C O R P O R A T E D I R E C T O R Y
DIRECTORS
Mr Stephen Belben
Non-Executive Chairman
Mr Mathew Ratty
Managing Director and Chief Executive Officer
Mr Renaud Besnard
Non-Executive Director
COMPANY SECRETARY
Ms Susan Hunter
PRINCIPAL AND REGISTERED OFFICE
Suite 10, 16 Brodie Hall Drive
Bentley WA 6102
Telephone: +61 8 9473 2500
Facsimile: +61 8 9473 2501
SHARE REGISTER
Security Transfer Australia Pty Ltd
770 Canning Highway
Applecross WA 6153
Telephone: +61 8 9315 2333
Facsimile: +61 8 9315 2233
SECURITIES EXCHANGE LISTING
Tech Mpire Limited shares are listed
on the Australian Securities Exchange
(ASX: TMP)
SOLICITORS
Steinepreis Paganin
Level 4, The Read Building
16 Milligan Street
Perth WA 6000
BANKERS
Commonwealth Bank of Australia Limited
150 St Georges Terrace
Perth WA 6000
AUDITORS
Ernst & Young
The EY Building
11 Mounts Bay Road
Perth WA 6000
T A B L E O F C O N T E N T S
Letter to Shareholders
Directors’ Report
Auditor’s Independence Declaration
Consolidated Statement of Profit and Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Page
2
4
20
21
22
23
24
25
58
59
65
1
TECH MPIRE ANNUAL REPORT 2018 L E T T E R T O
S H A R E H O L D E R S
Mathew J. Ratty
Chief Executive Officer
Stephen Belben
Non-Executive Chairman
Dear Shareholder,
We are pleased to provide Tech Mpire’s Annual Report for the 2018 financial year.
Throughout FY18, the Company’s concerted efforts to drive innovation through its 4 pillar technology strategy have delivered
valuable new opportunities for Tech Mpire.
The 4 pillar technology strategy was launched at the end of FY17 as a framework to guide the development of the Company’s
proprietary technology in FY18. These 4 pillars have been implemented to drive superior advertising performance for our
global clients:
1.
Investment in big data analytics and automation
2. Accessing higher-volume sources of supply
3. Strengthening our mobile business
4. Continuing the evolution of quality assurance measures
TrafficGuard Launch as a SaaS
Initiatives in each of these pillars had a strong impact on the development of Tech Mpire’s proprietary advertising fraud
mitigation solution, TrafficGuard, which evolved rapidly over the period.
While TrafficGuard was initially developed to mitigate fraud for Tech Mpire’s performance advertising division, Mpire
Network, its increasingly sophisticated use of data and machine learning has made it broadly appealing to other parties in the
advertising supply chain.
In April, the Company filed a patent application to protect new TrafficGuard intellectual property and announced its intention
to launch TrafficGuard software as a service (SaaS).
Digital ad fraud is forecast to cost businesses US$19 billion globally, in the 2018 calendar year. Inadequacy of existing fraud
management solutions has been evident from the volumes of fraud detected by TrafficGuard. Existing fraud prevention tools
predominantly report on fraud rather than actually blocking it. As fraud forecasts and fraud-related litigation make headlines
in marketing trade press, it is clear that there is an increasing dissatisfaction with the status quo and growing demand for a
more sophisticated approach.
In other industries fraud and security are managed by independent specialists but for some reason in digital advertising, that
hasn’t been the case until now. TrafficGuard is comprised of multiple layers of scoring, algorithms, thresholds and machine
learning, applied to the click, install and post-install events. We are excited to be the first mobile ad fraud prevention specialists
with our unique triple layered protection.
Strategic Solution to Supply-Related Challenges
Despite strong demand for performance advertising throughout the year, Mpire Network continued to face challenges in
accessing adequate volumes of quality supply. Finding a solution to these challenges was the top priority of leadership.
In the second half of FY18, Tech Mpire entered into negotiations to form a strategic alliance with Canadian performance
marketplace, ClearPier. In July 2018, negotiations culminated in the sale of a 90% stake in Mpire Network. ClearPier’s
extensive supply network, together with existing operational synergies between the two businesses, made them a natural fit,
addressing Mpire’s supply challenges.
A profit share agreement with ClearPier allows Tech Mpire to benefit from the upside of future revenue, whilst the reduced
interest in performance advertising enables the Company to now focus on its higher margin software business.
2
TECH MPIRE ANNUAL REPORT 2018 Growing our SaaS Business
In launching TrafficGuard, Tech Mpire continues to build a reputation as a global advertising technology innovator.
In development for over 2 years, TrafficGuard’s first application has been mitigating digital advertising fraud. Tech Mpire
is currently exploring future opportunities to extend TrafficGuard’s core technology to other digital applications including
payment protection and web/app security.
In addition to the thorough product development roadmap for TrafficGuard, Tech Mpire is exploring the feasibility of
commercialising components of nxus as SaaS solutions. nxus comprises proprietary data-driven tools for mediation and
optimisation of digital advertising, as well as traffic partner management.
Considerable time and effort has been invested in the development of TrafficGuard and nxus, and we are pleased that these
tools now represent significant revenue opportunities as SaaS products.
Thanks for your Continued Support
Tech Mpire would like to thank our global team and executive leadership who achieved so much this year in the development
of our technology and readying TrafficGuard for commercialisation. Thank you also to our board members for their valuable
guidance in positioning Tech Mpire for future success as a global SaaS company.
As Tech Mpire’s focus shifts to commercialising our world class technology, we are confident that our efforts will translate
into growth for Tech Mpire and strong returns for our shareholders. On behalf of Tech Mpire, we would like to thank you, our
shareholders, for your continued support.
Yours sincerely,
Mathew J. Ratty
Chief Executive Officer
Stephen Belben
Non-Executive Chairman
3
TECH MPIRE ANNUAL REPORT 2018 The directors present their report together with the financial report of Tech Mpire Limited (Tech Mpire or Company) and its controlled entities
(collectively referred to as the Group) for the financial year ended 30 June 2018 and the independent auditor’s report thereon.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below. Directors
were in office for this entire period unless stated otherwise.
Mr Stephen Belben
Non-Executive Chairman
Mr Belben has over 20 years’ experience in both executive and non-executive director roles, at a number of public and private companies. This
experience follows 9 years as a senior partner at Ernst & Young, specialising in corporate and assurance work in Western Australia. Whilst at
Ernst & Young, Mr Belben was appointed the national partner in charge of the firm’s Minerals and Energy Industry Group responsible for the
development of a major client base in that sector in Australia.
During the last three years, Mr Belben has not served as a director of any other ASX listed company.
Mr Belben is a Chartered Accountant and holds a Bachelor of Accountancy degree and a Bachelor of Commerce Honours degree.
Mr Mathew Ratty
Interim Managing Director and Chief Executive Officer (Appointed on 20 March 2018)
Mr Ratty is an experienced investor focused on Australian and US equity and debt markets. He has extensive experience across capital raising
advice, seed investment negotiation, corporate strategy and financial modelling.
He is the co-founder of MC Management Group Pty Ltd, a venture capital firm operating in domestic and international debt and equity markets.
At MC Management Group Pty Ltd, which is a substantial shareholder of the Company, Mr Ratty holds the position of Head of Investment and is
responsible for negotiating deal structures and asset pricing for companies in the healthcare, financial and technology space.
Prior to this, Mr Ratty was a director and analyst at property development and equity company, Gladstone Bridge.
During the last three years Mr Ratty has also served as a Non-Executive Director of medical technology company, Admedus Limited (ASX: AHZ).
He resigned from this position on 20 May 2018.
Mr Ratty holds a Bachelor of Commerce (Property and Finance) with first class honours in finance from Curtin University of Technology.
Mr Ratty resigned as Non-Executive Director and was appointed as an Executive Director on 21 December 2017. He was subsequently appointed
as Interim Managing Director and Chief Executive Officer on 20 March 2018.
Mr Lee Hunter
Managing Director and Chief Executive Officer (Resigned on 20 March 2018)
Mr Hunter is a former senior Google executive, most recently serving as the Head of Marketing Strategy & Innovation for Google Asia-Pacific,
where he was responsible for incubating and launching innovative strategies for the company’s key business priorities across the Asia-Pacific
region. He also served as Head of Advertiser Acquisition & Growth Marketing for Google UK and Ireland, where he was tasked with running the
Google AdWords advertiser acquisition strategy which resulted in the company consistently exceeding targets in Europe’s largest market.
Mr Hunter also spent several years at YouTube, most recently as Global Head of Brand & Creative, where he led many of the online video
channel’s biggest entertainment initiatives including the YouTube Music Awards and the YouTube Rewind 2012 and 2013 campaigns, as well as
spearheading branding and creative development. Mr Hunter was Head of Consumer Marketing across EMEA for YouTube and has also held
senior roles at Deutsche Bank and AMP Financial Services.
During the last three years, Mr Hunter has not served as a director of any other ASX listed company.
Mr Hunter holds a Masters in Marketing, a Graduate Certificate in Applied Finance & Investments, a Bachelor of Arts and a Diploma of Financial
Services.
Mr Hunter resigned from the position of Managing Director and Chief Executive Officer on 20 March 2018 to take up the role of Chief Operations
Officer.
Mr Renaud Besnard
Non-Executive Director (Appointed on 11 July 2017)
Mr Besnard is currently the Director of Marketing for Asia-Pacific (excl. India) at Uber Technologies Inc., based in Singapore. In this role, Mr
Besnard is responsible for the development of Uber’s marketing strategy and its execution across the region. At Uber, Mr Besnard has seen
success in rapidly growing usage across the product portfolio and launching brand reputation initiatives, while nurturing a world-class marketing
team throughout Asia-Pacific.
4
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT Prior to joining Uber in 2016, Mr Besnard was a long-standing Google executive, having spent almost 10 years in senior positions in Europe and
Asia. Mr Besnard notably accelerated small and medium business customer acquisitions, and then led Google’s advertising product marketing
strategy for Europe, Middle-East, and Africa. Amongst many roles at Google, he also led consumer and monetisation marketing across Southeast
Asia including must-win, high-growth ‘’next Billion users’’ markets, with particular focus on Google Search and YouTube.
During the last three years, Mr Besnard has not served as a director of any other ASX listed company.
Mr Besnard holds a Bachelor degree in Commerce from ESSCA Business School (France), a Masters in International Business from the University
of Manchester (UK) and an MBA from the University of Oxford (UK).
INTERESTS IN THE SECURITIES OF THE COMPANY AND RELATED BODIES CORPORATE
As at 30 June 2018 and as of the date of this report, the interests of the directors in the securities of the Company were as follows:
S. Belben
M. Ratty
R. Besnard (appointed on 11 July 2017)
COMPANY SECRETARY
As at 30 June 2018
As at the date of this report
Ordinary shares
Share options
Ordinary shares
Share options
200,000
6,551,676
-
500,000
500,000
500,000
200,000
6,551,676
-
500,000
500,000
500,000
Ms Susan Hunter was appointed to the position of joint company secretary on 29 September 2017. Ms Hunter has over 23 years’ experience in
the corporate finance industry and has extensive experience in Company Secretarial and Non-Executive Director roles on ASX, AIM and TSX listed
companies.
Mr Tim Allison resigned as joint company secretary on 22 May 2018. Mr Allison is a Chartered Accountant with over 7 years’ experience.
Ms Clare Madelin resigned as joint company secretary on 18 September 2017. Ms Madelin is a Chartered Accountant with over 30 years’ experience.
DIVIDENDS
The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report.
PRINCIPAL ACTIVITIES
For the current and prior year, the principle activitiy of the Group was to provide performance-based online advertising services using its
proprietary software, nxus®. nxus was developed specifically for digital advertising campaign mediation, optimisation and management.
The growing prevalence of ad fraud and invalid traffic, presented an opportunity for the Group to develop its digital advertising fraud mitigation
software, TrafficGuard®. TrafficGuard was implemented as a software service to a number of top-tier clients in October 2016. During the current
year, increased focus was placed on the development of TrafficGuard with the objective of commercialising it in early FY19.
OPERATING AND FINANCIAL REVIEW
As shown in the table below, during the current financial year the Company experienced a significant downturn in revenue from its performance
marketing division which is attributable to the challenges faced by the Group in accessing quality online traffic supplies.
Revenue from performance marketing
FY 2018
FY 2017
FY 2016
$15,483,256
$37,025,141
$32,123,476
The growing prevalence of ad fraud and invalid traffic presented an opportunity to the Group and led to the development of TrafficGuard®.
TrafficGuard is the Group’s fraud prevention technology which detects, mitigates and reports on mobile advertising fraud before the fraud impacts
on the advertisers’ mobile advertising budgets, protecting advertisers from both the direct and indirect costs of fraud.
After a stringent review of operations and sector outlook, the Board decided to focus the Company’s resources towards achieving its key objective
of being a leader in ad technology. Consequently, the Company’s focus shifted away from performance marketing and was instead directed
towards the further development and future commercialisation of nxus and TrafficGuard.
In May 2018, the Company, via its wholly owned subsidiary, Livelynk Group Pty Ltd (Livelynk), entered into an indicative, confidential and non-
binding term sheet with Canadian performance marketplace, ClearPier Inc (ClearPier), pursuant to which Livelynk agreed to sell 90% of its equity
interest in Mpire Network Inc (Mpire Network).
On 31 July 2018, Livelynk executed a share purchase agreement for the sale of 90% of Mpire Network, to ClearPier for a cash consideration of
$900,000 ($500,000 received upfront and $400,000 deferred) plus a maximum of $6,000,000 under a 3 year profit share agreement.
5
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT
OPERATING AND FINANCIAL REVIEW (CONTINUED)
For purposes of financial reporting, the performance marketing division has been classified as a discontinued operation. The post-tax loss of the
discontinued operation has been disclosed as a single amount in the consolidated statement of comprehensive income, and the assets and liabilities
of Mpire Network have been shown as “held for sale” in the consolidated statement of financial position. The comparative information for FY17 in
the consolidated statement of comprehensive income has been restated accordingly.
A summary of the operating results achieved by the Group over the last 4 years is set out below. The 2016 financial year was the Group’s first full
year of trading since being readmitted to quotation on the Australian Securities Exchange on 7 July 2015.
Note
FY 2018
FY 2017
FY 2016
FY 2015
1
2
3
4
2
Grant income
Sundry income
Other income
Server hosting costs
Administration, marketing and occupancy costs
Compliance and consultancy costs
Employment costs
Bad and doubtful debts expense
Foreign exchange differences
Finance costs
Depreciation
Overheads
$
-
73,311
73,311
(760,847)
(893,904)
(551,522)
$
-
51,178
51,178
(368,216)
(738,200)
(365,010)
$
187,594
151,933
339,527
(166,212)
(390,401)
(309,177)
$
-
151,555
151,555
(66,999)
(339,585)
(106,217)
(4,777,622)
(3,406,094)
(1,990,483)
(1,441,368)
(1,000)
-
(194,514)
(127,754)
(112,881)
(23)
(52,631)
(17)
(67,285)
9,144
(41,043)
(18,210)
(113,845)
(130,524)
(15,991)
(19,150)
(7,165,303)
(5,057,703)
(3,100,896)
(2,233,679)
Share based payments
Corporate transaction costs
Excess consideration on reverse acquisition
Reversal of prior period sale
Other expenses
5
(111,621)
(215,442)
(4,250,454)
-
-
-
-
-
-
-
(30,484)
(1,817,674)
-
-
(6,167,441)
(488,250)
(111,621)
(215,442)
(4,280,938)
(8,473,365)
Loss before tax
Income tax (expense) / benefit
(7,203,613)
(5,221,967)
(7,042,307)
(10,555,489)
(47,971)
191,148
(258,056)
(58,195)
Loss after tax - continuing operations
(7,251,584)
(5,030,819)
(7,300,363)
(10,613,684)
Profit / loss after tax - discontinued operations
(257,811)
5,448,025
3,653,798
282,192
Profit / (loss) after tax for the Group
(7,509,395)
417,206
(3,646,565)
(10,331,492)
Notes
The grant income received in FY16 related to the Group’s research and development spending incurred in FY15. In subsequent years, the
Group has been eligible for a research and development rebate in the form of an off-set against its income tax liability.
Server hosting costs and employment costs increased in FY18 in accordance with the Board’s decision to focus on the development of its
software as a service offerings.
Administration, marketing and occupancy costs have increased in FY18 largely as a result of additional software subscriptions required to
support the development of nxus and TrafficGuard together with an office being opened in Singapore to enable the Group to target the Asia
Pacific region.
Compliance and consultancy costs have increased in FY18 largely as a result of the additional fees incurred in relation to the placement shares
issued in December 2017.
The significant share based payments expense in FY16 related to the vesting of the Class A and Class B performance rights on the
achievement of revenue and profit milestones.
1.
2.
3.
4.
5.
6
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
As set out above, the challenges faced by the Group in accessing quality online traffic had a significant negative impact on the Group’s revenue from
performance-based advertising.
After a stringent review of operations and sector outlook, the Board decided to focus the Company’s resources on the development and future
commercialisation of its core advertising technology and offer both its ad fraud mitigation platform, TrafficGuard, and its advertising management
platform, nxus, as software as a service products.
The performance marketing division has been classified as a discontinued operation in the financial statements.
SIGNIFICANT EVENTS AFTER BALANCE DATE
On 31 July 2018, the Company’s wholly owned subsidiary, Livelynk Group Pty Ltd, executed a share purchase agreement for the sale of 90% of
Mpire Network Inc, to ClearPier Inc for a cash consideration of $900,000 ($500,000 received upfront and $400,000 deferred) plus a maximum of
$6,000,000 under a 3 year profit share agreement.
No other event has arisen since 30 June 2018 that would be likely to materially affect the operations of the Group, or its state of affairs which has
not otherwise been disclosed in this financial report.
LIKELY DEVELOPMENTS AND EXPECTED FUTURE RESULTS
The Board intends to focus the Company’s resources on the continued development and commercialisation of both the TrafficGuard and nxus
products and offer them to established businesses in the rapidly growing advertising industry. Commercialisation of these products is a logical
step for Tech Mpire as it represents a potential major revenue source for the Company and is expected to operate as a higher margin business than
performance-based marketing.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group is not subject to any particular or specific environmental regulation in any of the jurisdictions in which it operates and therefore is not
required to present further details in relation to environmental regulation.
SHARE OPTIONS
Unissued Shares
As at 30 June 2018 and the date of this report, there were 2,000,000 unissued ordinary shares under options.
Expiry Date
30 March 2020
25 August 2020
Exercise Price Number on issue
$0.45
$0.45
1,500,000
500,000
2,000,000
Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate.
Shares Issued as a Result of the Exercise of Options
During the financial year, no options have been exercised to acquire ordinary shares (2017: NIL).
PERFORMANCE RIGHTS
Unissued Shares
As at 30 June 2018 and the date of this report, there were 1,233,332 unissued ordinary shares under performance rights. 33,332 performance
rights vested on 29 June 2018 and will be converted to shares subsequent to the date of this report. Refer to the remuneration report and note 16
for further details of the performance rights outstanding.
Holders of performance rights do not have any right, by virtue of the performance right, to participate in any share issue of the Company or any
related body corporate.
Shares Issued as a Result of the Conversion of Performance Rights
During the financial year 7,500,000 performance rights were converted into ordinary shares (2017: 33,334).
7
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company has agreed to indemnify all the directors of the Company for any liabilities to another person (other than the Company or related
body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of
conduct involving a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract insuring the directors and officers of the Company against any
liability incurred in the course of their duties to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure
of the nature of the liability and the amount of the premium.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Group has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst &
Young during or since the financial year.
DIRECTORS’ MEETINGS
The number of meetings of directors held by the Company during the year and the number of meetings attended by each director were as follows:
Number of meetings held: 14
S. Belben
L. Hunter
M. Ratty
R. Besnard
Committee Membership
Number of
meetings eligible
to attend
Number of
meetings
attended
14
10
14
13
14
10
14
11
Due to the Company’s relatively small size and board structure, separate Remuneration and Audit Committees have not been constituted. The full
board of directors assumes responsibility for any such matters as outlined in the Company’s corporate governance plan.
NON-AUDIT SERVICES
The following non-audit services were provided by the Group’s auditor, Ernst & Young Australia, during the year and Ernst & Young Australia
received or is due to receive the following amounts for the provision of such services:
Tax advice services
$
85,733
The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence imposed by the
Corporations Act 2001. The nature and scope of each type of non-audit service provided means the auditor’s independence was not compromised.
AUDITOR INDEPENDENCE
Section 307C of the Corporations Act 2001 requires the Company’s auditors, Ernst & Young Australia, to provide the directors of the Company
with an Independence Declaration in relation to the audit of the Financial Report. The directors received the Independence Declaration set out on
page 20 for the year ended 30 June 2018.
REMUNERATION REPORT (AUDITED)
This remuneration report for the year ended 30 June 2018 outlines the remuneration arrangements of the Group in accordance with the
requirements of the Corporations Act 2001 (Cth), as amended (the Act) and its regulations. This information has been audited as required by
section 308(3C) of the Act.
The remuneration report is presented under the following sections:
Introduction
1.
2. Remuneration governance
3. Remuneration outcomes
4. Executive contracts
5. Additional disclosures relating to performance rights, options and shares
6. Other transactions and balances with key management personnel and their related parties
8
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
1.
Introduction
The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any
director (whether executive or otherwise) of the parent entity.
The table below outlines the KMP of the Group during the financial year ended 30 June 2018. Unless otherwise indicated, the individuals
were KMP for the entire financial year.
For the purposes of this report, the term “executive” indicates the executive directors and senior executives of the Group.
Non-Executive Directors (NEDs)
S. Belben
M. Ratty
R. Besnard
Executive Directors
L. Hunter
M. Ratty
Senior Executives
L. Taylor
L. Hunter
J. Botnick
J. Dutton
C. Madelin
T. Allison
F. Muir
Non-Executive Chairman
Non-Executive Director from 1 July 2017 to 21 December 2017 when appointed as Executive Director
Non-Executive Director appointed on 11 July 2017
Managing Director and Chief Executive Officer, resigned 20 March 2018 and appointed as Senior Executive
Appointed as Executive Director on 21 December 2017 and interim Managing Director and Chief Executive
Officer on 20 March 2018
Chief Technology Officer
Chief Operations Officer, appointed on 20 March 2018, resigned on 18 July 2018
Managing Director of Mpire Network Inc, resigned on 21 November 2017
Managing Director of Mpire Operations Asia Pacific Pte Ltd, appointed 5 December 2017
Chief Financial Officer, resigned on 18 September 2017
Chief Financial Officer, appointed on 18 September 2017, resigned on 15 June 2017
Chief Financial Officer, appointed on 25 June 2018
2. Remuneration Governance
2(a) Remuneration Philosophy
The performance of the Group depends upon the quality of the directors and executives. The philosophy of the Group in determining
remuneration levels is to:
• set competitive remuneration packages to attract and retain high calibre employees;
• link rewards to shareholder value creation; and
• establish appropriate, demanding performance hurdles for variable executive remuneration.
2(b) Remuneration Committee
The current size of the Group and structure of the board of directors does not warrant a separate remuneration committee. The board of
directors as a whole (Board) is currently responsible for determining and reviewing compensation arrangements for directors and executives.
Directors are excluded from discussions and voting on their own remuneration arrangements.
The Board assesses the appropriateness of the nature and amount of remuneration of directors and executives on a periodic basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention
of a high quality Board and executive team.
2(c) Remuneration Structure: Non-Executive Director Remuneration
Fixed Remuneration
In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and
distinct.
The Board seeks to set aggregate remuneration of non-executive directors at a level that provides the Group with the ability to attract and
retain high calibre directors, whilst incurring a cost that is acceptable to shareholders.
The ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from time to time by a general
meeting. The aggregate remuneration set pursuant to Tech Mpire Limited’s constitution is $500,000 per year, which may be varied by
shareholders in general meeting.
9
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors
is reviewed annually. The Board does not currently seek external remuneration advice.
Each director receives a fee for being a director of the Company.
Options
In addition to fees, during the current year, a non-executive director in office received 500,000 options on 26 October 2017, the issue of
which was approved by shareholders on that date. The exercise price of the options was determined so as to ensure that the options only have
value if there is an increase in shareholder wealth over time. These options vested immediately. The purpose of the issue was to recognise
work undertaken by the director and to incentivise him further. Such options are outside the normal remuneration policy for directors.
In the prior year, 1,000,000 options were issued to non-executive directors.
2(d) Remuneration Structure: Executive Director and Senior Executive Remuneration
(i) Objective
The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities so as to:
• Reward executives;
• Align the interests of executives with those of shareholders;
• Link reward with strategic goals and performance of the Group; and
• Ensure total remuneration is competitive by market standards.
(ii) Principles of Compensation
Compensation levels for employees of the Group are competitively set to attract and retain appropriately qualified and experienced senior
executives. Executive remuneration and other terms of employment are reviewed annually by the Board having regard to the performance,
relevant comparative information and expert advice.
(iii) Structure
Remuneration consists of the following key elements:
• Fixed Remuneration (base salary, superannuation and non-monetary benefits);
• Variable Remuneration
– Short-term incentives
– Long-term incentives
The Board establishes the proportion of fixed and variable remuneration for each executive.
Fixed Remuneration
The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive
in the market. The Board reviews fixed remuneration annually by reviewing the overall performance of the individual and of the Group.
Executives may be given the flexibility to receive their remuneration in a variety of forms including cash and fringe benefits. It is intended that
the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group.
Variable Remuneration – Short-term Incentive
The objective of short term incentives is to link the achievement of the Group’s operational targets with the remuneration received by the
executives charged with meeting those targets.
From time to time cash bonuses (short-term incentives) are paid where an executive has met a short term objective of the Group. Such
bonuses are paid when specific criteria are met which are set by the Board or when an executive has made contributions that are significant
and beyond the normal expectations of their role.
Variable Remuneration – Long-term Incentive
Long-term incentives are delivered in the form of options and performance rights.
Options
The exercise price of options is determined so as to ensure that the options only have value if there is an increase in shareholder wealth over
time. For each option granted, specific hurdles are provided which must be met before the options vest.
No options were issued to executive directors during the current year (2017: Nil). 500,000 options were issued to non-executive directors
during the current year (2017: 1,000,000). These options were issued pursuant the to the agreements with the non-executive directors
whereby options are to be issued on appointment. Accordingly, no performance conditions are attached.
10
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
Performance Rights
Performance rights are issued in accordance with the terms and conditions of the Tech Mpire Performance Rights Plan (Plan) that has been
approved by the Company’s shareholders.
Pursuant to the listing rules of the Australian Securities Exchange (Listing Rules), the Company’s shareholders are required to re-approve the
Plan and all unallocated performance rights issuable under it every three years.
The key features of the Plan are as follows:
• The Board will determine the number of performance rights to be granted to eligible employees and the vesting conditions and expiry date
of the performance rights in its sole discretion.
• The vesting conditions may include one or more of (i) service to the Group of a minimum period of time (ii) achievement of specific
performance conditions by the eligible employee and / or by the Group or (iii) such other performance conditions as the Board may
determine. The Board determines whether vesting conditions have been met.
• The vesting conditions will have a milestone date as determined by the Board in its absolute discretion and the Board shall have discretion
to extend a milestone date.
• If a vesting condition is not achieved by the earlier of the milestone date or the expiry date then the performance right will lapse. An
unvested performance right will also lapse if the participant ceases to be an eligible employee for the purposes of the Plan by reason of
resignation, termination for poor performance or termination for cause (unless the Board determines otherwise).
• Performance rights will not be listed for quotation. However, the Company will make application to the Australian Securities Exchange for
official quotation of all shares issued on vesting of the performance rights within the period required by the Listing Rules.
• The performance rights are not transferable unless the Board determines otherwise or the transfer is required by law and the transfer
complies with the Corporations Act.
• Where there is an event that the Board considers may result in a change of control of the Company (Change of Control Event), the
Board may in its discretion determine that all or a specified number of the participant’s performance rights vest or cease to be subject to
restrictions (as applicable) although the Board may specify in an offer to a participant that a different treatment will apply if a Change of
Control Event occurs.
Unless the Board determines otherwise, if a Change of Control Event occurs, any restrictions on dealing imposed on vested Performance
Rights will cease to have effect.
2(e) Remuneration Report Approval at 2017 Annual General Meeting
The remuneration report of Tech Mpire Limited for the year ended 30 June 2017 was approved by shareholders at the 2017 AGM.
11
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
3. Remuneration Outcomes
Remuneration of Key Management Personnel
Short-term benefits
Post-
employment
Long-term
benefits
Share-based payments
Commission
/ Bonus
Termination
benefits
Long service
leave
Performance
Rights
Options
Total
Performance
related
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-
monetary
benefits
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-Executive
Directors
S. Belben
Z. Tsvetnenko1
R. Besnard2
P. O’Connor3
Executive
Directors
M. Ratty4,13
Total Directors
Senior
Executives
L. Taylor5
J. Botnick6
L. Hunter7,8,14,15
J. Dutton9
C. Madelin10
T. Allison11
F. Muir12
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Salary & fees
$
60,165
60,099
-
2,954
39,407
-
-
23,692
$
-
-
-
-
-
-
-
-
114,315
45,000
14,835
-
213,887
45,000
101,580
200,550
427,279
-
-
-
287,727
131,963
198,483
294,759
710,645
322,440
50,000
45,953
174,989
-
58,669
201,669
198,934
-
11,394
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Senior
Executives
2018 1,254,703
181,963
198,483
2017
969,660
710,645
-
Total
2018 1,468,590
226,963
198,483
2017 1,071,240
710,645
-
12
Super
$
5,716
5,709
-
246
3,744
-
-
2,251
15,135
1,409
24,595
9,615
$
-
-
-
-
-
-
-
-
170
-
170
-
19,052
3,972
40,592
13,119
-
2,564
20,030
4,365
-
-
4,895
19,159
17,056
-
1,083
-
-
-
482
61
-
-
-
(94)
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35,637
-
-
-
-
-
-
-
-
-
$
-
$ %
65,881
65,519
131,327
-
-
-
3,200
45,616
88,767
-
-
-
-
-
-
25,943
174,620
65,519
81,763
45,616
329,268
131,038
242,233
-
-
-
223,574
480,990
618,173
- 1,007,968
-
428,589
65,519
115,898
-
-
-
-
-
-
-
-
174,989
-
63,564
220,734
215,990
-
12,477
-
62,116
4,454
35,637
- 1,737,356
66,680
13,086
-
65,519 1,825,590
86,711
4,624
35,637
45,616 2,066,624
76,295
13,086
-
196,557 2,067,823
-
-
-
-
-
-
-
26
-
14
-
-
-
21
71
20
-
-
-
-
-
-
-
13
39
13
34
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
Remuneration Outcomes (Continued)
Notes
1. Resigned as Non-Executive Director on 25 July 2016
2. Appointed as Non-Executive Director on 11 July 2017
3. Resigned on 24 February 2017
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Appointed as Executive Director on 21 December 2017 and subsequently as Interim Managing Director on 20 March 2018. Total
remuneration in FY18 whilst serving as a Non-Executive Director was $21,210 (FY17: 81,763)
Resigned as Managing Director on 15 May 2017 and was appointed as Chief Technology Officer on that date. Total remuneration in FY17
whilst serving as Managing Director was $451,106 which included additional payments arising on change of employment status from Chief
Executive Officer to Chief Technology Officer and pay out of accumulated annual leave
Resigned as Managing Director of Mpire Network on 21 November 2017. Salary and fees for FY18 include payments arising on cessation of
employment and pay out of accumulated annual leave
Resigned as Managing Director on 20 March 2018 and appointed as Chief Operating Officer on that date. Total remuneration in FY17 whilst
serving as Managing Director was $353,484
Appointed as Non-Executive Director on 16 February 2017 and subsequently as Managing Director on 15 May 2017. Total remuneration in
FY17 whilst serving as a Non-Executive Director was $75,987
Appointed as Managing Director of Mpire Operation Asia Pacific Pte Ltd on 5 December 2017
Resigned as Chief Financial Officer on 18 September 2017
Appointed as Chief Financial Officer on 18 September 2017 and resigned on 15 June 2018
Appointed as Chief Financial Officer 25 June 2018
Bonus paid on the successful completion of a $3 million placement
Bonus paid on the successful opening of an office in Singapore to cover the Asia pacific region
Refer to section 5 below and Note 16 for further information on the vesting conditions attached to the performance rights issued during the
current year
13
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
4. Executive Contracts
Remuneration arrangements for executives are formalised in the employment agreements. The following outlines the details of the contracts
with executives:
Name:
Title:
Mathew Ratty
Interim Managing Director and Chief Executive Officer
Agreement commenced:
20 March 2018
Term of agreement:
20 March 2018 to 30 June 2019
Details:
• Annual base salary of $180,000 plus statutory superannuation.
• Performance related bonuses:
if, for the financial year ended 30 June 2019, the Company records audited revenue of $45 million or more, Mr
Ratty will be issued a total of 1,000,000 performance rights in the Company (subject to shareholder approval) or
a payment in cash equivalent to the value of those shares as at the date the performance bonus is earned; and
if, for the financial year ended 30 June 2019, the Company records an audited EBITDA of $1 million, Mr Ratty
will be issued a total of 1,000,000 performance rights in the Company (subject to shareholder approval) or a
payment in cash equivalent to the value of those shares as at the date the performance bonus is earned; and
if, for the financial year ended 30 June 2019, the Company records an audited EBITDA of $2 million or more, Mr
Ratty will be issued a further 2,000,000 performance rights in the Company (subject to shareholder approval) or
a payment in cash equivalent to the value of those shares as at the date the performance bonus is earned; and
the Company may at any time up until 30 June 2019 pay the Executive, at the discretion of the Board, bonuses
in aggregate of up to 2x the Executive’s Salary for achieving milestones or transactions as identified and agreed
between Mr Ratty and the Company.
• The agreement may be terminated:
– by either party without cause with six months’ notice, or in the case of the Company, immediately with payment
in lieu of notice;
– by the Company on one months’ notice if Mr Ratty is unable to perform his duties due to illness, accident or
incapacitation, for two consecutive months or a period aggregating more than two months in any 12 month
period; or
– promptly following material breach or in the case of misconduct.
• Other industry standard provisions for a senior executive of a public listed company.
Name:
Title:
Lee Hunter
Chief Operations Officer
Agreement commenced:
20 March 2018
Term of agreement:
No fixed term
Details:
• Annual base salary of $240,000 plus statutory superannuation.
• Performance based incentive relating to TrafficGuard SaaS product: 3% of the purchase price for a purchase price
under A$12 million or 4% of the purchase price for a purchase over A$12 million.
• The agreement may be terminated:
– by either party without cause with one months’ notice, or in the case of the Company, immediately with
payment in lieu of notice;
– by the Company on one months’ notice if Mr Hunter is unable to perform his duties due to illness, accident or
incapacitation, for two consecutive months or a period aggregating more than two months in any 12 month
period; or
– promptly following material breach or in the case of misconduct.
• Other industry standard provisions for a senior executive of a public listed company.
14
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
4. Executive Contracts (continued)
Name:
Title:
Luke Taylor
Chief Technology Officer
Agreement commenced:
15 May 2017
Term of agreement:
No fixed term.
Details:
• Annual base salary of $200,000 plus statutory superannuation.
• A cash bonus may be paid at any time during the Term linked to KPI’s to be approved by the Board.
• The agreement may be terminated:
– by either party without cause with three months’ notice, or in the case of the Company, immediately
with payment in lieu of notice;
– by the Company on one months’ notice, if Mr Taylor is unable to perform his duties due to illness,
accident or incapacitation, for two consecutive months or a period aggregating more than two months
in any 12 month period;
– promptly following material breach or in the case of misconduct.
• Other industry standard provisions for a senior executive of a public listed company.
Name:
Title:
Jeffrey Botnick (resigned on 21 November 2017)
Managing Director of Mpire Network Inc
Agreement commenced:
28 February 2014
Term of agreement:
No fixed term
Details:
• Mr Botnick receives an annual salary of US$265,000 (inclusive of social security payment and taxes)
together with benefits and insurance, and commission of 7.5% of gross profit of the Company’s Canadian
subsidiary, Mpire Network.
• The agreement may be terminated:
– by Mr Botnick with three months’ notice;
– by the Company without cause with seven days’ notice and payment of six months’ salary; or
– by the Company immediately for cause.
• Mr Botnick is based in Toronto, Canada, but may be required to spend up to 15% of his time travelling and
Name:
Title:
working overseas.
James Dutton
Managing Director of Mpire Operations Asia Pacific Pte Ltd
Agreement commenced:
5 December 2017
Term of agreement:
No fixed term
Details:
• Annual base salary of $250,000
• Two performance-based bonuses of $35,000 and $100,000 upon the achievement of pre-determined
key performance indicators.
• The agreement may be terminated:
– by either party without cause with three months’ notice, or in the case of the Company, immediately
with payment in lieu of notice;
– by the Company on one months’ notice if Mr Dutton is unable to perform his duties due to illness,
accident or incapacitation, for two consecutive months or a period aggregating more than two months
in any 12 month period;
– by the Company summarily without notice following material breach or in the case of misconduct; or
– by Mr Dutton if at any time the Company commits any serious or persistent beach which is not
remedied with 28 days.
• Other industry standard provisions for a senior executive of a public listed company.
15
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
4. Executive Contracts (Continued)
Name:
Title:
Clare Madelin (resigned on 18 September 2017)
Chief Financial Officer and joint Company Secretary
Agreement commenced:
18 January 2016 and extended to 19 September 2017
Term of agreement:
Minimum 12 months, with the option to extend
Details:
• Annual base salary of $230,000 plus statutory superannuation.
• The agreement may be terminated:
– by Ms Madelin with one months’ notice, unless the Company is in breach of a material term of the
agreement, in which case Ms Madelin may terminate it immediately;
– by the Company with one months’ notice or payment in lieu of notice;
– by the Company immediately for cause.
Name:
Title:
Tim Allison (resigned as joint Company Secretary on 22 May 2018, resigned as Chief Financial
Officer on 15 June 2017)
Chief Financial Officer and joint Company Secretary
Agreement commenced:
18 September 2017
Term of agreement:
No fixed term
Details:
• Annual base salary of $180,000 plus statutory superannuation.
• The agreement may be terminated:
– by Mr Allison with one months’ notice, unless the Company is in breach of a material term of the
agreement, in which case Mr Allison may terminate it immediately;
– by the Company with one months’ notice or payment in lieu of notice;
– by the Company immediately for cause.
Name:
Title:
Fiona Muir
Chief Financial Officer
Agreement commenced:
25 June 2018
Term of agreement:
No fixed term
Details:
• Ms Muir fulfils the role of Chief Financial Officer on a part time basis and is remunerated pro-rate based
on an annual base salary of $259,350 plus statutory superannuation.
• The agreement may be terminated:
– by Ms Muir with one months’ notice, unless the Company is in breach of a material term of the
agreement, in which case Ms Muir may terminate it immediately;
– by the Company with one months’ notice or payment in lieu of notice;
– by the Company immediately for cause.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
16
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONTINUED)
5. Additional Disclosures Relating to Performance Rights, Options and Shares
Performance Rights
The table below discloses the number of performance rights granted and vested during the year. No performance rights lapsed during the
year.
2018
Class B
Class E
Class F
Class G
L. Taylor
J. Botnick
L. Hunter
L. Hunter
L. Hunter
Balance at the beginning of the year
1,950,000
1,950,000
-
-
-
Number issued during the year
Grant date
Fair value per performance right at grant date
(cents)
Number vested during the year
-
N/A
N/A
-
-
N/A
N/A
-
150,000
900,000
150,000
26 Oct 2017
26 Oct 2017
26 Oct 2017
10.57
-
7.05
-
5.87
-
Number converted during the year
(1,950,000)
(1,950,000)
Balance at the end of the year
-
-
150,000
900,000
150,000
2017
Balance at the beginning of the year
Number issued during the year
Grant date
Fair value per performance right at grant date (cents)
Number vested during the year1
Number converted during the year
Balance at the end of the year
Notes
Class B
Z. Tsvetnenko 2
L. Taylor
J. Botnick
3,600,000
1,950,000
1,950,000
-
N/A
N/A
-
N/A
N/A
-
N/A
N/A
3,600,000
1,950,000
1,950,000
-
-
-
3,600,000
1,950,000
1,950,000
1.
2.
The performance rights vested during the 2017 financial year and were converted into ordinary shares on a one for one basis during the 2018
financial year.
Mr Tsvetnenko resigned on 25 July 2016.
Performance rights do not carry any voting or dividend rights and can only be converted once the vesting conditions have been met, until their
expiry date.
The performance rights were granted with the following vesting conditions and milestone dates:
Tranche
Vesting Condition
Milestone date
Class B Performance Rights
Upon the Livelynk Group achieving cumulative net profit before tax of at
least $1,500,000 during the period from Completion until the date that is
24 months after Completion.
On or before the date that is 24
months after Completion (Class B
Milestone Date)
Class E Performance Rights
Upon the Company achieving a five day volume weighted average share
price of $0.80 or higher before 30 June 2019.
On or before 30 June 2019
Class F Performance Rights
Upon the Company achieving a five day volume weighted average share
price of $1.00 or higher before 30 June 2019.
On or before 30 June 2019
Class G Performance Rights
Upon the Company achieving a five day volume weighted average share
price of $1.20 or higher before 30 June 2019.
On or before 30 June 2019
Livelynk Group comprises Livelynk Group Pty Ltd, Mpire Media Pty Ltd and Mpire Network Inc.
Completion occurred on 29 June 2015
17
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
5. Additional Disclosures Relating to Performance Rights, Options and Shares (Continued)
Options awarded, vested and lapsed during the year
The table below discloses the number of share options granted, vested or lapsed during the year. It includes only options granted as part of
remuneration to KMP.
Share options do not carry any voting or dividend rights, and can only be exercised once the vesting conditions, if any, have been met, and only
until the expiry date.
Number
vested
during year
Number
lapsed
during
year
Value of
options
granted
during year
Value of
options
exercised
during year
Options
awarded
during the
year
#
Award date
Fair value
per option
at award
date
$
Vesting date
Exercise
price
$
Expiry date
Name
2018
R. Besnard
500,000
26/10/2017
0.09
26/10/2017
0.45
25/08/2020
500,000
2017
S Belben
M Ratty
L Hunter
500,000
26/05/2017
500,000
26/05/2017
500,000
26/05/2017
0.131
0.131
0.131
26/05/2017
26/05/2017
26/05/2017
0.45
0.45
0.45
30/03/2020
500,000
30/03/2020
500,000
30/03/2020
500,000
$
45,616
65,519
65,519
65,519
-
-
-
-
$
-
-
-
-
Option holdings of KMP
The table below discloses the options held directly, indirectly and beneficially by key management personnel.
Balance at 1
July 2017
Granted as
remuneration
Exercised
Net change
other
Balance at 30
June 2018
Exercisable
Not
exercisable
-
-
-
-
-
-
-
-
-
-
-
-
500,000
500,000
500,000
500,000
(6,500,000)
500,000
500,000
-
-
-
-
-
-
-
-
-
-
500,000
500,000
-
-
-
-
-
-
(6,500,000)
2,000,000
2,000,000
-
-
-
-
-
-
-
-
-
-
Non-Executive Directors
S. Belben
R. Besnard
Executive Directors
500,000
-
-
500,000
M. Ratty1
7,000,000
Senior Executives
-
-
-
-
-
-
-
-
-
500,000
-
-
-
8,000,000
500,000
L. Taylor
J. Botnick
L. Hunter
C. Madelin
T. Allison
F. Muir
Total
Notes
1. 6,500,000 options lapsed on 29 June 2018.
18
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (CONTINUED)
5. Additional Disclosures Relating to Performance Rights, Options and Shares (Continued)
Share holdings of KMP
The table below discloses the shares held directly, indirectly and beneficially by key management personnel.
Non-Executive Directors
S. Belben
R. Besnard
Executive Directors
M. Ratty
Senior Executives
L. Taylor
J. Botnick1
L. Hunter2
C. Madelin
T. Allison
F. Muir
Total
Notes
Balance at
1 July 2017
Granted as
remuneration
On conversion
of performance
rights
Net change
other
Balance at
30 June 2018
200,000
-
6,551,676
1,300,000
1,300,000
146,000
-
-
-
9,497,676
-
-
-
-
-
-
-
-
-
-
-
-
-
1,950,000
1,950,000
-
-
-
-
-
-
-
-
-
(3,250,000)
(146,000)
-
-
-
200,000
-
6,551,676
3,250,000
-
-
-
-
-
3,900,000
(3,396,000)
10,001,676
1. Mr Botnick resigned on 21 November 2017 at which time he held 3,250,000 shares in the Company
2. Mr Hunter disposed of his shares on market
6. Other Transactions and Balances with Key Management Personnel and their Related Parties
During the current year, the Company entered into a consultancy agreement with Mr Ratty for the provision of Corporate Advisory services
which included advice on roadshows, communication with current and potential shareholders, and marketing. The agreement was terminated
on 19 March 2018 when Mr Ratty was appointed as interim Managing Director and Chief Executive Officer. Under the agreement Mr Ratty
was paid $20,529.
During the prior year the Company entered into a consultancy agreement with Mr Hunter for the provision of business, sales and marketing
advice. Under this agreement Mr Hunter was entitled to fees of $8,333 per month (exclusive of GST) with effect from 1 April 2017. The term
of the agreement was 1 year. However, the contract was terminated on 15 May 2017 when he was appointed Managing Director. Under the
agreement Mr Hunter was paid consultancy fees of $11,957.
Signed in accordance with a resolution of the directors:
Stephen Belben
Non-Executive Chairman
Perth, Western Australia
Dated this 30th day of August 2018
19
TECH MPIRE ANNUAL REPORT 2018DIRECTORS’ REPORT
A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of Tech Mpire
Limited
As lead auditor for the audit of Tech Mpire Limited for the financial year ended 30 June 2018, I declare 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.
This declaration is in respect of Tech Mpire Limited and the entities it controlled during the financial year.
Ernst & Young
G Lotter
Partner
30 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GL:EH:TMP:035
20
TECH MPIRE ANNUAL REPORT 2018
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
For the year ended 30 June 2018
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Continuing Operations
Other income
Overheads
Server hosting costs
Administration costs
Compliance costs
Consultancy costs
Employment costs
Occupancy costs
Marketing costs
Bad and doubtful debts expense
Foreign exchange differences
Finance costs
Depreciation
Other Expenses
Share based payments
Loss before income tax
Income tax benefit / (expense)
Note
2018
$
2017
$
4(a)
73,311
51,178
4(b)
4(c)
4(f)
4(d)
4(e)
16
(760,847)
(621,614)
(331,720)
(219,802)
(4,777,622)
(202,391)
(69,899)
(1,000)
(127,754)
(23)
(52,631)
(368,216)
(559,708)
(207,264)
(157,746)
(3,406,094)
(163,050)
(15,442)
-
(112,881)
(17)
(67,285)
(7,165,303)
(5,057,703)
(111,621)
(111,621)
(215,442)
(215,442)
(7,203,613)
(5,221,967)
5
(47,971)
191,148
Loss for the year from continuing operations attributable to the members
of Tech Mpire Limited
(7,251,584)
(5,030,819)
Discontinued Operations
Profit / (Loss) after tax for the year from discontinued operations
12
(257,811)
5,448,025
Profit / (loss) for the year attributable to the members of Tech Mpire Limited
(7,509,395)
417,206
Other comprehensive income net of tax
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
79,601
(464,104)
Total comprehensive loss for the year attributable to the members
of Tech Mpire Limited
(7,429,794)
(46,898)
Loss per share attributable to members of Tech Mpire Limited
Basic earnings / (loss) per share (cents)
Diluted earnings / (loss) per share (cents)
23
23
(9.35)
(9.35)
0.63
0.54
The Consolidated Statement of Profit and Loss and Other Comprehensive Income is to be read in conjunction with the notes to the financial
statements.
21
TECH MPIRE ANNUAL REPORT 2018 C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
For the year ended 30 June 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Assets held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Goodwill
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Provisions
Interest–bearing loans and borrowings
Liabilities directly associated with the assets held for sale
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share based payment reserve
Foreign currency translation reserve
Accumulated losses
TOTAL EQUITY
Note
2018
$
2017
$
6
7
12
15
8
9
10
11
12
10
13
14
14
17
4,054,816
148,118
1,154,520
5,357,454
34,000
70,704
104,704
8,202,204
3,668,862
-
11,871,066
34,000
142,786
176,786
5,462,158
12,047,852
691,122
271,079
-
715,917
1,678,118
1,900,615
747,611
1,096,574
-
3,744,800
18,129
18,129
98,968
98,968
1,696,247
3,843,768
3,765,911
8,204,084
22,586,507
2,658,453
12,346
17,157,235
5,096,104
(67,255)
(21,491,395)
(13,982,000)
3,765,911
8,204,084
The Consolidated Statement of Financial Position is to be read in conjunction with the notes to the financial statements.
22
TECH MPIRE ANNUAL REPORT 2018
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
For the year ended 30 June 2018
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other income received
Interest received
Interest paid
Income tax paid
Note
2018
$
2017
$
17,990,379
36,961,739
(23,667,373)
(35,118,330)
120,201
42,470
(78,916)
(188,685)
224,860
11,301
(55,507)
(25,576)
Net cash flows generated by operating activities
6
(5,781,924)
1,998,487
Cash flows from investing activities
Purchase of plant and equipment
Acquisition of subsidiary, net of cash acquired
Deposits paid for leased premises
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs paid
15
(26,030)
-
-
(86,243)
(28,995)
(34,432)
(26,030)
(149,670)
3,000,000
(120,000)
Net advances received / (repaid) under debtor financing facility
11
(1,014,179)
Net cash flows provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
1,865,821
(3,942,133)
8,202,204
(28,187)
Cash and cash equivalents at the end of the year
6
4,231,884
The Consolidated Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.
-
-
1,124,102
1,124,102
2,972,919
5,601,353
(372,068)
8,202,204
23
TECH MPIRE ANNUAL REPORT 2018
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
For the year ended 30 June 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
Contributed
equity
Retained
earnings/
(accumulated
losses)
Share based
payments
reserve
Foreign
currency
translation
reserve
Total equity
$
$
$
$
$
Balance at 1 July 2017
17,157,235
(13,982,000)
5,096,104
(67,255)
8,204,084
Loss for the year
Other comprehensive income
Foreign exchange differences arising on
translation of foreign operations
Total comprehensive income /
(expenditure) for the year
Transactions with equity holders in
their capacity as owners
Ordinary shares issued
Share issue costs
Share based payments expense
Shares issued on vesting of performance
rights
-
-
-
(7,509,395)
-
(7,509,395)
3,000,000
(120,000)
-
2,549,272
5,429,272
-
-
-
-
-
-
-
-
-
-
111,621
(2,549,272)
(2,437,651)
-
(7,509,395)
79,601
79,601
79,601
(7,429,794)
-
-
-
-
-
3,000,000
(120,000)
111,621
-
2,991,621
Balance at 30 June 2018
22,586,507
(21,491,395)
2,658,453
12,346
3,765,911
Balance at 1 July 2016
17,143,905
(14,399,206)
4,893,993
396,849
8,035,541
Loss for the year
-
417,206
-
-
417,206
Other comprehensive income
Foreign exchange differences arising on
translation of foreign operations
-
-
-
(464,104)
(464,104)
Total comprehensive income
(expenditure) for the year
-
417,206
-
(464,104)
(46,898)
Transactions with equity holders in
their capacity as owners
Share based payments expense
Shares issued on vesting of performance
rights
-
13,330
13,330
-
-
215,441
(13,330)
-
-
215,441
-
-
202,111
-
215,441
Balance at 30 June 2017
17,157,235
(13,982,000)
5,096,104
(67,255)
8,204,084
The Consolidated Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.
24
TECH MPIRE ANNUAL REPORT 2018
1. CORPORATE INFORMATION
The consolidated financial report of Tech Mpire Limited (Tech Mpire or Company) and its controlled entities (collectively referred to as the
Group) for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the directors on 30 August 2018.
Tech Mpire is a for-profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the
Australian Securities Exchange. The Group’s registered office is in Bentley, Western Australia.
The nature of the operations and principal activities of the Group are as follows:
During the current and prior year, the Group generated revenue from its performance marketing division which uses a global network of
online media partners to enable advertisers to reach their target audiences online. This service is provided on a performance basis whereby
advertiser clients are only charged if a predefined result is achieved.
The Company experienced a significant downturn in performance marketing revenue during the current year due to challenges experienced
in accessing supplies of quality online traffic. As a consequence, the Company shifted its resources and focus to the development and future
commercialisation of its core advertising technology, being its ad fraud mitigation platform, TrafficGuard, and its advertising management
platform, nxus.
Information on the Group’s structure and related party relationships is provided in Note 20.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This note provides a summary of the significant accounting policies adopted in the preparation of this financial report. These policies have
been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of Preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements issued by the Australian Accounting
Standards Board.
The financial report has also been prepared on a historical cost basis. Cost is based on the fair values of the consideration given in
exchange for assets acquired.
The financial report is presented in Australian dollars.
i
Statement of Compliance
The consolidated financial statements of Tech Mpire Ltd comply with the International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
ii
Changes in Accounting Policies, Disclosures, Standards and Interpretations
Accounting Standards and Interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not
been adopted by the Group for the annual reporting period ended 30 June 2018 are outlined below.
25
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Standards and Interpretations Issued but not yet Effective
AASB 9: Financial Instruments
AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement.
Except for certain trade receivables, an entity initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVTPL), transaction costs.
Debt instruments are subsequently measured at FVTPL, amortised cost, or fair value through other comprehensive income (FVOCI), on the
basis of their contractual cash flows and the business model under which the debt instruments are held.
There is a fair value option (FVO) that allows financial assets on initial recognition to be designated as FVTPL if that eliminates or significantly
reduces an accounting mismatch.
Equity instruments are generally measured at FVTPL. However, entities have an irrevocable option on an instrument-by-instrument basis
to present changes in the fair value of non-trading instruments in other comprehensive income (OCI) without subsequent reclassification to
profit or loss.
For financial liabilities designated as FVTPL using the FVO, the amount of change in the fair value of such financial liabilities that is attributable
to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in profit or loss, unless presentation
in OCI of the fair value change in respect of the liability’s credit risk would create or enlarge an accounting mismatch in profit or loss.
All other AASB 139 classification and measurement requirements for financial liabilities have been carried forward into AASB 9, including the
embedded derivative separation rules and the criteria for using the FVO.
The incurred credit loss model in AASB 139 has been replaced with an expected credit loss model in AASB 9.
The requirements for hedge accounting have been amended to more closely align hedge accounting with risk management, establish a more
principle-based approach to hedge accounting and address inconsistencies in the hedge accounting model in AASB 139
Application date of standard: 1 January 2018
Application date for the Group: 1 July 2018
Impact on the Group’s Financial Statements: The impact of this new standard is still being assessed but is not expected to have a material
effect.
AASB 15: Revenue from Contracts with Customers
AASB 15 replaces all existing revenue requirements in Australian Accounting Standards and applies to all revenue arising from contracts with
customers, unless the contracts are in the scope of other standards, such as AASB 117 Leases (or AASB 16 Leases, once applied).
The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. An entity recognises
revenue in accordance with the core principle by applying the following steps:
• Step 1: Identify the contract(s) with a customer
• Step 2: Identify the performance obligations in the contract
• Step 3: Determine the transaction price
• Step 4: Allocate the transaction price to the performance obligations in the contract
• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Application date of standard: 1 January 2018
Application date for the Group: 1 July 2018
Impact on the Group’s Financial Statements: Given the Group has reached a decision to dispose of its main revenue generating operating
entity, adoption of AASB 15 is not expected to have a significant impact. The Group’s future revenue recognition policy will be reviewed to
ensure compliance with AASB 15 upon adoption.
26
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Standards and Interpretations Issued but not yet Effective
AASB 2: Share Based Payments
This Standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The
amendments provide requirements on the accounting for:
• The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments
• Share-based payment transactions with a net settlement feature for withholding tax obligations
• A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to
equity-settled.
Application date of standard: 1 January 2018
Application date for the Group: 1 July 2018
Impact on the Group’s Financial Statements: No significant impact is anticipated.
AASB 16: Leases
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under AASB 117
Leases. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term
leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease
payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use
asset).
Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use
asset.
Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in
future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the
amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting is substantially unchanged from today’s accounting under AASB 117. Lessors will continue to classify all leases using the
same classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases.
Application date of standard: 1 January 2019
Application date for the Group: 1 July 2019
Impact on the Group’s Financial Statements: The impact of this new standard is still being assessed but is not expected to have a material
impact.
27
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) Basis of Consolidation
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group
has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee
• The ability to use its power over the investee to affect its returns
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption, and when the Group has
less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing
whether it has power over an investee, including:
• The contractual arrangement(s) with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more
of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases
when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during
the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to
control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary,
adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting
policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group
loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other
components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.
(c) Segment Reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur
expenses (including revenues and expenses relating to transactions with other components of the same entity), whose operating results
are regularly reviewed by the entity’s chief operating decision makers to make decisions about resources to be allocated to the segments
and assess their performance and for which discrete financial information is available. This includes start-up operations which are yet to
earn revenues.
Operating segments have been identified based on the information presented to the chief operating decision makers, being the
executive management team.
Information about other business activities are combined and disclosed in a separate category called “other”.
(d) Foreign Currency Translation
i.
Functional and Presentation Currency
Items included in the financial statements of each Group company are measured using the currency of the primary economic
environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in
Australian dollars, which is the parent’s functional and presentation currency. For each entity, the Group determines the functional
currency and items included in the financial statements of each entity are measured using that functional currency.
ii.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transaction.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end exchange rates are recognised in profit or loss.
iii. Group Companies
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of exchange
prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on translation for consolidation purposes are recognised in other comprehensive
income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign
operation is recognised in profit or loss. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments
to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation
and translated at the spot rate of exchange at the reporting date.
28
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e) Plant and Equipment
All plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to
the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The
carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance
are charged to the profit or loss during the reporting period in which they are incurred.
Depreciation is calculated over the estimated useful life of the asset as follows:
Plant and equipment
Leasehold improvements
Office equipment
Computer software and hardware
Method
Straight Line
Straight Line
Straight Line
Straight Line
Useful Lives
1.5 – 2.5 years
the term of the lease
2 – 10 years
1.5 – 4 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
(f)
Impairment of Non-Financial Assets
Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value (less costs of disposal) and value in use. For the purposes of
assessing impairment, assets are grouped together at the lowest levels for which there are separately identifiable cash inflows which are
largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets that suffered
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
(g) Trade and Other Receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. Trade receivables are generally due for settlement within 45 days. They are presented as current assets
unless collection is not expected for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing
the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in
payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment
allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in profit or loss. When a trade receivable for which an impairment allowance had been
recognised becomes uncollectible in a subsequent period, the bad debt expense in the profit and loss is offset by the reversal of the
impairment allowance. Subsequent recoveries of amounts previously written off are recognised in profit or loss.
(h) Cash and Cash Equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at banks and on hand and short-term deposits with a
maturity of three months or less.
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits as
defined above, net of outstanding bank overdrafts.
29
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain.
The expense relating to any provision is presented in the statement of profit and loss and other comprehensive income net of any
reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
(j)
Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on
a straight line basis over the period of the lease.
(k) Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade
allowances, rebates and amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will
flow to the entity and the specific criteria have been met for each of the Group’s activities as described below:
i.
Advertising Income
Revenue from advertising services is recognised when the services have been performed and the fair value of the consideration for
the services provided can be reliably measured.
ii.
Interest Income
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised
cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of
the financial asset.
(l) Trade and Other Payables
These amounts represent liabilities for goods or services provided to the Group prior to the end of the financial year which are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current
liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and
subsequently measured at amortised cost using the effective interest method.
(m) Income Tax
Current Tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for
the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for
current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred Tax
Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those
items.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent
that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses
and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise
to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither
taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences
arising from goodwill.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, branches, associates and
joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary
differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with
these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
30
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) Income Tax (Continued)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability
giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting
date.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company /
Group intends to settle its current tax assets and liabilities on a net basis.
Current and Deferred Tax for the Period
Current and deferred tax is recognised as an expense or income in the statement of profit and loss and other comprehensive income
except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.
(n) Employee Benefits
Short-term Obligations
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled wholly within 12 months after
the end of the period in which the employees render the related service are recognised in respect of employees services up to the end of
the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
Long Service Leave
The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high
quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
(o) Contributed Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
(p) Financial Assets
Initial Recognition and Measurement
Financial assets within the scope of AASB 139 are classified into the following specified categories: financial assets ‘at fair value through
profit or loss’, ‘held-to-maturity’ investments, ‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on
the nature and purpose of the financial assets and is determined at the time of initial recognition.
All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value
through profit or loss.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
market place (regular way trades) are recognised on the trade date (the date that the Group commits to purchase or sell the asset).
The Group’s financial assets include cash and short-term deposits, trade and other receivables and loans and other receivables.
Subsequent Measurement
Loans and Receivables
Trade receivables, loans and other receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are recorded at amortised cost less impairment. Impairment is determined by review of the nature and
recoverability of the loan or receivable with reference to its terms of repayments and capacity of the debtor entity to repay the debt. If
the recoverable amount of a receivable is estimated to be less than its carrying amount, the carrying amount of receivable is reduced to
its recoverable amount. An impairment loss is recognised in profit or loss immediately. They are included in current assets, other than
those with maturities greater than 12 months from reporting date which are classified as non-current assets.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:
• The rights to receive cash flows from the asset have expired.
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a” pass-through” arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
evaluates if and to what extent it has retained the risks and rewards of ownership.
31
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(p) Financial Assets (Continued)
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset,
the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an
associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that
the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of Financial Assets
The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is
impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event
has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation
and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
Financial Assets Carried at Amortised Cost
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually
for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group
determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it
includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included
in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the
loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding
future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the
financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss
is the current effective interest rate (EIR).
(q) Financial Liabilities
Initial Recognition and Measurement
Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or loss, loans and
borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables and loans and borrowings.
Subsequent Measurement
The measurement of financial liabilities depends on their classification, described as follows:
Financial Liabilities at Fair Value Through Profit or Loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon
initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term.
Gains or losses on liabilities held for trading are recognised in the statement of profit and loss and other comprehensive income.
Financial liabilities designated upon initial recognition at fair value through profit and loss so designated at the initial date of recognition,
and only if criteria of AASB 139 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss.
Loans and Borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest
Rate (EIR) method. Gains and losses are recognised in the statement of profit and loss and other comprehensive income when the
liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of
the EIR. The EIR amortisation is included in finance costs in the statement of profit and loss and other comprehensive income.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and
the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss and
other comprehensive income.
32
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) Fair Value Measurement
The carrying amount of financial assets and trade and other payables recorded in the Financial Statements approximate their fair values.
The carrying amount of interest-bearing loans and borrowings recorded in the Financial Statements approximate their fair values and
are all classified as level 1 instruments per the below valuation methodology.
For financial instruments carried at fair value, the Group uses various methods in estimating fair value. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in an active market.
Level 2 – the fair value is estimated using inputs other than quoted prices included in the Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
(s) Financial Instruments Issued by the Group
Debt and Equity Instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement.
Transaction Costs on the Issue of Equity Instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity.
Interest and Dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the statement of financial position
classification of the related debt or equity instruments or component parts of compound instruments.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(u) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity,
on or before the end of the reporting period but not distributed at balance date.
(v) Share-based Payments
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and / or service conditions are fulfilled.
If the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. An
additional expense is recognised for any modification that increases the total fair value of the share based arrangement, or is otherwise
beneficial to the recipient, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for
the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement
award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as
described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted loss per share.
33
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(w) Earnings/Loss Per Share
Basic earnings / loss per share is calculated as net profit or loss attributable to members of the Company, adjusted to exclude any costs
of servicing equity (other than dividends), divided by the weighted average number of ordinary shares of the Company, adjusted for any
bonus element.
Diluted loss per share is calculated as net profit or loss attributable to members of the Company, adjusted for:
• costs of servicing equity (other than dividends);
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(x) Significant Accounting Judgements, Estimates and Assumptions
The directors made estimates and judgements during the preparation of these Financial Statements regarding assumptions about
current and future events affecting transactions and balances.
These estimates and judgements are based on the best information available at the time of preparing the Financial Statements, however
as additional information is known then the actual results may differ from the estimates.
The significant estimates and assumptions made have been described below:
Share-based Payments
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation
model, which is dependent on the terms and conditions of the grant. The estimate also requires making assumptions about the most
appropriate inputs to the valuation model, including the expected life of the share option, volatility and dividend yield. The assumptions
and models used for estimating fair value for share-based payment transactions are disclosed in Note 16.
Income Taxes
Judgement is required in assessing whether deferred tax assets are recognised in the statement of financial position. Deferred tax
assets are recognised only when it is considered more likely than not that they will be recovered, which is dependent on the generation
of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of
future cash flows. Judgements are also required about the application of income tax legislation.
The Group has $7,795,721 (2017: $1,982,060) of tax losses carried forward. Although these losses do not expire, they may not be
capable of being used to offset taxable income elsewhere in the Group. The Group has neither taxable temporary differences nor tax
planning opportunities available that could partly support the recognition of these losses as deferred tax assets. On this basis, the Group
has determined that it cannot recognise deferred tax assets in respect of the tax losses carried forward.
Further details on taxes are disclosed in Note 5.
Impairment of Non-financial Assets
The Group tests annually whether non-financial assets have suffered any impairment, in accordance with the accounting policy stated
at Note 2(f). Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is
the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from
binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing
of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the budget for the
next two years. The assumptions used in the budget, such as growth rates, and the discount rate used are subject to judgement and
estimates.
34
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(y) Going Concern
The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities
and the realisation of assets and the settlement of liabilities in the ordinary course of business.
During the year ended 30 June 2018, the Group incurred a net loss after tax of $7,509,395 and a net cash outflow from operating
activities of $5,781,924. The cash and cash equivalents balance as at 30 June 2018 was $4,231,884 (including the cash reserves of the
discontinued operation). The Group’s net current asset position at 30 June 2018 was $3,765,080.
The ability of the Group to pay its trade creditors, repay its borrowings and continue its planned activities and maintain its going concern
status is dependent on the Group generating sufficient revenues and / or raising additional funds, as required. As at the date of this report,
the directors are satisfied that there are reasonable grounds to believe that the Group will be able to operate as a going concern by raising
further funds as required. In forming this view, the directors have considered the sale proceeds generated from the sale of 90% of Mpire
Network Inc which took place subsequent to year end, and the ability of the Company to raise funds by way of a capital raising.
There are inherent uncertainties associated with the successful completion of a capital raising. Should the directors not be able to
manage these inherent uncertainties and successfully secure funding, there would be significant uncertainty as to whether the Group
would be able to meet its debts as and when they fall due and therefore continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts nor
to the amounts or classifications of liabilities that might be necessary should the Group not be able to continue as a going concern.
3. SEGMENT INFORMATION
During the current year, the Company’s board of directors conducted a stringent review of operations and sector outlook and decided to
direct the Company’s resources towards achieving its key objective of being a leader in ad technology. Consequently, the Company’s focus
shifted away from performance marketing and was instead directed towards the further development and future commercialisation of nxus
and TrafficGuard.
The Group’s performance marketing division has been designated as a discontinued operation (refer to Note 12 for more information). The
financial information presented below relates to the Group’s two operating segments and is based on the internal reports that are reviewed
and used by the executive management team in assessing performance and in determining the allocation of resources.
The Group’s key operating segment is its technology division which is responsible for the development and maintenance of the Group’s
proprietary software platforms, nxus and TrafficGuard. These activities are conducted primarily at the Group’s Australian head office and its
office in Croatia. During the current year, the Group opened an office in Singapore. Upon commercialisation of the Group’s software products,
the Singapore office will be responsible for marketing thereof in the Asia Pacific region.
The board of directors review internal management reports on a monthly basis that are consistent with the information provided in the
Statement of Profit and Loss and Other Comprehensive Income, Statement of Financial Position and Statement of Cash Flows. As a result,
no reconciliation is required because, in aggregate, the information as presented is what is used by the board to make strategic decisions. No
operating segments have been aggregated.
35
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 3. SEGMENT INFORMATION (CONTINUED)
For the year ended 30 June 2018
Technology
Other
Consolidated
Revenue1
Other income
Overheads
Other expenses
EBITDA
Reconciliation of reportable segment loss
EBITDA
Interest income
Interest expense
Depreciation
Income tax expense
Loss after income tax
$
-
30,839
$
-
-
$
-
30,839
(3,807,822)
(3,304,827)
(7,112,649)
-
(111,621)
(111,621)
(3,776,983)
(3,416,448)
(7,193,431)
(3,776,983)
(3,416,448)
(7,193,431)
-
(23)
(48,915)
(47,971)
42,472
-
(3,716)
-
42,472
(23)
(52,631)
(47,971)
(3,873,892)
(3,377,692)
(7,251,584)
The segment information for the prior financial year has been restated to exclude performance marketing.
For the year ended 30 June 2017
Technology
Other
Consolidated
Revenue1
Other income
Overheads
Other expenses
EBITDA
Reconciliation of reportable segment loss
EBITDA
Interest income
Interest expense
Depreciation
Income tax (expense) / benefit
Loss after income tax
$
-
$
-
$
-
34,400
5,477
39,877
(3,292,611)
(1,697,819)
(4,990,430)
-
(215,412)
(215,412)
(3,258,211)
(1,907,754)
(5,165,965)
(3,258,211)
(1,907,754)
(5,165,965)
9,410
(17)
(65,808)
(50,221)
1,891
-
(1,478)
241,369
11,301
(17)
(67,286)
191,148
(3,364,847)
(1,665,972)
(5,030,819)
1.
Revenue excludes amounts charged by the technology division to the discontinued performance marketing division because this
revenue is eliminated on consolidation.
The Group’s assets and liabilities by segment at 30 June 2018 is as follows:
Continuing operations
Discontinued
operation
Performance
Marketing
$
Other
$
Elimination of
inter segment
balances
3,573,031
1,154,520
429,180
715,917
-
-
Consolidated
$
5,462,158
1,696,247
Technology
$
734,607
551,150
Assets
Liabilities
36
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
3. SEGMENT INFORMATION (CONTINUED)
The Group’s assets and liabilities by segment at 30 June 2017 is as follows:
Continuing operations
Technology
$
Other
$
489,128
6,525,751
1,649,960
464,475
Discontinued
operation
Performance
Marketing
$
6,213,360
2,909,720
Elimination of
inter segment
balances
Consolidated
$
(1,180,387)
12,047,852
(1,180,387)
3,843,768
Assets
Liabilities
4. OTHER INCOME AND EXPENSE ITEMS
This note provides a breakdown of the items included in ‘other income’ and material overheads shown in the Statement of Profit and Loss and
Other Comprehensive Income.
(a)
Other income
Rental income
Recoveries
Miscellaneous income
(b)
Administration costs
IT costs
Office and general administration costs
Write off of plant and equipment
Travel
(c)
Compliance costs
Accounting fees
ASX compliance fees
Tax advice and compliance fees
Regulatory body fees
(d)
Employment costs
Salaries and wages2
Ancillary employment costs
Other
(e)
Finance costs
Interest expense
(f)
Consultancy costs
Legal
Investor relations
Other
2.
Note 24 provides details on directors and executives’ remuneration.
Consolidated
2018
$
-
-
73,311
73,311
266,896
182,377
-
172,341
621,614
11,150
136,207
182,653
1,710
331,720
2017
$
2,802
1,774
46,602
51,178
219,493
116,030
41,446
182,739
559,708
19,927
61,813
123,689
1,835
207,264
3,639,078
2,716,895
878,893
259,651
579,765
109,434
4,777,622
3,406,094
23
23
76,547
111,592
31,663
219,802
17
17
58,249
80,540
18,957
157,746
37
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
5.
INCOME TAX EXPENSE
Major components of income tax expense for the year are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of previous years:
- Under provision for income tax in previous years
- Research and development tax credit relating to the prior year
Deferred income tax
Deferred income tax charge relating to origination and reversal of temporary differences
Income tax expense / (benefit) reported in income statement
Consolidated
2018
$
2017
$
47,971
50,221
-
-
138,603
(379,972)
47,971
(191,148)
-
Reconciliation
A reconciliation of income tax expense / (benefit) applicable to accounting loss before income tax at the statutory income tax rate to income
tax expense / (benefit) at the Company’s effective income tax rate for the year is as follows:
Accounting loss before tax from continuing operations
Accounting profit / (loss) before tax from discontinued operations
Income tax expense / (benefit) at the statutory income tax rate of 27.5% (2017: 30%)
Adjusted for:
Under / (over) provision for income tax in previous years
Research and development tax credit relating to the prior year
Non-deductible share-based payment expenses
Non-deductible entertainment expenses
Other non-deductible expenses
Other non-assessable amounts
Difference between the Australian statutory income tax rate and the statutory income tax rate
applicable to foreign operations
Consolidated
2018
$
2017
$
(7,203,613)
(2,030,771)
(743,257)
2,810,582
(7,946,870)
(2,185,390)
(485,446)
-
30,696
4,878
28,038
779,811
233,943
138,603
(379,972)
64,633
9,240
30,985
-
(114,563)
(17,989)
(98,248)
Carried forward tax losses utilised (FY17: Canadian tax losses of $229,016))
-
(229,016)
Tax losses and temporary differences not recognised as a deferred tax asset (Australian tax:
$1,837,304 (FY17: $702,853), Canadian tax: $175,987 (FY17: $4,417), Singapore tax: $174,447
(FY17: Nil))
Income tax expense / (benefit) reported in income statement
Income tax expense / (benefit) attributable to discontinued operation
2,187,738
707,000
(437,475)
362,605
47,971
(485,446)
(437,475)
(191,148)
553,753
362,605
Tax Consolidation
The Company and its 100% owned Australian incorporated subsidiaries formed a tax consolidated group with effect from 1 July 2015.
38
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
5.
INCOME TAX EXPENSE (CONTINUED)
Unrecognised Deferred Tax Assets
Deferred tax assets have not been recognised in respect of the following items:
Revenue losses
Capital losses
Temporary differences
Consolidated
2018
$
2017
$
7,601,207
1,787,546
194,514
1,931,765
9,727,486
194,514
1,687,748
3,669,808
Unrecognised tax losses at 27.5% (2017: 30%)
2,675,059
1,100,943
Tax losses do not expire under current legislation.
Deferred tax assets have not been recognised in respect of tax losses or temporary differences because it is not certain that future taxable
profit will be available in the near term against which the Group can utilise the benefits.
Availability of Tax Losses
The availability of the Group’s tax losses for future periods is uncertain and will be dependent on strict requirements being satisfied with
respect to continuity of ownership and the same business test imposed by income tax legislation.
The recoupment of tax losses as at 30 June 2018 is contingent upon the following:
• entities in the Group deriving future assessable income of a nature and of an amount sufficient to enable the benefit from the losses to be
realised;
• the conditions for deductibility imposed by income tax legislation continuing to be complied with; and
• there being no changes in income tax legislation which would adversely affect the entities from realising the benefit from the losses.
6. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short term deposits
Cash and cash equivalents
Consolidated
2018
$
4,054,816
-
4,054,816
2017
$
5,598,224
2,603,980
8,202,204
For the purpose of the Statement of Cash Flows, cash and cash equivalents comprise the following at 30 June:
Cash at bank and on hand
Short term deposits
Cash at bank and on hand attributable to discontinued operations
Cash and cash equivalents
Consolidated
2018
$
4,054,816
-
177,068
4,231,884
2017
$
4,065,197
2,603,980
1,533,027
8,202,204
Cash at bank and on hand earns interest at floating rates based on daily at call bank deposit and savings rates. Short-term deposits are for a
period of 1 month, and earn interest at the respective short-term deposit rate.
39
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
6. CASH AND CASH EQUIVALENTS (CONTINUED)
Reconciliation from the Loss After Tax to the Net Cash Flows from Operations
Net profit / (loss)
Adjustments for non-cash items:
Bad debts written off
Depreciation
Plant and equipment written off
Share based payments
Unrealised foreign exchange differences
Changes in assets and liabilities:
Decrease / (Increase)/ in trade receivables1
(Increase) / decrease in other receivables
(Increase) / decrease in accrued revenue
(Increase) / decrease in prepayments
Increase in trade and other payables1
Increase in provision for employee entitlements
Increase / (decrease) in provision for income tax
Consolidated
2018
$
2017
$
(7,509,395)
417,206
127,572
69,053
-
111,621
116,550
723,304
79,847
41,446
215,441
85,354
2,203,851
(441,139)
(59,599)
185,296
107,454
(527,655)
19,487
(626,159)
225,180
194,652
(62,484)
148,818
33,834
337,028
Net cash generated by operating activities
(5,781,924)
1,998,487
1.
Movement is stated after adjusting for the effects of movements in foreign exchange rates from the beginning of the financial year to
the end of the financial year.
7. TRADE AND OTHER RECEIVABLES
Trade receivables
Accrued revenue
Prepayments
Deposits
Other receivables
GST receivables
As at 30 June, the ageing analysis of trade receivables, net of impairment loss is as follows:
Note
(a)
(b)
Consolidated
2018
$
2017
$
30,895
3,203,736
-
71,521
35,955
831
8,916
200,698
184,872
42,984
368
36,204
148,118
3,668,862
2018
2017
30,895
27,156
3,203,736
2,940,849
Total
$
Past due but not impaired
< 30 days
30-60 days
61-90 days
> 90 days
$
$
3,714
261,887
$
25
-
$
-
1,000
No trade receivables are considered impaired at balance date and accordingly, there was no provision for doubtful debts at 30 June 2018
(2017:$294,250).
See Note 18 on credit risk of trade receivables for details of how the Group manages and measures credit quality of trade receivables that are
neither past due nor impaired.
40
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
7. TRADE AND OTHER RECEIVABLES (CONTINUED)
(a) Classification as Trade and Other Receivables
Trade receivables are amounts due from customers for services performed in the ordinary course of business. Loans and other
receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. If collection
of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade
receivables are generally due for settlement within 45 days and therefore are all classified as current. The Group’s impairment and other
accounting policies for trade and other receivables are outlined in Note 2(g).
The balance of trade receivables is after provision for doubtful debts. The movement in the balance of this provision is as follows:
Balance at the beginning of the financial year
Net movement for the year
Impact of foreign exchange
Balance at the end of the financial year
(b) Sundry Receivables
Consolidated
2018
$
-
-
-
-
2017
$
515,784
(198,382)
(23,152)
294,250
These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at
commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained.
(c) Fair Values of Trade and Other Receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value. The fair
values of non-current receivables are generally not significantly different to their carrying amounts.
(d)
Impairment and Risk Exposure
Information about the impairment of trade and other receivables, their credit quality and the Group’s exposure to credit risk, foreign
currency risk and interest rate risk can be found in Note 18.
8. PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Consolidated: 2018
Leasehold
Improvements
Computer
Equipment
Office
Equipment
$
80,393
(29,876)
$
94,473
(82,123)
$
79,462
(71,625)
Total
$
254,328
(183,624)
Carrying amount at 30 June
50,517
12,350
7,837
70,704
Reconciliation
Carrying amount at 1 July
Additions
Impact of foreign exchange
Assets held for sale
Depreciation: discontinued operation
Depreciation: continuing operations
66,596
-
-
-
-
28,137
10,127
-
-
-
(16,079)
(25,914)
48,053
15,903
(3,369)
(25,690)
(16,422)
(10,638)
142,786
26,030
(3,369)
(25,690)
(16,422)
(52,631)
Carrying amount at 30 June
50,517
12,350
7,837
70,704
41
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 8. PLANT AND EQUIPMENT (CONTINUED)
Consolidated: 2017
Leasehold
improvements
Computer
Equipment
Office
Equipment
Software &
Hardware
Cost
Accumulated depreciation
80,393
(13,797)
$
84,346
(56,209)
$
135,476
(87,423)
Carrying amount at 30 June
66,596
28,137
48,053
Reconciliation
Carrying amount at 1 July
Additions
Disposals
Impact of foreign exchange
Plant and equipment written off
Reclassification
Depreciation
54,811
33,614
-
-
-
20,488
24,754
-
-
-
99,786
31,684
(399)
(809)
(8,032)
(13,797)
8,032
(25,137)
-
(40,913)
Carrying amount at 30 June
66,596
28,137
48,053
Refer to Note 2(e) for further details on the Group’s accounting policies for plant and equipment.
9. TRADE AND OTHER PAYABLES
Trade payables
Statutory liabilities
Commission payable
Prepayments received from advertisers
Other payables
(41,296)
(150)
(41,446)
$
-
-
-
150
-
-
-
Total
$
300,215
(157,429)
142,786
175,235
90,052
(399)
(809)
-
-
-
-
(79,847)
142,786
Consolidated
2018
$
230,328
312,681
-
-
148,113
691,122
2017
$
1,143,401
286,675
151,269
89,791
229,479
1,900,615
Trade payables and other payables are non-interest bearing and are unsecured. Balances are usually settled within 30 days of recognition.
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature.
42
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
10. PROVISIONS
CURRENT
Employee benefits (a)
Income tax
NON-CURRENT
Employee benefits (a)
(a) Employee Benefits
Consolidated
2018
$
2017
$
241,109
29,970
271,079
161,142
586,469
747,611
18,129
98,968
The current provision for employee benefits relates to the Group’s liability for annual leave and long service leave. The non-current
provision for employee benefits relates only to the Group’s liability for long service leave.
Movement in the provisions for employee benefits is as follows:
Consolidated
2018
2017
Annual leave
Long service
leave
Annual leave
Long service
leave
$
$
$
$
Balance at the beginning of financial year attributable to
continuing operations
Amounts provided for during the year
Unused leave balances paid during the year
Leave taken during the year
Balance at the end of financial year
97,900
98,968
150,982
242,772
(43,908)
(141,399)
155,365
4,905
-
-
103,873
280,569
(73,440)
(196,969)
161,142
The balance is spilt as follows:
Current potion
Non-current portion
155,365
-
85,744
18,129
161,142
-
75,294
23,674
-
-
98,968
-
98,968
11. INTEREST BEARING LOANS AND BORROWINGS
Interest-bearing loans and borrowings comprise amounts owing under a debtor factoring facility. The amount owing at 30 June 2018 has
not been separately presented on the face of the consolidated statement of financial position as it has been included with liabilities directly
associated with assets held for sale. Refer to Note 12 for further information.
The debtor factoring facility enables the Company’s Canadian subsidiary, Mpire Network Inc, to receive cash receipts in advance on certain of
its customer invoices which are purchased by the lender. This is a rolling loan facility which is repaid as debtors settle their accounts and which
may be replaced with new borrowings against new debtor invoices. The amount which may be advanced is limited to 90% of the face value
of factored invoices with a maximum credit limit of USD $3,600,000. A fixed fee of 1.0% of the customer invoice purchased is charged by the
lender. Where the customer invoice remains unpaid after 30 days, a further fee of 0.033% of the invoice value is charged per day thereafter
that the invoice remains unpaid. In addition to the fees, interest is payable on the average daily balance drawn based on the Bank of Montreal
prime rate plus 3%. In the event the customer invoice remains unpaid for 90 days from invoice date, Mpire Network may be required to repay
to the lender all advances received for that invoice plus all related fees, interest and costs associated with that invoice. Under the current
terms the debtor factoring facility will terminate on 31 March 2019. Mpire Network is not obligated to factor a minimum value of customer
invoices over the life of the facility.
43
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 11. INTEREST BEARING LOANS AND BORROWINGS (CONTINUED)
Debt factoring facility balance at 30 June
The transferred financial assets that are not derecognised in their entirety:
Carrying amounts of assets (trade receivables)
Carrying amounts of associated liabilities (amounts owing under the facility)
For those liabilities that have recourse only to the transferred asset
Fair value of assets (trade receivables)
Fair value of associated liabilities (amounts owing under the facility)
Net position
Financing activities for the year was as follows:
Factoring facility balance at 1 July
Cash flows during the year
Factoring facility balance at 30 June
12. DISCONTINUED OPERATION
2018
$
82,395
82,395
2017
$
1,096,574
1,096,574
2018
$
2017
$
91,404
1,218,416
(82,395)
(1,096,574)
2018
$
2017
$
91,404
1,218,416
(82,395)
(1,096,574)
9,009
121,842
2018
$
1,096,574
(1,014,179)
82,395
2017
$
-
1,096,574
1,096,574
During the current year, the Company experienced a significant downturn in performance marketing revenue resulting from challenges
experienced in accessing adequate volumes of quality online traffic.
After a stringent review of operations and sector outlook, the Board decided to shift the Company’s focus and resources away from
performance marketing and direct them instead towards the further development and future commercialisation of the Company’s core
technologies, nxus and TrafficGuard.
In May 2018, the Company, via its wholly owned subsidiary, Livelynk Group Pty Ltd (Livelynk), entered into an indicative, confidential and
non-binding term sheet with Canadian performance marketplace, ClearPier Inc (ClearPier), pursuant to which Livelynk agreed to sell 90% of
its equity interest in Mpire Network Inc (Mpire Network)
On 31 July 2018, Livelynk executed a share purchase agreement for the sale of 90% of Mpire Network, to ClearPier for a cash consideration
of $900,000 ($500,000 received upfront and $400,000 deferred) plus a maximum of $6,000,000 under a 3 year profit share agreement.
The results of the performance marketing division are presented below:
44
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
12. DISCONTINUED OPERATION (CONTINUED)
Revenue
Cost of services rendered
Gross Profit
Other Income
Administration costs
Compliance costs
Consultancy costs
Employment costs
Occupancy costs
Marketing costs
Bad and doubtful debts expense
Foreign exchange differences
Finance costs
Depreciation
Overheads
Profit / (loss) before income tax
Income tax benefit / (expense)
Profit / (loss) for the year
2018
$
2017
$
15,483,256
37,025,141
(13,050,446)
(27,630,610)
2,432,810
9,394,531
89,362
157,306
(249,127)
(310,700)
(6,005)
(113,713)
(2,607)
(90,975)
(2,381,343)
(1,905,091)
(76,121)
(305,680)
12,535
(50,660)
(78,893)
(16,422)
(75,851)
(391,920)
(524,922)
(179,941)
(55,490)
(12,562)
(3,265,429)
(3,550,059)
(743,257)
6,001,778
485,446
(553,753)
(257,811)
5,448,025
The major classes of assets and liabilities of Mpire Network classified as held for sale at 30 June are set out below:
Assets
Cash and short term deposits
Trade and other receivables
Plant and equipment
Assets held for sale
Liabilities
Trade and other payables
Provisions
Interest-bearing loans and borrowings (Refer to note 11)
Liabilities directly associated with assets held for sale
Net assets directly associated with disposal group
2018
$
177,068
951,762
25,690
1,154,520
(613,163)
(20,359)
(82,395)
(715,917)
438,603
45
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
12. DISCONTINUED OPERATION (CONTINUED)
The net cash flows incurred by Mpire Network are as follows:
Operating activities
Investing activities
Financing activities
Net cash (outflow) / inflow
13. CONTRIBUTED EQUITY
(a)
Issued Capital
Ordinary shares, fully paid
(b) Movements in Share Capital
2018
$
2017
$
613,177
(2,491,639)
(4,692)
(2,022,110)
(5,940)
147,683
(1,413,625)
(2,349,896)
Consolidated
2018
$
2017
$
22,586,507
17,157,235
Shares on issue at 1 July
65,807,669
17,157,235
65,741,001
17,143,905
2018
2017
Number
$
Number
$
Shares issued on conversion of Class B Performance Rights
7,500,000
2,549,272
Shares issued on conversion of Class C Performance Rights
Shares issued under an Employee Incentive Plan
-
196,664
-
-
Shares issued pursuant to a placement
15,000,000
3,000,000
Share issue costs
-
(186,000)
Shares issued as consideration for placement services
293,334
66,000
-
33,334
-
-
-
Shares issued as consideration for acquisition of controlled
entity (refer to Note 15)
-
-
33,334
-
13,330
-
-
-
-
Shares on issue at 30 June
88,797,667
22,586,507
65,807,669
17,157,235
(c) Ordinary Shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held
and in proportion to the amount paid up on the shares held. At shareholder meetings, each ordinary share is entitled to one vote in
proportion to the paid up amount of the share when a poll is called, otherwise each shareholder has one vote on a show of hands.
46
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
13. CONTRIBUTED EQUITY (CONTINUED)
(d) Capital Risk Management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2018 and 30 June
2017. The financial information presented below for the year ended 30 June 2018 excludes amounts classified as assets held for sale
and amounts classified as liabilities associated with assets held for sale.
Interest bearing loans and borrowings (Note 11)
Trade and other payables (Note 9)
Less: cash and cash equivalents (Note 6)
Net (Debt) / Capital
Equity
Total Capital
Capital and net debt
Gearing ratio
14. RESERVES
Share based payments reserve
Consolidated
2018
$
-
691,122
2017
$
1,096,574
1,900,615
(4,054,816)
(8,202,204)
(3,363,694)
(5,205,015)
22,586,507
17,157,235
22,586,507
17,157,235
19,222,813
11,952,220
(17%)
(44%)
Consolidated
2018
$
2017
$
2,658,453
5,096,104
Foreign currency translation reserve
12,346
(67,255)
Share based payments reserve
Balance at beginning of year
Fair value of options issued to Directors
Fair value of Class C Performance Rights converted into ordinary shares
Fair value of Class B Performance Rights converted into ordinary shares
Fair value of Class C Performance Rights recognised (refer to Note 16)
Fair value of Class D Performance Rights recognised (refer to Note 16)
Fair value of Class E Performance Rights recognised (refer to Note 16)
Fair value of Class F Performance Rights recognised (refer to Note 16)
Fair value of Class G Performance Rights recognised (refer to Note 16)
Employee Share Scheme expense
Balance at end of year
Foreign currency translation reserve
Balance at beginning of year
Foreign exchange differences arising on translation of foreign operations
Balance at end of year
5,096,104
4,893,993
45,616
-
(2,549,272)
-
6,109
6,415
25,659
3,564
24,258
196,557
(13,330)
-
12,219
6,665
-
-
-
-
2,658,453
5,096,104
(67,255)
79,601
12,346
396,849
(464,104)
(67,255)
47
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
14. RESERVES (CONTINUED)
Nature and Purpose of Reserves
Share based payments
The share based payments reserve is used to recognise the fair value of equity-settled share based payments provided to employees,
consultants and other third parties.
Foreign Currency
The foreign currency translation reserve is used to recognise foreign currency exchange differences arising on translation of functional
currency to presentation currency for foreign operations.
15. CORPORATE TRANSACTION
In the prior year the Company’s acquisition of the Croatian based entity, Appenture d.o.o. was finalised. The provisional cost of the acquisition
determined in FY16 was updated to reflect the final valuation of the net assets acquired.
The finalised fair value of the consideration transferred was:
Cash paid
Ordinary shares issued
Acquisition date fair value consideration transferred
$
75,680
14,000
89,680
The finalised fair values of the identifiable assets and liabilities of Appenture d.o.o. as at the date of acquisition, 1 June 2016, were as follows:
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Total assets
Trade and other payables
Employee benefits
Total liabilities
Provisional fair value of identifiable net assets
Goodwill arising on acquisition
Acquisition date fair value consideration transferred
The net cash outflow to complete the acquisition in FY17 was $28,995.
$
34,609
23,787
12,686
71,082
(6,159)
(9,243)
(15,402)
55,680
34,000
89,680
48
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
16. SHARE BASED PAYMENTS
(a) Share Based Payments in Existence During the Year
2018
Financial
Year
Number
2017
Financial
Year
Number
Security
Grant Date
Expiry Date
Exercise
Price
Fair Value at
Grant Date
(cents)
(cents)
Options transferred under reverse
acquisition accounting1
-
6,800,000
01/10/2012
31/12/2016
Options (50c exercise price)2
7,000,000
7,000,000
29/06/2015
29/06/2018
Options (45c exercise price)
1,500,000
1,500,000
26/05/2017
30/03/2020
Options (45c exercise price)
500,000
-
26/10/2017
25/08/2020
Class B Performance Rights
7,500,000
7,500,000
29/06/2015
29/06/2017
Class C Performance Rights
Class D Performance Rights
Class E Performance Rights
Class F Performance Rights
Class G Performance Rights
-
33,334
01/06/2016
01/06/2017
33,332
33,332
01/06/2016
01/06/2018
150,000
900,000
150,000
-
-
-
26/10/2017
30/06/2019
26/10/2017
30/06/2019
26/10/2017
30/06/2019
20
50
45
45
N/A
N/A
N/A
N/A
N/A
N/A
19.00
14.69
13.10
9.12
17.00
39.99
39.99
10.57
7.05
5.87
1.
These options were fair valued on 29 June 2015 as part of the corporate transaction whereby Tech Mpire Limited acquired
Livelynk Group Pty Ltd and its subsidiaries. Reverse acquisition accounting was applied to this transaction. These options lapsed
during the 2017 financial year.
2.
These options lapsed on 29 June 2018.
(b) Options
500,000 options were granted during the current year (2017: 1,500,000).
The fair value of options granted during the year was $45,616 (2017: $196,557). The options were issued as part of directors’
remuneration and vested on issue. Holders of options do not have any voting or dividend rights in relation to the options.
The weighted average fair value of the options granted during the year was $0.091 (2017: $0.131). Options were valued using the
Black-Scholes model and took into account the following assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
0.00%
85.59%
2.02%
No allowance was made for the effects of early exercise.
49
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 16. SHARE BASED PAYMENTS (CONTINUED)
(b) Options (Continued)
The following table illustrates the outstanding options granted, exercised and forfeited during the year.
Outstanding at 1 July
Granted during the year
Options exercised during the year
Options expired during the year
2018
2017
Weighted
average exercise
price (cents)
49.12
45.00
-
Number
8,500,000
500,000
-
Number
13,800,000
1,500,000
-
(7,000,000)
(50.00)
(6,800,000)
Weighted
average exercise
price (cents)
17.31
45.00
-
(20.00)
Outstanding as at 30 June
2,000,000
45.00
8,500,000
49.12
Subject to escrow restrictions at 30 June
Exercisable at 30 June
-
2,000,000
500,000
8,000,000
50.00
49.06
No options were forfeited during the current year (2017: Nil).
The weighted average remaining contractual life for the share-based payment options outstanding as at 30 June 2018 was 1.85 years
(2017: 1.31 years).
The exercise price for share-based payment options outstanding as at the end of the year was $0.45 (2017: range of $0.45 to $0.50).
500,000 options were issued to directors during the current year (2017: 1,500,000).
(c) Performance Rights
Holders of performance rights do not have any voting or dividend rights in relation to the performance rights.
The fair value of performance rights granted and vested during the current year and prior year is set out below.
2018
Security
Class D Performance Rights (note ii)
Class E Performance Rights (note iii)
Class F Performance Rights (note iii)
Class G Performance Rights (note iii)
Fair Value of
performance
rights granted
($)
-
15,856
63,423
8,809
88,088
Number
granted
-
150,000
900,000
150,000
1,200,000
Share based
payments
expense
($)
6,109
6,415
25,659
3,564
41,747
Number
vested
33,332
-
-
-
33,332
The weighted average fair value per right of the performance rights granted during the current year is $0.07 (2017: Nil).
50
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
16. SHARE BASED PAYMENTS (CONTINUED)
(c) Performance Rights (Continued)
2017
Security
Class B Performance Rights (note i)
Class C Performance Rights (note ii)
Class D Performance Rights (note ii)
(i) Class B Performance Rights
Fair Value of
performance
rights granted
($)
Number
granted
-
-
-
-
-
-
-
-
Number
vested
7,500,000
33,334
-
7,533,334
Share based
payments
expense
($)
-
12,219
6,665
18,884
The Class B performance rights were issued to key management personnel as incentive awards and were subject to escrow
restrictions until 7 July 2017. The escrow restrictions applied to the performance rights and to the ordinary shares into which they
are converted.
The performance rights were valued on grant date using the Black-Scholes model and taking into account the following
assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Probability at grant date of the performance milestone being achieved
0.00%
80.00%
2.02%
50%
The vesting condition attached to the Class B performance rights was the achievement by the Livelynk Group (Livelynk Group
Pty Ltd, Mpire Media Pty Ltd and Mpire Network Inc) of cumulative net profit of $1,500,000 on or before 29 June 2017. The
performance rights vested in FY17 and were converted into ordinary shares on a one for one basis on 31 August 2017.
(ii) Class C and Class D Performance Rights
The Class C and Class D performance rights were issued to incentivise management of Appenture d.o.o (acquired on 1 June
2016). These performance rights were valued on grant date using the Black-Scholes model and taking into account the following
assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Probability at grant date of the performance milestone being achieved
Class C
0.00%
80.00%
1.68%
100%
Class D
0.00%
80.00%
1.68%
100%
The vesting conditions, milestone dates and status of the Class C and Class D performance rights are set out below:
51
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 16. SHARE BASED PAYMENTS (CONTINUED)
(c) Performance Rights (Continued)
Class
Vesting Condition
Milestone Date
Status
Class C performance
rights
The Class C performance rights vest on 1 June 2017
provided that, on or before that date, the holder has
neither been summarily terminated by, nor has resigned
as a full time employee or a non-executive director (as
applicable) from, Appenture d.o.o.
1 June 2017
Vested on 1 June 2017 and
converted into ordinary shares
on 7 June 2017.
Class
Vesting Condition
Milestone Date
Status
Class D performance
rights
The Class D performance rights vest on 1 June 2018
provided that, on or before that date, the holder has
neither been summarily terminated by, nor has resigned
as a full time employee or a non-executive director (as
applicable) from, Appenture d.o.o.
1 June 2018
Vested on 1 June 2018. As at
30 June 2018, the performance
rights had not yet been
converted into ordinary shares.
The share based expense has
been recognised in full.
(iii) Class E, F and G Performance Rights
The Class E, F and G performance rights were issued to key management personnel as incentive awards on 26 October 2017.
The performance rights were valued on grant date using the Black-Scholes model and taking into account the following
assumptions:
Dividend yield
Expected volatility
Risk-free interest rate
Probability at grant date of the performance milestone being achieved
Class E
0.00%
85.59%
0.19%
45%
Class F
0.00%
85.59%
0.19%
30%
Class G
0.00%
85.59%
0.19%
25%
The vesting conditions, expiry dates and status of the Class E, F and G performance rights are set out below:
Class
Vesting Condition
Class E performance rights
The Class E performance rights vest on the achievement
of a 5 day VWAP of $0.80
Expiry Date
30 June 2019
Class F performance rights
The Class F performance rights vest on the achievement
of a 5 day VWAP of $1.00
30 June 2019
Class G performance rights
The Class G performance rights vest on the achievement
of a 5 day VWAP of $1.20
30 June 2019
Status
Not yet vested as at
30 June 2018.
Not yet vested as at
30 June 2018.
Not yet vested as at
30 June 2018.
17. ACCUMULATED LOSSES
Accumulated losses at the beginning of financial year
Net profit / (loss) for the year
Accumulated losses at the end of financial year
Consolidated
2018
$
2017
$
(13,982,000)
(14,399,206)
(7,509,395)
417,206
(21,491,395)
(13,982,000)
52
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
18. FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments comprise receivables, interest-bearing loans and borrowings, payables and cash and cash
equivalents which arise directly from its operations.
The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the
policy is to support the delivery of the Group’s financial targets whilst protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The
Board reviews and agrees policies for managing each of these risks and they are summarised below.
Risk Exposures and Responses
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. The Group generates income from interest on surplus funds.
At balance date, the Group did not have material exposure to interest rate risk.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. The only material cash balances denominated in a foreign currency held by the Group are cash amounts that are denominated
in United States Dollars (USD). A summary of the AUD equivalent of the Group’s cash balances at the reporting date is as follows:
USD balances
Cash and cash equivalents
Net exposure
Consolidated
2018
$
2017
$
2,969,470
2,969,470
7,903,774
7,903,774
The following sensitivity analysis is based on the foreign currency risk exposures in existence at the reporting date. The reasonably possible
changes in AUD / USD exchange rates used below were derived by reference to the maximum movement in historical exchange rates per year
over the last 5 years.
At 30 June 2018, if exchange rates had moved, as illustrated in the table below, with all other variables held constant, pre-tax loss and equity
would have been affected as follows:
Effect on profit before tax
(Higher)/Lower
Effect on pre-tax Equity
Higher/(Lower)
2018
$
326,642
(326,642)
2017
$
869,419
(869,419)
2018
$
326,642
(326,642)
2017
$
869,419
(869,419)
+11%
-11%
Translation Risk
All USD denominated balance sheet accounts are converted to AUD at spot rate at year end. Group net assets are therefore sensitive to
the exchange rate at year end. The reasonably possible changes in AUD / USD exchange rates used below were derived by reference to the
maximum movement in historical exchange rates per year over the last 5 years.
At 30 June 2018, if the closing exchange rate for the year had moved, as illustrated in the table below, with all other variables held constant,
net group assets before Australian group tax would have been affected as follows:
53
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 18. FINANCIAL RISK MANAGEMENT (CONTINUED)
Risk Exposures and Responses (Continued)
Effect on net group assets before
Australian group tax
Effect on equity before Australian
group tax
(Higher) / Lower
Higher / (Lower)
2018
$
414,250
(414,250)
2017
$
(931,715)
(931,715)
2018
$
414,250
(414,250)
2017
$
(931,715)
(931,715)
+11%
-11%
Credit Risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its operating activities (primarily in relation to trade receivables) and from its financing activities,
including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
Trade Receivables
Customer credit risk is managed by the Group’s established policy, procedures and control relating to customer credit risk management.
Credit quality of the customer is assessed based on the customer’s financial position, past working experience with the customer (if any) and
any other applicable factors. Individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are
regularly monitored and followed up accordingly.
The requirement for any impairment is analysed at each reporting date on an individual basis for major clients. The maximum exposure to
credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 7. The Group does not hold collateral
as security. The Group evaluates the concentration of risk with respect to trade receivables as low, as its customers are located in several
jurisdictions and operate in largely independent markets.
Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and funding to ensure that the Group can meet its obligations when
due. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
The Group holds the majority of its financial assets as trade receivables with reputable customers who have had no payment issues in the past
and hence, does not have any material liquidity risk at the reporting date.
All financial assets and liabilities have a maturity of less than 6 months and as such, further detailed analysis has not been provided.
The Group monitors rolling forecasts of liquidity reserves on the basis of expected cash flow.
Fair Values
Fair values of financial assets and liabilities are equivalent to carrying values due to their short terms to maturity.
19. COMMITMENTS AND CONTINGENCIES
(a) Operating Lease Commitments – Group as Lessee
Future minimum rentals payable under non-cancellable operating leases are as follows:
Within one year
After one year but not more than five years
More than five years
(b) Property, Plant and Equipment Commitments
At balance date the Group had no contractual obligations to purchase plant and equipment (2017: nil).
(c) Contingent Liabilities
At balance date the Group had no pending legal claims or other contingent liabilities (2017: nil).
Consolidated
2018
$
153,792
255,211
-
2017
$
196,877
402,450
-
409,003
599,327
54
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
20. RELATED PARTY DISCLOSURES
The consolidated financial statements include the financial statements of Tech Mpire Limited and the entities listed in the following table.
Livelynk Group Pty Ltd1
Mpire Media Pty Ltd2
Mpire Operations Asia Pacific Pte Ltd2
Mpire Network Inc.2
Appenture d.o.o2
1.
2.
equity interest is held directly by Tech Mpire Limited.
equity interest is held directly by Livelynk Group Pty Ltd.
Transactions with Related Parties
Country of
incorporation
Australia
Australia
Singapore
Canada
Croatia
% Equity interest
2018
2017
100
100
100
100
100
100
100
-
100
100
During the current year, the Company entered into a consultancy agreement with Mr Ratty for the provision of Corporate Advisory services
which included advice on roadshows, communication with current and potential shareholders, and marketing. The agreement was terminated
on 19 March 2018 when Mr Ratty was appointed as interim Managing Director and Chief Executive Officer. Under the agreement Mr Ratty
was paid $20,529.
During the prior year the Company entered into a consultancy agreement with Mr Hunter for the provision of business, sales and marketing
advice. Under this agreement Mr Hunter was entitled to fees of $8,333 per month (exclusive of GST) with effect from 1 April 2017. The term
of the agreement was 1 year. However, the contract was terminated on 15 May 2017 when he was appointed Managing Director. Under the
agreement Mr Hunter was paid consultancy fees of $nil (FY17: $11,957).
Guarantees
Livelynk Group Pty Ltd is a guarantor under the debtor factoring agreement between Mpire Network Inc and Pivot Financial Inc.
21. EVENTS AFTER BALANCE SHEET DATE
On 31 July 2018, the Company’s wholly owned subsidiary, Livelynk Group Pty Ltd, executed a share purchase agreement for the sale of 90%
of Mpire Network Inc, to ClearPier Inc for a cash consideration of $900,000 ($500,000 received upfront and $400,000 deferred) plus a
maximum of $6,000,000 under a 3 year profit share agreement.
No other event has arisen since 30 June 2018 that would be likely to materially affect the operations of the Group, or its state of affairs which
has not otherwise been disclosed in this financial report.
22. AUDITOR’S REMUNERATION
Remuneration of the Group’s Auditor, Ernst and Young , was as Follows:
Audit or review of the financial report
Non-audit services provided
Consolidated
2018
$
86,004
85,733
171,737
2017
$
69,254
66,913
136,167
55
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 23. EARNINGS / LOSS PER SHARE
Basic earnings / (loss) per share is calculated by dividing the profit / (loss) for the year attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares on issue during the year.
Diluted earnings / (loss) per share is calculated by dividing the profit / (loss) attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares on issue during the year plus the weighted average number of ordinary shares that would be
issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the data used in the calculation of the basic and diluted earnings / (loss) per share:
Weighted average number of ordinary shares used in the calculation of basic earnings / (loss) per share
80,290,480
65,776,070
Weighted average number of ordinary shares used in the calculation of diluted earnings / (loss) per
share
80,290,480
76,768,581
2018
Number
2017
Number
Profit / (loss) attributable to ordinary equity holders of Tech Mpire Limited
Continuing operations
Discontinued operations
Profit /(loss) attributable to ordinary equity holders of Tech Mpire Limited for basic and diluted
earnings / (loss)
Basic earnings / (loss) per share
Basic earnings / (loss) per share – continuing operations
Basic earnings / (loss) per share – discontinued operations
Diluted earnings / (loss) per share
Diluted earnings / (loss) per share – continuing operations
Diluted earnings / (loss) per share – discontinued operations
$
$
(7,251,584)
(5,030,819)
(257,811)
5,448,025
(7,509,395)
417,206
Cents
(9.35)
(9.03)
(0.32)
(9.35)
(9.03)
(0.32)
Cents
0.63
(7.65)
8.28
0.54
(6.55)
7.09
Classification of Securities as Ordinary Shares
The Company has only one category of ordinary shares included in basic earnings / (loss) per share.
Classification of Securities as Potential Ordinary Shares
No securities have been classified as dilutive potential ordinary shares on issue in the current year because the unlisted options and
performance rights on issue are considered anti-dilutive on the basis that their inclusion in the calculation would reduce the loss per share.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
authorisation of these financial statements.
24. DIRECTORS AND EXECUTIVE DISCLOSURE
(a)
Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share based payments
56
Consolidated
2018
$
2017
$
1,894,036
1,781,885
86,711
4,624
81,253
76,295
13,086
196,557
2,066,624
2,067,823
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018
25. PARENT ENTITY INFORMATION
The following information relates to the legal parent entity of the Group, being Tech Mpire Limited. The information presented has been
prepared using consistent accounting policies as presented in Note 2.
Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Share based payment reserve
Accumulated losses
Total equity
Financial Performance
Loss for the year
Other comprehensive income
Total comprehensive loss
As at 30 June
As at 30 June
2018
$
2017
$
3,496,524
6,115,359
9,611,883
6,514,409
2,909,283
9,423,692
370,223
51,173
421,396
415,217
49,246
464,463
9,190,487
8,959,229
19,354,405
13,925,133
1,344,306
3,781,958
(11,508,224)
(8,747,862)
9,190,487
8,959,229
(2,760,362)
(1,542,494)
-
-
(2,760,362)
(1,542,494)
57
TECH MPIRE ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 June 2018 D I R E C T O R S ’ D E C L A R A T I O N
In the Directors’ Opinion:
(a)
The financial statements and notes of Tech Mpire Limited set out on pages 21 to 57 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements,
and
giving a true and fair view of the Group’s financial position as at 30 June 2018 and its performance for the financial year ended on that
date, and
(b)
Note 2(a)(i) confirms that the financial statements also comply with the International Financial Reporting Standards as issued by the
International Accounting Standards Board.
(c)
Subject to note 2(y), there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
This declaration has been made after receiving the declarations required to be made to the directors by the chief executive officer and chief
financial officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2018.
On behalf of the board
Stephen Belben
Non-Executive Chairman
Perth, Western Australia
Dated this 30th day of August 2018
58
TECH MPIRE ANNUAL REPORT 2018 I N D E P E N D E N T A U D I T O R ’ S R E P O R T
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
INDEPENDENT AUDITOR’S REPORT
To the members of Tech Mpire Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Tech Mpire Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
notes to the 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:
(i)
(ii)
giving a true and fair view of the consolidated financial position as at 30 June 2018 and of its
consolidated financial performance for the year ended on that date; and
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 Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have 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 2 in the financial statements, which indicates that the Company incurred a net
loss of $7,509,395 during the year ended June 30, 2018 and, as of that date, the Company’s current
assets exceeded its current liabilities by $3,679,336. As stated in Note 2, these events or conditions,
along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast
significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GL:EH:TECHMPIRE:020
59
TECH MPIRE ANNUAL REPORT 2018
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our
audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a
separate opinion on these matters. 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. For each matter below, our description of how our audit addressed the
matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
1. Revenue recognition
Why significant
How our audit addressed the key audit matter
Revenue is an important measure by which to
assess the performance of the Group.
The Group’s business model is performance-based
whereby advertising revenue is earned at the
point when a measureable conversion is achieved.
These are measurable goals related to the Group’s
advertising service, such as subscriptions sale of a
product, installation of software and mobile
applications, registration of a customer, or other
quantifiable targets.
There is a risk of improper revenue recognition,
particularly with regard to the accuracy of
conversions tracked by the Group, using their IT
tracking platform and the increasing volume of
data processed during the year.
Accordingly, we considered this to be a key audit
matter.
The Group’s disclosures about revenue recognition
and related receivables from advertisers as at 30
June 2018 are included in the significant
accounting policies in Note 2(k) as well as in Note
12.
Our audit procedures included the following:
► Assessed whether the Group’s accounting
policy in respect of revenue recognition was in
accordance with Australian Accounting
Standards.
► Selected a sample of revenue transactions and
agreed conversions to underlying sales invoices
and evidence of customer acceptance, such as
and cash received.
► Assessed the determination of any accrued
revenue recognised at year-end.
► We selected a sample of revenue transactions
recorded both prior to and subsequent to
balance date to assess whether revenue had
been recognised in the appropriate accounting
period.
► Performed an analysis of revenue recognised
during the year compared to our expectations,
considering revenue, margins and other direct
costs such as commission expenses. Where
significant or unusual variances were identified
we sought supporting evidence.
► We assessed the adequacy of the related
disclosures and presentation in the financial
report and whether this complied with
Australian Accounting Standards.
A member firm of Ernst & Young Global Limited
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TECH MPIRE ANNUAL REPORT 2018
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
2. Income taxes
Why significant
How our audit addressed the key audit matter
There is significant judgment in accounting for
income taxes given the number of jurisdictions in
which the Group operates, which give rise to
complexity and uncertainty in the calculation of
income taxes.
The evaluation of areas of tax risk, and the
recognition and recoverability of deferred tax
assets in respect of tax losses, were significant to
our audit because the assessment requires
significant judgment and is based on assumptions
that are affected by uncertain future events.
The Group’s taxation related disclosures are
included in the significant accounting policies in
Note 2(m), Note 2(x) as well as in Note 5.
Our audit procedures included the following:
► We assessed the calculated tax balances for the
Group’s material legal entities.
► We assessed the recoverability of deferred tax
assets recognised and considered the Group’s
basis where deferred tax assets where the
Group does not have taxable temporary
differences available that support the
recognition of these losses.
► We involved our Australian and international
tax specialists in the assessment of the
recorded tax positions.
► We assessed the adequacy of tax disclosures
and presentation in the financial report and
whether this complied with Australian
Accounting Standards.
3. Share-based payments
Why significant
How our audit addressed the key audit matter
Our audit procedures included the following:
► We assessed whether the assumptions used in
the Group’s calculation, including volatility,
were appropriate and that the calculation was
in accordance with Australian Accounting
Standards. We involved our valuation
specialists in performing these procedures.
► We assessed the adequacy of the share based
payment disclosure in the financial report.
In the current year, the Group granted share
based payments in the form of performance rights
and share options. The awards vest subject to the
achievement of certain vesting conditions.
The Group used the Black Scholes model to value
the then determined the related share based
payment expense of $111,621 recorded in the
consolidated statement of profit or loss.
Due to the complex and judgmental estimates such
as volatility, used in determining the valuation of
the share based payments and vesting expense,
we considered the Group’s calculation of the share
based payment expense to be a key audit matter.
The Group’s disclosures about share based
payments are included in the significant
accounting policies in Note 2(v), Note 2(x) as well
as in Note 16.
A member firm of Ernst & Young Global Limited
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TECH MPIRE ANNUAL REPORT 2018
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
4. Discontinued operations
Why significant
How our audit addressed the key audit matter
The Group has presented the performance
marketing division as a discontinued operation in
the statement of profit and loss and other
comprehensive income and as a disposal group
held for sale in the statement of financial position.
The result of the discontinued operations amounts
to loss after tax of $257,811.
This was considered a key audit matter given the
judgements made by the Group in determining
whether the criteria set out in Australian
Accounting Standards, for disclosure as a
discontinued operation were met and the
significance of this matter to the presentation of
the financial report.
The Group’s disclosures related to discontinued
operations are included in Note 12.
Our audit procedures included the following:
► We assessed whether the classification of
discontinued operations and disposal group
held for sale was appropriate based on the
criteria set out in Australian Accounting
Standards.
► We determined whether the disposal group
held for sale was correctly presented and
whether it was recorded at the lower of
carrying amount and fair value less costs of
disposal.
► We assessed the adequacy of the discontinued
operations disclosure in the financial report.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information
in the Company’s Annual Report for the year ended 30 June 2018, but does not include the financial
report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form
of assurance conclusion thereon, with the exception of the Remuneration Report and our related
assurance opinion.
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 upon 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 cease
operations, or have no realistic alternative but to do so.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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TECH MPIRE ANNUAL REPORT 2018
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
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 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.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
►
►
►
►
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting in
the preparation of the financial report. We also conclude, based on the audit evidence obtained,
whether a material uncertainty exists related to events and conditions that may cast significant
doubt on the entity’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in the auditor’s report to the disclosures in the
financial report about the material uncertainty or, if such disclosures are inadequate, to modify the
opinion on the financial report. However, future events or conditions may cause an entity to cease
to continue as a going concern.
►
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GL:EH:TECHMPIRE:020
63
TECH MPIRE ANNUAL REPORT 2018
I N D E P E N D E N T A U D I T O R ’ S R E P O R T
From the matters communicated to the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 19 the Directors' Report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Tech Mpire Limited for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Ernst & Young
G Lotter
Partner
Perth
30 August 2018
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GL:EH:TECHMPIRE:020
64
TECH MPIRE ANNUAL REPORT 2018
A S X A D D I T I O N A L I N F O R M A T I O N
The following additional information is required by the Australian Securities Exchange. The information is current as at 27 September 2018.
CORPORATE GOVERNANCE
The Board of Tech Mpire Ltd is committed to achieving and demonstrating the highest standards of Corporate Governance. The Board is
responsible to its Shareholders for the performance of the Company and seeks to communicate extensively with Shareholders. The Board believes
that sound Corporate Governance practices will assist in the creation of Shareholder wealth and provide accountability. In accordance with ASX
Listing Rule 4.10.3, the Company has elected to disclose its Corporate Governance policies and its compliance with them on its website, rather
than in the Annual Report. Accordingly, information about the Company’s Corporate Governance practices is set out on the Company’s website at
https://www.techmpire.com/about-us/corporate-governance/ .
SECURITY HOLDING
The security holding information outlined below is current as at 27 September 2018.
1.
Substantial Shareholders
Substantial shareholders in the Company and the number of equity securities over which the substantial shareholder has a relevant interest
as disclosed in substantial holding notices provided to the Company are listed below:
Substantial holders
Number of shares
Number of options
Voting interest
Date of Lodgement
of Notice
MC Management Group Pty Ltd
Zhenya Holdings Pty Ltd
6,551,676
10,000,000
500,000
-
8.94%
13.64%
5/9/2017
1/9/2017
2. Number of Holders of Each Class of Equity Security
Ordinary Fully Paid Shares
There are 842 holders of ordinary fully paid shares.
Each shareholder is entitled to one vote per share. In accordance with the Company’s constitution, on a show of hands every number present
in person or by proxy or attorney or duly authorised representative has one vote. On a poll every member present in person or by proxy or
attorney or duly authorised representative has one vote for every fully paid ordinary share held.
Options
There are 3 holders of the 1,500,000 unlisted options on issue. There are no voting rights attached to these options.
Performance Rights
There are 2 holders of the 33,332 unlisted Class D performance rights on issue. There are no voting rights attached to these performance
rights.
3. Distribution Schedules
Shareholders
Spread of holders
Nil Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over 100,000
Total on register
Number of
Shareholders
Number of Shares
-
43
144
104
424
127
842
-
11,429
475,237
898,222
16,309,606
71,103,173
88,797,667
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TECH MPIRE ANNUAL REPORT 2018 A S X A D D I T I O N A L I N F O R M A T I O N
3. Distribution Schedules (Continued)
Option Holders
Spread of holders
Nil Holding
1
1,001
5,001
10,001
–
–
–
–
1,000
5,000
10,000
100,000
Over 100,000
Total on register
Performance Right Holders
Spread of holders
Nil Holding
1
1,001
5,001
10,001
–
–
–
–
1,000
5,000
10,000
100,000
Over 100,000
Total on register
Number of
Option Holders
Number of Options
-
-
-
-
-
3
3
-
-
-
-
-
1,500,000
1,500,000
Number of Class D
Performance Rights
Holders
Number of Class D
Performance Rights
-
-
-
-
2
-
2
-
-
-
-
33,332
-
33,332
4. Restricted Securities
As at 27 September 2018, there are:
• 128,588 ordinary shares that were issued pursuant to the Company’s Incentive Share Plan that are under voluntary escrow until the
earlier of 28 September 2020 and the employee leaving the Company; and
• 293,334 ordinary shares that are under voluntary escrow until 26 December 2018
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TECH MPIRE ANNUAL REPORT 2018 5. Top 20 Shareholders
Holder name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Zhenya Hldgs Pty Ltd
National Nominees Ltd
MC Management Group Pty Ltd
Taylor Luke
H Cunnold Pty Ltd
Unaval Nom Pty Ltd
Daws & Sons Pty Ltd
Barry Leo David
MC Management Group Pty Ltd
Morckstow Pty Ltd
Upsky Equity Pty Ltd
Reco Hldgs Pty Ltd
Alexander Peter + S
Mackinnon Barry J + P A
Giovanni Nom Pty Ltd
Stanley Scott D + L A
Reed Martin James
Rho Shane Michael
Hui Titus Xien Tat
Moperry Pty Ltd (Pursell Retmnt Fun)
Total
A S X A D D I T I O N A L I N F O R M A T I O N
Number
% of issued capital
10,000,000
11.26%
5,264,644
5,000,000
3,250,000
2,406,450
2,400,000
2,000,000
1,639,050
1,551,676
1,430,000
1,287,077
1,150,000
1,130,000
1,100,000
1,100,000
1,000,000
1,000,000
900,269
775,000
750,000
5.93%
5.63%
3.66%
2.71%
2.70%
2.25%
1.85%
1.75%
1.61%
1.45%
1.30%
1.27%
1.24%
1.24%
1.13%
1.13%
1.01%
0.87%
0.84%
45,134,166
50.83%
6. Marketable Parcels
There are 234 shareholders with less than a marketable parcel of $500 based on a share price of 5.7 cents.
7. On-Market Buy-Back
The Company is not currently undertaking an on-market buy-back.
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TECH MPIRE ANNUAL REPORT 2018 Tech Mpire Limited
Suite 10, 16 Brodie Hall Drive
Bentley WA 6102
+61 8 9473 2500
ABN: 88 156 377 141