressability and efficiency benefits of platforms, need not be mutually exclusive. As a result, agencies, in particular the large global holding companies, are looking for solutions that can provide this “best of both worlds” outcome for their clients. organisation, the collective benefits Adslot Media provides a transparent of “platforming” the media buying method of buying forward process can be substantial and guaranteed media via a platform. transformative for agencies. In summary, we believe that the Adslot Media enables agencies Adslot Media platform is a solution to manage forward guaranteed purpose-built to address the issues media buying via a purpose built, conf ronting buyers and sellers of sophisticated and integrated premium media today. Our strong platform. Transparency At the end of the day, all media transactions are funded by the ultimate buyer of the media, the advertiser or brand. Not surprisingly, advertisers are increasingly coverage of the tier 1 publisher market in the US and our ongoing progress with the global agency holding companies would suggest that they agree. We look forward with excitement to the year ahead. insisting upon greater commercial Ben Dixon transparency in the media buying CEO and Executive Director. Adslot 2019 Annual Report 7 “ 2019 was a year of considerable progress for the Company.” Director’s Report DIRECTORS’ REPORT. Your Directors present their report, together with Mr Andrew Barlow Executive Chairman Mr Ben Dixon CEO and Executive Director Mr Adrian Giles Non-Executive Director the financial report of Adslot Ltd ACN 001 287 510 Andrew Barlow is the Mr Ben Dixon’s career in Adrian Giles is an (‘the Company’) and its founder and Executive the advertising industry entrepreneur in the internet controlled entities (‘the Chairman of Adslot, and an goes back over 19 years and Information Technology Group’) for the financial experienced technology and includes roles at industries. In 1997 Mr Giles year ended 30 June 2019 entrepreneur. Prior to several large multinational co-founded Sinewave and the auditor’s report Adslot, Mr Barlow co- agency groups including Interactive which pioneered thereon. founded online competitive DDB and Mojo. He has the concept of marketing intelligence company, wide experience across a website using search Hitwise, with Adrian Giles both the media buying engines and was the first in 1997. Hitwise was ranked and account management company in Australia to offer one of the Top 10 fastest fields having held senior Search Engine Optimisation growing companies by positions directing (SEO) as a service. Deloitte for five years accounts for advertisers In 1997 Mr Giles co-founded running, before being sold such as Telstra and Kraft Hitwise which grew over to Experian Group (LSX. Foods. In particular 10 years to become one of EXPN) in May 2007. Mr he was responsible the most recognised global Barlow was also Founder for the development internet measurement and CEO of Max Super, an and implementation of brands in the USA, UK, online retail superannuation e-commerce and online Australia, NZ, Hong Kong, fund sold to Orchard Funds strategies across a number and Singapore. Whilst Management in 2007. Mr of advertisers. positioning the company Barlow is also the Founder of In late 1999 Ben conceptualised for a NASDAQ listing in Venturian, a privately-owned and then co-founded early 2007 Hitwise was sold venture capital fund with Facilitate Digital Pty Ltd, to Experian (LSX: EXPN) investments in early-stage assuming the role of General in one of Australia’s most technology companies with Manager. In the subsequent successful venture capital unique IP, highly scalable business models and global 3 years he played an integral role in steering the business backed trade sales. Mr Giles is also Chairman market potential. through an industry collapse of ORDER Esports - an Mr Barlow is currently a to a position of strength. Australian esports team director of Nitro Software, Ben was appointed Chief and Chairman of Fortress Inc., a leading provider of Executive Officer of Facilitate Esports - an esports and PDF creation, conversion when Adslot acquired it in video game entertainment and editing software and December 2013. company. e-signing cloud services. Mr. Dixon was appointed Mr Giles is Chair of the as the interim CEO on the Remuneration Committee 27 February 2018. He was and a member of the Audit made permanent CEO on & Risk Committee. 1 January 2019. 8 Adslot 2019 Annual Report Ms Sarah Morgan Non-Executive Director Mr Quentin George Non-Executive Director Mr Andrew Dyer Non-Executive Director Ms Felicity Conlan Company Secretary Sarah has extensive Quentin George is one of the Andrew Dyer is a Senior Ms Conlan brings to the experience in the finance advertising industry’s most Partner and Director of Group extensive experience industry, primarily as part credentialed and respected The Boston Consulting in the media/advertising of independent corporate thought leaders. Based in the Group (BCG). Mr Dyer has and technology sectors advisory firm Grant Samuel. United States, Mr George has held local, regional and where she has held General Sarah has been involved in previously served as the Chief global leadership positions, Manager - Finance and public and private company Digital and Innovation Officer at including leading BCG’s CFO roles with companies mergers and acquisitions, IPG Mediabrands, where he was People & Organization and including M&C Saatchi, as well as equity and debt responsible for overseeing $2b Enablement Practices. He Network Ten, Beattie capital raisings. Sarah holds in digital media spend across has also been a member McGuinness Bungay a degree in Engineering global media agency networks, of BCG’s global Executive (London) and Genero Media. and a Master of Business as well as specialist digital Committee and held various Ms Conlan is a member Administration from the agencies for Fortune 500 brands. roles on a number of BCG of CPA Australia and a University of Melbourne and Mr George has also previously Board Committees and member of the Australian is a Graduate of Australian held the positions of Global initiatives. Institute of Company Institute of Company Head of Digital Media and Mr Dyer has over 25 years' Directors. Directors. Sarah is also Strategic Innovation, and consulting experience Non-Executive Director President, Global at Universal supporting senior executives of Hansen Technologies McCann. In 2008, Mr George in leading companies Limited, Future Generation led the team that architected around the world, with Global Investment Company and built the industry’s first a particular focus on Limited and Whispir Limited. ever, standalone programmatic financial and other services Ms Morgan is Chair of the media-buying agency, Cadreon, businesses. Audit and Risk Committee. which he successfully grew into Prior to joining BCG in a multi-national organisation 1994, Mr Dyer worked for encompassing North America, the Commonwealth Bank Europe and Asia-Pacific. Mr George has also previously and the Australian Federal Government. Information on Directors Mr Andrew Barlow, served on the customer Andrew Dyer is a member of advisory boards of Google, the Audit & Risk Committee Mr Adrian Giles, Mr Ben Dixon, Microsoft Advertising, Yahoo! and was also appointed Mr Quentin George, and AOL. He has also served on to the Remuneration high-profile industry advisory Committee on 2 August boards including the Internet 2019. Advertising Bureau (IAB) and the American Association of Advertising Agencies (AAAA’s), and has held senior leadership roles at digital agencies such as Razorfish and Organic. Mr George is currently a Senior Advisor at McKinsey & Company. Mr. George resigned as a Director on 16 July 2019. Ms Sarah Morgan and Mr Andrew Dyer were directors for the whole financial year and, with the exception of Mr Quentin George, up to the date of this report. Mr Quentin George resigned subsequent to year end on 16 July 2019. Adslot 2019 Annual Report 9 Directors’ Report Operating Results Group revenues for FY19 were $10,271,629, an increase of 28% versus FY18 ($8,013,289). The Consolidated Group operating loss before interest, income tax, depreciation and amortisation (EBITDA) in FY19 was $2,619,402, a 59% reduction in losses versus FY18 ($6,340,479). The Consolidated Group operating loss of $7,042,755 is 40% lower than the loss for the prior year of $11,653,319. Review of Operations The financial year ended 30 June 2019 saw strong revenue growth for the Company. Total group revenue of $10.3m represented a 28% increase on the prior financial year (FY18: $8.0m). Revenue growth was primarily driven by a $2.2m (+58%) increase in Symphony licence fee revenue, supported by a $0.7m (+153%) growth in Adslot trading fee revenue. Revenues generated from Trading Technology (licence fees and trading fees combined) grew $2.9m (+56%) compared to the prior financial year. The Company’s return to revenue growth and increased business performance was due to the continued focus on the following key strategies for the business in FY19: 1. Continued investment in the Symphony product and a focus on new market deployments; 2. Focus on the US market for generating Trading Fees from the Adslot Media platform; and 3. Ongoing cost management. Trading Technology The strategic focus of the business remains Trading Technology revenues. These revenues are comprised of: • Licence Fees – derived mostly from Symphony, a market-leading workflow automation tool for Media Agencies, and also from customised solutions developed for Publishers; and, • Trading Fees – fees charged as a percentage of media traded via the stand alone Adslot Media platform and also via Symphony. Trading fees generated via the stand alone Adslot Media platform attract a higher % fee and represent a significant majority of Trading Fees. Licence Fees Significant events for the past year for Symphony include: • Successful deployment of Symphony for GroupM into four new markets, including three in the APAC region (Thailand, Indonesia and Philippines) and one in the EMEA region (South Africa); • A full year of Licence Fees from GroupM India (deployed in June 2018) with further individual agencies activated in the Indian market during the financial year; and, • Renegotiation of certain key terms of the Company’s agreement with GroupM that resulted in an increase in Licence Fees for some previously deployed markets. Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong growth of 49% on the prior financial year (FY18: $4.5m). growth of 49% on the prior financial year (FY18: $4.5m). growth of 49% on the prior financial year (FY18: $4.5m). Total Licence Fees (Normalised) Total Licence Fees (Normalised) Total Licence Fees (Normalised) FY16 -FY19 FY16 -FY19 FY16 -FY19 8,000,000 8,000,000 8,000,000 7,000,000 7,000,000 7,000,000 6,000,000 6,000,000 6,000,000 5,000,000 5,000,000 5,000,000 4,000,000 4,000,000 4,000,000 3,000,000 3,000,000 3,000,000 2,000,000 2,000,000 2,000,000 1,000,000 1,000,000 1,000,000 - - - FY16 FY16 FY16 FY17 FY17 FY17 FY18 FY18 FY18 FY19 FY19 FY19 Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- off payment, as outlined in the 20 July 2018 Symphony Outlook release. off payment, as outlined in the 20 July 2018 Symphony Outlook release. off payment, as outlined in the 20 July 2018 Symphony Outlook release. Trading Fees Trading Fees Trading Fees The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media Stand Alone Value of Media Traded & Trading Fees - Adslot Media Stand Alone Adslot Media Stand Alone Value of Media Traded & Trading Fees - Value of Media Traded & Trading Fees - FY18 vs FY19 FY18 vs FY19 FY18 vs FY19 18,000,000 18,000,000 18,000,000 16,000,000 16,000,000 16,000,000 14,000,000 14,000,000 14,000,000 12,000,000 12,000,000 12,000,000 10,000,000 10,000,000 10,000,000 8,000,000 8,000,000 8,000,000 6,000,000 6,000,000 6,000,000 4,000,000 4,000,000 4,000,000 2,000,000 2,000,000 2,000,000 - - - 1,200,000 1,200,000 1,200,000 1,000,000 1,000,000 1,000,000 800,000 800,000 800,000 600,000 600,000 600,000 400,000 400,000 400,000 200,000 200,000 200,000 - - - FY18 FY18 FY18 FY19 FY19 FY19 Adslot Media: $ Traded Adslot Media: $ Traded Adslot Media: $ Traded Adslot Trading Fees Adslot Trading Fees Adslot Trading Fees 10 Adslot 2019 Annual Report 1 2 2 2 Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong Total Licence Fee revenues across Symphony and Adslot Media were $6.7m in FY19, representing strong growth of 49% on the prior financial year (FY18: $4.5m). growth of 49% on the prior financial year (FY18: $4.5m). growth of 49% on the prior financial year (FY18: $4.5m). Total Licence Fees (Normalised) Total Licence Fees (Normalised) Total Licence Fees (Normalised) Total Licence Fees (Normalised) FY16 -FY19 FY16 - FY19 FY16 -FY19 FY16 -FY19 FY16 FY16 FY16 FY17 FY17 FY17 FY18 FY18 FY18 FY19 FY19 FY19 8,000,000 8,000,000 8,000,000 7,000,000 7,000,000 7,000,000 6,000,000 6,000,000 6,000,000 5,000,000 5,000,000 5,000,000 4,000,000 4,000,000 4,000,000 3,000,000 3,000,000 3,000,000 2,000,000 2,000,000 2,000,000 1,000,000 1,000,000 1,000,000 - - - Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- Note: Symphony Licence Fee revenues for FY17 and FY18 are normalised to allow for the reversal of a one- off payment, as outlined in the 20 July 2018 Symphony Outlook release. off payment, as outlined in the 20 July 2018 Symphony Outlook release. off payment, as outlined in the 20 July 2018 Symphony Outlook release. Trading Fees Trading Fees Trading Fees The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to The value of media traded via the stand alone Adslot Media platform grew 295% from $3.9m in 2018 to $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the $15.4m in 2019. This increased trading activity resulted in a 153% increase in Trading Fees derived from the Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media platform from $0.5m in 2018 to $1.1m in 2019. Adslot Media Stand Alone Adslot Media Stand Alone Adslot Media Stand Alone Value of Media Traded & Trading Fees - Value of Media Traded & Trading Fees - Value of Media Traded & Trading Fees - FY18 vs FY19 FY18 vs FY19 FY18 vs FY19 18,000,000 18,000,000 18,000,000 16,000,000 16,000,000 16,000,000 14,000,000 14,000,000 14,000,000 12,000,000 12,000,000 12,000,000 10,000,000 10,000,000 10,000,000 8,000,000 8,000,000 8,000,000 6,000,000 6,000,000 6,000,000 4,000,000 4,000,000 4,000,000 2,000,000 2,000,000 2,000,000 - - - 1,200,000 1,200,000 1,200,000 1,000,000 1,000,000 1,000,000 800,000 800,000 800,000 600,000 600,000 600,000 400,000 400,000 400,000 200,000 200,000 200,000 - - - FY18 FY18 FY18 FY19 FY19 FY19 Adslot Media: $ Traded Adslot Media: $ Traded Adslot Media: $ Traded Adslot Trading Fees Adslot Trading Fees Adslot Trading Fees Adslot 2019 Annual Report 2 2 2 11 The total gross value of media transactions (Adslot Media and Symphony combined) from which the Group derives Trading Fee revenues was $27.2m, an increase of 50% compared to the prior year (FY18: $18.1m). Services The trading fees derived from media transactions (Adslot Media and Symphony combined) grew 104% from $0.7m in 2018 to $1.4m in FY19. Total Value of Media Traded & Total Trading Fees FY18 vs FY19 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 - 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - FY18 FY19 Total Value of Media Traded Total Trading Fees The Group continues to make significant progress in growing adoption and sales pipelines across all active regions, including the US, UK, Europe and Australia. The Company’s growth strategy has seen a focus on securing Master Services Agreements (MSAs) with the six largest global media agency holding companies for the US market. During the year the Group announced the first of these MSAs with Cadreon, the programmatic trading division of the Interpublic Group of Companies. The Group has subsequently announced that it has secured verbal indications from two additional agency holding companies of their intention to execute an MSA. During the financial year The Group continued to add premium publishers to its Adslot Media marketplace around the world. These included Bloomberg, Business Insider, CBS, Priceline, Telegraph (UK), BBC and Match Media. In addition the Group entered in to agreements with publishers that see Adslot as a preferred or mandated channel for certain transactions. These included: o The Group executed an agreement with leading Australian property website Domain. This relationship sees the Adslot Media platform as a preferred method for non-real estate direct bookings by non-programmatic advertisers. o The Group commenced a similar project with UK publisher the Financial Times (FT) in FY19. The FT commenced a project to automate all direct campaigns within a nominated transaction size from both direct advertisers and agencies through the Adslot Media platform, creating operational efficiencies. Cost Management EBITDA Cash Management Services revenue is derived predominantly from Webfirm, the Group’s Australian-based digital marketing services business, providing website design, hosting, search engine optimisation (SEO), search engine marketing (SEM) and social media marketing services (FY19: $1.7m). Services revenue is also derived to a lesser extent from custom development work for Symphony and Adslot Media customers. Webfirm underwent a strategic review in FY19, pivoting the business towards its higher margin search marketing services and targeting larger clients. FY19 Services revenue at $1.8m was essentially flat year on year (a nominal 2% increase). Total operating costs of $12.8m for FY19 represents a $1.4m (-10%) reduction in costs on FY18 ($14.2m). This is primarily driven by salary savings that are $1.1m (-13%) down on the prior period. Cost reductions were targeted to ensure continued investment in strategic and revenue generating product development and no disruption to existing client relationships. The growth in revenue combined with tight cost control has seen a 59% reduction ($3.7m) in EBITDA losses from $6.3m in FY18 to $2.6m loss for the 2019 financial year. Key major shareholders supported the Group in two capital raises in FY19 in August 2018 ($3.5m) and May 2019 ($4.0m) contributing net cash inflows from financing activities of $7.1m (after transaction costs). Net cash outflows from operating activities for FY19 were $1.1m, a $4.2m reduction on the prior period (FY18: $5.3m net cash outflow). Cash receipts for FY19 were $17.4m, a 110% increase of $9.1m on the prior period (FY18: $8.3m). Cash payments for operating activities at $19.3m were a 33% increase of $4.8m on the prior period (FY18: $14.5m). Cash as at 30 June 2019 was $8.2m (FY18: $4.8m). Matters Subsequent to the End of the Financial Year There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Environmental regulations The Group’s operations are not subject to any significant environmental regulations under the Commonwealth, State or any other country in which the entity operates. Dividends the year. The Directors do not recommend the declaration of a dividend. No dividend has been declared or paid during 12 Adslot 2019 Annual Report 3 4 Services Services revenue is derived predominantly from Webfirm, the Group’s Australian-based digital marketing services business, providing website design, hosting, search engine optimisation (SEO), search engine marketing (SEM) and social media marketing services (FY19: $1.7m). Services revenue is also derived to a lesser extent from custom development work for Symphony and Adslot Media customers. Webfirm underwent a strategic review in FY19, pivoting the business towards its higher margin search marketing services and targeting larger clients. FY19 Services revenue at $1.8m was essentially flat year on year (a nominal 2% increase). Cost Management Total operating costs of $12.8m for FY19 represents a $1.4m (-10%) reduction in costs on FY18 ($14.2m). This is primarily driven by salary savings that are $1.1m (-13%) down on the prior period. Cost reductions were targeted to ensure continued investment in strategic and revenue generating product development and no disruption to existing client relationships. EBITDA The growth in revenue combined with tight cost control has seen a 59% reduction ($3.7m) in EBITDA losses from $6.3m in FY18 to $2.6m loss for the 2019 financial year. Cash Management Key major shareholders supported the Group in two capital raises in FY19 in August 2018 ($3.5m) and May 2019 ($4.0m) contributing net cash inflows from financing activities of $7.1m (after transaction costs). Net cash outflows from operating activities for FY19 were $1.1m, a $4.2m reduction on the prior period (FY18: $5.3m net cash outflow). Cash receipts for FY19 were $17.4m, a 110% increase of $9.1m on the prior period (FY18: $8.3m). Cash payments for operating activities at $19.3m were a 33% increase of $4.8m on the prior period (FY18: $14.5m). Cash as at 30 June 2019 was $8.2m (FY18: $4.8m). Matters Subsequent to the End of the Financial Year There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Environmental regulations The Group’s operations are not subject Commonwealth, State or any other country in which the entity operates. to any significant environmental regulations under the Dividends The Directors do not recommend the declaration of a dividend. No dividend has been declared or paid during the year. Adslot 2019 Annual Report 4 13 Shares under option Details of unissued shares or interests under option as at the date of signing this report are. Issue Type Expiry Date Exercise Price $ Balance at beginning of the year (Number) Issued during the year (Number) Forfeited during the year (Number) Exercised during the year (Number) Balance at end of the year (Number) Ordinary options 04/10/2021 0.073 3,000,000 Ordinary options 25/11/2021 0.060 5,800,000 Ordinary options 25/02/2022 0.035 23,500,000 Ordinary options 15/05/2022 0.034 12,700,000 Ordinary options 27/05/2022 0.036 4,000,000 - - - - - Ordinary options 30/01/2023 0.060 - 5,800,000 - (200,000) - (1,300,000) - - 49,000,000 5,800,000 (1,500,000) - - - - - - - 3,000,000 5,600,000 23,500,000 11,400,000 4,000,000 5,800,000 53,300,000 Shares subject to rights Details of unissued shares or interests subject to rights as at the date of signing this report are: Executive Performance Rights Issue Type Issue or Acquisition Date Performance Rights 01/09/2016 Issue Price $ Nil Balance at beginning of the year (Number) 2,125,000 Issued during the year (Number) Transfers during the year (Number) Forfeited during the year (Number) Balance at end of the year (Number) - (1,925,000) (200,000) - Indemnification and Insurance of Officers The Group has during the financial year, in respect of each person who is or has been an officer of the Group or a related body Corporate, made a relevant agreement for indemnifying against a liability incurred as an officer, including costs and expenses in successfully defending legal proceedings. Since the end of the financial year, the Group has paid premiums to insure all directors and officers of Adslot Ltd and the Adslot Group of companies, against costs incurred in defending any legal proceedings arising out of their conduct as a director and officer of the Group, other than for conduct involving a wilful breach of duty or a contravention of Sections 232(5) or (6) of the Corporations Act 2011, as permitted by section 241A (3) of the Corporations Act. Disclosure of the premium amount is prohibited by the insurance contract. Proceedings on behalf of the Group No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001. Auditor’s Independence Declaration The auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found on page 26 of the financial report. Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in Note 20 to the financial statements. The Directors are satisfied that the provision of non-audit services, during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. Remuneration Report The remuneration report is set out under the following headings: Section 1: Non-executive directors’ remuneration Section 2: Executive remuneration Section 3: Details of remuneration Section 4: Executive contracts of employment Section 5: Long Term Incentives (equity-based compensation) Section 6: Equity holdings and transactions Section 7: Other transactions with key management personnel Section 1: Non-executive directors’ remuneration Non-executive directors’ fees are reviewed annually and are determined by the Board. In making its determination it takes into account fees paid to other non-executive directors of comparable companies. Non-executive directors’ fees are within the maximum aggregate limit of $350,000 per annum agreed to by shareholders at the Annual General Meeting held on 30 November 2009. To preserve the independence and integrity of their position, non-executive directors do not receive performance-based bonuses. For the 2019 financial year, the Chairman’s fees were $100,000 per annum. Non-executive directors’ fees were $50,000 per annum. Mr Andrew Dyer waived his non-executive director fees for the 2019 year. In addition, the Chair of the Audit & Risk Committee and the Remuneration Committee received a further $25,000 in recognition of the additional workload of those positions. Section 2: Executive remuneration The Board of Directors are responsible for determining and reviewing compensation arrangements for key management personnel and the executive team. The Remuneration Committee makes recommendations on remuneration of key management personnel to the Board. The Board assesses the appropriateness of the nature and amount of emoluments of these employees on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit by: a) Attracting the highest quality employees; b) Retaining the best performing employees c) Aligning the employees with shareholder outcomes; optimal strategic outcomes for the business; and e) Ensuring it aligns with the latest industry best practice. d) Aligning employee motivation to a cascading set of key performance indicators that drive the most Executives’ remuneration consists of a fixed cash component, short-term incentives in the form of cash bonuses, and long-term incentives in the form of equity-based compensation linked to the long term prospects and future performance of the Group. The inclusion of equity-based compensation in executives’ remuneration provides a direct link between their remuneration and shareholder wealth, otherwise there are no direct relationships. In providing the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years: Item EPS (cents) Net loss ($) 2019 (0.49) 2018 (0.91) 2017 (0.70) 2016 (0.77) 2015 (0.89) 7,042,755 11,653,319 8,630,187 8,138,485 9,205,521 Share price at 30 June ($) 0.028 0.026 0.051 0.110 0.090 14 Adslot 2019 Annual Report 5 6 Remuneration Report The remuneration report is set out under the following headings: Section 1: Non-executive directors’ remuneration Section 2: Executive remuneration Section 3: Details of remuneration Section 4: Executive contracts of employment Section 5: Long Term Incentives (equity-based compensation) Section 6: Equity holdings and transactions Section 7: Other transactions with key management personnel Section 1: Non-executive directors’ remuneration Non-executive directors’ fees are reviewed annually and are determined by the Board. In making its determination it takes into account fees paid to other non-executive directors of comparable companies. Non-executive directors’ fees are within the maximum aggregate limit of $350,000 per annum agreed to by shareholders at the Annual General Meeting held on 30 November 2009. To preserve the independence and integrity of their position, non-executive directors do not receive performance-based bonuses. For the 2019 financial year, the Chairman’s fees were $100,000 per annum. Non-executive directors’ fees were $50,000 per annum. Mr Andrew Dyer waived his non-executive director fees for the 2019 year. In addition, the Chair of the Audit & Risk Committee and the Remuneration Committee received a further $25,000 in recognition of the additional workload of those positions. Section 2: Executive remuneration The Board of Directors are responsible for determining and reviewing compensation arrangements for key management personnel and the executive team. The Remuneration Committee makes recommendations on remuneration of key management personnel to the Board. The Board assesses the appropriateness of the nature and amount of emoluments of these employees on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit by: a) Attracting the highest quality employees; b) Retaining the best performing employees c) Aligning the employees with shareholder outcomes; d) Aligning employee motivation to a cascading set of key performance indicators that drive the most optimal strategic outcomes for the business; and e) Ensuring it aligns with the latest industry best practice. Executives’ remuneration consists of a fixed cash component, short-term incentives in the form of cash bonuses, and long-term incentives in the form of equity-based compensation linked to the long term prospects and future performance of the Group. The inclusion of equity-based compensation in executives’ remuneration provides a direct link between their remuneration and shareholder wealth, otherwise there are no direct relationships. In providing the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years: Item EPS (cents) Net loss ($) 2019 (0.49) 2018 (0.91) 2017 (0.70) 2016 (0.77) 2015 (0.89) 7,042,755 11,653,319 8,630,187 8,138,485 9,205,521 Share price at 30 June ($) 0.028 0.026 0.051 0.110 0.090 Adslot 2019 Annual Report 6 15 Remuneration Report (Continued) Section 3: Details of remuneration Details of the remuneration of the directors and the key management of the Group and its controlled entities are set out in the following tables. The key management personnel of Adslot Ltd and its controlled entities include the following directors and executive officers: Directors Position Mr Andrew Barlow Executive Chairman Non-Executive Chairman Non-Executive Director Date appointed/resigned Appointed 27 February 2018 Appointed 26 November 2013 Appointed 16 February 2010 Mr Ben Dixon Chief Executive Officer Appointed 1 January 2019 Interim Chief Executive Officer 27 February to 31 December 2018 Interim Company Secretary 15 July to 9 October 2017 Executive Director Appointed 23 December 2013 Mr Andrew Dyer Non-Executive Director Mr Quentin George Non-Executive Director Appointed 28 May 2018 Appointed 14 June 2014 Resigned 16 July 2019 Mr Adrian Giles Non-Executive Director Appointed 26 November 2013 Ms Sarah Morgan Non-Executive Director Appointed 27 January 2015 Executive Officers Ms Felicity Conlan Company Secretary Chief Financial Officer Appointed 9 October 2017 Appointed 30 August 2017 Mr Tom Peacock Group Commercial Director Appointed 23 December 2013 Group 2019 Name Short-term benefits employment Share-based payment Short Term Incentive Other annuation Options Super- Share Performance Post- Benefits benefits Long Term Long Service Leave Executive directors Mr A Barlow (i) Mr B Dixon Non-executive directors Mr A Giles Mr Q George Ms S Morgan Mr A Dyer Ms F Conlan Mr T Peacock Mr I Lowe (ii) Salary & fees $ 228,262 253,000 75,000 50,000 68,493 - 250,000 231,500 67,509 Other key management personnel $ - - - - - - - - $ - - - - - - - - $ - - - - - - $ 8,676 - - - 6,507 $ - - - - 18,402 Rights $ Total $ - - - - - - - - - 236,938 349,925 75,000 50,000 75,000 18,402 320,811 309,239 153,094 594 7,522 20,531 49,686 20,531 49,686 5,133 20,452 60,000 50,000 16,648 20,051 10,226 Totals 1,223,764 50,000 60,000 24,764 81,429 148,452 - 1,588,409 (i) (ii) includes $136,938 consultancy fees incurred since his appointment as an Executive Chairman. resigned as CEO and Executive Director on 27 February 2018. Continued to be a key management personnel until 27 July 2018. Short Term Incentives Short Term Incentives (STIs) paid in the year, along with the total STI opportunity in each year, relating to the 2018 and 2019 financial years, are outlined in the table below: Name Amount Paid Total 2018 STI Opportunity Amount Paid Total 2019 Opportunity STI Assessment Criteria Mr B Dixon Ms F Conlan Mr T Peacock $ $ $ 100,000 50,000 100,000 Group performance to budget and executive management to achieve KPIs. 50,000 N/A (a) - - 50,000 Performance related KPI’s N/A (a) Performance related KPI’s Mr I Lowe N/A - Bonus for completion of strategic project 80,000 to 160,000 (a) Not applicable as total bonus opportunity is based on a percentage of the Group’s performance. No STIs were paid in relation to the 2018 financial year. Mr Dixon was the only key management personnel entitled to be paid an STI in the 2019 financial year, which was paid during the 2019 financial year. $ - - - - 16 Adslot 2019 Annual Report 7 8 Long Term Benefits Post- employment benefits Share-based payment Super- annuation $ Share Options $ Performance Rights $ Group 2019 Name Short-term benefits Salary & fees $ Short Term Incentive Other $ $ Executive directors Mr A Barlow (i) Mr B Dixon 228,262 253,000 - 50,000 Non-executive directors Mr A Giles Mr Q George Ms S Morgan Mr A Dyer 75,000 50,000 68,493 - Other key management personnel Ms F Conlan Mr T Peacock Mr I Lowe (ii) 250,000 231,500 67,509 - - - - - - - - - - - - - - - 60,000 Long Service Leave $ - 16,648 - - - - 8,676 - 20,051 10,226 - - 6,507 - - - - 18,402 594 7,522 - 20,531 49,686 20,531 49,686 5,133 20,452 Total $ 236,938 349,925 75,000 50,000 75,000 18,402 320,811 309,239 153,094 - - - - - - - - - Totals (i) (ii) 1,223,764 50,000 60,000 24,764 81,429 148,452 - 1,588,409 includes $136,938 consultancy fees incurred since his appointment as an Executive Chairman. resigned as CEO and Executive Director on 27 February 2018. Continued to be a key management personnel until 27 July 2018. Short Term Incentives Short Term Incentives (STIs) paid in the year, along with the total STI opportunity in each year, relating to the 2018 and 2019 financial years, are outlined in the table below: Name Amount Paid Total 2018 STI Opportunity Amount Paid Total 2019 STI Opportunity Assessment Criteria Mr B Dixon Ms F Conlan Mr T Peacock Mr I Lowe $ - - - - $ $ $ 100,000 50,000 100,000 Group performance to budget and executive management to achieve KPIs. 50,000 N/A (a) - - 50,000 Performance related KPI’s N/A (a) Performance related KPI’s N/A - 80,000 to 160,000 Bonus for completion of strategic project (a) Not applicable as total bonus opportunity is based on a percentage of the Group’s performance. No STIs were paid in relation to the 2018 financial year. Mr Dixon was the only key management personnel entitled to be paid an STI in the 2019 financial year, which was paid during the 2019 financial year. Adslot 2019 Annual Report 8 17 Section 4: Executive contracts of employment Formal contracts of employment for all members of the key management personnel are in place. Contractual terms for most executives are similar but do, on occasions, vary to suit different needs. The following table summarises the key contractual terms for all key management personnel. Length of contract Open ended Fixed Remuneration Remuneration comprises salary and statutory employer superannuation contributions. executive. period. executive. Incentive Plans Eligible to participate. Incentive criteria and award opportunities vary for each Notice Period Key Management Personnel, including executive directors, have notice periods ranging from three to four months. The Chief Executive Officer has a notice period of four months and the Chief Financial Officer and Chief Commercial Officer have notice periods of three months. Other Executives have notice periods ranging from four weeks to three months. Resignation Employment may be terminated by giving notice consistent with the notice Retirement There are no financial entitlements due from the Group on retirement of an Termination by the The Group may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period. Group Redundancy Payments for redundancy are discretionary and are determined having regard to the particular circumstances. There are no contractual commitments to pay redundancy over and above any statutory entitlement. Termination for serious misconduct The Group may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of remuneration only up to the date of termination. Remuneration Report (Continued) Section 3: Details of remuneration (Continued) Group 2018 Name Short-term benefits Salary & fees $ Short Term Incentive Other $ $ Executive directors Mr A Barlow (i) Mr B Dixon Mr I Lowe (ii) Non-executive directors Mr A Giles Mr Q George Ms S Morgan Mr A Dyer (iii) 141,324 206,000 360,000 75,000 50,000 68,493 - Other key management personnel Ms F Conlan (iv) Mr T Peacock Mr B Maher (v) Totals 211,956 224,000 20,538 1,357,311 - - - - - - - - - - - - - - - - - - - - - - Long Term Benefits Long Service Leave $ - 3,975 - - - - - - Post- employment benefits Share-based payment Super- annuation $ Share Options $ Performance Rights $ Total $ 8,676 - - 150,000 19,570 6,817 53,125 289,487 20,049 13,635 - - 6,507 - 4,095 - - 32,392 17,360 35,036 - - - - - - 393,684 75,000 54,095 75,000 32,392 264,352 8,108 - 20,049 35,036 83,097 370,290 1,771 - - 22,309 12,083 93,982 127,011 136,222 1,726,609 (i) (ii) (iii) (iv) (v) includes $50,000 consultancy fees incurred since his appointment as an Executive Chairman. resigned as CEO and Executive Director on 27 February. Continued to be a key management personnel for the rest of the year. Figures represent annual remuneration. from 28 May 2018. from 30 August 2017. to 14 July 2017. Short Term Incentives No Short Term Incentives (STIs) were paid in the year ended 30 June 2018 relating to the 2017 financial year. The total 2018 STI opportunity is outlined in the table below: Name Amount Paid Total 2017 STI Opportunity Assessment Criteria Mr I Lowe Mr B Dixon Mr B Maher Mr T Peacock $ - - - - $ 150,000 Group performance to budget, product development and launch, and client & partnership signings. 55,000 Performance related KPI’s. 45,063 Division performance, governance, reporting and performance related KPI’s. N/A (a) Performance related KPI’s. (a) Not applicable as total bonus opportunity is based on a percentage of the Group’s performance. No STIs were paid in relation to the 2017 financial year. 18 Adslot 2019 Annual Report 9 10 Section 4: Executive contracts of employment Formal contracts of employment for all members of the key management personnel are in place. Contractual terms for most executives are similar but do, on occasions, vary to suit different needs. The following table summarises the key contractual terms for all key management personnel. Length of contract Open ended Fixed Remuneration Remuneration comprises salary and statutory employer superannuation contributions. Incentive Plans Notice Period Resignation Retirement Eligible to participate. Incentive criteria and award opportunities vary for each executive. Key Management Personnel, including executive directors, have notice periods ranging from three to four months. The Chief Executive Officer has a notice period of four months and the Chief Financial Officer and Chief Commercial Officer have notice periods of three months. Other Executives have notice periods ranging from four weeks to three months. Employment may be terminated by giving notice consistent with the notice period. There are no financial entitlements due from the Group on retirement of an executive. Termination by the Group The Group may terminate the employment agreement by providing notice consistent with the notice period or payment in lieu of the notice period. Redundancy Payments for redundancy are discretionary and are determined having regard to the particular circumstances. There are no contractual commitments to pay redundancy over and above any statutory entitlement. Termination for serious misconduct The Group may terminate the employment agreement at any time without notice, and the executive will be entitled to payment of remuneration only up to the date of termination. Adslot 2019 Annual Report 10 19 Remuneration Report (Continued) Incentive Option Plan Section 5: Long Term Incentives (equity-based compensation) Performance Rights over Shares Shareholders approved at the November 2014 Annual General Meeting the creation of Performance Rights over Shares which enables the Board to offer eligible employees the right to Performance Rights which convert to shares subject to the executive’s performance against specific individual financial and non- financial performance criteria. No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. All rights are subject to service periods which require the employees remain an employee of the Group. The Performance Rights over Shares Plan was replaced by the Incentive Option Plan in financial year 2018 and as such there have been no new Performance Rights granted during the year ending 30 June 2019. The Performance Rights over Shares Plan concluded during the 2019 financial year. At the November 2017 Annual General Meeting, shareholders approved the creation of the Group’s Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which convert to fully-paid ordinary shares upon exercise, subject to meeting certain vesting criteria. The objective of the Incentive Option Plan is to attract, motivate and retain key employees and the Group considers that the adoption of the Incentive Option Plan and the future issue of options under the Incentive Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. Adslot continually reviews its operations, performance and the broader market conditions to ensure that incentives offered to key executives are aligned with the growth of the Group and shareholder outcomes whilst ensuring it can attract and retain experienced talent in a competitive industry. Adslot continues to operate within a highly competitive employment environment for experienced people in the technology and The following table shows grants of share-based compensation to directors and senior management under the Performance Rights over Shares Plan during the 2019 financial year: No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director Name Ben Dixon Tom Peacock Series Sep 16 Sep 16 Balance at beginning of the year (Number) Granted during the year (Number) Expired during the year (Number) Exercised during the year (Number) Balance at the end of the year (Number) 250,000 375,000 - - - - (250,000) (375,000) 625,000 - - (625,000) - - - The following table shows grants of share-based compensation to directors and senior management under the Performance Rights over Shares Plan during the prior year ending 30 June 2018: Name Ben Dixon Brendan Maher Tom Peacock Series Sep 16 Sep 16 Sep 16 Balance at beginning of the year (Number) 500,000 750,000 750,000 2,000,000 Granted during the year (Number) Expired during the year (Number) Exercised during the year (Number) Balance at the end of the year (Number) - - - - - (250,000) 250,000 (750,000) - - - (375,000) 375,000 (750,000) (625,000) 625,000 No Performance rights to shares were granted to KMP during the year ended 30 June 2019 and 30 June 2018. Rights over Shares under the Group’s previous ESOP Upon commencement of his employment on 8 October 2012 Mr Lowe was granted the right to receive up to 17,000,000 shares after the share price of the Group trades above certain 30-day volume-weighted average price (VWAP) hurdles. Each right would convert into one ordinary share of Adslot Ltd when the VWAP criteria was met. In the event of a Change of Control of the Group some of the Rights over Shares would have vested on a sliding scale between the take-over price and required VWAP of the next eligible series. No amounts would have been paid or payable by the recipient on receipt of the right. The rights carried no voting rights. Mr Lowe has signed a Separation and Exit Deed with the Group with a separation date of 27 August 2018. All of Mr Lowe's Share Rights automatically lapsed on the separation date. software field. of the Group. year: 2019 The following tables show grants and movements of share-based compensation to directors and senior management under the Incentive Option Plan during the current financial year and the previous financial Balance at Exercised beginning of Granted during Expired during during the Balance at the the year (Number) the year (Number) the year (Number) year end of the year (Number) (Number) - - - - - 2,000,000 - 1,000,000 - Name Series Ian Lowe (i) Ben Dixon OP # 18-1 2,000,000 OP # 18-1 1,000,000 Felicity Conlan OP # 18-2 1,000,000 Tom Peacock OP # 18-2 1,000,000 Felicity Conlan OP # 18-3 6,500,000 Tom Peacock OP # 18-3 6,500,000 Andrew Dyer (ii) OP # 18-5 4,000,000 - - - 4,000,000 3,000,000 22,000,000 22,000,000 16,000,000 - - - - - - - - - - 1,000,000 1,000,000 6,500,000 6,500,000 - - - - - Vested and exercisable at the end of the year (Number) - - - 6,500,000 6,500,000 (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. (ii) In conjunction with his appointment as Director, Mr Dyer was granted 4 million options. The exercise price of each Option is $0.036 and the Options expire on 27 May 2022. 2 million of the options vested immediately. The remaining 2 million vest in four equal tranches in 6 month intervals from the date of appointment. Mr Dyer has agreed to waive his annual base director fees of $50,000 per annum for the first two years of his directorship. There were no new options granted to key management personnel under the Incentive Option Plan during the year ended 30 June 2019. 20 Adslot 2019 Annual Report 11 12 Incentive Option Plan At the November 2017 Annual General Meeting, shareholders approved the creation of the Group’s Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which convert to fully-paid ordinary shares upon exercise, subject to meeting certain vesting criteria. The objective of the Incentive Option Plan is to attract, motivate and retain key employees and the Group considers that the adoption of the Incentive Option Plan and the future issue of options under the Incentive Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. Adslot continually reviews its operations, performance and the broader market conditions to ensure that incentives offered to key executives are aligned with the growth of the Group and shareholder outcomes whilst ensuring it can attract and retain experienced talent in a competitive industry. Adslot continues to operate within a highly competitive employment environment for experienced people in the technology and software field. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director of the Group. The following tables show grants and movements of share-based compensation to directors and senior management under the Incentive Option Plan during the current financial year and the previous financial year: 2019 Name Series Balance at beginning of the year (Number) Granted during the year (Number) Expired during the year (Number) Exercised during the year (Number) Balance at the end of the year (Number) Ian Lowe (i) Ben Dixon OP # 18-1 2,000,000 OP # 18-1 1,000,000 Felicity Conlan OP # 18-2 1,000,000 Tom Peacock OP # 18-2 1,000,000 Felicity Conlan OP # 18-3 6,500,000 Tom Peacock OP # 18-3 6,500,000 - - - - - 2,000,000 - 1,000,000 - - - - - - - - - - - - 1,000,000 1,000,000 6,500,000 6,500,000 Vested and exercisable at the end of the year (Number) - - - - 6,500,000 6,500,000 Andrew Dyer (ii) OP # 18-5 4,000,000 - - - 4,000,000 3,000,000 22,000,000 - - - 22,000,000 16,000,000 (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. In conjunction with his appointment as Director, Mr Dyer was granted 4 million options. The exercise price of each Option is $0.036 and the Options expire on 27 May 2022. 2 million of the options vested immediately. The remaining 2 million vest in four equal tranches in 6 month intervals from the date of appointment. Mr Dyer has agreed to waive his annual base director fees of $50,000 per annum for the first two years of his directorship. (ii) There were no new options granted to key management personnel under the Incentive Option Plan during the year ended 30 June 2019. Adslot 2019 Annual Report 12 21 Remuneration Report (Continued) Section 5: Long Term Incentives (Continued) 2018 Name Ian Lowe (i) Ben Dixon Felicity Conlan Tom Peacock Felicity Conlan Tom Peacock Andrew Dyer (ii) Balance at beginning of the year Granted during the year Expired during the year Exercised during the year Balance at the end of the year Series (Number) (Number) (Number) (Number) (Number) Vested and exercisable at the end of the year (Number) OP # 18-1 OP # 18-1 OP # 18-2 OP # 18-2 OP # 18-3 OP # 18-3 OP # 18-5 - 2,000,000 - 1,000,000 - - - 2,000,000 - 1,000,000 - - - - - - 1,000,000 1,000,000 6,500,000 6,500,000 - - - - - - - - 1,000,000 1,000,000 6,500,000 6,500,000 - - - - - 4,000,000 - - 4,000,000 2,000,000 - 22,000,000 - - 22,000,000 2,000,000 (ii) (i) Based on the Separation and Exit Deed signed with the Group, Mr Lowe is entitled to retain the 2,000,000 options issued to him. The Board has agreed to exercise its discretion to waive the vesting condition that Mr Lowe remains an employee. In conjunction with his appointment as Director, Mr Dyer was granted 4 million options. The exercise price of each Option is $0.036 and the Options expire on 27 May 2022. 2 million of the options vested immediately. The remaining 2 million vest in four equal tranches in 6 month intervals from the date of appointment. Mr Dyer has agreed to waive his annual base director fees of $50,000 per annum for the first two years of his directorship. The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2018 included: Model Input Grant Date Expiry Date Exercise Price $ 5-day VWAP at Grant Date $ Expected Volatility Risk Free Interest rate OP # 18-1 OP # 18-2 OP # 18-3 OP # 18-5 05/10/17 04/10/21 0.073 0.050 62.62% 1.83% 26/11/17 25/11/21 0.060 0.041 61.92% 1.83% 26/02/18 25/02/22 0.035 0.024 69.20% 1.99% 28/05/18 27/05/22 0.036 0.025 86.58% 2.02% Details of Share Options, ESOP and other rights to ordinary shares in the Group provided as remuneration of directors and the key management personnel of the Group are set out below: Name 2019 (Options) 2018 (Options) 2019 (Rights) 2018 (Rights) Number $ Number $ Number $ Number $ Options Granted During the Year Rights Vested During the Year Directors Mr A Giles Mr A Barlow Mr B Dixon Mr Q George Ms S Morgan Mr A Dyer Ms F Conlan Mr T Peacock Mr I Lowe Other Key Management Personnel - 1,000,000 19,600 250,000 31,250 250,000 31,250 - - - - - - - - 4,000,000 55,208 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7,500,000 84,722 - - 7,500,000 84,722 375,000 46,875 375,000 46,875 - 2,000,000 39,200 - - - - The assessed fair value at issue date of the rights, and the assessed fair value at grant date of the options, granted to the executive are allocated equally over the period from issue/grant date to vesting date, and the amount is included in the remuneration tables above. 22 Adslot 2019 Annual Report 13 14 Details of Share Options, ESOP and other rights to ordinary shares in the Group provided as remuneration of directors and the key management personnel of the Group are set out below: Name 2019 (Options) 2018 (Options) 2019 (Rights) 2018 (Rights) Number $ Number $ Number $ Number $ Options Granted During the Year Rights Vested During the Year Directors Mr A Giles Mr A Barlow Mr B Dixon Mr Q George Ms S Morgan Mr A Dyer Other Key Management Personnel Ms F Conlan Mr T Peacock Mr I Lowe - - - - - - - - - - - - - - - - - - - - - - - - 1,000,000 19,600 250,000 31,250 250,000 31,250 - - - - - - - - - 4,000,000 55,208 7,500,000 84,722 7,500,000 84,722 - 2,000,000 39,200 - - - - - - - - - - - - - - - - 375,000 46,875 - - - - 375,000 46,875 The assessed fair value at issue date of the rights, and the assessed fair value at grant date of the options, granted to the executive are allocated equally over the period from issue/grant date to vesting date, and the amount is included in the remuneration tables above. Adslot 2019 Annual Report 14 23 Remuneration Report (Continued) Section 6: Equity holdings and transactions The number of shares in the Group held during the financial year by each Director of Adslot Ltd and other key management personnel of the Group, including their personally related parties, are set out below: Other Director’s Report Disclosures Directors Andrew Barlow Executive Chairman Adrian Giles Non-Executive Director 2019 Name Balance at the start of the year Received during the year on exercise of an option or right Net other changes during the year Balance at the end of the year (Number) (Number) (Number) (Number) Directors Mr A Giles Mr A Barlow Mr B Dixon Mr Q George Ms S Morgan Mr A Dyer 7,571,452 35,674,668 37,353,660 - 200,500 21,659,342 Other key management personnel Ms F Conlan Mr T Peacock 500,000 3,228,807 - - 250,000 1,000,000 - - - 2,000,000 9,571,452 12,428,000 48,102,668 - 37,603,660 - - 1,000,000 200,500 14,000,000 35,659,342 - 500,000 375,000 (228,807) 3,375,000 Totals 106,188,429 1,625,000 28,199,193 136,012,622 Section 7: Other transactions with Key Management Personnel Transactions with Directors and their personally related entities: During the years ending 30 June 2019 and 30 June 2018 there were no transactions with Directors and their personally related entities. Information about the remuneration of directors and senior management is set out in the remuneration report This marks the end of the audited remuneration report. This report is made in accordance with a resolution of directors. Andrew Barlow Chairman 22 August 2019 24 Adslot 2019 Annual Report 15 16 Ben Dixon Sarah Morgan Andrew Dyer CEO & Executive Director Non-Executive Director Non-Executive Director Mr Andrew Barlow, Mr Adrian Giles, Mr Ben Dixon, Mr Quentin George, Ms Sarah Morgan and Mr Andrew Dyer were directors for the whole financial year and, with the exception of Mr Quentin George, up to the date of this report. Mr Quentin George resigned subsequent to year end on 16 July 2019. Directorships of other listed companies Other than those disclosed on page 8 to 9 of this Annual Report no director holds a Directorship in any other listed companies in the three year period immediately before the end of the financial year. The following table sets out each director’s relevant interest in shares or options in shares of the Group as at Directors’ shareholdings the date of this report. Directors Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Mr Quentin George (i) Ms Sarah Morgan Mr Andrew Dyer Ordinary # 48,102,668 9,571,452 37,603,660 1,000,000 200,500 35,659,342 Shares Share Rights Share Options ESOP Shares Performance Rights # - - - - - - # - - - - 1,000,000 4,000,000 # - - - - - - (i) Mr. George resigned as a Director on 16 July 2019. Remuneration of directors and senior management of this directors’ report. Directors’ Meetings The following table sets out the number of meetings of the Group’s Directors held during the year ended 30 June 2019 and the number of meetings attended by each Director. Directors Held Attended Held Attended Held Attended Board of Directors Remuneration Committee Audit and Risk Committee Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Mr Quentin George Ms Sarah Morgan Mr Andrew Dyer Principal activities 8 8 8 8 8 8 7 8 8 7 8 8 4 4 - 4 - - 4 4 - 4 - - - 5 - - 5 3 Adslot Ltd derives revenue from two principal activities: 1. Trading Technology - comprises Adslot, a leading global media trading technology platform, and Symphony, market-leading workflow automation technology for media agencies. 2. Services - comprises digital marketing services - provided by the Group’s Webfirm division - and project- based customisation of Trading Technology. # - - - - - - - 5 - - 5 5 Other Director’s Report Disclosures Directors Andrew Barlow Executive Chairman Adrian Giles Non-Executive Director Ben Dixon CEO & Executive Director Sarah Morgan Non-Executive Director Andrew Dyer Non-Executive Director Mr Andrew Barlow, Mr Adrian Giles, Mr Ben Dixon, Mr Quentin George, Ms Sarah Morgan and Mr Andrew Dyer were directors for the whole financial year and, with the exception of Mr Quentin George, up to the date of this report. Mr Quentin George resigned subsequent to year end on 16 July 2019. Directorships of other listed companies Other than those disclosed on page 8 to 9 of this Annual Report no director holds a Directorship in any other listed companies in the three year period immediately before the end of the financial year. Directors’ shareholdings The following table sets out each director’s relevant interest in shares or options in shares of the Group as at the date of this report. Directors Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Mr Quentin George (i) Ms Sarah Morgan Mr Andrew Dyer Ordinary Shares # 48,102,668 9,571,452 37,603,660 1,000,000 200,500 35,659,342 Share Rights Share Options ESOP Shares Performance Rights # - - - - - - # - - 1,000,000 - - 4,000,000 # - - - - - - # - - - - - - (i) Mr. George resigned as a Director on 16 July 2019. Remuneration of directors and senior management Information about the remuneration of directors and senior management is set out in the remuneration report of this directors’ report. Directors’ Meetings The following table sets out the number of meetings of the Group’s Directors held during the year ended 30 June 2019 and the number of meetings attended by each Director. Directors Held Attended Held Attended Held Attended Board of Directors Remuneration Committee Audit and Risk Committee Mr Andrew Barlow Mr Adrian Giles Mr Ben Dixon Mr Quentin George Ms Sarah Morgan Mr Andrew Dyer Principal activities 8 8 8 8 8 8 7 8 8 7 8 8 4 4 - 4 - - 4 4 - 4 - - - 5 - - 5 5 - 5 - - 5 3 Adslot Ltd derives revenue from two principal activities: 1. Trading Technology - comprises Adslot, a leading global media trading technology platform, and Symphony, market-leading workflow automation technology for media agencies. 2. Services - comprises digital marketing services - provided by the Group’s Webfirm division - and project- based customisation of Trading Technology. Adslot 2019 Annual Report 16 25 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Collins Square, Tower 5 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Adslot Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Adslot Ltd for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 22 August 2019 Items that may be reclassified subsequently to profit or loss Foreign exchange translation Total other comprehensive income / (loss) Total comprehensive loss attributable to the members (6,935,164) (11,657,455) Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Earnings per share (EPS) from loss from continuing operations attributable to the ordinary equity holders of the Group Basic earnings per share Diluted earnings per share The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 26 Adslot 2019 Annual Report Total revenue for services rendered Interest revenue Other income Total revenue from continuing operations Total revenue and other income Hosting & other related technology costs Employee benefits expense Directors’ fees Recruitment fees Advertising expense Lease – rental premises Impairment of receivables Listing & registrar fees Legal fees Travel expenses Consultancy fees Audit and accountancy fees Other expenses Share based payment expense Depreciation and amortisation expenses Total expenses Loss before income tax expense Income tax benefit / (expense) Loss after income tax expense Net loss attributable to members Other comprehensive income / (loss) Notes 4,10 3 3 3 3 3 4 4 4 22 4 5 17 17 2019 $ 9,839,017 55,144 9,894,161 377,468 10,271,629 (1,214,754) (7,817,748) (436,938) (106,649) (258,976) (1,024,336) (3,489) (87,620) (65,835) (367,553) (218,638) (196,012) (919,212) (118,127) 107,591 107,591 2019 Cents (0.49) (0.49) 2018 $ 6,912,447 160,017 7,072,464 940,825 8,013,289 (832,936) (8,943,887) (350,000) (99,935) (221,407) (958,707) (4,537) (92,392) (140,071) (420,995) (264,869) (185,744) (900,468) (777,804) (4,136) (4,136) 2018 Cents (0.91) (0.91) 18 (4,367,983) (5,442,959) (17,203,870) (19,636,711) (6,932,241) (11,623,422) (110,514) (29,897) (7,042,755) (11,653,319) (7,042,755) (11,653,319) Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Total revenue for services rendered Interest revenue Total revenue from continuing operations Other income Total revenue and other income Hosting & other related technology costs Employee benefits expense Directors’ fees Recruitment fees Advertising expense Lease – rental premises Impairment of receivables Listing & registrar fees Legal fees Travel expenses Consultancy fees Audit and accountancy fees Other expenses Share based payment expense Depreciation and amortisation expenses Total expenses Loss before income tax expense Income tax benefit / (expense) Loss after income tax expense Net loss attributable to members Other comprehensive income / (loss) Items that may be reclassified subsequently to profit or loss Foreign exchange translation Total other comprehensive income / (loss) Notes 3 3 3 3 3 4,10 4 4 4 22 4 5 2019 $ 9,839,017 55,144 9,894,161 377,468 10,271,629 (1,214,754) (7,817,748) (436,938) (106,649) (258,976) (1,024,336) (3,489) (87,620) (65,835) (367,553) (218,638) (196,012) (919,212) (118,127) 2018 $ 6,912,447 160,017 7,072,464 940,825 8,013,289 (832,936) (8,943,887) (350,000) (99,935) (221,407) (958,707) (4,537) (92,392) (140,071) (420,995) (264,869) (185,744) (900,468) (777,804) (4,367,983) (5,442,959) (17,203,870) (19,636,711) (6,932,241) (11,623,422) (110,514) (29,897) (7,042,755) (11,653,319) (7,042,755) (11,653,319) 107,591 107,591 (4,136) (4,136) Total comprehensive loss attributable to the members (6,935,164) (11,657,455) Earnings per share (EPS) from loss from continuing operations attributable to the ordinary equity holders of the Group Basic earnings per share Diluted earnings per share 17 17 2019 Cents (0.49) (0.49) 2018 Cents (0.91) (0.91) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Adslot 2019 Annual Report 18 27 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity As at 30 June 2019 Current assets Cash and cash equivalents Trade and other receivables Total current assets Non- current assets Property, plant & equipment Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Contract liabilities Lease Incentive Liability Provisions Total current liabilities Non- current liabilities Lease Incentive Liability Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Notes 2019 $ 2018 $ 7 8 9 5 10 11 12 13 14 13 14 5 15 16 8,165,544 6,424,659 4,775,331 5,471,925 14,590,203 10,247,256 601,239 36,370 832,833 36,370 22,886,434 23,202,768 23,524,043 24,071,971 38,114,246 34,319,227 6,538,788 2,925,743 374,781 146,300 658,736 445,491 60,248 587,150 7,718,605 4,018,632 323,110 439,041 36,370 798,521 555,463 360,763 36,370 952,596 8,517,126 4,971,228 29,597,120 29,347,999 145,838,216 138,397,710 649,149 712,654 (116,890,245) (109,762,365) 29,597,120 29,347,999 For the year ended 30 June 2019 2019 Balance at 1 July 2018 138,397,710 712,654 (109,762,365) 29,347,999 Adjustment from adoption of AASB 15 Adjusted balance at 1 July 2018 - (85,125) (85,125) 138,397,710 712,654 (109,847,490) 29,262,874 Notes 1(a) Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Reclassification of vested performance rights 15 16 Net movement in treasury shares Increase in employees share based payments reserve 16 107,591 107,591 - - 107,591 107,591 - (7,042,755) (7,042,755) 107,591 (7,042,755) (6,935,164) 7,151,283 184,223 105,000 - 7,440,506 - (184,223) (105,000) 118,127 (171,096) - - - - - 7,151,283 - - 118,127 7,269,410 Balance 30 June 2019 145,838,216 649,149 (116,890,245) 29,597,120 2018 Balance at 1 July 2017 137,949,047 389,929 (98,109,046) 40,229,930 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Notes Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Reclassification of vested performance rights 15 16 Net movement in treasury shares Increase in employees share based payments reserve 16 (4,136) (4,136) - - (4,136) (4,136) - (11,653,319) (11,653,319) (4,136) (11,653,319) (11,657,455) 412,119 36,544 448,663 - (414,399) (36,544) 777,804 326,861 - - - - - (2,280) - - 777,804 775,524 Balance 30 June 2018 138,397,710 712,654 (109,762,365) 29,347,999 - - - - - - - - - - - The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 28 Adslot 2019 Annual Report 19 20 Consolidated Statement of Changes in Equity For the year ended 30 June 2019 2019 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Notes Balance at 1 July 2018 138,397,710 712,654 (109,762,365) 29,347,999 Adjustment from adoption of AASB 15 1(a) - - (85,125) (85,125) Adjusted balance at 1 July 2018 138,397,710 712,654 (109,847,490) 29,262,874 Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) - - - - 107,591 107,591 - - 107,591 107,591 - (7,042,755) (7,042,755) 107,591 (7,042,755) (6,935,164) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Reclassification of vested performance rights 15 16 Net movement in treasury shares Increase in employees share based payments reserve 16 7,151,283 184,223 105,000 - 7,440,506 - (184,223) (105,000) 118,127 (171,096) - - - - - 7,151,283 - - 118,127 7,269,410 Balance 30 June 2019 145,838,216 649,149 (116,890,245) 29,597,120 2018 Balance at 1 July 2017 137,949,047 389,929 (98,109,046) 40,229,930 Issued Capital $ Reserves $ Accumulated Losses $ Total Equity $ Notes Movement in foreign exchange translation reserve 16 Other comprehensive income Loss attributable to members of the Group Total comprehensive income/(loss) Transactions with equity holders in their capacity as equity holders Contributions of equity, net of transaction costs Reclassification of vested performance rights 15 16 Net movement in treasury shares Increase in employees share based payments reserve 16 - - - - - 412,119 36,544 - 448,663 (4,136) (4,136) - - (4,136) (4,136) - (11,653,319) (11,653,319) (4,136) (11,653,319) (11,657,455) - (414,399) (36,544) 777,804 326,861 - - - - - - (2,280) - 777,804 775,524 Balance 30 June 2018 138,397,710 712,654 (109,762,365) 29,347,999 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Adslot 2019 Annual Report 20 29 Consolidated Statement of Cash Flows For the year ended 30 June 2019 Notes 2019 $ 2018 $ Cash flows from operating activities Receipts from trade and other debtors Interest received Receipt of R&D tax incentive and other Grants 17,401,152 8,276,865 56,077 733,145 157,478 768,439 Payments to trade creditors, other creditors and employees (19,300,249) (14,476,555) Interest paid - (60) Net cash outflows from operating activities 23 (1,109,875) (5,273,833) Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of fixed assets Receipt of R&D tax incentive relating to capitalised assets Payments for intangible assets (33,109) (134,740) - 2,265,149 (5,021,387) 330 1,921,946 (6,068,636) Net cash outflows from investing activities (2,789,347) (4,281,100) The adoption of AASB 15 has affected the following areas which are associated with the Webfirm business: Cash flows from financing activities Proceeds from issue of shares Payments of equity raising costs Net cash inflows from financing activities Net increase / (decrease) in cash held Cash at the beginning of the financial year Effects of exchange rate changes on cash 7,500,000 (392,949) 7,107,051 3,207,829 4,775,331 182,384 - - - (9,554,933) 14,320,147 10,117 Cash at the end of the financial year 7 8,165,544 4,775,331 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 30 Adslot 2019 Annual Report 21 22 Notes to the Financial Statements For the year ended 30 June 2019 1. Sum m ary of Significant Accounting Policies The financial report covers Adslot Ltd (‘the Company’) and controlled entities (‘the Group’). Adslot Ltd is a listed public company, incorporated and domiciled in Australia. The financial report is for the financial year ended 30 June 2019 and is presented in Australian dollars. The principal accounting policies adopted in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) New or amended Accounting Standards and Interpretations adopted The group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the group. Any new, revised or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. AASB 15 Revenue from Contracts with Customers AASB 15 replaced AASB 118 which covered revenue arising from the sale of goods and the rendering of services and AASB 111 which covered construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard was adopted on 1 July 2018 using the modified retrospective approach. Search Engine Optimization (SEO) revenues The Group has historically recognised 30% of annual SEO contracts upfront to reflect the initial work involved. However, there is no specific performance obligation nor is there an identifiable transaction price for this initial work. As such, and in accordance with AASB 15, revenue arising from this upfront work needs to be recognised over time as clients simultaneously receive the service and the Group satisfies its performance obligations. On initial adoption on 1 July 2018, the Group increased deferred revenue by $117,195 and adjusted the retained earnings by the same amount. Domain Name Registration (DNR) and SSL Certification revenues DNR services is provided by the Group where the client’s domain name is registered for 2 years with a third- party registry. SSL Certification services involves obtaining annual SSL Certificates on behalf of the client from a third party and installing in the client’s website. Historically these revenues have been recognised over time. For both DNR and SSL certification, on initial set up the service has been delivered in full to the customer; and the customer is able to realize benefit from service received without further involvement from the Group. Furthermore, the Group separately prices and sells these products. There are no further performance obligations for the Group. Therefore, as per AASB 15, the Group needs to recognise revenue at a point of time, not over a period of time. On initial adoption on 1 July 2018 the Group reduced deferred revenue by $25,620 for Domain Names Registration and $6,450 for SSL certification and adjusted the retained earnings by the same amounts. Notes to the Financial Statements For the year ended 30 June 2019 1. Sum m ary of Significant Accounting Policies The financial report covers Adslot Ltd (‘the Company’) and controlled entities (‘the Group’). Adslot Ltd is a listed public company, incorporated and domiciled in Australia. The financial report is for the financial year ended 30 June 2019 and is presented in Australian dollars. The principal accounting policies adopted in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) N ew or amended Accounting Standards and Interpretations adopted The group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the group. Any new, revised or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. AASB 15 Revenue from Contracts with Customers AASB 15 replaced AASB 118 which covered revenue arising from the sale of goods and the rendering of services and AASB 111 which covered construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard was adopted on 1 July 2018 using the modified retrospective approach. The adoption of AASB 15 has affected the following areas which are associated with the Webfirm business: Search Engine Optimization (SEO) revenues The Group has historically recognised 30% of annual SEO contracts upfront to reflect the initial work involved. However, there is no specific performance obligation nor is there an identifiable transaction price for this initial work. As such, and in accordance with AASB 15, revenue arising from this upfront work needs to be recognised over time as clients simultaneously receive the service and the Group satisfies its performance obligations. On initial adoption on 1 July 2018, the Group increased deferred revenue by $117,195 and adjusted the retained earnings by the same amount. Domain Name Registration (DNR) and SSL Certification revenues DNR services is provided by the Group where the client’s domain name is registered for 2 years with a third- party registry. SSL Certification services involves obtaining annual SSL Certificates on behalf of the client from a third party and installing in the client’s website. Historically these revenues have been recognised over time. For both DNR and SSL certification, on initial set up the service has been delivered in full to the customer; and the customer is able to realize benefit from service received without further involvement from the Group. Furthermore, the Group separately prices and sells these products. There are no further performance obligations for the Group. Therefore, as per AASB 15, the Group needs to recognise revenue at a point of time, not over a period of time. On initial adoption on 1 July 2018 the Group reduced deferred revenue by $25,620 for Domain Names Registration and $6,450 for SSL certification and adjusted the retained earnings by the same amounts. Adslot 2019 Annual Report 22 31 Notes to the Financial Statements Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Going concern Summary of Significant Accounting Policies (Continued) 1. 1. Summary of Significant Accounting Policies (Continued) (a) New or amended Accounting Standards and Interpretations adopted (Continued) (c) On the date of the initial application of AASB15, 1 July 2018, the impact to retained earnings of the Group is as follows: Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. $ Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from - operations until such time as sufficient revenue growth is achieved. Accumulated Losses Search Engine Optimization (SEO) Other Equity Total Equity Impact Area (117,195) (117,195) $ $ SSL Certification Domain Name Registration (DNR) - As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to - the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management - believe its FY16 R&D claim is consistent with the criteria of the scheme. (85,125) (85,125) 25,620 25,620 Total 6,450 6,450 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 On 1 July 2018 unearned income under Other Liabilities were reclassified as Contract Liabilities; as such R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its other liabilities decreased by $445,491 and contract liabilities increased by $360,366. ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. The tables below highlight the impact of AASB 15 on the Group’s statement of profit or loss and other However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due comprehensive income and the statement of financial position for the period ending 30 June 2019. The for the following reasons: adoption of AASB 15 did not have an impact on the Group’s statement of cash flows. Consolidated Statement of Profit or Loss and Other Comprehensive Income (Extract) the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Amounts under AASB 118 & 111 $ Total revenue from continuing operations • • • • • 9,855,289 Loss after income tax expense (7,081,627) Adjustments $ 38,872 38,872 Amounts under AASB 15 $ 9,894,161 (7,042,755) Total comprehensive income for the year (6,935,164) Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (6,974,036) 38,872 Consolidated Statement of Financial Position (Extract) (d) Principles of consolidation Amounts under AASB 118 & 111 $ Adjustments $ Amounts under AASB 15 $ Subsidiaries CURRENT LIABILITIES Unearned income The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable - returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. 374,781 Contract liabilities (328,528) 328,528 374,781 - NET ASSETS TOTAL LIABILITIES 8,517,126 All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are 29,597,120 reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. (116,890,245) Accumulated losses (116,843,992) 29,643,373 EQUITY 8,470,873 (46,253) (46,253) 46,253 29,597,120 TOTAL EQUITY Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 29,643,373 (46,253) 32 Adslot 2019 Annual Report 25 23 24 Notes to the Financial Statements For the year ended 30 June 2019 AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement requirements. It addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial The group adopted AASB 9 using a modified retrospective approach. The new standard has no impact on the Group’s current classification, measurement and derecognition of financial assets and liabilities. The Group does not have any debt instruments, available-for sale financial assets or any hedging agreements. For trade and other receivables the Group applies the simplified approach permitted by AASB 9, whereby the loss allowance is measured at an amount equal to lifetime expected credit losses. Lifetime expected credit loss is the amount the Group expects to lose due to default events that are possible over the life of the financial instrument. There was no impact on the impairment of trade receivables on adoption of assets. AASB 9. This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and Australian Accounting Standards include International Financial Reporting Standards as adopted in Australia. Compliance with Australian Accounting Standards ensures that the financial statements and notes of Adslot Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Adslot Ltd is a for-profit entity for the purpose of preparing the financial (b) Basis of preparation the Corporations Act 2001. Compliance with IFRS statements. Historical cost convention These financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets. Under the historical cost convention assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Notes to the Financial Statements For the year ended 30 June 2019 AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement requirements. It addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The group adopted AASB 9 using a modified retrospective approach. The new standard has no impact on the Group’s current classification, measurement and derecognition of financial assets and liabilities. The Group does not have any debt instruments, available-for sale financial assets or any hedging agreements. For trade and other receivables the Group applies the simplified approach permitted by AASB 9, whereby the loss allowance is measured at an amount equal to lifetime expected credit losses. Lifetime expected credit loss is the amount the Group expects to lose due to default events that are possible over the life of the financial instrument. There was no impact on the impairment of trade receivables on adoption of AASB 9. (b) Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Compliance with IFRS Australian Accounting Standards include International Financial Reporting Standards as adopted in Australia. Compliance with Australian Accounting Standards ensures that the financial statements and notes of Adslot Ltd comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Adslot Ltd is a for-profit entity for the purpose of preparing the financial statements. Historical cost convention These financial statements have been prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets. Under the historical cost convention assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business. Critical accounting estimates The preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates. The estimates and associated assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Adslot 2019 Annual Report 24 33 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) Business combinations (c) (c) Going concern Going concern Management continues to invest resources to support growth in trading fees, primarily from holding Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. operations until such time as sufficient revenue growth is achieved. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. believe its FY16 R&D claim is consistent with the criteria of the scheme. If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: for the following reasons: • • • • • • • • • • the Group had a cash position of $8.2 million at 30 June 2019; the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the ongoing cost management program; the opportunity to implement further cost reductions; and the opportunity to implement further cost reductions; and the ability to raise additional capital. the ability to raise additional capital. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) (d) Principles of consolidation Principles of consolidation Subsidiaries Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. in Note 25. Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. The Group recognises identifiable assets and liabilities assumed in the business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. Goodwill is stated after separate recognition of identifiable intangible assets calculated as the excess of the sum of the fair value of the consideration transferred over the acquisition date fair value of identifiable net assets. If the identifiable net assets exceed the consideration transferred, the excess amount is recognised in profit or loss immediately. Any deferred settlement of cash consideration is discounted to its present value as at the date of acquisition. The discount rate used is the incremental borrowing rate that the Group can obtain from an independent financier under comparable terms and conditions. Foreign Currency Exchange In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Exchange differences are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the reporting date. Income and expense items are translated at the closing exchange rates for the period. Exchange differences arising, if any, are charged/credited to other comprehensive income and recognised in the Group’s foreign currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. (e) C ash and cash equivalents For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are not subject to significant risk of changes in value, net of bank overdrafts. Publisher Account Cash represents share of advertising revenue held before release to Adslot Publishers. 34 Adslot 2019 Annual Report 25 25 26 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Business combinations Acquisition of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. The Group recognises identifiable assets and liabilities assumed in the business combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior to acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition date fair values. Goodwill is stated after separate recognition of identifiable intangible assets calculated as the excess of the sum of the fair value of the consideration transferred over the acquisition date fair value of identifiable net assets. If the identifiable net assets exceed the consideration transferred, the excess amount is recognised in profit or loss immediately. Any deferred settlement of cash consideration is discounted to its present value as at the date of acquisition. The discount rate used is the incremental borrowing rate that the Group can obtain from an independent financier under comparable terms and conditions. Foreign Currency Exchange In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the reporting date. Exchange differences are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars at exchange rates prevailing on the reporting date. Income and expense items are translated at the closing exchange rates for the period. Exchange differences arising, if any, are charged/credited to other comprehensive income and recognised in the Group’s foreign currency translation reserve in equity. On disposal of a foreign operation the cumulative translation difference recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. (e) C ash and cash equivalents For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and deposits at call which are readily convertible to cash and are not subject to significant risk of changes in value, net of bank overdrafts. Publisher Account Cash represents share of advertising revenue held before release to Adslot Publishers. Adslot 2019 Annual Report 26 35 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (j) Finance costs (c) (f) Going concern Property, plant and equipment Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a qualifying asset in which case the finance costs are capitalised as part of the 33– 40% per annum 20 – 33% per annum Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Management continues to invest resources to support growth in trading fees, primarily from holding The carrying values of property, plant and equipment are reviewed for impairment when events or changes companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised in circumstances indicate the carrying value may not be recoverable. Leasehold improvements are $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. depreciated using the straight-line method over the remaining period of the underlying lease. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Depreciation is calculated on a straight-line basis for all plant and equipment. The estimated useful lives, inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from residual values and depreciation method are reviewed at the end of each annual reporting period, with the operations until such time as sufficient revenue growth is achieved. effect of any changes recognised on a prospective basis. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management as the difference between the sales proceeds and the carrying amount of asset and is recognised in profit or believe its FY16 R&D claim is consistent with the criteria of the scheme. loss. The following depreciation rates are used for each class of depreciable asset: If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 Computer Equipment R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its Plant & Equipment ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. asset. (k) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a 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 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. Deferred tax liabilities are always provided for in full. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised future. directly in equity. Tax consolidation legislation Adslot Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Adslot Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. To the extent that it is not probable that taxable profit will be available in the foreseeable future against which the unused tax losses or unused tax credits can be utilised, the deferred tax assets of its own and its controlled entities are not recognised by Adslot Ltd. Leasehold Improvements However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: 20 – 100% per annum Receivables the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. • (g) • • Trade receivables are recognised initially at fair value and thereafter are measured at amortised cost, less • provision for impairment. They are non-derivative financial assets with fixed or determinable amounts not • quoted in an active market. Trade accounts receivable are generally settled between 14 and 60 days and carried at amounts recoverable. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible its debts as and when they fall due, and the financial report has been prepared on a going concern basis. are written off. The Group makes use of a simplified approach in accounting for trade receivables and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. The amount of the expected credit loss is recognised in profit or loss. (d) Subsequent recoveries of amounts previously written off are credited against the allowance account. Principles of consolidation Subsidiaries Trade and other creditors – financial liabilities The consolidated financial statements comprise those of the Group, and the entities it controlled at the end (h) of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power Trade accounts payable and other creditors represent liabilities for goods and services provided to the Group over the subsidiary. prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are Financial liabilities are measured subsequently at amortised cost using the effective interest method. reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing (i) the financial statements have been consistently applied by entities in the Group. Borrowings Borrowings are initially recognised at fair value (less transaction costs) and subsequently measured at Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information amortised cost. Any difference between the proceeds and the redemption amount is recognised in profit or in Note 25. loss over the period of the borrowing using the effective interest method. 36 Adslot 2019 Annual Report 25 27 28 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (j) Finance costs Finance costs are recognised as expenses in the period in which they are incurred except where they are incurred in the construction of a qualifying asset in which case the finance costs are capitalised as part of the asset. (k) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a 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 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. Deferred tax liabilities are always provided for in full. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax consolidation legislation Adslot Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Adslot Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. To the extent that it is not probable that taxable profit will be available in the foreseeable future against which the unused tax losses or unused tax credits can be utilised, the deferred tax assets of its own and its controlled entities are not recognised by Adslot Ltd. Adslot 2019 Annual Report 28 37 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (c) (l) Going concern Employee benefits Wages and salaries, annual leave and sick leave Management continues to invest resources to support growth in trading fees, primarily from holding Short-term employee benefits are current liabilities included in employee benefits, measured at the companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised undiscounted amount that the Group expects to pay as a result of the unused entitlement. Annual leave is $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. included in ‘provisions’. The Group does not discount the leave liability calculations as the Group expects all Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash annual leave for all employees to be used wholly within 12 months of the end of reporting period. inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to in provisions for employee entitlements and is measured at the amount expected to be paid when the the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management liabilities are settled. The liability for long service leave expected to be settled more than 12 months from the believe its FY16 R&D claim is consistent with the criteria of the scheme. reporting date, is recognised in the non-current provision for employee benefits and is measured as the If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 present value of the estimated future cash outflows to be made by the Group in respect of services provided R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its by employees up to reporting date. ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Share-based compensation benefits However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Equity-settled share-based payments with employees and others providing similar services are measured at for the following reasons: the fair value of the equity instrument at the grant date. The fair value at grant date is determined using a • binomial option pricing model that takes into account the exercise price, the term of the option, the impact of • dilution, the share price at grant date, the expected price volatility of the underlying share, the expected • dividend yield and the risk-free interest rate for the term of the option. • The fair value determined at the grant date of the equity-settled share-based payments is recognised as an • expense, with a corresponding increase in equity (share-based payments reserve) on a straight line basis over the vesting period. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay Upon the exercise of options, the balance of the share-based payments reserve relating to those options is its debts as and when they fall due, and the financial report has been prepared on a going concern basis. transferred to share capital while the proceeds received, net of any directly attributable transaction costs, are credited to share capital. the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (m) Intangible Assets Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (acquisition date). Goodwill is measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment at least on an annual basis. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Research and development expenditure Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related The carrying value of an intangible asset arising from development costs is tested for impairment annually when the asset is not yet available for use or more frequently when an indicator of impairment arises during project. the reporting period. Intellectual property The intellectual property relates to the platform technology, branding and domains acquired as a result of the acquisition of Adslot, QDC IP Technology and Facilitate Digital businesses. Where the useful life is assessed as indefinite, assets are not amortised and the carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. It is carried at cost less impairment losses. For those assets assessed as having a finite life, they are amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of intellectual property relating to the Adslot, QDC IP Technology and Facilitate Digital business is 4 to 5 years. Domain name Software Acquired domain names are accounted for at cost, useful life is assessed as indefinite and the assets are not amortised. The carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. They are carried at cost less impairment losses. Software represents internally developed software platforms capitalised according to accounting standards. Software is assessed as having a finite life and is amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of software is 5 years. The carrying value of the software is tested for impairment when an indicator of impairment arises during the reporting period. 38 Adslot 2019 Annual Report 25 29 30 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (m) Intangible Assets Goodwill Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (acquisition date). Goodwill is measured as the excess of the fair value of consideration paid over the fair value of the identifiable net assets of the entity or operations acquired. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment at least on an annual basis. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Research and development expenditure Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related project. The carrying value of an intangible asset arising from development costs is tested for impairment annually when the asset is not yet available for use or more frequently when an indicator of impairment arises during the reporting period. Intellectual property The intellectual property relates to the platform technology, branding and domains acquired as a result of the acquisition of Adslot, QDC IP Technology and Facilitate Digital businesses. Where the useful life is assessed as indefinite, assets are not amortised and the carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. It is carried at cost less impairment losses. For those assets assessed as having a finite life, they are amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of intellectual property relating to the Adslot, QDC IP Technology and Facilitate Digital business is 4 to 5 years. Domain name Acquired domain names are accounted for at cost, useful life is assessed as indefinite and the assets are not amortised. The carrying value is tested for impairment annually or more frequently if events or changes in circumstances indicate impairment. They are carried at cost less impairment losses. Software Software represents internally developed software platforms capitalised according to accounting standards. Software is assessed as having a finite life and is amortised on a straight-line basis over the estimated useful life of the asset. The expected accounting useful life of software is 5 years. The carrying value of the software is tested for impairment when an indicator of impairment arises during the reporting period. Adslot 2019 Annual Report 30 39 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (p) Revenue recognition (c) (n) Going concern Leased assets Leases of assets under which the Group assumes substantially all the risks and benefits of ownership are Management continues to invest resources to support growth in trading fees, primarily from holding classified as finance leases. This is distinct from operating leases under which the lessor effectively retains companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised substantially all such risks and benefits. Property, plant and equipment acquired by finance leases are $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. capitalised at the present value of the minimum lease payments as a finance lease asset and as a Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash corresponding lease liability from date of inception of the lease. Lease assets are amortised over the period inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from the entity is expected to benefit from the use of the assets or the term of the lease, whichever is shorter. operations until such time as sufficient revenue growth is achieved. Finance lease liabilities are reduced by the component of principal repaid. Lease payments are allocated between the principal component of the liability and interest expense. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Operating lease payments are charged to statement of profit or loss and other comprehensive income on a the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management straight-line basis over the period of the lease term. Associated costs such as maintenance and insurance believe its FY16 R&D claim is consistent with the criteria of the scheme. are expensed as incurred. If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. (o) However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except: for the following reasons: Goods and services tax the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; part of the cost of acquisition of an asset or as part of an item of expense; or the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. • i. Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as • • • ii. For receivables and payables which are recognised inclusive of GST. • The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. The Group derives revenue from trading technology and services. To determine whether to recognise revenue, the Group follows a 5-step process: 1. 2. Identifying the contract with a customer Identifying the performance obligations 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied The Group often enters into transactions involving a range of the Group’s products and services. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Revenue is recognised for the major business activities as follows: Revenue from Trading Technology - Licence Fees Adslot and Symphony licence fees are derived by providing customers access to the Group’s technology platforms. The fee is based on either annual contracted amounts, the number of users, a tier system based on historical volumes traded on the platform, and/or resources allocated. The contracts are ongoing but cancellable with defined notice periods. The Group is expected to maintain its performance obligations throughout the contracted period for the client to achieve the benefits of the platforms. As per AASB 15, revenue is recognised over time; since the promise to grant a licence as a performance obligation is satisfied over time. The client simultaneously receives and consumes the benefit from the Group’s performance of providing access to the platforms. Revenue from Trading Technology – Trading Fees Adslot Publisher revenues are recognised over time. Only the portion of the media campaign that is retained by the Group for their services is recorded as revenue. This is typically a percentage of the total media transacted on the Adslot platform. Where media campaigns are realised over a period a time, the portion that extends beyond the reporting period is not taken up as revenue as the performance obligations have not been satisfied. Where the funds for these campaigns are prepaid by advertisers those amounts are treated as contract liabilities in the Consolidated Statement of Financial Position. As the fees are usage-based revenues the revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Funds collected or collectable from advertisers and due to be repaid to publisher clients are disclosed in the accounts as publisher creditors and categorised under Trade and other payables in the Consolidated Statement of Financial Position. Symphony trading fees are charged for the use of the Symphony platform as a workflow solution. The fee is based on a percentage fee calculated from the total transacted value of campaigns. As per AASB 15, revenue is recognised over time when the usage occurs and the performance obligations are satisfied. 40 Adslot 2019 Annual Report 25 31 32 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (p) Revenue recognition The Group derives revenue from trading technology and services. To determine whether to recognise revenue, the Group follows a 5-step process: Identifying the contract with a customer Identifying the performance obligations 1. 2. 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied The Group often enters into transactions involving a range of the Group’s products and services. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties. Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised services to its customers. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as contract liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. Revenue is recognised for the major business activities as follows: Revenue from Trading Technology - Licence Fees Adslot and Symphony licence fees are derived by providing customers access to the Group’s technology platforms. The fee is based on either annual contracted amounts, the number of users, a tier system based on historical volumes traded on the platform, and/or resources allocated. The contracts are ongoing but cancellable with defined notice periods. The Group is expected to maintain its performance obligations throughout the contracted period for the client to achieve the benefits of the platforms. As per AASB 15, revenue is recognised over time; since the promise to grant a licence as a performance obligation is satisfied over time. The client simultaneously receives and consumes the benefit from the Group’s performance of providing access to the platforms. Revenue from Trading Technology – Trading Fees Adslot Publisher revenues are recognised over time. Only the portion of the media campaign that is retained by the Group for their services is recorded as revenue. This is typically a percentage of the total media transacted on the Adslot platform. Where media campaigns are realised over a period a time, the portion that extends beyond the reporting period is not taken up as revenue as the performance obligations have not been satisfied. Where the funds for these campaigns are prepaid by advertisers those amounts are treated as contract liabilities in the Consolidated Statement of Financial Position. As the fees are usage-based revenues the revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Funds collected or collectable from advertisers and due to be repaid to publisher clients are disclosed in the accounts as publisher creditors and categorised under Trade and other payables in the Consolidated Statement of Financial Position. Symphony trading fees are charged for the use of the Symphony platform as a workflow solution. The fee is based on a percentage fee calculated from the total transacted value of campaigns. As per AASB 15, revenue is recognised over time when the usage occurs and the performance obligations are satisfied. Adslot 2019 Annual Report 32 41 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (p) Revenue recognition (Continued) Going concern (c) Rendering of services Management continues to invest resources to support growth in trading fees, primarily from holding Service revenue is recognised at a point in time or over time based on when the performance obligations are companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised met, and the customer can realise benefit from service received without further involvement from the Group. $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Symphony services revenue is derived as a once off Symphony activation fee or custom development work. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash The revenue is recognised at a point in time when the Group has completed its performance obligation and inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from the customer has obtained the ability to direct the use of, and obtain substantially all of the remaining operations until such time as sufficient revenue growth is achieved. benefits from, the work carried out. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Website development revenue is recorded based on project delivery revenue over time as the project is the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management completed. All projects are assigned percentages of project completion (based on actual work in progress) believe its FY16 R&D claim is consistent with the criteria of the scheme. and all website development revenue applicable to percentage of incomplete work is recorded as contract liabilities . As such revenue is recognised over time when the performance obligations are met and when the If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 Group receives a right to payment for performance completed to date. R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Search Engine Optimisation and Search Engine Advertising attempts to improve search engine rankings of the client’s website or bid on certain keywords in order for their clickable ads to appear in search results. However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due These are ongoing contracts and can be cancelled with 90 days’ notice. The Group needs to continuously for the following reasons: manage these campaigns; as such the revenue is recognised over time as the clients simultaneously receive • the service and the Group satisfies its performance obligations. • Hosting revenue is derived for hosting the client’s websites in third party cloud servers managed by the • Group. These contracts are ongoing and can be cancelled with 90 days’ notice. Clients may pay upfront • annually. The Group needs to continually satisfy the performance obligations of hosting the site and provide • customer support, as and when required. Therefore, revenue is recognised over time. the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. For Domain Names Registration and SSL Certification at the time of initial activation the service has been Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay transferred in full to the customer; and the customer is able to realise benefits from services received without its debts as and when they fall due, and the financial report has been prepared on a going concern basis. further involvement from the Group. Furthermore, the Group separately prices and sells these products. There is no further performance obligation for the Group. As such revenue needs to be recognised at a point in time. (d) Interest revenue Principles of consolidation Subsidiaries Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount can be measured reliably, taking into account the effective yield on the financial asset. The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable Government grants returns from its involvement with the subsidiary and has the ability to affect those returns through its power In accordance with AASB 120, government grants are recognised at fair value where there is reasonable over the subsidiary. assurance that the grant will be received and all grant conditions will be met. Where appropriate grants All intra-group transactions, balances, income and expenses between entities in the Group included in the relating to expense items are recognised as other income in reporting the related expense, over the periods financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. deferred income and are amortised on a straight line basis over the expected lives of the assets. Where an entity either began or ceased to be controlled during the year, the results are included only from Sale of non-current assets the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. The net gain from the sale of non-current asset sales is recognised as income at the date control of the asset passes to the buyer, usually when the signed contract of sale becomes unconditional. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (q) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through the profit or loss statement, and which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified as financial assets at amortised cost. Classifications are determined by both: • The entity’s business model for managing the financial asset; and • The contractual cash flow characteristics of the financial assets. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as financial assets at fair value through profit and loss): they are held within a business model whose objective is to hold the financial assets and collect its • • contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as government bonds. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward- looking information to calculate the expected credit losses. Trade and other receivables and contract assets are subject to review at least at each reporting date to identify expected credit losses. other than trade and other receivables. At reporting date and throughout the reporting period the Group did not have any other financial instruments 42 Adslot 2019 Annual Report 25 33 34 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (q) Financial Instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through the profit or loss statement, and which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified as financial assets at amortised cost. Classifications are determined by both: • The entity’s business model for managing the financial asset; and • The contractual cash flow characteristics of the financial assets. All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as financial assets at fair value through profit and loss): • • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments as well as government bonds. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward- looking information to calculate the expected credit losses. Trade and other receivables and contract assets are subject to review at least at each reporting date to identify expected credit losses. At reporting date and throughout the reporting period the Group did not have any other financial instruments other than trade and other receivables. Adslot 2019 Annual Report 34 43 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (v) Segment reporting (c) (r) Going concern Leasehold improvements The cost of improvements to leasehold properties is amortised over the unexpired period of the lease or the Management continues to invest resources to support growth in trading fees, primarily from holding estimated useful life of the improvement to the Group, whichever is the shorter. companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from (s) operations until such time as sufficient revenue growth is achieved. Basic earnings per share Earnings per share As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Basic earnings per share for continuing operations and total operations attributable to members of the Group the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management are determined by dividing net profit after income tax from continuing operations and the net profit believe its FY16 R&D claim is consistent with the criteria of the scheme. attributable to members of the Group respectively, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period. The If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 number of shares used in the calculation at any time during the period is based on the physical number of R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its shares issued. ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Diluted earnings per share However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential • the Group had a cash position of $8.2 million at 30 June 2019; ordinary shares and the weighted average number of shares assumed to have been issued for no • strong Symphony licence fees to continue in FY20; consideration in relation to dilutive potential ordinary shares. • the ongoing cost management program; • the opportunity to implement further cost reductions; and • the ability to raise additional capital. (t) Dividends Provision is made for the amount of any dividend determined or recommended by the directors on or before Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay the end of the financial year but not distributed at reporting date. its debts as and when they fall due, and the financial report has been prepared on a going concern basis. Impairment of assets Principles of consolidation (u) (d) Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are Subsidiaries tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances The consolidated financial statements comprise those of the Group, and the entities it controlled at the end indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher returns from its involvement with the subsidiary and has the ability to affect those returns through its power of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets over the subsidiary. are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely All intra-group transactions, balances, income and expenses between entities in the Group included in the independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. each reporting date. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Chief Executive Officer. Each of the operating segments is managed separately as each of these service lines requires different technologies, service different clients and sells different products. All inter-segment transactions are carried out at arm’s length prices. The Group reports its segments based on geographical locations: • APAC – Australia, New Zealand and Asia; • EMEA – Europe, the Middle East and Africa; and • The Americas – North, Central and South America. (w) Provisions, contingent assets and contingent liabilities Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group is virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. (x) Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying the entity’s accounting policies The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements: Revenue recognition In web development and web hosting business operations, management assesses stage of completion of each project and recognises revenue in the period in which development work is undertaken. In making its judgement, management considered the standard duration of such contracts, stage of progress in contracts and commencement date of such contracts. Accordingly, management has deferred recognising some web development and web hosting revenue of an estimated value of services to be rendered in the future. 44 Adslot 2019 Annual Report 25 35 36 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (v) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Chief Executive Officer. Each of the operating segments is managed separately as each of these service lines requires different technologies, service different clients and sells different products. All inter-segment transactions are carried out at arm’s length prices. The Group reports its segments based on geographical locations: • APAC – Australia, New Zealand and Asia; • EMEA – Europe, the Middle East and Africa; and • The Americas – North, Central and South America. (w) Provisions, contingent assets and contingent liabilities Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Group and amounts can be estimated reliably. The timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan’s main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Group is virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. (x) Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying the entity’s accounting policies The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements: Revenue recognition In web development and web hosting business operations, management assesses stage of completion of each project and recognises revenue in the period in which development work is undertaken. In making its judgement, management considered the standard duration of such contracts, stage of progress in contracts and commencement date of such contracts. Accordingly, management has deferred recognising some web development and web hosting revenue of an estimated value of services to be rendered in the future. Adslot 2019 Annual Report 36 45 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) (y) New standards and interpretations issued but not effective (x) Critical accounting (c) (Continued) Going concern judgements and key sources of estimation uncertainty The following new or amendments to existing standards have been published and are mandatory for accounting periods beginning on or after 1 July 2019 or later periods, but have not yet been adopted by the Management continues to invest resources to support growth in trading fees, primarily from holding Key sources of estimation uncertainty companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised The following are the key assumptions concerning the future and other key estimation uncertainty at the $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash and liabilities within the next financial year. inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. Impairment of goodwill and intangible assets Determining whether goodwill and intangible assets are impaired requires an estimation of the fair value less As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to costs to sell of the cash-generating units to which goodwill and intangible assets have been allocated. Under the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management the market-based approach for fair value less costs to sell calculations, the entity is required to estimate the believe its FY16 R&D claim is consistent with the criteria of the scheme. amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its The Group’s shares are traded on the Australian Stock Exchange, and in the absence of a binding sale ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. agreement, the year-end share price is used to calculate the asset’s market value. However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due In the event the share price falls an impairment of the related intangible assets may result. for the following reasons: The carrying amount of goodwill and intangible assets at the reporting date was $22,886,434 (2018: • the Group had a cash position of $8.2 million at 30 June 2019; $23,202,768) and there were no impairment losses (2018: nil) recognised during the current financial year. • strong Symphony licence fees to continue in FY20; Refer to Note 10 for further details. • the ongoing cost management program; Capitalisation of internally developed software • the opportunity to implement further cost reductions; and • the ability to raise additional capital. Distinguishing the research and development phases of software projects and determining whether the recognition requirements for the capitalisation of development costs are met, requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay there are any indicators that capitalised costs may be impaired. its debts as and when they fall due, and the financial report has been prepared on a going concern basis. The capitalisation of internally developed software amount for the year was $3,792,752 (2018: $3,666,409). Refer to Note 10 for further details. Principles of consolidation Share based payments (d) The calculation of the fair value of options issued requires significant estimates to be made in regards to Subsidiaries several variables such as volatility and the probability of options reaching their vesting period. The The consolidated financial statements comprise those of the Group, and the entities it controlled at the end estimations made are subject to variability that may alter the overall fair value determined. The share based of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable payment expense for the year was $118,127 (2018: $777,804). returns from its involvement with the subsidiary and has the ability to affect those returns through its power Unrecognised deferred tax assets over the subsidiary. As disclosed in Note 5, the Group recognises deferred tax assets relating to temporary differences, capital All intra-group transactions, balances, income and expenses between entities in the Group included in the losses or operating losses when it is probable that they will be able to be utilised in future reporting periods. financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are Due to the continuing operating losses, the Directors have determined it is not appropriate to recognise reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. deferred tax assets until a point in time where it is probable that future taxable income is going to be Where an entity either began or ceased to be controlled during the year, the results are included only from available to utilise the assets. The tax benefit of deferred tax assets not recognised is $9,600,762 (2018: the date control commenced or up to the date control ceased. The accounting policies adopted in preparing $10,541,711). Refer to Note 5 for further details. the financial statements have been consistently applied by entities in the Group. Research and development tax concessions Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. A receivable of $2,051,661 (2018: $3,279,573) has been recognised in relation to a research and development tax concession for the 2019 financial year. Refer to Note 8 for further details. The actual claim is yet to be submitted with the Australian Tax Office and therefore there remains some uncertainty in regards to the quantum of the concession to be received. The financial statements reflect the Directors’ estimate of the receivable after taking into account the likelihood of each component of the claim being received. Group. AASB 16 Leases balance sheet. AASB 16 was issued in February 2016 and is applicable for reporting periods beginning on or after 1 January 2019. The new standard replaces the current standard AASB 117 Leases and for lessees will eliminate the classifications of operating leases and finance leases. The objective of AASB 16 is to improve transparency on financial leverage and capital employed by bringing all lease assets and liabilities onto the Subject to exceptions, a 'right-of-use' asset and lease liability are recognised at the commencement of the lease. The right-of-use asset is recognised at an amount that is equivalent to the initial measurement of the lease liability, adjusted for lease prepayments, lease incentives received, initial direct costs incurred, and an estimate of any future restoration, removal or dismantling costs. The lease liability is recognised at the present value of future lease payments comprising fixed lease payments less incentives, variable lease payments, residual guarantees payable, payment of purchase options where exercise is reasonably certain, and any anticipated termination penalties. The lease payments are discounted at the rate implicit in the lease, or where not readily determinable, the entity's incremental borrowing rate. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $3,604,816, see note 19. A preliminary assessment of the transition to AASB 16 indicates that majority of the Group’s operating leases at 30 June 2019 will be exempted from being classified as a lease under AASB16 they relate to payments for short-term and low value leases which will be recognised on a straight-line basis as an expense in profit or loss. The operating leases for the office premises in Sydney and Melbourne will meet the definition of a lease under AASB 16, and on adoption on 1 July 2019 the Group will recognise the lease liability and the right of use of an asset for these leases. 46 Adslot 2019 Annual Report 25 37 38 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 (y) New standards and interpretations issued but not effective The following new or amendments to existing standards have been published and are mandatory for accounting periods beginning on or after 1 July 2019 or later periods, but have not yet been adopted by the Group. AASB 16 Leases AASB 16 was issued in February 2016 and is applicable for reporting periods beginning on or after 1 January 2019. The new standard replaces the current standard AASB 117 Leases and for lessees will eliminate the classifications of operating leases and finance leases. The objective of AASB 16 is to improve transparency on financial leverage and capital employed by bringing all lease assets and liabilities onto the balance sheet. Subject to exceptions, a 'right-of-use' asset and lease liability are recognised at the commencement of the lease. The right-of-use asset is recognised at an amount that is equivalent to the initial measurement of the lease liability, adjusted for lease prepayments, lease incentives received, initial direct costs incurred, and an estimate of any future restoration, removal or dismantling costs. The lease liability is recognised at the present value of future lease payments comprising fixed lease payments less incentives, variable lease payments, residual guarantees payable, payment of purchase options where exercise is reasonably certain, and any anticipated termination penalties. The lease payments are discounted at the rate implicit in the lease, or where not readily determinable, the entity's incremental borrowing rate. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $3,604,816, see note 19. A preliminary assessment of the transition to AASB 16 indicates that majority of the Group’s operating leases at 30 June 2019 will be exempted from being classified as a lease under AASB16 they relate to payments for short-term and low value leases which will be recognised on a straight-line basis as an expense in profit or loss. The operating leases for the office premises in Sydney and Melbourne will meet the definition of a lease under AASB 16, and on adoption on 1 July 2019 the Group will recognise the lease liability and the right of use of an asset for these leases. Adslot 2019 Annual Report 38 47 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 1. Summary of Significant Accounting Policies (Continued) • • • • Going concern (y) New standards and interpretations issued but not effective (Continued) (c) The Group will adopt the standard from 1 July 2019 and will opt to apply the simplified approach. Management continues to invest resources to support growth in trading fees, primarily from holding As at 1 July 2019, it is anticipated that the impact on the financial statement would be; companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Initial recognition; $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash right of use assets of $2,792,597 including the net book value of the leasehold improvement of inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from $689,499 capitalised at 30 June 2019 to be recognised, operations until such time as sufficient revenue growth is achieved. lease liabilities of $2,472,799 to be recognised, reversal of existing lease incentive liability of $469,411 (merging with lease liability), As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to creation of a make good provision liability of $165,859 which is the present value of estimated make the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management good cost at end of the leases, believe its FY16 R&D claim is consistent with the criteria of the scheme. reversal of the existing make good provision of $49,591 included in accrued expenses, increasing the retained losses by $16,557. If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. AASB 16 is available for early adoption but have not been applied in this financial report. However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due There are no other standards that are not yet effective and that are expected to have a material impact on for the following reasons: the Group in the current or future accounting periods. • • • • • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. • • Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 48 Adslot 2019 Annual Report 25 39 40 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 2. Segm ent Inform ation 2019 Operating segments APAC EMEA The Americas Total Revenue for services rendered (i) Segment result from continuing operations Depreciation included in segment result (Note 9) Amortisation included in segment result (Note 10) Additions to non-current assets (PP&E) (Note 9) 8,711,221 (1,971,143) 251,096 4,109,086 23,208 1,228 - 3,784 $ $ $ 477,541 (348,518) 650,255 9,839,017 (1,310,843) (3,630,504) $ - - 6,573 258,897 4,109,086 26,992 Statement of financial position Segment assets Segment liabilities 2018 Operating segments Revenue for services rendered (i) Segment result from continuing operations Depreciation included in segment result (Note 9) Amortisation included in segment result (Note 10) Additions to non-current assets (PP&E) (Note 9) Statement of financial position Segment assets Segment liabilities 39,658,875 19,555,388 295,844 127,145 180,112 131,484 40,134,831 19,814,017 APAC EMEA The Americas Total $ $ $ $ 6,464,519 (5,591,454) 223,593 5,211,462 18,208 275,999 (555,384) 171,929 6,912,447 (1,710,534) (7,857,372) 772 - - 7,132 231,498 - 5,211,462 2,316 20,524 35,834,855 15,726,667 123,351 97,445 178,056 130,848 36,136,262 15,954,960 Segment revenue reconciles to total revenue from continuing operations as follows: Revenue Total segment revenue Head office revenue Interest revenue 9,839,017 6,912,447 2019 $ - 55,144 2018 $ - 160,017 Total revenue from continuing operations 9,894,161 7,072,464 (i) Refer to Note 3 for a description Revenue. Notes to the Financial Statements (Continued) For the year ended 30 June 2019 2. Segm ent Inform ation 2019 Operating segments Revenue for services rendered (i) Segment result from continuing operations Depreciation included in segment result (Note 9) Amortisation included in segment result (Note 10) Additions to non-current assets (PP&E) (Note 9) Statement of financial position Segment assets Segment liabilities 2018 Operating segments Revenue for services rendered (i) Segment result from continuing operations Depreciation included in segment result (Note 9) Amortisation included in segment result (Note 10) Additions to non-current assets (PP&E) (Note 9) Statement of financial position Segment assets Segment liabilities APAC EMEA The Americas Total $ $ $ $ 8,711,221 (1,971,143) 251,096 4,109,086 23,208 477,541 (348,518) 650,255 (1,310,843) 1,228 - 3,784 6,573 - - 9,839,017 (3,630,504) 258,897 4,109,086 26,992 39,658,875 19,555,388 295,844 127,145 180,112 131,484 40,134,831 19,814,017 APAC EMEA The Americas Total $ $ $ $ 6,464,519 (5,591,454) 223,593 5,211,462 18,208 275,999 (555,384) 171,929 (1,710,534) 772 - - 7,132 - 2,316 6,912,447 (7,857,372) 231,498 5,211,462 20,524 35,834,855 15,726,667 123,351 97,445 178,056 130,848 36,136,262 15,954,960 Segment revenue reconciles to total revenue from continuing operations as follows: Revenue Total segment revenue Head office revenue Interest revenue Total revenue from continuing operations (i) Refer to Note 3 for a description Revenue. 2019 $ 2018 $ 9,839,017 6,912,447 - 55,144 - 160,017 9,894,161 7,072,464 Adslot 2019 Annual Report 40 49 2019 $ 2018 $ Segment Result (32,263) 44,611 Gain / (Loss) on foreign exchange As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Income tax benefit/(expense) Profit/ (Loss) on sale/write off of asset (12,755) 182 732 (3,083) Total segment result Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. Interest revenue Other revenue Share option expenses 940,825 (777,804) 377,468 (118,127) (7,857,372) (3,630,504) 160,017 55,144 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 2. Segment Information (Continued) A reconciliation from segment result to operating profit before income tax is provided as follows: (c) Going concern based on their physical location. Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Revenues from external customers in the Group’s domicile, Australia, as well as its major markets the USA, have been identified on the basis of the customer’s geographical location. Non-current assets are allocated Notes to and forming part of the segment information Business segments The Group reports its segments based on geographical locations: • APAC – Australia, New Zealand and Asia; • EMEA – Europe, the Middle East and Africa; and • The Americas – North, Central and South America. Accounting policies described in Note 1. The accounting policies of the reportable segments are the same as the Group’s accounting policies Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment profit represents the profit earned by each segment without investment revenue, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, capitalised R&D and other intangible assets, net of related provisions but do not include non-current inter- entity assets and liabilities which are considered quasi-equity in substance. Segment liabilities consist primarily of trade and other creditors, employee benefits and sundry provisions Segment revenue reported above represents revenue generated from external customers. There were no Inter segment revenue transfers or expenses to be eliminated on consolidation (2018: nil). Major customers revenue. The Group provides services to and derives revenue from a number of customers across all the divisions. The Group had certain customers whose revenue individually represented 10% or more of the Group’s total For the year to 30 June 2019, one customer accounted for 10% or more of revenue (2018: one). Other head office income/(expenses) not allocated in segment result If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its (11,653,319) ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Loss before income tax from continuing operations (7,042,755) (3,692,122) (4,151,024) However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Reportable segment assets are reconciled to total assets as follows: for the following reasons: Segment assets the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Total segment assets Head office assets Intersegment eliminations • • • • • 2019 $ 40,134,831 48,085,810 (50,106,395) 2018 $ 36,136,262 48,289,359 (50,106,394) Total assets as per the statement of financial position 38,114,246 34,319,227 and accruals. Segment assets and liabilities do not include income taxes. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. Reportable segment liabilities are reconciled to total liabilities as follows: Inter-segment transfers Segment liabilities (d) Principles of consolidation Total segment liabilities Head office liabilities Subsidiaries 2019 $ 19,814,017 491,016 2018 $ 15,954,960 845,451 Intersegment eliminations Total liabilities as per the statement of financial position (11,829,183) The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The Group’s Total Revenue and Other Income (Note 3) and its non-current assets (other than financial instruments) are divided into the following geographical areas: All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Australia (Domicile) USA 23,511,419 3,084 24,052,355 9,284 6,657,110 171,929 7,526,723 650,255 Non-Current Assets Non-Current Assets 2018 $ 2019 $ 4,971,228 (11,787,907) 8,517,126 Revenue Revenue Other countries Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 1,184,250 2,094,651 10,332 9,540 8,013,289 24,071,971 23,524,043 10,271,629 Total 50 Adslot 2019 Annual Report 25 41 42 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Revenues from external customers in the Group’s domicile, Australia, as well as its major markets the USA, have been identified on the basis of the customer’s geographical location. Non-current assets are allocated based on their physical location. Notes to and forming part of the segment information Business segments The Group reports its segments based on geographical locations: • APAC – Australia, New Zealand and Asia; • EMEA – Europe, the Middle East and Africa; and • The Americas – North, Central and South America. A ccounting policies The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 1. Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment profit represents the profit earned by each segment without investment revenue, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. Segment assets include all assets used by a segment and consist primarily of operating cash, receivables, capitalised R&D and other intangible assets, net of related provisions but do not include non-current inter- entity assets and liabilities which are considered quasi-equity in substance. Segment liabilities consist primarily of trade and other creditors, employee benefits and sundry provisions and accruals. Segment assets and liabilities do not include income taxes. Inter-segment transfers Segment revenue reported above represents revenue generated from external customers. There were no Inter segment revenue transfers or expenses to be eliminated on consolidation (2018: nil). Major customers The Group provides services to and derives revenue from a number of customers across all the divisions. The Group had certain customers whose revenue individually represented 10% or more of the Group’s total revenue. For the year to 30 June 2019, one customer accounted for 10% or more of revenue (2018: one). Adslot 2019 Annual Report 42 51 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 3. Revenue and Other Incom e (c) Going concern 2019 $ 2018 $ 4. Expenses Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Management continues to invest resources to support growth in trading fees, primarily from holding Revenue companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Revenue from Trading Technology $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Revenue from Services Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from Total revenue for services rendered operations until such time as sufficient revenue growth is achieved. Interest revenue 8,038,425 1,800,592 9,839,017 1,765,778 5,146,669 6,912,447 160,017 55,144 Total revenue from continuing operations As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Other income If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 Grant income R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its 86,967 Revenue from Adserving ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. 940,825 Total Other Income However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: Total revenue and other income 10,271,629 8,013,289 377,468 853,859 377,468 9,894,161 7,072,464 - • • • • • Revenue derived from the two product lines are described as follows: the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Trading Technology Comprises Adslot, a leading global media trading technology, and Symphony, market-leading workflow automation technology, purpose built for digital media agencies. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. Services Comprising marketing services that are provided by the Group’s Webfirm division to SME clients and project-based customisation of Trading Technology. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 52 Adslot 2019 Annual Report 25 43 44 Loss before income tax includes the following specific expenses: Depreciation and amortisation Amortisation – Software development costs Amortisation – Leasehold improvements Depreciation – Computer & Equipment Depreciation – Plant & equipment Total depreciation and amortisation Other charges against assets Impairment of trade receivables Employee benefits expense Total capitalised development wages Employee benefits included in Share based payment expense Total employee benefits Capitalised development wages (net of related grants) Capitalised development wages included in the R&D grant Total capitalised development wages Rental expense – operating leases Foreign currency (gain) / loss included in Other expenses 2019 $ 2018 $ 4,109,086 163,354 90,090 5,453 5,211,462 125,802 102,215 3,480 4,367,983 5,442,959 3,489 4,537 7,817,748 5,288,455 99,726 8,943,887 6,068,635 741,317 13,205,929 15,753,839 3,792,752 1,495,703 5,288,455 3,666,409 2,402,226 6,068,635 1,024,336 958,707 32,264 (44,611) Defined contribution superannuation expense included in Employee 840,297 1,026,983 benefit expense Notes to the Financial Statements (Continued) For the year ended 30 June 2019 4. Expenses Loss before income tax includes the following specific expenses: Depreciation and amortisation Amortisation – Software development costs Amortisation – Leasehold improvements Depreciation – Computer & Equipment Depreciation – Plant & equipment Total depreciation and amortisation Other charges against assets Impairment of trade receivables Employee benefits expense Total capitalised development wages Employee benefits included in Share based payment expense Total employee benefits Defined contribution superannuation expense included in Employee benefit expense Capitalised development wages (net of related grants) Capitalised development wages included in the R&D grant Total capitalised development wages Rental expense – operating leases Foreign currency (gain) / loss included in Other expenses 2019 $ 2018 $ 4,109,086 163,354 90,090 5,453 5,211,462 125,802 102,215 3,480 4,367,983 5,442,959 3,489 4,537 7,817,748 5,288,455 99,726 8,943,887 6,068,635 741,317 13,205,929 15,753,839 840,297 1,026,983 3,792,752 1,495,703 5,288,455 3,666,409 2,402,226 6,068,635 1,024,336 958,707 32,264 (44,611) Adslot 2019 Annual Report 44 53 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 c) Deferred tax assets not brought to account In the course of periodic reviews, an inconsistency was identified in relation to the treatment of R&D accounting expenditure for the tax returns for the 2014, 2015 and 2016 income years. Adjustments have been made to correct the understatement of the add-back of R&D accounting expenditure, reducing the carried forward tax loss balances in each income year. These adjustments impact the deferred tax assets not brought to account only and do not impact the financial statements. Adjustment 1,442,834 1,813,806 1,740,723 4,997,363 2016 2015 2014 Total statements. In January 2019 Adslot made a voluntary disclosure to AusIndustry in relation to the ineligibility of a small sub-set of activities in the 2016 R&D claim. This adjustment increases the carried forward tax loss balances by $219,923. A provision for a refund of $164,280 was included in the December 2018 interim financial Above adjustments have been included in the Deferred tax assets not brought to account calculations for 2019. These tax assets will only be realised if the conditions for deductibility set out on Note 1(k) occur. Temporary differences Tax Losses: Operating losses Capital losses Potential tax benefit (27.5% 2018: 27.5%) 2019 $ 2018 $ (6,121,877) (5,344,713) 40,795,482 43,439,948 238,258 238,258 34,911,863 9,600,762 38,333,493 10,541,711 The Group and its wholly-owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Adslot Ltd. Deferred tax liabilities from temporary differences of $1,683,516 (2018: $1,469,769) have not been recognised as they have been offset with deferred tax assets of the same value. Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 5. (c) Incom e Tax Expense Going concern 2019 $ 2018 $ (3,196,441) (6,932,241) (1,906,366) (11,623,422) Management continues to invest resources to support growth in trading fees, primarily from holding a) Numerical reconciliation of income tax expense to prima facie tax benefit companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Loss before income tax $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Prima facie tax benefit on loss before income tax at 27.5% (2018: 27.5%) inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from Tax effect of: operations until such time as sufficient revenue growth is achieved. Other non-allowable items As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Share based expensed during year the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management Research and development tax concession believe its FY16 R&D claim is consistent with the criteria of the scheme. Income tax benefit attributable to entity If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its Deferred tax income relating to utilisation of unused tax losses ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Deferred tax assets relating to tax losses not recognised However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Other – adjustments and net foreign exchange differences for the following reasons: Income tax benefit/(expense) attributable to entity • • • • • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. b) Movement in deferred tax balances 2,073,293 1,297,027 (110,514) (114,560) (564,088) (894,591) Balance at 30 June 2019 (29,897) 979,254 433,327 213,896 20,247 12,766 14,661 32,485 - - Recognised Deferred tax in Profit & Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay liabilities Loss its debts as and when they fall due, and the financial report has been prepared on a going concern basis. $ $ Acquired in Business combination $ Balance at 1 July 2018 $ Deferred tax assets $ Net $ Trade and other receivables (125,957) Principles of consolidation Property, plant and equipment (d) Intangible assets Subsidiaries Unused tax losses 199 165,435 (39,677) 10,496 (17) (13,786) 3,307 - - - - (115,461) 182 151,649 - - - (36,370) (36,370) (115,461) 182 151,649 - - - - - (36,370) The consolidated financial statements comprise those of the Group, and the entities it controlled at the end 36,370 Net tax (assets) / liabilities of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Balance at 30 June 2018 Balance at 1 July 2017 $ Recognised All intra-group transactions, balances, income and expenses between entities in the Group included in the in Profit & Deferred tax Loss liabilities financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are $ $ reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from (115,461) 10,496 Trade and other receivables the date control commenced or up to the date control ceased. The accounting policies adopted in preparing 182 Property, plant and equipment the financial statements have been consistently applied by entities in the Group. 151,649 (13,786) Intangible assets Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information - Unused tax losses in Note 25. Net tax (assets) / liabilities Acquired in Business combination $ Deferred tax assets $ (115,461) (125,957) Net $ 151,649 (36,370) (36,370) (36,370) (39,677) 165,435 3,307 36,370 182 (17) 199 - - - - - - - - - - - 54 Adslot 2019 Annual Report 25 45 46 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 c) Deferred tax assets not brought to account In the course of periodic reviews, an inconsistency was identified in relation to the treatment of R&D accounting expenditure for the tax returns for the 2014, 2015 and 2016 income years. Adjustments have been made to correct the understatement of the add-back of R&D accounting expenditure, reducing the carried forward tax loss balances in each income year. These adjustments impact the deferred tax assets not brought to account only and do not impact the financial statements. 2016 2015 2014 Total Adjustment 1,442,834 1,813,806 1,740,723 4,997,363 In January 2019 Adslot made a voluntary disclosure to AusIndustry in relation to the ineligibility of a small sub-set of activities in the 2016 R&D claim. This adjustment increases the carried forward tax loss balances by $219,923. A provision for a refund of $164,280 was included in the December 2018 interim financial statements. Above adjustments have been included in the Deferred tax assets not brought to account calculations for 2019. These tax assets will only be realised if the conditions for deductibility set out on Note 1(k) occur. Temporary differences Tax Losses: Operating losses Capital losses Potential tax benefit (27.5% 2018: 27.5%) 2019 $ 2018 $ (6,121,877) (5,344,713) 40,795,482 43,439,948 238,258 238,258 34,911,863 9,600,762 38,333,493 10,541,711 The Group and its wholly-owned Australian resident entities have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax-consolidated group is Adslot Ltd. Deferred tax liabilities from temporary differences of $1,683,516 (2018: $1,469,769) have not been recognised as they have been offset with deferred tax assets of the same value. Adslot 2019 Annual Report 46 55 $ $ 2019 2018 1,019,587 4,775,331 3,755,744 2,390,417 8,165,544 5,775,127 Cash at bank and on hand Cash held on behalf of Publishers Cash and Cash Equivalents Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 6. Dividends 8. Trade and Other Receivables The Group did not declare any dividends in the current year or prior year. There are no franking credits (c) available to shareholders of the Group. Going concern As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Included in the Cash at Bank is $509,605 (2018: $615,289) of funds held on term deposit as guarantee for However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due our corporate credit card facilities and for the benefit of landlords under office lease agreements. for the following reasons: Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. 7. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. (i) Based on a finding made by Innovation Australia in relation to the FY16 R&D activities, the Group expects the ATO to amend the R&D Tax Incentive Offset for FY16 and seek repayment of $1.5m previously paid to the Group. It is expected the FY19 claim will be paid less any outstanding amounts owed to the ATO at time of payment. (ii) 2018 balance included $116,821 erroneously received in June 2018 from a trade debtor. This amount was refunded in July 2018. The average age of the Group’s trade debtors is 40 days (2018: 49 days). (a) Ageing of trade debtors not impaired Current: Trade debtors Less: Allowance for impairment Trade debtors not impaired Research and Development grant receivable (i) Other receivables (ii) Prepayments 0 – 30 days 31 – 60 days 61 – 90 days Over 91 days (b) Movement in the provision for impairment Balance at beginning of the year Impairment recognised during the year Amounts written off as uncollectible Amounts recovered during the year Balance at the end of the year 2019 $ 4,260,637 (2,782) 4,257,855 1,887,381 56,165 223,258 2018 $ 2,042,744 (2,370) 2,040,374 3,279,573 (93,219) 245,197 6,424,659 5,471,925 3,034,440 1,436,910 4,257,855 2,040,374 2019 $ 81,287 136,628 1,005,500 2019 $ 2,370 2,782 (2,370) - 2,782 2018 $ 255,626 228,540 119,298 2018 $ 2,814 2,370 - (2,814) 2,370 In determining the recoverability of a trade receivable, the Group considers any recent history of payments and the status of the projects to which the debt relates. No payment terms have been renegotiated. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further provision required in excess of the allowance for impairment. Fair value of receivables impairment. Fair value of receivables at year end is measured to be the same as receivables net of the allowance for • • • • • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 56 Adslot 2019 Annual Report 25 47 48 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 8. Trade and Other Receivables Current: Trade debtors Less: Allowance for impairment Trade debtors not impaired Research and Development grant receivable (i) Other receivables (ii) Prepayments 2019 $ 4,260,637 (2,782) 4,257,855 1,887,381 56,165 223,258 2018 $ 2,042,744 (2,370) 2,040,374 3,279,573 (93,219) 245,197 6,424,659 5,471,925 (i) Based on a finding made by Innovation Australia in relation to the FY16 R&D activities, the Group expects the ATO to amend the R&D Tax Incentive Offset for FY16 and seek repayment of $1.5m previously paid to the Group. It is expected the FY19 claim will be paid less any outstanding amounts owed to the ATO at time of payment. (ii) 2018 balance included $116,821 erroneously received in June 2018 from a trade debtor. This amount was refunded in July 2018. The average age of the Group’s trade debtors is 40 days (2018: 49 days). (a) Ageing of trade debtors not impaired 0 – 30 days 31 – 60 days 61 – 90 days Over 91 days (b) Movement in the provision for impairment Balance at beginning of the year Impairment recognised during the year Amounts written off as uncollectible Amounts recovered during the year Balance at the end of the year 2019 $ 2018 $ 3,034,440 1,436,910 81,287 136,628 1,005,500 255,626 228,540 119,298 4,257,855 2,040,374 2019 $ 2,370 2,782 (2,370) - 2,782 2018 $ 2,814 2,370 - (2,814) 2,370 In determining the recoverability of a trade receivable, the Group considers any recent history of payments and the status of the projects to which the debt relates. No payment terms have been renegotiated. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further provision required in excess of the allowance for impairment. Fair value of receivables Fair value of receivables at year end is measured to be the same as receivables net of the allowance for impairment. Adslot 2019 Annual Report 48 57 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 9. (c) Property, Plant and Equipm ent Going concern 2019 2018 Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Leasehold improvements – at cost $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Less: Accumulated amortisation Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. (289,915) (126,466) 526,146 816,061 689,499 815,965 $ $ As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Plant and equipment – at cost the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management Less: Accumulated depreciation believe its FY16 R&D claim is consistent with the criteria of the scheme. (84,527) (79,054) 93,119 90,307 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. 531,109 Computer equipment – at cost However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Less: Accumulated depreciation for the following reasons: (399,028) (379,529) 446,030 8,592 11,253 • the Group had a cash position of $8.2 million at 30 June 2019; • strong Symphony licence fees to continue in FY20; Total carrying amount of property, plant and equipment • the ongoing cost management program; • the opportunity to implement further cost reductions; and • the ability to raise additional capital. Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below: Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 2019 832,833 601,239 66,501 132,081 (d) Principles of consolidation Carrying amount at 1 July 2018 Subsidiaries Additions Leasehold Plant and Computer Improvements Equipment Equipment $ $ $ 689,499 11,253 132,081 - 2,757 30,257 Total $ 832,833 33,014 Disposals/ Write Offs The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Depreciation / amortisation expense Net foreign exchange differences (258,897) (163,354) (90,090) (6,059) (5,453) (6,059) 348 36 312 - - - Carrying amount at 30 June 2019 All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. 2018 Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Improvements Equipment Equipment Leasehold Computer Plant and 526,145 601,239 66,501 8,593 Total $ $ $ $ Carrying amount at 1 July 2017 Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 196,045 243,744 24,709 22,990 Additions 792,311 (8,537) 33,456 817,230 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 10. Intangible Assets Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2019 Opening net book amount 6,462,835 38,267 1,539,727 15,161,939 23,202,768 Additions Amortisation 3,792,752 (2,569,359) - - - (1,539,727) - - 3,792,752 (4,109,086) Carrying amount at 30 June 2019 7,686,228 38,267 - 15,161,939 22,886,434 At 30 June 2019 Cost Accumulated amortisation and impairment 15,400,189 38,267 29,045,251 15,161,939 59,645,646 (7,713,961) - (29,045,251) - (36,759,212) Carrying amount at 30 June 2019 7,686,228 38,267 - 15,161,939 22,886,434 Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2018 Opening net book amount 4,721,903 38,267 4,825,712 15,161,939 24,747,821 Additions Amortisation 3,666,409 (1,925,477) - - - (3,285,985) - - 3,666,409 (5,211,462) Carrying amount at 30 June 2018 6,462,835 38,267 1,539,727 15,161,939 23,202,768 At 30 June 2018 Cost impairment Accumulated amortisation and (5,144,602) - (27,505,524) - (32,650,126) 11,607,437 38,267 29,045,251 15,161,939 55,852,894 Carrying amount at 30 June 2018 6,462,835 38,267 1,539,727 15,161,939 23,202,768 Disposals/ Write Offs Depreciation / amortisation expense Net foreign exchange differences - (125,802) (1,449) (3,480) 1,197 (252) (102,215) (231,497) - 10 3,598 3,608 Carrying amount at 30 June 2018 689,499 11,253 132,081 832,833 58 Adslot 2019 Annual Report 25 49 50 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 10. Intangible Assets Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2019 Opening net book amount 6,462,835 38,267 1,539,727 15,161,939 23,202,768 Additions Amortisation 3,792,752 (2,569,359) - - - (1,539,727) - - 3,792,752 (4,109,086) Carrying amount at 30 June 2019 7,686,228 38,267 - 15,161,939 22,886,434 At 30 June 2019 Cost Accumulated amortisation and impairment 15,400,189 38,267 29,045,251 15,161,939 59,645,646 (7,713,961) - (29,045,251) - (36,759,212) Carrying amount at 30 June 2019 7,686,228 38,267 - 15,161,939 22,886,434 Internally Developed Software $ Domain Name $ Intellectual Property $ Goodwill $ Total $ Year ended 30 June 2018 Opening net book amount 4,721,903 38,267 4,825,712 15,161,939 24,747,821 Additions Amortisation 3,666,409 (1,925,477) - - - (3,285,985) - - 3,666,409 (5,211,462) Carrying amount at 30 June 2018 6,462,835 38,267 1,539,727 15,161,939 23,202,768 At 30 June 2018 Cost Accumulated amortisation and impairment 11,607,437 38,267 29,045,251 15,161,939 55,852,894 (5,144,602) - (27,505,524) - (32,650,126) Carrying amount at 30 June 2018 6,462,835 38,267 1,539,727 15,161,939 23,202,768 Adslot 2019 Annual Report 50 59 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 10. Intangible Assets (Continued) Intellectual property (Continued) The Facilitate for Agencies (“FFA”) platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the FFA technology platform intellectual property was $455,231 (2018: $455,231). Accumulated amortisation of this asset at 30 June 2019 was $455,231 (2018: $455,231). This asset has been fully amortised. The Directors have assessed the accounting useful life of all of the above technologies for accounting purposes to be five years. This assessment has given regard to the expected financial benefits of the technologies to be potentially well beyond a five year period, together with the risk that competitors could replicate these technologies and in light of the Group’s ongoing commitment to research and development of the Core IP. Goodwill has not been impaired. (a) Cash Generating Units (CGUs) The Goodwill balance relating to the acquisition of Facilitate has an attributed fair value of $15,161,939 and For the purpose of impairment testing, goodwill has been allocated to the group of CGUs that are expected to benefit from the acquisition, being both the Adslot and Symphony CGUs. A summary of the carrying amount of goodwill and intangible assets with indefinite useful lives is detailed below: 2019 2018 Intangible assets with indefinite useful lives Goodwill $ $ - Goodwill $ 15,161,939 Intangible assets with indefinite useful lives $ - Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 10. Intangible Assets (Continued) Internally Developed Software (c) Going concern Internally developed software represents a number of software platforms developed within the Group. The Management continues to invest resources to support growth in trading fees, primarily from holding following table shows the portion of platform development costs that are capitalised and expensed for the companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised current financial year, 2019: $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Platform inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. R&D grants offsetting capitalised wages Net Capitalised Wages Capitalised Wages Adslot Publisher and As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Marketplace the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. 2,778,005 3,696,193 (918,188) Symphony $ 1,592,262 $ (577,515) $ 1,014,747 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its The following table shows the portion of platform development costs that are capitalised and expensed for ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. the prior financial year, 2018: However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due Platform for the following reasons: Capitalised Wages R&D grants offsetting capitalised wages Net Capitalised Wages 5,288,455 (1,495,703) 3,792,752 • • Adslot Publisher and • Marketplace • Symphony • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. 1,432,707 4,635,928 $ 6,068,635 $ (623,227) (1,778,999) (2,402,226) $ 809,480 2,856,929 3,666,409 Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay The Directors have assessed the accounting useful life of these internally developed software systems, for its debts as and when they fall due, and the financial report has been prepared on a going concern basis. accounting purposes, to be five years. This assessment has given regard to the expected financial benefits of the technology. CGU Adslot and Symphony CGUs 15,161,939 Principles of consolidation Domain names (d) Domain names opening carrying value of $38,267 (2018: $38,267) relates to the various domain names held by Webfirm and Adslot. The Directors have assessed that this intellectual property has an indefinite useful Subsidiaries life on the basis that the Directors do not believe that there is a foreseeable limit on the period over which The consolidated financial statements comprise those of the Group, and the entities it controlled at the end this asset is expected to generate cash inflows for the entity. of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power Intellectual property over the subsidiary. Adslot Technologies Pty Ltd (“Adslot”) holds valuable copyright and patent licences (“Licences”) in respect of All intra-group transactions, balances, income and expenses between entities in the Group included in the Combinatorial Auction Platform Technology (“CAP” or “Core IP”) owned by Enterprise Point Pty Ltd and its financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are controlled entities (“Enterprise”). $5,932,006 (2018: $5,932,006) of the opening balance relates to this “CAP” reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. technology. Accumulated amortisation of this asset as at 30 June 2019 was $5,932,006 (2018: $5,932,006). Where an entity either began or ceased to be controlled during the year, the results are included only from This asset has been fully amortised. the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. QDC IP Technology (“QDC”) is creative ad building and video advertising technology with licences to the Core IP valued at $6,466,517 (2018: $6,466,517) in the opening balance and attached to the Adslot CGU. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information Accumulated amortisation of this asset as at 30 June 2019 was $6,466,517 (2018: $6,466,517). This asset in Note 25. has been fully amortised. The Symphony platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the Symphony technology platform intellectual property was $16,191,496 (2018: $16,191,496). Accumulated amortisation of this asset at 30 June 2019 was $16,191,496 (2018: $14,651,770). This asset was fully amortised during the year. 60 Adslot 2019 Annual Report 25 51 52 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 10. Intangible Assets (Continued) Intellectual property (Continued) The Facilitate for Agencies (“FFA”) platform technology was acquired as part of the Facilitate Digital Holdings Limited acquisition. The fair value attributable to the FFA technology platform intellectual property was $455,231 (2018: $455,231). Accumulated amortisation of this asset at 30 June 2019 was $455,231 (2018: $455,231). This asset has been fully amortised. The Directors have assessed the accounting useful life of all of the above technologies for accounting purposes to be five years. This assessment has given regard to the expected financial benefits of the technologies to be potentially well beyond a five year period, together with the risk that competitors could replicate these technologies and in light of the Group’s ongoing commitment to research and development of the Core IP. Goodwill The Goodwill balance relating to the acquisition of Facilitate has an attributed fair value of $15,161,939 and has not been impaired. (a) Cash Generating Units (CGUs) For the purpose of impairment testing, goodwill has been allocated to the group of CGUs that are expected to benefit from the acquisition, being both the Adslot and Symphony CGUs. A summary of the carrying amount of goodwill and intangible assets with indefinite useful lives is detailed below: CGU 2019 2018 Intangible assets with indefinite useful lives $ Goodwill $ Intangible assets with indefinite useful lives $ Goodwill $ Adslot and Symphony CGUs 15,161,939 - 15,161,939 - 52 Adslot 2019 Annual Report 61 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 10. Intangible Assets (Continued) 11. Trade and Other Payables Intellectual property (Continued) (c) Going concern the group of CGUs attributed to goodwill; and the Group’s share price (ASX: ADJ as at 30 June 2019 of $0.028); Management continues to invest resources to support growth in trading fees, primarily from holding (b) Impairment testing and key assumptions companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised The Group tests whether goodwill and other intangible assets have suffered any impairment in accordance $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. with the Group’s accounting policies. The recoverable amounts of assets and CGUs have been determined Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash using a fair value less costs to sell approach. The directors have assessed the fair value having regard to a inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from market-based approach and have determined the goodwill is not impaired. operations until such time as sufficient revenue growth is achieved. The directors’ determination of fair value using a market based approach is the market capitalisation of the Group, less the value attributed to business units that are not part of the group of CGUs attributed to As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to goodwill, less other net assets. the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. The most significant judgements and key assumptions pertaining to the calculation are: If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 • R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its • a 4x valuation multiple on EBITDA to estimate the value of the business unit (Webfirm) that is not part of ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Trade creditors Publisher creditors (i) Other creditors 12. Other Liabilities Current: contract liabilities (i) Refer to Note 1(p) for further information on publisher creditors. Contract liabilities relates to website development and hosting invoices that are rendered based on full contract terms at the contracts’ inception, however performed over stages which straddle the reporting date, licence fees billed in advance and advertising campaigns that have been purchased but whose delivery will occur after the reporting date. 13. Lease Incentives Liabilities Current: Lease Incentives Liability Non-current: Lease Incentives Liability 14. Provisions Current: Employee benefits Non-current: Employee benefits The lease agreements for some premises included a free fit-out provided by the lessor as a lease incentive. The assets obtained by the Group have been recognised as leasehold improvements at fair value and are depreciated over the lease term (see Note 9). A corresponding liability is presented as part of the lease liabilities and is reversed on a straight-line basis over the lease term. 2019 $ 518,498 2018 $ 546,024 5,154,892 1,514,495 865,398 865,224 6,538,788 2,925,743 2019 $ 374,781 2018 $ 445,491 2019 $ 146,300 323,110 2018 $ 60,248 555,463 2019 $ 658,736 439,041 2018 $ 587,150 360,763 However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due • costs to sell including a transaction fee (3.5% of total value) plus estimate of legal, account and other for the following reasons: consultant costs ($200k). • The Group’s directors appointed an independent expert to review the approach adopted by management in • assessing the carrying value of the intangible assets of the Group as at 30 June 2018. The review supported • the selection of methodology and the assessment of the value of the Group under the primary quoted security price approach. The director’s determined the same methodology be adopted for the tests at 30 • June 2019. • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. (c) Sensitivity analysis Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. The Group’s share price forms the basis of the market-based approach. A material adverse change in the Group’s share price would likely result in the carrying amount exceeding the recoverable amount. Principles of consolidation On 9 May 2019 Adslot Limited announced the successful closing of a $4.0 million share placement to institutional and sophisticated investors. The placement is a reference point as a binding sale agreement in (d) an arm’s length transaction. Subsidiaries Sensitivity Analysis has been performed using the placement offer price of $0.025, a recalculation of the The consolidated financial statements comprise those of the Group, and the entities it controlled at the end Costs to Sell and all other elements of the 30 June calculation remaining equal. The result also shows a of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable surplus fair value over carrying value of the intangible assets at a share price of $0.025, albeit with less returns from its involvement with the subsidiary and has the ability to affect those returns through its power headroom. Calculations show that only when the share price falls below $0.020, and all other variables over the subsidiary. remain constant, does a deficit occur. All intra-group transactions, balances, income and expenses between entities in the Group included in the There are no other material sensitivities involved in the directors’ determination of fair value using a market financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are based approach. reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 62 Adslot 2019 Annual Report 25 53 54 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 11. Trade and Other Payables Trade creditors Publisher creditors (i) Other creditors (i) Refer to Note 1(p) for further information on publisher creditors. 12. Other Liabilities Current: contract liabilities 2019 $ 518,498 2018 $ 546,024 5,154,892 1,514,495 865,398 865,224 6,538,788 2,925,743 2019 $ 374,781 2018 $ 445,491 Contract liabilities relates to website development and hosting invoices that are rendered based on full contract terms at the contracts’ inception, however performed over stages which straddle the reporting date, licence fees billed in advance and advertising campaigns that have been purchased but whose delivery will occur after the reporting date. 13. Lease Incentives Liabilities Current: Lease Incentives Liability Non-current: Lease Incentives Liability 2019 $ 146,300 323,110 2018 $ 60,248 555,463 The lease agreements for some premises included a free fit-out provided by the lessor as a lease incentive. The assets obtained by the Group have been recognised as leasehold improvements at fair value and are depreciated over the lease term (see Note 9). A corresponding liability is presented as part of the lease liabilities and is reversed on a straight-line basis over the lease term. 14. Provisions Current: Employee benefits Non-current: Employee benefits 2019 $ 658,736 439,041 2018 $ 587,150 360,763 Adslot 2019 Annual Report 54 63 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 15. 1. Summary of Significant Accounting Policies (Continued) Contributed equity (c) Going concern 2019 Number 2018 Number 2019 $ 2018 $ Ordinary Shares – Fully Paid 145,838,216 1,284,950,994 1,587,875,994 Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from the numbers of shares. operations until such time as sufficient revenue growth is achieved. At the shareholders meeting each ordinary share is entitled to one vote when a poll is called, otherwise each As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to shareholder has one vote on a show of hands. the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Movements in Paid-Up Capital If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Value Capital raising costs Number of shares Issue price 138,397,710 Balance (including Treasury shares) However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: 01-Jul-17 • 11-Oct-17 • 30-Jun-18 • • • 30-Jun18 the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Issue of shares – Performance Rights vesting Less: Treasury shares 1,284,950,994 1,288,006,269 1,284,328,769 138,699,400 138,397,710 138,287,281 (2,622,047) (2,622,047) (2,619,769) (3,055,275) (301,690) 3,677,500 Balance Number 412,119 (2,278) Details $0.113 Date - $ $ $ Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay 01-Jul-18 its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 2,852,695 09-Aug-18 Balance (including Treasury shares) Share Placement 1,288,006,269 138,699,400 118,000,000 (2,622,047) (97,305) $0.025 Treasury Shares Treasury shares are shares in Adslot Ltd that are held by the Adslot Employee Share Trust, which administers the Adslot Employee Share Ownership Plan (ESOP). This Trust has been consolidated in accordance with Note 1(d). Shares held by the Trust on behalf of eligible employees are shown as treasury shares in the financial statements. Shares issued under this scheme will, subject to the provision of the Trust deed, rank equally in all respects and will have the same rights and entitlements as ordinary shares under the Constitution of the Group. Treasury Shares movements during the financial year are summarised below: Issue or Acquisition Date Issue Type Employee ESOP 16/06/14 Employee ESOP 01/05/15 Employee ESOP 01/09/16 Issue Price $ 0.105 0.090 0.125 Balance at year (Number) 1,000,000 1,942,775 112,500 3,055,275 beginning of the Issued during Transfers Balance at end the year (Number) during the year (Number) of the year (Number) - - - - (1,000,000) (1,812,500) (112,500) 130,275 - - (2,925,000) 130,275 Rights over shares movements during the financial year are summarised below: Issue Type Price $ year (Number) year (Number) Required VWAP beginning of the during the the year (Number) Vested during the year (Number) of the year (Number) Balance at Granted Expired during Balance at end Rights over shares Rights over shares Rights over shares Rights over shares 0.200 0.300 0.400 0.500 3,000,000 4,000,000 5,000,000 5,000,000 3,000,000 4,000,000 5,000,000 5,000,000 - - - - - 17,000,000 17,000,000 - - - - - - - - - - Balance The consolidated financial statements comprise those of the Group, and the entities it controlled at the end 30-Jun19 of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. 1,587,875,994 145,838,216 (2,970,764) All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 64 Adslot 2019 Annual Report 25 55 56 22,000,000 160,000,000 1,588,006,269 (130,275) $0.025 $0.025 (18,142) 531,858 (233,270) 3,766,730 (2,970,764) 145,850,683 - (12,467) Share Placement Principles of consolidation 09-May-19 (d) 30-Jun-19 Subsidiaries 19-Sep-18 Share Placement Less: Treasury shares Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Treasury Shares Treasury shares are shares in Adslot Ltd that are held by the Adslot Employee Share Trust, which administers the Adslot Employee Share Ownership Plan (ESOP). This Trust has been consolidated in accordance with Note 1(d). Shares held by the Trust on behalf of eligible employees are shown as treasury shares in the financial statements. Shares issued under this scheme will, subject to the provision of the Trust deed, rank equally in all respects and will have the same rights and entitlements as ordinary shares under the Constitution of the Group. Treasury Shares movements during the financial year are summarised below: Issue or Acquisition Date Issue Type Employee ESOP 16/06/14 Employee ESOP 01/05/15 Employee ESOP 01/09/16 Issue Price $ 0.105 0.090 0.125 Balance at beginning of the year (Number) 1,000,000 1,942,775 112,500 3,055,275 Issued during the year (Number) Transfers during the year (Number) Balance at end of the year (Number) - - - - (1,000,000) (1,812,500) (112,500) - 130,275 - (2,925,000) 130,275 Rights over shares movements during the financial year are summarised below: Issue Type Rights over shares Rights over shares Rights over shares Rights over shares Required VWAP Price $ Balance at beginning of the year (Number) Granted during the year (Number) Expired during the year (Number) Vested during the year (Number) Balance at end of the year (Number) 0.200 0.300 0.400 0.500 3,000,000 4,000,000 5,000,000 5,000,000 17,000,000 - - - - - 3,000,000 4,000,000 5,000,000 5,000,000 17,000,000 - - - - - - - - - - Adslot 2019 Annual Report 56 65 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 15. Contributed equity (Continued) Going concern (c) Performance rights movements during the financial year are summarised below: Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from Nil operations until such time as sufficient revenue growth is achieved. Balance at beginning of the year (Number) Balance at end of the year (Number) Forfeited during the year (Number) Issued during the year (Number) Transfers during the year (Number) Issue or Acquisition Date Issue Type Issue Price (1,925,000) 2,125,000 (200,000) 01/09/16 Performance Rights $ - - 2,125,000 - (1,925,000) (200,000) - As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Options movements during the financial year are summarised below: If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Exercise Price Balance at beginning of the year (Number) Issued during the year (Number) Forfeited during the year (Number) Issue Type Expiry Date $ However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: Ordinary options 04/10/21 • Ordinary options • • Ordinary options • Ordinary options • Ordinary options 0.073 the Group had a cash position of $8.2 million at 30 June 2019; 0.060 strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and 15/05/22 the ability to raise additional capital. 27/05/22 23,500,000 12,700,000 11,400,000 23,500,000 (1,300,000) 3,000,000 5,800,000 4,000,000 3,000,000 5,600,000 4,000,000 (200,000) 25/11/21 25/02/22 0.035 0.034 0.036 - - - - - - - - - - - - - Exercised during the year (Number) Balance at end of the year (Number) Ordinary options 5,800,000 Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 53,300,000 (1,500,000) 49,000,000 5,800,000 5,800,000 30/01/23 0.060 - - - - (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 66 Adslot 2019 Annual Report 25 57 58 16. Reserves Reserves Share–based payments reserve Foreign currency translation reserve Share–based payments reserve Opening balance Reclassification of Treasury Shares Reclassification vested Performance Rights Share based payment expense Closing balance Foreign currency translation reserve Opening balance Movement on currency translation Closing balance 2019 $ 434,882 214,267 649,149 2018 $ 605,978 106,676 712,654 605,978 (105,000) (184,223) 118,127 279,117 (36,544) (414,399) 777,804 434,882 605,978 106,676 110,812 107,591 (4,136) 214,267 106,676 The Share-based payments reserve is used to record the value of options accounted for in accordance with AASB2: Share Based Payments. The foreign currency translation reserve is used to record the value of aggregate movements in the translation of foreign currency in accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates. Notes to the Financial Statements (Continued) For the year ended 30 June 2019 16. Reserves Reserves Share–based payments reserve Foreign currency translation reserve Share–based payments reserve Opening balance Reclassification of Treasury Shares Reclassification vested Performance Rights Share based payment expense Closing balance Foreign currency translation reserve Opening balance Movement on currency translation Closing balance 2019 $ 434,882 214,267 649,149 2018 $ 605,978 106,676 712,654 605,978 (105,000) (184,223) 118,127 279,117 (36,544) (414,399) 777,804 434,882 605,978 106,676 110,812 107,591 (4,136) 214,267 106,676 The Share-based payments reserve is used to record the value of options accounted for in accordance with AASB2: Share Based Payments. The foreign currency translation reserve is used to record the value of aggregate movements in the translation of foreign currency in accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates. Adslot 2019 Annual Report 58 67 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 17. Earnings Per Share 18. Contingencies (c) Going concern 2019 Cents 2018 Cents In April 2019, the Group received a Certificate of Finding from Innovation and Science Australia regarding review of the Group’s R&D tax incentive claim for the 2016 financial year (FY16). Basic earnings per share Loss attributable to the ordinary equity holders of the Group (a) Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised (0.91) $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from (b) operations until such time as sufficient revenue growth is achieved. Diluted earnings per share (0.49) Loss attributable to the ordinary equity holders of the Group (0.91) As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Reconciliation of earnings used on calculating earnings per share (i) 2018 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 $ R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its (c) ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. (11,653,319) However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: Loss from continuing operations attributable to the members of the Group used on calculating basic and diluted earnings per share 2019 $ (7,042,755) (0.49) • • • • • (d) Weighted average number of shares used as the denominator the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. 2019 Number 2018 Number favour. Weighted average number of shares on issue used in the calculation of basic EPS Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 1,283,691,139 1,432,078,391 The Certificate of Finding determined certain core and supporting activities claimed by the Group in FY16 as non-compliant with the terms of the scheme. This opinion relates to a sub-set of activities claimed. The Group disagrees with the position provided by Innovation and Science Australia and believes the activities to be compliant with the terms of the scheme. In order to defend its position, the Group lodged a request with the Board of Innovation and Science Australia to reconsider the decision under Division 5 of the IR&D Act, for which the Group may ultimately be required to repay up to $1,527,734 plus potential penalties and interest. The ultimate outcome of this review is still pending and cannot be predicted with certainty. In order to defend its position, the Group may initiate proceedings in the Administrative Appeals Tribunal to dispute the finding made by Innovation Australia in relation to the FY16 claim. These amounts have not been brought to account as the potential repayment of the FY16 R&D claim is only a possible obligation that is payable contingent upon further review by up to two independent bodies that are outside the Group’s control. Based on the April 2019 finding made by Innovation Australia in relation to the FY16 R&D claim, it is expected the ATO will amended the Research & Development Tax Incentive Offsets for the 2016 income year and seek repayment of amounts previously paid to the Group in respect of the FY16 R&D Claim. The ATO may claim interest and penalties should the matter be found in Innovation and Science Australia’s 19. Com m itm ents Total operating lease expenditure contracted for at reporting date but not capitalised in the financial statements payable: Within 1 year Between 1 and 5 years 2019 $ 2018 $ 963,533 917,155 1,874,982 2,687,661 2,838,515 3,604,816 The lease commitments detailed above relate to rental premises and lease rental of printer/copier. Capital commitments The Group has not entered any capital expenditure contracts at reporting date that are not recognised as liabilities on the Statement of Financial Position. All intra-group transactions, balances, income and expenses between entities in the Group included in the 2018 financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are Number reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing 17,186,327 the financial statements have been consistently applied by entities in the Group. Weighted average number of rights and options that could potentially dilute basic earnings per share in the future, but are not included in the calculation of diluted EPS because they are anti-dilutive for the period presented. 2019 Number 50,428,767 Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 68 Adslot 2019 Annual Report 25 59 60 Weighted average number of shares on issue used in the calculation of diluted EPS 1,283,691,139 The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable (i) During 2019 and 2018 there were no discontinued operations or values attributable to minority interests. returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. 1,432,078,391 Principles of consolidation (d) (e) Weighted average number of shares used as the denominator Subsidiaries 2019 Number 2018 Number Operating lease commitments Notes to the Financial Statements (Continued) For the year ended 30 June 2019 18. Contingencies In April 2019, the Group received a Certificate of Finding from Innovation and Science Australia regarding review of the Group’s R&D tax incentive claim for the 2016 financial year (FY16). The Certificate of Finding determined certain core and supporting activities claimed by the Group in FY16 as non-compliant with the terms of the scheme. This opinion relates to a sub-set of activities claimed. The Group disagrees with the position provided by Innovation and Science Australia and believes the activities to be compliant with the terms of the scheme. In order to defend its position, the Group lodged a request with the Board of Innovation and Science Australia to reconsider the decision under Division 5 of the IR&D Act, for which the Group may ultimately be required to repay up to $1,527,734 plus potential penalties and interest. The ultimate outcome of this review is still pending and cannot be predicted with certainty. In order to defend its position, the Group may initiate proceedings in the Administrative Appeals Tribunal to dispute the finding made by Innovation Australia in relation to the FY16 claim. These amounts have not been brought to account as the potential repayment of the FY16 R&D claim is only a possible obligation that is payable contingent upon further review by up to two independent bodies that are outside the Group’s control. Based on the April 2019 finding made by Innovation Australia in relation to the FY16 R&D claim, it is expected the ATO will amended the Research & Development Tax Incentive Offsets for the 2016 income year and seek repayment of amounts previously paid to the Group in respect of the FY16 R&D Claim. The ATO may claim interest and penalties should the matter be found in Innovation and Science Australia’s favour. 19. Com m itm ents Operating lease commitments Total operating lease expenditure contracted for at reporting date but not capitalised in the financial statements payable: Within 1 year Between 1 and 5 years 2019 $ 2018 $ 963,533 917,155 1,874,982 2,687,661 2,838,515 3,604,816 The lease commitments detailed above relate to rental premises and lease rental of printer/copier. Capital commitments The Group has not entered any capital expenditure contracts at reporting date that are not recognised as liabilities on the Statement of Financial Position. Adslot 2019 Annual Report 60 69 $ $ 96,503 231,070 211,503 112,000 115,000 119,070 Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised During the year the following fees were paid/payable to the auditor of the Group: $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Audit services Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from Audit and review of financial reports operations until such time as sufficient revenue growth is achieved. During the year the following fees were paid/payable to a related entity of the auditor of the Group: As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Other services the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. Taxation compliance, GroupM compliance audit and Research and Development grant advice If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 20. (c) Rem uneration of auditors Going concern 2019 2018 The following persons were directors of the Group during the financial year: Notes to the Financial Statements (Continued) For the year ended 30 June 2019 21. Key Managem ent Personnel Disclosures Directors Mr Andrew Barlow (Executive Chairman) Mr Adrian Giles (Non-Executive Director) Mr Quentin George (Non-Executive Director) Ms Sarah Morgan (Non-Executive Director) Mr Andrew Dyer (Non-Executive Director) Mr Ben Dixon (Executive Director & CEO) (i) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Ms Felicity Conlan Mr Tom Peacock Mr Ian Lowe (ii) Position Chief Financial Officer and Company Secretary Group Commercial Director Former CEO Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term employee benefits Share based payments Total compensation (a) 1,333,764 1,357,311 2019 $ 81,429 24,764 2018 $ 93,982 12,083 148,452 263,233 1,588,409 1,726,609 (i) Mr Dixon was an Executive Director for the entire financial year. He was appointed as the CEO on 1 January 2019 having performed as the interim CEO since 27 February 2018. (ii) Mr Lowe’s resigned as CEO and Executive Director on 27 February 2018. Continued to be a key management personnel until 27 July 2018. (a) There were 9 key management personnel throughout 2019, some of whom have a part year of service (2018: 10). Business Acquisitions: There were no related party transactions during the year ended 30 June 2019. Transactions with Directors and their personally related entities: During the year there were no transactions with Directors and their personally related entities (2018: nil). However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: • • • • • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 70 Adslot 2019 Annual Report 25 61 62 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 21. Key Managem ent Personnel Disclosures Directors The following persons were directors of the Group during the financial year: Mr Andrew Barlow (Executive Chairman) Mr Adrian Giles (Non-Executive Director) Mr Quentin George (Non-Executive Director) Ms Sarah Morgan (Non-Executive Director) Mr Andrew Dyer (Non-Executive Director) Mr Ben Dixon (Executive Director & CEO) (i) Other key management personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year: Name Ms Felicity Conlan Mr Tom Peacock Mr Ian Lowe (ii) Position Chief Financial Officer and Company Secretary Group Commercial Director Former CEO Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term employee benefits Share based payments Total compensation (a) 2019 $ 1,333,764 81,429 24,764 2018 $ 1,357,311 93,982 12,083 148,452 263,233 1,588,409 1,726,609 (i) Mr Dixon was an Executive Director for the entire financial year. He was appointed as the CEO on 1 January 2019 having performed as the interim CEO since 27 February 2018. (ii) Mr Lowe’s resigned as CEO and Executive Director on 27 February 2018. Continued to be a key management personnel until 27 July 2018. (a) There were 9 key management personnel throughout 2019, some of whom have a part year of service (2018: 10). Business Acquisitions: There were no related party transactions during the year ended 30 June 2019. Transactions with Directors and their personally related entities: During the year there were no transactions with Directors and their personally related entities (2018: nil). Adslot 2019 Annual Report 62 71 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 22. Share Based Paym ents Performance Rights over Shares Going concern Employee Share Option Plan (ESOP) (c) In November 2012 the Group gained approval to establish an employee incentive scheme comprising the Management continues to invest resources to support growth in trading fees, primarily from holding Adslot Limited Share Option Plan and the Adslot Employee Share Trust. companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Awards of rights to shares are available to be issued to eligible employees and are subject to a two-year $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. service period and if this service period is not met, the rights to shares will be forfeited by the eligible Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash employee. Shares held by the Trust under the scheme will have voting and dividend rights, and the right to inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from participate in further issues pro-rata to all ordinary shareholders. operations until such time as sufficient revenue growth is achieved. ESOP rights to shares are valued at fair value at the date the options were granted. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to The ESOP was replaced by the Performance Rights over Shares Plan in financial year 2015 and as such the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management there have been no new ESOP rights granted during the years ending 30 June 2015 to 30 June 2019. The believe its FY16 R&D claim is consistent with the criteria of the scheme. remaining ESOP shares vested at the end of the financial year and have subsequently been transferred to If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 the employees. R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its The following tables shows the movement of share-based compensation to employees under the ESOP for ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. the period. However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due 2019 for the following reasons: • • • • • 15/06/14 Grant Date the Group had a cash position of $8.2 million at 30 June 2019; Balance at Granted strong Symphony licence fees to continue in FY20; start of the during the ongoing cost management program; year the year the opportunity to implement further cost reductions; and the ability to raise additional capital. Transferred during the year Valuation Price $ Escrow End Date (Number) (Number) (Number) Forfeited during the year (Number) Balance at end of the year (Number) Vested at the end of the year (Number) 15/06/15 0.105 250,000 - (250,000) - - - 15/06/14 - Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 2016-2018 (750,000) 750,000 0.105 - - - 1,000,000 - (1,000,000) - - - Total Weighted average share price $0.105 - $0.105 - - (d) Principles of consolidation Weighted average remaining contractual life at 30 June 2019 (days) - - Subsidiaries 2018 The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Balance at start of the year Granted during the year Transferred during the year Forfeited during the Grant Date Escrow End Date Valuation Price $ All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from 15/06/14 - the date control commenced or up to the date control ceased. The accounting policies adopted in preparing 15/06/14 - 750,000 - the financial statements have been consistently applied by entities in the Group. 27/08/15 - 67,567 - Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information Total - in Note 25. 2016-2018 (Number) 1,067,567 1,000,000 1,000,000 (Number) (Number) (Number) (Number) 15/06/15 07/09/17 (67,567) (67,567) 250,000 250,000 250,000 750,000 750,000 year 0.080 0.105 0.105 - - - - - - Balance at end of the year (Number) Vested at the end of the year Weighted average share price $0.103 - $0.080 - $0.105 $0.105 Weighted average remaining contractual life at 30 June 2018 (days) - 72 Adslot 2019 Annual Report 25 63 Shareholders approved at the November 2014 Annual General Meeting the creation of Performance Rights over Shares which enables the Board to offer eligible employees the right to Performance Rights which convert to shares subject to the employee’s performance against certain performance criteria. No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. All rights are subject to service periods which require the employees remain an employee of the Group. The following table shows grants and movements of share-based compensation to employees under the Performance Rights over Shares Plan during the current financial year: 2019 2018 Grant Date Assessme nt period Valuation Price $ Balance at start of the year Granted during the year Transferred during the year Forfeited during the year Balance at end of the year Vested at the end of the year (Number) (Number) (Number) (Number) (Number) (Number) 01/09/16 2 years 0.125 2,125,000 (1,925,000) (200,000) Total 2,125,000 (1,925,000) (200,000)) No Performance Rights over Shares were granted during the financial year 2019. Balance at start of the year Granted during the year Transferred during the year Forfeited during the year Balance at end of the year Vested at the end of the year (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Assessme nt period Valuation Price $ 26/08/15 27/06/16 01/09/16 01/09/16 Total 2 years 2 years 1 year 2 years 0.074 0.100 0.125 0.125 1,090,000 400,000 250,000 7,500,000 9,240,000 (790,000) (400,000) (250,000) (300,000) - - (2,437,500) (2,937,500) 2,125,000 (3,877,500) (3,237,500) 2,125,000 No Performance Rights over Shares were granted during the financial year 2018. - - - - - - - - - - - - - - - - - - - 64 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Performance Rights over Shares Shareholders approved at the November 2014 Annual General Meeting the creation of Performance Rights over Shares which enables the Board to offer eligible employees the right to Performance Rights which convert to shares subject to the employee’s performance against certain performance criteria. No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. All rights are subject to service periods which require the employees remain an employee of the Group. The following table shows grants and movements of share-based compensation to employees under the Performance Rights over Shares Plan during the current financial year: 2019 Grant Date Assessme nt period Valuation Price $ Balance at start of the year Granted during the year Transferred during the year Forfeited during the year Balance at end of the year Vested at the end of the year (Number) (Number) (Number) (Number) (Number) (Number) 01/09/16 2 years 0.125 2,125,000 Total 2,125,000 - - (1,925,000) (200,000) (1,925,000) (200,000)) - - - - No Performance Rights over Shares were granted during the financial year 2019. 2018 Grant Date Assessme nt period Valuation Price $ Balance at start of the year Granted during the year Transferred during the year Forfeited during the year Balance at end of the year Vested at the end of the year (Number) (Number) (Number) (Number) (Number) (Number) 26/08/15 27/06/16 01/09/16 01/09/16 Total 2 years 2 years 1 year 2 years 0.074 0.100 0.125 0.125 1,090,000 400,000 250,000 7,500,000 9,240,000 - - - - - (790,000) (400,000) (250,000) (300,000) - - - - - (2,437,500) (2,937,500) 2,125,000 (3,877,500) (3,237,500) 2,125,000 - - - - - No Performance Rights over Shares were granted during the financial year 2018. Adslot 2019 Annual Report 64 73 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 22. Share Based Payments (continued) Employee Option Plan Rights over Shares (c) Going concern Upon commencement of employment (8 October 2012) Mr Lowe was granted the right to receive the Management continues to invest resources to support growth in trading fees, primarily from holding following shares after the share price of the Group trades above a 30-day volume-weighted average price companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised (VWAP) as per the table below. Each right would convert into one ordinary share of Adslot Ltd when the $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. VWAP criteria is met. In the event of a Change of Control of the Group some of these Rights would vest on a Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash sliding scale between the take over price and required VWAP of the next eligible series. inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from No amounts are paid or payable by the recipient on receipt of the right. The rights carry no voting rights. operations until such time as sufficient revenue growth is achieved. Some rights are subject to escrow per the below table and all rights are subject to Mr Lowe remaining an employee of the Group. As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management No Rights over Shares were issued in 2019 (2018: nil). These shares were forfeited with the departure of Mr believe its FY16 R&D claim is consistent with the criteria of the scheme. Lowe during the year. The following tables shows movement in the Rights over Shares for the current financial year (no change in the last two years): If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its 2019 ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Balance at end of the year Balance at However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due start of the for the following reasons: year Granted during the year Forfeited during the year Vested during the year Valuation Required VWAP Price $ Escrow Required from the Group had a cash position of $8.2 million at 30 June 2019; award $ strong Symphony licence fees to continue in FY20; 2 years 64,500 the ongoing cost management program; 66,000 - 4,000,000 the opportunity to implement further cost reductions; and - 5,000,000 the ability to raise additional capital. • Issue Date • 8-Oct-2012 • • • (Number) 3,000,000 Price 8-Oct-2012 8-Oct-2012 73,000 0.40 0.20 0.30 8-Oct-2012 0.50 - 63,500 5,000,000 (Number) - (Number) - (Number) 3,000,000 (Number) - - - - - - - 4,000,000 5,000,000 5,000,000 - - - Total Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay 17,000,000 its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 17,000,000 267,000 - - - 2018 (d) Principles of consolidation Subsidiaries Required VWAP Price $ Escrow Required from award 2 years Valuation Price The consolidated financial statements comprise those of the Group, and the entities it controlled at the end Issue Date of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable 8-Oct-2012 returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. (Number) 3,000,000 (Number) 3,000,000 (Number) - (Number) - (Number) - $ 64,500 8-Oct-2012 4,000,000 4,000,000 66,000 0.30 0.20 - - - - Balance at start of the year Granted during the year Vested during the year Forfeited during the year Balance at end of the year 8-Oct-2012 0.40 - 73,000 5,000,000 - - - 5,000,000 0.50 8-Oct-2012 All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. 17,000,000 Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. 17,000,000 5,000,000 5,000,000 267,000 63,500 Total - - - - - - - Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 74 Adslot 2019 Annual Report 25 65 66 Shareholders approved at the November 2017 Annual General Meeting the creation of Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which can be exercised to shares subject to the certain vesting criteria. The objective of the Option Plan is to attract, motivate and retain key employees and it is considered by the Group that the adoption of the Option Plan and the future issue of Options under the Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director The following table shows grants and movements of share-based compensation to employees under the Employee Option Plan during the current financial year: or the Group. 2019 Balance at Exercise start of the Price year Granted during the year Exercised during the Lapsed Forfeited during the during the Balance at end of the year year year year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 05/10/17 04/10/21 0.073 3,000,000 26/11/17 25/11/21 0.060 5,800,000 26/02/18 25/02/22 0.035 23,500,000 16/05/18 15/05/22 0.034 12,700,000 28/05/18 27/05/22 0.036 4,000,000 - - - - - 31/01/19 30/01/23 0.060 - 5,800,000 3,000,000 (200,000) 5,600,000 23,500,000 23,500,000 (1,300,000) 11,400,000 11,400,000 4,000,000 3,000,000 5,800,000 - - - - - - - - - - - - - - - - - - - - - - - Total 49,000,000 5,800,000 (1,500,000) 53,300,000 37,900,000 Weighted average exercise price $0.040 $0.060 $0.037 $0.042 $0.035 The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2019 included: Model Input Grant Date Expiry Date Exercise Price $ 5-day VWAP at Grant Date $ Expected Volatility Risk Free Interest rate OP # 191 30/01/19 30/01/23 0.060 0.041 92.93% 0.99% Notes to the Financial Statements (Continued) For the year ended 30 June 2019 Employee Option Plan Shareholders approved at the November 2017 Annual General Meeting the creation of Incentive Option Plan which enables the Board to offer eligible employees and directors the right to options which can be exercised to shares subject to the certain vesting criteria. The objective of the Option Plan is to attract, motivate and retain key employees and it is considered by the Group that the adoption of the Option Plan and the future issue of Options under the Option Plan will provide selected employees and directors with the opportunity to participate in the future growth of the Group. No amounts are paid or payable by the recipient on the receipt of the options. The options carry no voting rights. All options are subject to service periods which require the employees remain an employee or Director or the Group. The following table shows grants and movements of share-based compensation to employees under the Employee Option Plan during the current financial year: 2019 Exercise Price Balance at start of the year Granted during the year Exercised during the year Lapsed during the year Forfeited during the year Balance at end of the year Vested and exercisable at the end of the year $ (Number) (Number) (Number) (Number) (Number) (Number) (Number) Grant Date Expiry Date 05/10/17 04/10/21 0.073 3,000,000 26/11/17 25/11/21 0.060 5,800,000 26/02/18 25/02/22 0.035 23,500,000 16/05/18 15/05/22 0.034 12,700,000 28/05/18 27/05/22 0.036 4,000,000 - - - - - 31/01/19 30/01/23 0.060 - 5,800,000 Total 49,000,000 5,800,000 Weighted average exercise price $0.040 $0.060 - - - - - - - - - - - - - - - - - 3,000,000 (200,000) 5,600,000 - - - 23,500,000 23,500,000 (1,300,000) 11,400,000 11,400,000 - - 4,000,000 3,000,000 5,800,000 - (1,500,000) 53,300,000 37,900,000 $0.037 $0.042 $0.035 The options are valued using the Black-Scholes pricing model. The model inputs for options granted during the year ended 30 June 2019 included: Model Input Grant Date Expiry Date Exercise Price $ 5-day VWAP at Grant Date $ Expected Volatility Risk Free Interest rate OP # 191 30/01/19 30/01/23 0.060 0.041 92.93% 0.99% Adslot 2019 Annual Report 66 75 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 22. Share Based Payments (continued) 23. Cash Flow reconciliation - - - - - - - - - - - - - - - - - - - - - - $ Total Weighted average exercise However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due $0.035 price for the following reasons: $0.040 $0.040 $0.041 27/05/22 2,000,000 If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 28/05/18 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its 3,000,000 ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. (3,000,000) 4,000,000 49,000,000 4,000,000 52,000,000 0.036 25/11/21 - 26/11/17 As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to 26/02/18 - - the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management believe its FY16 R&D claim is consistent with the criteria of the scheme. 1,000,000 - 16/05/18 25,750,000 12,700,000 23,500,000 12,700,000 (2,250,000) 5,800,000 6,550,000 (750,000) 25/02/22 15/05/22 0.060 0.035 0.034 Going concern (c) 2018 Management continues to invest resources to support growth in trading fees, primarily from holding Vested and companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised exercisable $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. at the end of the year Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash (Number) (Number) inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. 05/10/17 - Balance at start of the year Balance at end of the year Exercised during the year Granted during the year Forfeited during the year Lapsed during the year Exercise Price Expiry Date Grant Date 3,000,000 3,000,000 (Number) (Number) (Number) (Number) (Number) 4/10/21 0.073 Reconciliation of Net Cash Flows from Operating Activities to Loss for the Adjustment from adoption of AASB 15 (movement in contract liabilities) year Add/(less) non-cash and other items: Loss for the year after income tax Depreciation and amortisation Cash Based: Depreciated Leasehold Fitout Share based payment Impairment of receivables (Profit)/Loss on asset write off Unrealised foreign currency loss / (gain) Movements in receivables relating to investing activities Changes in assets and liabilities (net of effects of acquisition and disposal of entities) (Increase)/Decrease in receivables (Decrease)/Increase in payables and other provisions Net cash outflow from operating activities 24. Financial Risk Managem ent 2019 $ 2018 $ (7,042,755) (11,653,319) (85,125) 4,367,983 (146,300) 118,127 3,489 3,083 (31,327) (1,036,515) - 5,442,959 (107,260) 777,804 4,537 (182) 15,908 480,280 (952,734) (786,304) 3,692,199 551,744 (1,109,875) (5,273,833) The Group’s operations expose it to various financial risks including market, credit, liquidity and cash flow risks. Risk management programmes and policies are employed to mitigate the potential adverse effects of these exposures on the results of the Group. Financial risk management is carried out by the Chief Financial Officer with oversight provided by the Audit & Risk Committee and Board. (a) Market risks cash and cash equivalents. (b) Credit risk Market risks include foreign exchange risk, interest rate risk and other price risk. The Group’s activities expose it to the financial risks of changes in foreign currency, interest rate risk relating to interest earned on Disclosures relating to foreign currency risks are covered in Note 24(d) and interest rate risk is covered in Note 24(e). The Group does not have formal policies that address the risks associated with changes in interest rates or changes in fair values on available-for-sale financial assets. Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets, other than investments, of the Group which have been recognised in the Consolidated Statement of Financial Position is the carrying amount net of any provision for doubtful debts. The Group has no significant concentrations of credit risk. As disclosed in Note 8(a), ‘Impairment of receivables’, the Group has policies in place to ensure that sales of services are made to customers with appropriate credit history. Before accepting any new customers, the Group internally reviews the potential customer’s credit quality. A substantial deposit on contract in website development and hosting segment of the Group mitigates initial credit risk. • The options are valued using the Black-Scholes pricing model. The model inputs for options granted during • the year ended 30 June 2018 included: • • Model Input • the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. OP # 18-5 OP # 18-3 OP # 18-4 OP # 18-1 OP # 18-2 Grant Date Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay 27/05/22 Expiry Date its debts as and when they fall due, and the financial report has been prepared on a going concern basis. 0.036 Exercise Price $ 04/10/21 25/11/21 25/02/22 15/05/22 05/10/17 26/11/17 16/05/18 26/02/18 28/05/18 0.035 0.034 0.073 0.060 5-day VWAP at Grant Date $ Expected Volatility Risk Free Interest rate (d) Principles of consolidation 0.050 62.62% 1.83% 0.041 61.92% 1.83% 0.024 69.20% 1.99% 0.023 85.12% 2.02% 0.025 86.58% 2.02% Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 76 Adslot 2019 Annual Report 25 67 68 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 23. Cash Flow reconciliation Reconciliation of Net Cash Flows from Operating Activities to Loss for the year Add/(less) non-cash and other items: Loss for the year after income tax Adjustment from adoption of AASB 15 (movement in contract liabilities) Depreciation and amortisation Cash Based: Depreciated Leasehold Fitout Share based payment Impairment of receivables (Profit)/Loss on asset write off Unrealised foreign currency loss / (gain) Movements in receivables relating to investing activities Changes in assets and liabilities (net of effects of acquisition and disposal of entities) (Increase)/Decrease in receivables (Decrease)/Increase in payables and other provisions Net cash outflow from operating activities 24. Financial Risk Managem ent 2019 $ 2018 $ (7,042,755) (11,653,319) (85,125) 4,367,983 (146,300) 118,127 3,489 3,083 (31,327) (1,036,515) - 5,442,959 (107,260) 777,804 4,537 (182) 15,908 480,280 (952,734) (786,304) 3,692,199 551,744 (1,109,875) (5,273,833) The Group’s operations expose it to various financial risks including market, credit, liquidity and cash flow risks. Risk management programmes and policies are employed to mitigate the potential adverse effects of these exposures on the results of the Group. Financial risk management is carried out by the Chief Financial Officer with oversight provided by the Audit & Risk Committee and Board. (a) Market risks Market risks include foreign exchange risk, interest rate risk and other price risk. The Group’s activities expose it to the financial risks of changes in foreign currency, interest rate risk relating to interest earned on cash and cash equivalents. Disclosures relating to foreign currency risks are covered in Note 24(d) and interest rate risk is covered in Note 24(e). The Group does not have formal policies that address the risks associated with changes in interest rates or changes in fair values on available-for-sale financial assets. (b) Credit risk Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets, other than investments, of the Group which have been recognised in the Consolidated Statement of Financial Position is the carrying amount net of any provision for doubtful debts. The Group has no significant concentrations of credit risk. As disclosed in Note 8(a), ‘Impairment of receivables’, the Group has policies in place to ensure that sales of services are made to customers with appropriate credit history. Before accepting any new customers, the Group internally reviews the potential customer’s credit quality. A substantial deposit on contract in website development and hosting segment of the Group mitigates initial credit risk. Adslot 2019 Annual Report 68 77 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 24. Financial Risk Management (Continued) 1. Summary of Significant Accounting Policies (Continued) 24. Financial Risk Management (Continued) The Group held the following financial assets with potential credit risk exposure: (c) Going concern Financial assets Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. 2019 $ 8,165,544 2018 $ 4,775,331 Trade debtors and Other receivables (Note 8) Cash and cash equivalents 5,471,925 6,424,659 As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management (c) Liquidity risk believe its FY16 R&D claim is consistent with the criteria of the scheme. 14,590,203 10,247,256 Financial liabilities If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Trade and other payables However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: 2019 $ 6,538,788 2018 $ 2,925,743 the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. • Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the • availability of funding through an adequate amount of committed credit facilities and the ability to close-out • market positions. Due to the dynamic nature of the underlying business, the Board aims at maintaining • flexibility in funding by keeping committed credit lines and sufficient cash available. • All financial liabilities are expected to be settled within 12 months of the reporting date, per the contractual terms of the obligations. Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay its debts as and when they fall due, and the financial report has been prepared on a going concern basis. (d) Foreign currency risk Principles of consolidation Most of the Group’s transactions are carried out in Australian Dollars (AUD). Exposures to currency exchange rates arise from the Group’s overseas operations which are primarily denominated in US dollars (USD), Pound Sterling (GBP), Euros (EUR), New Zealand dollars (NZD), Chinese Yuan (CNY) and (d) Malaysian Ringgit (MYR). Subsidiaries Foreign currency exposure is monitored by the Board on a periodic basis. The consolidated financial statements comprise those of the Group, and the entities it controlled at the end Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable disclosed below. The amounts shown are those reported to key management translated into AUD at the returns from its involvement with the subsidiary and has the ability to affect those returns through its power closing rate: over the subsidiary. USD A$ GBP A$ EUR A$ 30 June 2019 All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Financial Liabilities Financial Assets (4,670,052) 7,473,794 (365,601) (105,015) 310,516 159,241 (34,406) 47,189 63,779 (6,511) 2,746 - CNY A$ MYR A$ NZD A$ Total Exposure Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 30 June 2018 2,803,742 (55,085) 54,226 57,268 12,783 2,746 Financial Assets 1,716,774 78,689 91,938 40,636 31,220 3,857 Financial Liabilities (796,334) (193,004) (44,996) (1,452) (29,907) - Total Exposure 920,440 (114,315) 46,942 39,184 1,313 3,857 78 Adslot 2019 Annual Report 25 69 70 The following table illustrates the sensitivity on profit and equity in relation to the Group’s financial assets and liabilities and the USD/AUD exchange rate, GBP/AUD exchange rate, EUR/AUD exchange rate, NZD/AUD exchange rate and CNY/AUD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the following exchange rates for the year ended 30 June 2019 (30 June 2018:10%). These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. There is no Equity exposure to foreign currency risk. 30 June 2019 USD A$ GBP A$ EUR A$ Impact on Profit (250,745) 15,674 (6,185) - Impact on Reserves (4,141) (10,666) 1,255 (5,206) CNY A$ (357) (805) MYR Total A$ A$ (250) (241,863) - (19,563) Impact on Equity (254,886) 5,008 (4,930) (5,206) (1,162) (250) (261,426) +10% NZD A$ 30 June 2018 Impact on Profit (131,245) (4,318) (2,091) - (373) (351) (138,378) Impact on Reserves 47,569 14,710 (2,176) (3,562) 254 - 56,795 Impact on Equity (83,676) 10,392 (4,267) (3,562) (119) (351) (81,583) 30 June 2019 USD A$ GBP A$ Impact on Profit 306,466 (19,157) Impact on Reserves 5,061 13,037 (1,535) CNY MYR Total A$ 437 983 A$ 305 A$ 295,611 - 23,909 Impact on Equity 311,527 (6,120) 6,025 1,420 305 319,520 EUR A$ 7,560 -10% NZD A$ - 6,363 6,363 30 June 2018 Impact on Profit 160,410 5,278 Impact on Reserves (58,139) (17,980) Impact on Equity 102,271 (12,702) 2,556 2,660 5,216 - 4,354 4,354 456 (310) 146 429 169,129 - (69,415) 429 99,714 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 24. Financial Risk Management (Continued) The following table illustrates the sensitivity on profit and equity in relation to the Group’s financial assets and liabilities and the USD/AUD exchange rate, GBP/AUD exchange rate, EUR/AUD exchange rate, NZD/AUD exchange rate and CNY/AUD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the following exchange rates for the year ended 30 June 2019 (30 June 2018:10%). These percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. There is no Equity exposure to foreign currency risk. 30 June 2019 USD A$ GBP A$ EUR A$ +10% NZD A$ Impact on Profit (250,745) 15,674 (6,185) - Impact on Reserves (4,141) (10,666) 1,255 (5,206) CNY A$ (357) (805) MYR Total A$ A$ (250) (241,863) - (19,563) Impact on Equity (254,886) 5,008 (4,930) (5,206) (1,162) (250) (261,426) 30 June 2018 Impact on Profit (131,245) (4,318) (2,091) - (373) (351) (138,378) Impact on Reserves 47,569 14,710 (2,176) (3,562) 254 - 56,795 Impact on Equity (83,676) 10,392 (4,267) (3,562) (119) (351) (81,583) 30 June 2019 USD A$ GBP A$ Impact on Profit 306,466 (19,157) EUR A$ 7,560 Impact on Reserves 5,061 13,037 (1,535) Impact on Equity 311,527 (6,120) 6,025 -10% NZD A$ - 6,363 6,363 CNY MYR Total A$ 437 983 A$ 305 A$ 295,611 - 23,909 1,420 305 319,520 30 June 2018 Impact on Profit 160,410 5,278 Impact on Reserves (58,139) (17,980) Impact on Equity 102,271 (12,702) 2,556 2,660 5,216 - 4,354 4,354 456 (310) 146 429 169,129 - (69,415) 429 99,714 Adslot 2019 Annual Report 70 79 30,800 -1% $ +1% $ However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: 30 June 2019 (28,163) At reporting date, if interest rates had been 100 basis points higher or lower and all other variables were If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 held constant, the Group’s net profit would: R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 24. Financial Risk Management (Continued) 25. Parent Entity Inform ation (c) Going concern (e) Cash flow and interest rate risk Interest rate sensitivity analysis Management continues to invest resources to support growth in trading fees, primarily from holding As the Group has no significant interest-bearing assets or liabilities (except cash), the Group’s income companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised and operating cash flows are not materially exposed to changes in market interest rates. $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from operations until such time as sufficient revenue growth is achieved. The sensitivity analysis below has been determined based on exposure to interest rates on interest bearing bank balances throughout the reporting period. A 100-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to assessment of the possible change in interest rates (also comparable to movement in interest rates the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management during the reporting year). believe its FY16 R&D claim is consistent with the criteria of the scheme. The following details of information are related to the parent entity, Adslot Ltd, at 30 June 2019. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Share-based payments reserve Retained losses Total equity Loss for the year Total comprehensive loss for the year 2019 $ 2018 $ 3,630,511 3,667,011 44,463,013 44,919,847 48,093,524 48,586,858 306,357 323,111 629,468 447,356 555,463 1,002,819 145,850,683 138,699,400 434,880 605,975 (98,821,507) (91,721,336) 47,464,056 47,584,039 (7,118,262) (10,014,024) (7,118,262) (10,014,024) The Commitments Note 19 includes commitments by the parent entity related to leases of the Melbourne office premises at 425 Collins Street, Melbourne (34 ½ months) for an amount of $801,574 (2018: $1,063,969) and the Sydney office premises at 10-14 Waterloo Street, Surry Hills (42 months) for an amount of $1,844,115 (2018: $2,358,486). 26. Related Party Transactions Other than the transactions disclosed in Note 21 relating to key management personnel, there have been no related party transactions that have occurred during the current or prior financial year. 27. Events Subsequent to Reporting Date There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. • • • • • 68,461 30 June 2018 the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; This is mainly attributable to the Group’s exposure to interest rate on its bank balances bearing interest. the opportunity to implement further cost reductions; and the ability to raise additional capital. (f) Net fair value of financial assets and liabilities (64,993) The net fair value of cash and cash equivalents and other short-term financial assets and financial Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay liabilities of the Group approximates their carrying value. its debts as and when they fall due, and the financial report has been prepared on a going concern basis. The net fair value of other financial assets and financial liabilities is based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. Principles of consolidation (d) Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. 80 Adslot 2019 Annual Report 25 71 72 Notes to the Financial Statements (Continued) For the year ended 30 June 2019 25. Parent Entity Inform ation The following details of information are related to the parent entity, Adslot Ltd, at 30 June 2019. This information has been prepared using consistent accounting policies as presented in Note 1. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Contributed equity Share-based payments reserve Retained losses Total equity Loss for the year Total comprehensive loss for the year 2019 $ 3,630,511 2018 $ 3,667,011 44,463,013 44,919,847 48,093,524 48,586,858 306,357 323,111 629,468 447,356 555,463 1,002,819 145,850,683 138,699,400 434,880 605,975 (98,821,507) (91,721,336) 47,464,056 47,584,039 (7,118,262) (10,014,024) (7,118,262) (10,014,024) The Commitments Note 19 includes commitments by the parent entity related to leases of the Melbourne office premises at 425 Collins Street, Melbourne (34 ½ months) for an amount of $801,574 (2018: $1,063,969) and the Sydney office premises at 10-14 Waterloo Street, Surry Hills (42 months) for an amount of $1,844,115 (2018: $2,358,486). 26. Related Party Transactions Other than the transactions disclosed in Note 21 relating to key management personnel, there have been no related party transactions that have occurred during the current or prior financial year. 27. Events Subsequent to Reporting Date There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in future years. Adslot 2019 Annual Report 72 81 Notes to the Financial Statements (Continued) Notes to the Financial Statements (Continued) For the year ended 30 June 2019 For the year ended 30 June 2019 1. Summary of Significant Accounting Policies (Continued) 28. Consolidated Entities (c) Name Going concern Country of Incorporation Ordinary Share Consolidated Equity Interest and: Australia 2019 % 2018 % Management continues to invest resources to support growth in trading fees, primarily from holding companies in the US market. In August 2018 ($3.5m) and May 2019 ($4.0m) the Group successfully raised Parent entity $7.5 million via share placements, resulting in $7.1 million net cash inflows from financing activities. Adslot Ltd Combined with the net cash outflows from operating and investing activities of $3.9million, the net cash Controlled entities inflow for the year was $3.2 million. Management anticipate incurring further net cash outflows from Adslot Technologies Pty Ltd operations until such time as sufficient revenue growth is achieved. Ansearch.com.au Pty Ltd As previously disclosed, the Group received a notification of finding of ineligible R&D activities in relation to Ansearch Group Services Pty Ltd the FY16 claim. The Group has requested an internal review of the decision which is ongoing. Management Webfirm Pty Ltd believe its FY16 R&D claim is consistent with the criteria of the scheme. QDC IP Technologies Pty Ltd If a delay in expected growth in revenues and/or a negative outcome of AusIndustry’s review of the FY16 Adslot UK Limited R&D claim was to occur, this has the potential to create a cash flow risk to the Group which could affect its Adslot Inc. ability to pay its debts as and when they fall due, and to realise its assets in the normal course of business. Symphony International Solutions Limited However, the Directors believe the Group will be able to continue to pay its debts as and when they fall due for the following reasons: Symphony Workflow Pty Ltd United Kingdom United States Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Symphony Media Pty Ltd • • Facilitate Digital (Shanghai) Software Service Co., Ltd • Facilitate Digital Limited • Facilitate Digital Trust • Facilitate Digital, LLC the Group had a cash position of $8.2 million at 30 June 2019; strong Symphony licence fees to continue in FY20; the ongoing cost management program; the opportunity to implement further cost reductions; and the ability to raise additional capital. New Zealand New Zealand United States Australia China 100 100 100 100 100 100 100 100 100 100 Directors’ Declaration The directors declare that the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, accompanying notes, as set out on pages 27 to 82 are in accordance with the Corporations Act 2001 (a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements in Australia; (b) give a true and fair view of the Company’s financial position as at 30 June 2019 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date; and (c) the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. In the directors’ opinion: (a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (b) the audited remuneration disclosures set out on pages 15 to 24 of the Directors’ Report comply with section 300A of the Corporations Act 2001. The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Facilitate Digital UK Limited Accordingly, the Directors believe there exists a reasonable expectation that the Group can continue to pay Facilitate Digital Deutschland GmbH its debts as and when they fall due, and the financial report has been prepared on a going concern basis. United Kingdom Germany 100 100 100 100 Equity interests in all controlled entities are by way of ordinary shares. (d) Principles of consolidation Subsidiaries The consolidated financial statements comprise those of the Group, and the entities it controlled at the end of, or during, the financial year. The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All intra-group transactions, balances, income and expenses between entities in the Group included in the financial statements have been eliminated in full. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Where an entity either began or ceased to be controlled during the year, the results are included only from the date control commenced or up to the date control ceased. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the Group. Investments in subsidiaries are accounted for at cost less impairment losses in the parent entity information in Note 25. Andrew Barlow Chairman Adslot Ltd 22 August 2019 82 Adslot 2019 Annual Report 25 73 74 Directors’ Declaration The directors declare that the financial statements, comprising the statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity, statement of cash flows, accompanying notes, as set out on pages 27 to 82 are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements in Australia; (b) give a true and fair view of the Company’s financial position as at 30 June 2019 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date; and (c) the Company has included in the notes to the financial statements an explicit and unreserved statement of compliance with International Financial Reporting Standards. In the directors’ opinion: (a) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. (b) the audited remuneration disclosures set out on pages 15 to 24 of the Directors’ Report comply with section 300A of the Corporations Act 2001. The directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Andrew Barlow Chairman Adslot Ltd 22 August 2019 Adslot 2019 Annual Report 74 83 Independent Auditor’s Report To the Members of Adslot Limited Report on the audit of the financial report Opinion Collins Square, Tower 5 727 Collins Street Melbourne VIC 3008 Correspondence to: GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au We have audited the financial report of Adslot Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: Impairment testing of goodwill and intangible assets requires a utilised by the model; a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year ended on that date; and b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 (c) in the financial statements, which indicates that the Group incurred net loss of $7.04 million for the year, and management anticipate incurring further net losses from operations until such time as sufficient revenue growth is achieved. As stated in Note 1 (c), these events or conditions, along with other matters as set forth in Note 1 (c), indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. 84 Adslot 2019 Annual Report 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. Key audit matter How our audit addressed the key audit matter Intangible assets and goodwill impairment testing Note 10 At 30 June 2019, goodwill and other intangibles included within Our procedures included, amongst others: the Group’s statement of financial position amounted to $22.9m. Reviewing the impairment model for compliance with AASB The requirement per AASB 136 Impairment of Assets is for an entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired. Should any indication of impairment exist, the entity shall estimate the recoverable amount of the asset. 136 ; Assessing management's determination of the Group's cash generating units based on our understanding of the nature of the Group's business, the economic environment in which segments operate and the Group's internal reporting structure; Testing the completeness and accuracy of the source data high degree of estimation and judgement by management and Testing the mathematical accuracy and appropriateness of the there is subjectivity involved relating to assumptions and key methodology of the underlying model calculations; inputs. Due to these reasons, this has been assessed as a key audit matter. Assessing the reasonableness of inputs and assumptions used in the market based model prepared by management; Performing a sensitivity analysis of the key assumptions in Reviewing relevant disclosures for adequacy in the financial model; and statements. Research and development grants and capitalised wages Note 1(x) The Group has recognised $3.8m relating to capitalised Our procedures included, amongst others: developments costs as intangible assets as at 30 June 2019. The Group has also claimed associated research and development (R&D) grants from AusIndustry to the value of $2.1m under the R&D Tax Incentive Scheme, for estimated and submitted R&D claims at year end. Determining whether the criteria for capitalising R&D costs are met requires a high level of judgement and there is a risk that the criteria for capitalised development costs in accordance with AASB 138 Intangible Assets are not achieved. Further to the above, AASB 120 Accounting for Government Grants and Disclosure of Government Assistance also requires grants received relating to costs that are capitalised to be offset Obtaining an understanding of the capitalisation process and how costs are allocated to the project; Reviewing compliance with criteria for capitalisation of costs under AASB 138; Assessing the reasonableness of total development costs against expectations, having regard to prior year costs and current year budgeted costs; Testing on a sample basis, capitalised development costs incurred to underlying supporting documentation; Ensuring the above sample meets the recognition requirements of accounting standing AASB 138; Tracing the R&D receivable to submitted claims and where applicable, subsequent cash receipt; Testing the mathematical accuracy of R&D grant claims against the capitalised amount, while grants relating to costs that are not capitalised to be recognised as income. R&D grant claims accrued for; Obtaining an understanding of the current status of discussions with AusIndustry in relation to R&D claims; and Assessing the appropriateness of the disclosures in the financial statements. submitted but not yet received relating to costs incurred in the previous financial year and for the estimated R&D grant claim pertaining to costs incurred during the 2019 financial year, are to be recognised as a receivable,. Given the subjectivity and management judgement applied in assessing whether costs meet the recognition criteria of AASB 138, this has been assessed as a key audit matter. 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. Key audit matter How our audit addressed the key audit matter Intangible assets and goodwill impairment testing Note 10 At 30 June 2019, goodwill and other intangibles included within the Group’s statement of financial position amounted to $22.9m. The requirement per AASB 136 Impairment of Assets is for an entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired. Should any indication of impairment exist, the entity shall estimate the recoverable amount of the asset. Impairment testing of goodwill and intangible assets requires a high degree of estimation and judgement by management and there is subjectivity involved relating to assumptions and key inputs. Due to these reasons, this has been assessed as a key audit matter. Research and development grants and capitalised wages Note 1(x) The Group has recognised $3.8m relating to capitalised developments costs as intangible assets as at 30 June 2019. The Group has also claimed associated research and development (R&D) grants from AusIndustry to the value of $2.1m under the R&D Tax Incentive Scheme, for estimated and submitted R&D claims at year end. Determining whether the criteria for capitalising R&D costs are met requires a high level of judgement and there is a risk that the criteria for capitalised development costs in accordance with AASB 138 Intangible Assets are not achieved. Further to the above, AASB 120 Accounting for Government Grants and Disclosure of Government Assistance also requires grants received relating to costs that are capitalised to be offset against the capitalised amount, while grants relating to costs that are not capitalised to be recognised as income. R&D grant claims submitted but not yet received relating to costs incurred in the previous financial year and for the estimated R&D grant claim pertaining to costs incurred during the 2019 financial year, are to be recognised as a receivable,. Given the subjectivity and management judgement applied in assessing whether costs meet the recognition criteria of AASB 138, this has been assessed as a key audit matter. Our procedures included, amongst others: Reviewing the impairment model for compliance with AASB 136 ; Assessing management's determination of the Group's cash generating units based on our understanding of the nature of the Group's business, the economic environment in which segments operate and the Group's internal reporting structure; Testing the completeness and accuracy of the source data utilised by the model; Testing the mathematical accuracy and appropriateness of the methodology of the underlying model calculations; Assessing the reasonableness of inputs and assumptions used in the market based model prepared by management; Performing a sensitivity analysis of the key assumptions in model; and Reviewing relevant disclosures for adequacy in the financial statements. Our procedures included, amongst others: Obtaining an understanding of the capitalisation process and how costs are allocated to the project; Reviewing compliance with criteria for capitalisation of costs under AASB 138; Assessing the reasonableness of total development costs against expectations, having regard to prior year costs and current year budgeted costs; Testing on a sample basis, capitalised development costs incurred to underlying supporting documentation; Ensuring the above sample meets the recognition requirements of accounting standing AASB 138; Tracing the R&D receivable to submitted claims and where applicable, subsequent cash receipt; Testing the mathematical accuracy of R&D grant claims accrued for; Obtaining an understanding of the current status of discussions with AusIndustry in relation to R&D claims; and Assessing the appropriateness of the disclosures in the financial statements. Adslot 2019 Annual Report 85 The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 22 August 2019 Information other than the financial report and auditor’s report thereon Responsibilities The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the 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 financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 12 to 21 of the Directors’ report for the year ended 30 June 2019. 15 to 24 In our opinion, the Remuneration Report of Adslot Limited, for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. 86 Adslot 2019 Annual Report Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants M J Climpson Partner – Audit & Assurance Melbourne, 22 August 2019 Adslot 2019 Annual Report 87 Corporate Governance Statement In accordance with Listing Rule 4.10.3, Adslot’s Corporate Governance Statement can be found at http://www.adslot.com/investor-relations/governance/ Shareholder Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current as at 16 August 2019. Distribution of equity securities The number of shareholders by size of shareholding are: Ordinary Shares Number of Holders Number of Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 + TOTAL The number of shareholders holding less than a marketable parcel of shares (17,858 shares): Twenty largest shareholders The names of the twenty largest holders of quoted shares are: NATIONAL NOMINEES LIMITED MR PETER JOHN DIAMOND + MRS DIANA ELIZABETH DIAMOND J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DAWNIE DIXON PTY LTD INVIA CUSTODIAN PTY LIMITED ANDAMA HOLDINGS PTY LTD VENTURIAN PTY LTD CAPITAL ACCRETION PTY LTD AMBLESIDE VENTURES PTY LTD SAPEAME PTY LTD 1 2 3 4 5 6 7 8 9 10 11 MR RICHARD ARMSTRONG CALDOW 12 MDJD PTY LTD 13 14 15 16 MR VLADIMIR ANTHONY VITEZ & MS CATHERINE MARY DOWLAN 17 18 19 WALLOON SECURITIES PTY LTD 20 HILLBOI NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED G & D DIXON INVESTMENTS PTY LTD CHARMED5 PTY LTD DAK DRAFTING SERVICES PTY LTD BRISPOT NOMINEES PTY LTD Total Top 20 holders of Ordinary Shares Remaining holders balance 205 322 491 1,250 908 3,176 1,347 22,939 1,068,211 3,935,663 48,899,441 1,534,080,015 1,588,006,269 9,441,734 Listed Ordinary Shares Number of Shares % of Shares 184,756,486 140,000,000 107,721,356 76,046,522 52,252,850 48,940,000 48,102,668 40,000,000 33,091,710 27,300,000 16,000,000 15,000,000 13,702,951 12,361,631 12,302,184 11,000,000 10,692,376 10,000,000 10,000,000 9,937,705 879,149,339 708,856,930 11.63 8.82 6.78 4.79 3.29 3.08 3.03 2.52 2.08 1.72 1.01 0.94 0.86 0.78 0.77 0.69 0.67 0.63 0.63 0.63 55.36 44.64 Corporate Directory Directors Mr Andrew Barlow – Executive Chairman Mr Ben Dixon – Chief Executive Director Mr Adrian Giles – Non-Executive Director Ms Sarah Morgan – Non-Executive Director Mr Andrew Dyer – Non-Executive Director Chief Executive Officer Mr Ben Dixon Company Secretary Ms Felicity Conlan Auditors Grant Thornton Australia Collins Square, Tower 5 727 Collins Street Melbourne VIC 3008 Australia Bankers National Australia Bank Limited 330 Collins Street, Melbourne VIC 3000 Australia Share Register Computershare Registry Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford, VIC 3001 Australia Home Stock Exchange Australian Securities Exchange Limited Level 45, South Tower Rialto, 525 Collins Street Melbourne, VIC 3000 Australia ASX Code: ADJ Website www.adslot.com Registered Office Adslot Ltd Level 2, 419 Collins Street, Melbourne VIC 3000 Australia Phone: + 61 3 8695 9100 Fax: + 61 3 9696 0700 Head Office Adslot Ltd Level 2, 419 Collins Street, Melbourne VIC 3000 Australia Phone: + 61 3 8695 9100 Fax: + 61 3 9696 0700 Asia Pacific Offices Level 8, 10-14 Waterloo Street Surry Hills NSW 2010 Australia 1-231, Shanghai 1933 No 10 Shajing Road Shanghai 200080 China 301S Botany Road Botany Downs, Auckland New Zealand North America Office 79 Madison Avenue New York, NY 10016 United States of America European Offices Three Tuns House 109 Borough High Street London, SE1 1NL United Kingdom 8th Floor 33 Theatinerstrasse 11 80333 Munchen Bayern Germany Classes of Shares - Adslot Ltd has only one class of share on issue, being fully paid ordinary shares. Substantial Shareholders Peter Diamond Private Portfolio Managers Pty Ltd Geoff Dixon Shares 155,000,000 96,091,818 95,599,666 % Shares 9.76 6.05 6.02 Voting Rights - All ordinary shares carry one vote per share without restrictions. 88 Adslot 2019 Annual Report 78 79 Corporate Directory Directors Mr Andrew Barlow – Executive Chairman Mr Ben Dixon – Chief Executive Director Mr Adrian Giles – Non-Executive Director Ms Sarah Morgan – Non-Executive Director Mr Andrew Dyer – Non-Executive Director Chief Executive Officer Mr Ben Dixon Company Secretary Ms Felicity Conlan Auditors Grant Thornton Australia Collins Square, Tower 5 727 Collins Street Melbourne VIC 3008 Australia Bankers National Australia Bank Limited 330 Collins Street, Melbourne VIC 3000 Australia Share Register Computershare Registry Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford, VIC 3001 Australia Home Stock Exchange Australian Securities Exchange Limited Level 45, South Tower Rialto, 525 Collins Street Melbourne, VIC 3000 Australia ASX Code: ADJ Website www.adslot.com Registered Office Adslot Ltd Level 2, 419 Collins Street, Melbourne VIC 3000 Australia Phone: + 61 3 8695 9100 Fax: + 61 3 9696 0700 Head Office Adslot Ltd Level 2, 419 Collins Street, Melbourne VIC 3000 Australia Phone: + 61 3 8695 9100 Fax: + 61 3 9696 0700 Asia Pacific Offices Level 8, 10-14 Waterloo Street Surry Hills NSW 2010 Australia 1-231, Shanghai 1933 No 10 Shajing Road Shanghai 200080 China 301S Botany Road Botany Downs, Auckland New Zealand North America Office 79 Madison Avenue New York, NY 10016 United States of America European Offices Three Tuns House 109 Borough High Street London, SE1 1NL United Kingdom 8th Floor 33 Theatinerstrasse 11 80333 Munchen Bayern Germany Adslot 2019 Annual Report 89 79 ADSLOT.COM
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