archTIS Limited
ABN 79 123 098 671
Annual Report
30 June 2018
archTIS Limited
ABN 79 123 098 671
Corporate directory
30 June 2018
Directors
Company secretary
Registered office
Principal place of business
Share register
Auditor
Accountants
Solicitors
Bankers
Stephen Smith
Daniel Lai
Bruce Talbot
Leanne Graham
Wayne Zekulich
Baden Bowen
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Automic
Level 2, 267 St Georges Terrace
Perth, WA 6000
RSM Australia Pty Ltd
Equinox Building 4, Level 2
70 Kent Street
Deakin, ACT 2600
mgi Joyce Dickson
Level 1, 65 Canberra Avenue
Griffith, ACT 2603
Steinepreis Paganin
16 Milligan Street,
Perth, WA 6000
Westpac Banking Corporation
6-8 Wollongong Street
Fyshwick, ACT 2609
Stock exchange listing
archTIS Limited shares are listed on the
Australian Stock Exchange (ASX: AR9)
Website
www.archtis.com
Corporate Governance Statement
https://www.archtis.com/company/investor-relations/
Page 2 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity')
consisting of archTIS Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended
30 June 2018.
Directors
The following persons were directors of archTIS Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:
Stephen Smith (Appointed 1 February 2018)
Daniel Lai
Bruce Talbot
Leanne Graham (Appointed 1 February 2018)
Wayne Zekulich (Appointed 1 February 2018)
Phillip Dean (Resigned 1 February 2018)
James Hyndes (Resigned 1 February 2018)
Darren Patterson (Resigned 31 July 2017)
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of:
- Development of secure information management and collaboration software and appliance solutions.
- Consulting and solutions services for secure information sharing and inter-organisational collaboration.
Dividends
There have been no dividends paid or declared since the start of the financial year.
Review of operations
The loss for the consolidated entity after providing for income tax and non-controlling interest amounted to $2,091,466 (30 June 2017: $1,132,202).
The consolidated entity focused on product research and development with a consequent reduction in consulting and services revenues.
In April 2018 the company changed its status to a public company limited by shares, adopted a new constitution and changed its name to archTIS
Limited. In order to meet the funding requirements of the future research and development, the directors raised $5,533,686 during the year and
commenced the process to undertake an initial public offer (IPO) in August 2018 to raise additional capital of $8,000,000. The IPO was successfully
completed in September 2018 and the company was listed on the Australian Stock Exchange on 21 September 2018.
During the year the company capitalised costs related to its product development that are expected to be recouped in the future. A successful conclusion
from research and development is inherently risky. The company is focused on bringing its product to the market in a timely and cost effective manner.
Significant changes in the state of affairs
In April 2018 the company changed its status to a public company limited by shares, adopted a new constitution and changed its name to archTIS
Limited. In May 2018 the parent entity acquired 100% of the ordinary shares of archTIS Solutions Pty Ltd for the total consideration of $10 and 100% of
the ordinary shares of archTIS Services Pty Ltd for the total consideration of $10. Neither company commenced operations prior to 30 June 2018.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
In July 2018 the company commenced the process to undertake an initial public offer in August 2018 to raise additional capital of $8,000,000. The capital
raise was fully subscribed and the investment funds have been received. The company was listed on the Australian Stock Exchange on
21 September 2018. In July 2018 share options at 1.9% of capital were issued and in September 2018 the lead managers of the initial public offer were
issued share options at 6% of capital. In August 2018 archTIS Solutions Pty Ltd, a subsidiary of the parent entity established an office in the Czech
Republic. archTIS Solutions Pty Ltd will engage and manage a software development team based in the Czech Republic. The company's Product
Manager and Product Requirements, Learning, Marketing and Capability Development Manager have relocated to the Czech Republic to manage and
lead the development team. There has not been any other matter or circumstance occurring subsequent to the end of the financial year that has
significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in
future financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this
report because the directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Page 3 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Information about the directors
The names and particulars of the directors of the company during or since the end of the financial year are:
Name:
Title:
Qualifications:
Experience and expertise:
Stephen Smith
Non-Executive Chairman
LLM (London)
Stephen Smith is a former Australian politician who was a member of the House of Representatives from 1993 to
2013. He served as a minister in the Rudd and Gillard Governments, including as Minister for Foreign Affairs
(2007‑2010), Minister for Trade (2010), and Minister for Defence (2010‑2013). He was appointed Winthrop
Professor of International Law at the University of Western Australia in 2014.
He has served as a member of the Ernst & Young Oceania Government and Public Sector Advisory Board and was
a Board member of Hockey Australia. He is currently a member of the Board of the LNG Marine Fuel Institute and
the board of the Perth USAsia Centre.
Other current directorships: None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
None
None
1,080,000
Name:
Title:
Qualifications:
Experience and expertise:
Daniel Lai
Chief Executive Officer
BCom (UC)
Daniel is a founding member of the Company and has successfully developed the business with its partners to be
recognised by the Australian and United States Departments of Defence as a thought leader in information sharing
strategies.
Daniel has extensive experience in successfully delivering outcomes as part of a senior executive team for
government and for multi-national software companies. Most importantly, Daniel has direct experience of
successfully implementing organisational change in rapidly evolving business environments
Other current directorships: None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Contractual rights to
shares:
None
None
None
7,284,252 Ordinary shares
1,800,000
Name:
Title:
Qualifications:
Experience and expertise:
Bruce Talbot
Chief Technology Officer
MBT (UNSW) AdvDip CompEng AdvDip RadarEng Dip ElectEng MAICD.
Bruce served with the Royal Australian Air Force, and has worked with government agencies with sensitive data
management requirements, as well as private sector roles working with clients within the Australian Federal
Government, State Governments and large strategic corporate accounts.
He has been involved in systems architectures, Security Management, Application Management and Delivery and
Information Management for his entire career.
Other current directorships: None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
None
7,396,436 ordinary shares
1,080,000
Name:
Title:
Qualifications:
Experience and expertise:
Leanne Graham
Non-Executive Director
Leanne Graham has over 30 years of executive sales and technology experience, having founded a number of
successful software development businesses as well as serving as the former New Zealand General Manager of
ASX listed company, Xero.
Leanne is the former CEO of GeoOp Ltd. She led the company through multiple rounds of capital raising, listing on
the New Zealand Stock Exchange, growing to over 40 staff with customers in 34 countries and $1 million
annualised monthly subscription revenues.
Page 4 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Chair and Non-Executive Director of VPCL Limited (since October 2015) and Non-Executive Directior of BidEnergy
Limited (since July 2016)
Executive Director and CEO of GeoOp Ltd (resigned May 2016)
None
50,000 Ordinary shares
540,000
Wayne Zekulich
Non-Executive Director
BBus (WAIT), FCA
Wayne is a consultant with extensive banking and investment banking experience covering mergers and
acquisitions, arranging and underwriting financings and debt and equity capital markets. Wayne is a member of the
Curtin Business School of Accounting Advisory Board and the John Curtin Gallery Board, a member of the
University of Western Australia Audit Committee and a Board member of ARTrinsic Inc.
Non-Executive Director of Cleveland Mining Limited (from February 2015 to January 2016).
Other current directorships: None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
100,000 ordinary shares
540,000
Name:
Title:
Qualifications:
Experience and expertise:
Phillip Dean
Commercial Manager
BSc (ANU)
Phillip's career spans 35 years in government and in the IT industry. This experience includes many tears working
as a supplier to the Department of Defence, as well as within the Department, and as a Ministerial staffer. Phillip
joined the Board in September 2007 and resigned in February 2018.
Other current directorships: None
None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
Not applicable as no longer a director
Not applicable as no longer a director
Name:
Title:
Qualifications:
Experience and expertise:
James Hyndes
Former Non-Executive Director
BA Asian Studies BEc (ANU) GradDip AppFinInv
James is an Investment Banker. He joined the Board in a non-executive capacity in 2014 and resigned in February
2018. James is Founding Director of a private investment company and formerly a senior executive with major
investment banks.
Non-Executive Director of US Residential Limited (from November 2016 to December 2017)
Other current directorships: None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
Not applicable as no longer a director
Not applicable as no longer a director
Name:
Title:
Qualifications:
Experience and expertise:
Darren Patterson
Former Non-Executive Director
MBA (Chicago) BCompSc (UTS)
Darren joined the Board in December 2016 and resigned in July 2017. He is a senior executive with both start-up
and blue-chip technology companies.
Other current directorships: None
None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
None
Not applicable as no longer a director
Not applicable as no longer a director
Company secretary
Baden Bowen, BCom (UWA) FCA, has held the role of Company Secretary since November 2017. He is currently Company Secretary of CannPal
Animal Therapeutics Limited and Sapien Cyber Limited. Baden is a Fellow of Chartered Accountants Australia and New Zealand.
Page 5 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2018, and
the number of meetings attended by each director were:
Attended
4
Stephen Smith
20
Daniel Lai
20
Bruce Talbot
5
Leanne Graham
4
Wayne Zekulich
16
Phillip Dean
16
James Hyndes
Darren Patterson
0
*Held: represents the number of meetings held during the time the director held office.
Held*
5
20
20
5
5
16
16
0
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the
requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly
or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is
considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies
the following key criteria for good reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the consolidated
entity depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high
quality personnel.
The Board has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the consolidated
entity.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance
shareholders' interests by:
●
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing
attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are
reviewed annually by the Board. The Board may, from time to time, receive advice from independent remuneration consultants to ensure non-executive
directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-
executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his
own remuneration. Non-executive directors receive share options but no other incentives.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed
and variable components.
Page 6 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Board based on individual and
business unit performance, the overall performance of the consolidated entity and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create
any additional costs to the consolidated entity and provides additional value to the executive.
The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments
are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution,
customer satisfaction, leadership contribution and product management.
The long-term incentives ('LTI') include long service leave and share-based payments. Shares are awarded to executives over a period of three years
based on long-term incentive measures. These include increase in shareholders value relative to the entire market and the increase compared to the
consolidated entity's direct competitors. The Board reviewed the long-term equity-linked performance incentives specifically for executives during the
year ended 30 June 2018.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus and incentive payments are
dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the
Board. Refer to the section 'Additional information' below for details of the earnings and total shareholders return for the last five years.
The Board is of the opinion that the continued improved results can be attributed in part to the adoption of performance based compensation and is
satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity consisted of the following directors of archTIS Limited:
●
●
●
●
●
Stephen Smith - Non-Executive Chairman
Leanne Graeme - Non-Executive Director
Wayne Zekulich - Non-Executive Director
Daniel Lai - Executive Director and Chief Executive Officer
Bruce Talbot - Executive Director and Chief Technical Officer
And the following persons:
●
●
●
●
●
Phillip Dean - Commercial Manager
Martin Tuček - Product Manager
Deborah Tuček - Product Requirements, Learning, Marketing and Capability Development Manager
Gregory Ginnivan - Senior Account Executive
Matthew Kluken - Senior Account Executive
There are no changes since the end of the reporting period.
Page 7 of 44
Post-employment benefitsLong-term benefitsCash salary and feesCash bonusNon-monetarySuper-annuationLong service leaveEquity-settled sharesEquity-settled optionsTotal2018$$$$$$$$Non-Executive Directors:Stephen Smith21 February 2018 to 30 June 201825,000 - - 2,375 - - 15,578 42,953 Leanne Graeme21 February 2018 to 30 June 201820,833 - - - - - 7,789 28,622 Wayne Zekulich21 February 2018 to 30 June 201816,667 - - 1,583 - - 7,789 26,039 James Hyndes1 July 2017 to 21 February 201822,500 - - - - - 15,578 38,078 Darren Patterson1 July 2017 to 31 July 2017- - - - - - - - Executive Directors:- Daniel Lai1 July 2017 to 30 June 2018219,221 - - 17,343 3,001 - 25,963 265,528 Bruce Talbot1 July 2017 to 30 June 2018250,372 - - 20,302 ( 30,372)- 15,578 255,880 Other Key Management personnel:- Phillip Dean1 July 2017 to 30 June 2018200,054 - - 17,105 3,001 - 15,578 235,738 Martin Tuček1 July 2017 to 30 June 2018166,340 - - 15,943 - - - 182,283 Deborah Tuček1 July 2017 to 30 June 2018150,000 - - 14,250 - - - 164,250 Gregory Ginnivan14 May 2018 to 30 June 201811,196 - - 1,060 - - - 12,256 Matthew Kluken7 March 2018 to 30 June 201841,036 - - 3,888 - - - 44,924 Total1,123,219 - - 93,849 ( 24,370)- 103,853 1,296,551 PeriodShort-term benefitsShare-based payments archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard to the satisfaction of
performance measures and weightings as described above in the section 'Consolidated entity performance and link to remuneration'. The maximum
bonus values are established at the start of each financial year and amounts payable are determined in the final month of the financial year by the Chief
Executive Officer.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Page 8 of 44
Post-employment benefitsLong-term benefitsPeriodCash salary and feesCash bonusNon-monetarySuper-annuationLong service leaveEquity-settled sharesEquity-settled optionsTotal2017$$$$$$$$Non-Executive Directors:James Hyndes1 July 2016 to 30 June 201712,500 - - - - 227,951 - 240,451 Darren Patterson1 December 2016 to 30 June 2017102,000 - - - - - - 102,000 Executive Directors:- Daniel Lai1 July 2016 to 30 June 2017189,052 - - 17,105 3,001 - - 209,158 Bruce Talbot1 July 2016 to 30 June 2017189,052 - - 17,105 3,001 - - 209,158 Phillip Dean1 July 2016 to 30 June 2017189,052 - - 17,105 3,001 - - 209,158 Total681,656 - - 51,315 9,003 227,951 - 969,925 Short-term benefitsShare-based paymentsName201820172018201720182017Non-Executive Directors:Stephen Smith100%-----Leanne Graeme100%-----Wayne Zekulich100%-----James Hyndes100%100%----Darren Patterson100%100%----Executive Directors:Daniel Lai100%100%----Bruce Talbot100%100%----Other Key Management personnel:Phillip Dean100%100%Martin Tuček100%100%----Deborah Tuček100%100%----Gregory Ginnivan85%---15%-Matthew Kluken95%-5%---Fixed remunerationAt risk - STIAt risk - LTIName2018201720182017Executive Directors:Daniel Lai----Bruce Talbot----Other Key Management personnel:Phillip Dean----Martin Tuček----Deborah Tuček----Gregory Ginnivan----Matthew Kluken0%-100%-Cash bonus paid/payableCash bonus forfeited
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as
follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Daniel Lai
Executive Director and Chief Executive Officer
15 December 2007
On-going
Base salary for the year ending 30 June 2019 of $180,054 plus superannuation, to be reviewed annually by the
Board. Directors' fee for the year ending 30 June 2019 of $50,000 plus superannuation. 6 month termination notice
by either party, non-solicitation and non-compete clauses.
Bruce Talbot
Executive Director and Chief Technical Officer
15 December 2007
On-going
Base salary for the year ending 30 June 2019 of $180,054 plus superannuation, to be reviewed annually by the
Board. Directors' fee for the year ending 30 June 2019 of $50,000 plus superannuation. 6 month termination notice
by either party, non-solicitation and non-compete clauses.
Phillip Dean
Commercial Manager
15 December 2007
On-going
Base salary for the year ending 30 June 2019 of $180,054 plus superannuation, to be reviewed annually by the
Board. 6 month termination notice by either party, non-solicitation and non-compete clauses.
Martin Tuček
Product Manager
18 March 2013
On-going
Base salary for the year ending 30 June 2019 of $200,000 plus superannuation, to be reviewed annually by the
CEO, Share option bonus of 20%-60% as per Board approval and KPI achievement, 4 weeks termination notice by
either party, non-solicitation and non-compete clauses.
Deborah Tuček
Product Requirements, Learning, Marketing and Capability Development Manager
18 March 2013
On-going
Base salary for the year ending 30 June 2019 of $200,000 plus superannuation, to be reviewed annually by the
CEO, Share option bonus of 20%-60% as per Board approval and KPI achievement, 4 weeks termination notice by
either party, non-solicitation and non-compete clauses.
Gregory Ginnivan
Senior Account Executive
14 May 2018
On-going
Base salary for the year ending 30 June 2019 of $220,000 plus superannuation, to be reviewed annually by the
CEO, Share option bonus of 15% as per KPI achievement, 4 weeks termination notice by either party, non-
solicitation and non-compete clauses.
Matthew Kluken
Senior Account Executive
7 March 2018
On-going
Base salary for the year ending 30 June 2019 of $175,000 plus superannuation, to be reviewed annually by the
CEO, cash bonus of as per KPI achievement, 4 weeks termination notice by either party, non-solicitation and non-
compete clauses.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct
Share-based compensation
Issue of shares
No shares were issued to directors and other key management personnel as part of compensation during the year ended 30 June 2018.
Page 9 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this
financial year or future reporting years are as follows:
Options granted carry no dividend or voting rights.
All options were granted over unissued fully paid ordinary shares in the company. The number of options granted was determined having regard to the
satisfaction of performance measures and weightings as described above in the section 'Consolidated entity performance and link to remuneration'.
Options vest based on the provision of service over the vesting period whereby the executive becomes beneficially entitled to the option on vesting date.
Options are exercisable by the holder as from the vesting date. There has not been any alteration to the terms or conditions of the grant since the grant
date. There are no amounts paid or payable by the recipient in relation to the granting of such options other than on their potential exercise.
There were no options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation
during the year ended 30 June 2018
Additional information
The earnings of the consolidated entity for the five years to 30 June 2018 are summarised below:
Sales revenue
EBITDA
EBIT
Profit (loss) after income tax
Profit (Loss) per share (cents)
Share price (at 30 June)
2018
$
573,827
( 2,004,394)
( 2,065,309)
( 2,091,466)
( 2.50)
N/A
2017
$
1,515,961
( 1,019,082)
( 1,082,709)
( 1,132,202)
( 3.69)
N/A
2016
$
4,179,667
1,068,214
990,696
349,009
1.38
N/A
2015
$
2,955,734
309,877
255,834
87,325
.36
N/A
2014
$
1,871,550
( 99,771)
( 121,822)
( 123,834)
( .54)
N/A
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management personnel of the
consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Non-Executive Directors:
James Hyndes (Retired 21 February 2018)
Executive Directors:
Daniel Lai
Bruce Talbot
Other Key Management personnel:
Phillip Dean
Martin Tuček
Deborah Tuček
Total
Balance at the
start of the
year
Received as
part of
remuneration
Additions
Disposals
/other
Balance at the
end of the year
2,787,129
7,284,252
7,346,436
7,284,252
240,000
240,000
25,182,069
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,787,129
7,284,252
7,346,436
7,284,252
240,000
240,000
25,182,069
Page 10 of 44
Number of options grantedGrant dateVesting date and exercisable dateExpiry dateExercisepriceFair value per option at grant dateNameNon-Executive Directors:Stephen Smith1,080,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106Leanne Graeme540,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106Wayne Zekulich540,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106James Hyndes (retired 21 Feb 2018)1,080,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106Executive Directors:Daniel Lai1,800,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106Bruce Talbot1,080,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106Other Key Management personnel:Phillip Dean1,080,000 01-Feb-1801-Feb-1801-Feb-21$0.120$0.106
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at the
start of the
year
Granted
Exercised
Expired/
forfeited/
other
Balance at the
end of the year
Options over ordinary shares
Non-Executive Directors:
Stephen Smith
Leanne Graeme
Wayne Zekulich
James Hyndes (retired 21 February 2018)
Darren Patterson
Executive Directors:
Daniel Lai
Bruce Talbot
Other Key Management personnel:
Phillip Dean
Total
-
-
-
-
-
-
-
-
-
1,080,000
540,000
540,000
1,080,000
-
1,800,000
1,080,000
1,080,000
7,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,080,000
540,000
540,000
1,080,000
-
1,800,000
1,080,000
1,080,000
7,200,000
Other transactions with key management personnel and their related parties
During the financial year, there were no other transactions with key management personnel and their related parties.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of archTIS Limited under option at the date of this report are as follows:
Grant date
10 October 2017
1 February 2018
22 May 2018
6 July 2018
6 September 2018
Expiry date
10 October 2022
1 February 2021
1 July 2023
5 July 2021
6 September 2022
Exercise price Number of options
$0.1020 4,289,880
$0.1200 7,500,000
$0.2000 1,200,000
$0.2000 1,600,000
$0.2400 5,000,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the company or of any other
body corporate.
Shares issued on the exercise of options
No ordinary shares of archTIS Limited were issued during the year ended 30 June 2018 and up to the date of this report on the exercise of options
granted.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they
may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability 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.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity
against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity.
Proceedings on Behalf of Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to
intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those
proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 27 to the
financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's
behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
Page 11 of 44
archTIS Limited
ABN 79 123 098 671
Directors' report
30 June 2018
The directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise the external auditor's
independence requirements of the Corporations Act 2001 for the following reasons:
●
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting
in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and
rewards.
Officers of the company who are former partners of RSM
There are no officers of the company who are former partners of RSM.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors'
report.
Auditor
RSM continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001
On behalf of the Directors:
Stephen Smith
Chairman
27 September 2018
Perth, WA
Page 12 of 44
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of archTIS Limited for the year ended 30 June 2018, I declare
that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Canberra, Australian Capital Territory
Dated: 27 September 2018
RODNEY MILLER
Partner
Page 13 of 44
archTIS Limited
ABN 79 123 098 671
General information
30 June 2018
The financial statements cover archTIS Limited as a consolidated entity consisting of archTIS Limited and the entities it controlled at the end of, or
during, the year. The financial statements are presented in Australian dollars, which is archTIS Limited's functional and presentation currency.
archTIS Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business
are:
Level 3, archTIS House
10 National Circuit
Barton, ACT 2600
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the
financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27 September 2018. The directors have the power to
amend and reissue the financial statements.
Financial report
Contents:
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's review report to the members of archTIS Limited
Shareholder information
Page
15
16
17
18
19
41
42
44
Page 14 of 44
archTIS Limited
ABN 79 123 098 671
Statement of profit or loss and other comprehensive income
for the year ended 30 June 2018
Continuing operations
Rendering of services
Sale of goods
Share of profits of associates accounted for using the equity method
Revenue
Cost of goods sold
Gross profit
Income from research and development claim
Other operating income
Employee benefits expense
Contractors and sub-contractors
Superannuation
Share based payments
Depreciation and amortisation expense
Consultancy fees
Advertising expense
Accountancy expense
Lease expense
Other expenses
Development - capitalised
Operating profit
Interest earned
Interest and finance charges paid/payable
Profit (loss) before tax from continuing operations
Income tax benefit (expense)
Profit (loss) for the year from continuing operations
Other comprehensive income
Profit (loss) for the year
Consolidated
Note
2018
$
2017
$
564,704
9,123
-
573,827
1,440,774
75,187
-
1,515,961
( 1,462)
572,365
( 51,885)
1,464,076
208,571
11,032
( 2,648,308)
( 1,007,087)
( 212,584)
( 108,178)
( 60,915)
( 169,768)
( 32,205)
( 72,986)
( 153,556)
( 640,148)
2,240,165
( 2,073,602)
125,887
10,833
( 2,347,519)
( 877,927)
( 211,577)
-
( 63,627)
( 120,198)
( 1,072)
( 39,778)
( 183,209)
( 375,328)
1,534,121
( 1,085,318)
8,293
( 35,456)
2,609
( 38,385)
( 2,100,765)
( 1,121,094)
9,299
( 11,108)
( 2,091,466)
( 1,132,202)
-
-
( 2,091,466)
( 1,132,202)
8
3
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
Page 15 of 44
archTIS Limited
ABN 79 123 098 671
Statement of financial position
as at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Short term investments
Trade and other receivables
Other assets
Tax assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Bank overdraft
Interest-bearing loans and borrowings
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings (accumulated losses)
Total equity (attributable to the owners of archTIS Limited)
Note
2018
$
Consolidated
2017
$
2016
$
4
4
5
6
13
7
8
13
4,9
10
11
12
12
14
15
1,638,668
57,478
89,154
116,393
922,061
2,823,754
-
153,137
3,059,698
92,750
3,305,585
20,184
56,158
257,168
56,354
627,871
21,944
54,815
741,018
156,349
382,177
1,017,735
1,356,303
-
170,513
1,698,383
83,451
1,952,347
-
174,146
831,605
94,559
1,100,310
6,129,339
2,970,082
2,456,613
-
300,000
644,428
314,623
1,259,051
229,479
324,989
1,239,363
179,371
1,973,202
93,175
-
1,040,484
170,186
1,303,845
110,829
110,829
93,613
93,613
88,753
88,753
1,369,880
2,066,815
1,392,598
4,759,459
903,267
1,064,015
6,767,689
731,746
( 2,739,976)
1,234,003
317,774
( 648,510)
490,500
89,823
483,692
4,759,459
903,267
1,064,015
The above statement of financial position should be read in conjunction with the accompanying notes.
Page 16 of 44
archTIS Limited
ABN 79 123 098 671
Statement of changes in equity
for the year ended 30 June 2018
Issued capital
Balance at beginning of period
Issue of share capital
Balance at end of period
Share-based payments reserve
Balance at beginning of period
Arising on share-based payments
Balance at end of period
Retained earnings (accumulated losses)
Balance at beginning of period
Profit (Loss) for the year
Balance at end of period
Total equity
Balance at beginning of period
Profit (Loss) for the period
Share-based payments
Issue of share capital
Balance at end of period
Consolidated
2018
$
Note
2017
$
1,234,003
5,533,686
490,500
743,503
14
6,767,689
1,234,003
317,774
413,972
731,746
89,823
227,951
317,774
15
( 648,510)
483,692
( 2,091,466)
( 1,132,202)
( 2,739,976)
( 648,510)
903,267
1,064,015
( 2,091,466)
( 1,132,202)
413,972
5,533,686
4,759,459
227,951
743,503
903,267
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Page 17 of 44
archTIS Limited
ABN 79 123 098 671
Statement of cash flows
for the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipts from R&D Tax Incentive
Interest received
Interest paid
Income tax paid
Consolidated
Note
2018
$
2017
$
819,938
( 5,232,107)
793,231
8,293
( 30,219)
-
2,344,277
( 3,981,075)
547,536
2,609
( 33,577)
-
Net cash provided by (used in) operating activities
19
( 3,640,864)
( 1,120,230)
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from secured bank loans
Net cash provided by (used in) financing activities
Net increase (decrease) in cash held
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
7
14
10
4
( 43,539)
( 43,539)
( 59,994)
( 59,994)
5,533,686
-
743,503
300,000
5,533,686
1,043,503
1,849,283
( 153,137)
1,696,146
( 136,721)
( 16,416)
( 153,137)
The above statement of cash flows should be read in conjunction with the accompanying notes.
Page 18 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the consolidated entity.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 2016-1 Amendments to Australian Accounting Standards - Recognition of Deferred Tax Assets for Unrealised Losses
The consolidated entity has adopted AASB 2016-1 from 1 July 2017. The amendments to AASB 112 'Income Taxes' clarify the
requirements on recognition of deferred tax assets for unrealised losses on debt instruments measured at fair value.
AASB 2016-2 Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 107
The consolidated entity has adopted AASB 2016-2 from 1 July 2017. The amendments to AASB 107 'Statement of Cash Flows'
require the disclosure of changes in liabilities arising from financing activities, including both changes arising from cash flows
and non-cash changes.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation
of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties,
certain classes of property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 2.
a.
Parent company information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 23.
b.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of archTIS Limited
('company' or 'parent entity') as at 30 June 2018 and the results of all subsidiaries for the year then ended. archTIS
Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that
control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
Page 19 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as an equity transaction, where the difference between the
consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in
equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss
and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated
entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in
a deficit balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
c.
Foreign currency translation
The financial statements are presented in Australian dollars, which is archTIS Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
d.
Revenue recognition
The company earns revenues from consulting services and the sale of solutions services for secure information sharing
and inter-organisational collaboration.
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods,
the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue
are net of sales returns and trade discounts
Rendering of services
Rendering of services revenue is recognised by reference to the stage of completion of the contracts.
Stage of completion is measured by reference to the services performed to date as a percentage of total anticipated
services to be performed for each contract. Where the contract outcome cannot be reliably estimated, revenue is only
recognised to the extent of the recoverable expenditure incurred to date.
Interest
Interest revenue 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.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
e.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable
to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting nor taxable profits; or
Page 20 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
archTIS Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated
group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to
account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer
within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated
group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary
in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither
a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
f.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as
non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating
cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or
there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All
other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
g.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes,
cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the
statement of financial position.
h.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Page 21 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the consolidated entity 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 may be 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.
Other receivables are recognised at amortised cost, less any provision for impairment.
i.
Non-current assets or disposal groups classified as held for sale
Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying
amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held
for sale, they must be available for immediate sale in their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of
disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less
costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment
loss previously recognised.
Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented
separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified
as held for sale are presented separately on the face of the statement of financial position, in current liabilities.
j.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the
issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower
concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the
borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial
asset; or observable data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the current market rate of return for similar
financial assets.
k.
Property, plant and equipment
Each class of plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical
cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Leasehold improvements
Office furniture and equipment
Computer equipment
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Term of lease
2-4 years
2-4 years
Page 22 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to
the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or
loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
l.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the
asset's useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership
at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of
the lease term
m.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and
the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed
annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the
amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Research and development
Research costs are expensed in the period in which they are incurred. Development costs are capitalised when it is
probable that the project will be a success considering its commercial and technical feasibility; the consolidated entity is
able to use or sell the asset; the consolidated entity has sufficient resources; and intent to complete the development and
its costs can be measured reliably. Capitalised development costs are amortised on a systematic basis matched to the
future economic benefits over the useful life of the project.
Research and development tax incentive
The Research and Development Tax Incentive (RDTI) is a 43.5% refundable tax offset that is calculated as 43.5% of the
eligible research and development expenditure that has been incurred by the company. The Directors consider any
payment arising from the RDTI to be a form of government assistance and are of the view that it is appropriate to
recognise RDTI receipts as Government Grants in accordance with AASB120 Accounting for Government Grants and
Disclosure of Government Assistance.
Page 23 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
As such, RTDI refunds are recognised when there is a sufficient degree of certainty that the company will comply with the
conditions attaching to RDTI and that the payment will be received. Such refunds are recognised in the Statement of
profit and loss and other comprehensive income on a systematic basis over the periods in which the company recognises
as expenses the related costs for which the assistance is intended to compensate. The proportion of the refund that
relates to capitalised development is deducted against the carrying amount of the related non-current assets. Any
remaining proportion that cannot be recognised on either of the preceding bases is recognised in the Statement of profit
and loss and other comprehensive income as "Income from research and development claim".(cid:9)(cid:9)(cid:9)(cid:9)(cid:9)
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 10 years.
n.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
o.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
p.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
q.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
r.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a
past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding
the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the
liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.
s.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up
to the reporting date using the projected unit credit method. 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 corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Page 24 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
The company's obligations for long-term employee benefits are presented as non-current provisions in its statement of
financial position, except where the company does not have an unconditional right to defer settlement for at least 12
months after the end of the reporting period, in which case the obligations are presented as current provisions.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount
of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that
do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award
was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by
the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid
to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition
is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not
satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period,
unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
t.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; and assumes that the transaction will take place
either: in the principal market; or in the absence of a principal market, in the most advantageous market.
Page 25 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market
knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to
another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a
comparison, where applicable, with external sources of data.
u.
Issued capital
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.
v.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
w. Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the 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 tax authority is included in other receivables or other 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 tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
x.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018.
The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset
shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial
instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading)
in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair
value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch).
Page 26 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
1.
Significant accounting policies (continued)
New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk
management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to
recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial
instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The
standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018 and the
impact of its adoption is expected to be minimal on the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services.
The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate
performance obligations within the contract; determine the transaction price, adjusted for the time value of money
excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative
stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist;
and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an
expense rather than adjusted to revenue.
For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services,
the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to
customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to
determine how much revenue should be recognised as the performance obligation is satisfied.
Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract
asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers;
the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to
obtain or fulfil a contract with a customer.
The consolidated entity will adopt this standard from 1 July 2018, resulting in an increase in contract assets of $51,000
and an increase in contract liabilities of $51,000.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces
AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to
exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of
the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to
profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117.
However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the
operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification
within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and
interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially
change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1 July 2019. On the
application date the company will record a right-to-use asset equivalent to the present value of remaining lease payments
(approximately $322,000) and a corresponding lease liability for the lease of the premises at 10 National Circuit, Barton,
ACT. The right-to-use asset will be depreciated over the remaining term of the lease and interest will be expensed. The
lease liability will be reduced by the principle portion of the lease payments. Currently, no right-to-use asset or lease
liability is recorded in the statement of financial position, lease payments are expensed, and the lease commitment is
recorded in the notes to these financial statements.
Page 27 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
2
Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events, management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of
assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical
innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than
previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off
or written down.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy
stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and
growth rates of the estimated future cash flows.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course
of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax
audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these
matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period
in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Employee benefits provision
As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting date
are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at
the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through
promotion and inflation have been taken into account.
Page 28 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
3.
Tax expense
Consolidated
Note
2018
$
2017
$
a.
b.
The components of tax expense/(income) are:
Current tax
Deferred tax
Deferred tax - adjustment to prior year losses not recognised
Deferred tax - change of tax rate
Deferred tax on tax losses not recognised
Income tax expense/(income)
The prima facie tax on profit before income tax is reconciled to income tax as follows:
Prima facie tax payable on profit before income tax at 27.5%.
Less:
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
- Non deductible entertainment
- Non deductible insurances
- R&D expenditure
-
-
- Prior year adjustment - Tax losses not recognised
- Change of tax rate on Deferred Tax at beginning of year
Income from R&D claim
Tax losses not recognised
Income tax attributable to entity
4.
Cash and cash equivalents
Cash at bank and on hand
Cash on deposit
Reconciliation of cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to
items in the statement of financial position as follows:
Cash and cash equivalents
Bank overdraft
5.
Trade and other receivables
Current
Trade receivables
Other receivables
Loans to directors
GST receivable
Total current trade and other receivables
Credit risk
13
13
13
13
-
( 371,224)
( 175)
( 371,399)
-
362,100
( 9,299)
-
( 252,181)
-
( 252,181)
7,879
255,410
11,108
( 577,710)
( 342,920)
-
-
1,827
9,328
79,584
-
255,410
-
7,879
354,028
11,108
20,184
56,158
76,342
1,504
29,749
232,590
( 57,357)
362,100
( 175)
-
568,411
( 9,299)
1,638,668
57,478
1,696,146
9
1,696,146
-
1,696,146
76,342
( 229,479)
( 153,137)
42,659
5,639
-
40,856
89,154
196,536
6,715
9,494
44,423
257,168
The company has no significant concentration of credit risk with respect to any single counterparty or group of counterparties. The
main source of credit risk to the company is considered to relate to the class of assets described as "trade and other receivables".
The following table details the company's trade and other receivables exposed to credit risk (prior to collateral and other credit
enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as "past due" when the debt
has not been settled within the terms and conditions agreed between the company and the customer or counterparty to the
transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for
where there are specific circumstances indicating that the debt may not be fully repaid to the company.
Page 29 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
5.
Trade and other receivables (continued)
The balances of receivables that remain within initial trade terms (as detailed in the table below) are considered to be of high credit
quality.
6.
Other assets
Current
Prepayments
Accrued income
7.
Property, plant and equipment
Lease improvements
At cost
Accumulated depreciation
Office, furniture & equipment
At cost
Accumulated depreciation
Computer equipment
At cost
Accumulated depreciation
Total plant and equipment
Consolidated
2018
$
2017
$
109,315
7,078
116,393
33,261
23,093
56,354
72,779
( 39,413)
33,366
112,542
( 66,278)
46,264
243,214
( 169,707)
73,507
153,137
72,779
( 27,284)
45,495
102,424
( 49,233)
53,191
209,794
( 137,967)
71,827
170,513
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Balance at 1 July 2016
Additions
Disposals - written down value
Depreciation expense
Balance at 30 June 2017
Additions
Disposals - written down value
Depreciation expense
Balance at 30 June 2018
Lease
improvements
57,625
-
-
( 12,130)
45,495
-
-
( 12,130)
33,365
Office, furniture
& equipment
67,928
1,685
-
( 16,422)
53,191
10,119
-
( 17,045)
46,265
Computer
equipment
Total
48,593
58,309
-
( 35,075)
71,827
33,420
-
( 31,740)
73,507
174,146
59,994
-
( 63,627)
170,513
43,539
-
( 60,915)
153,137
Page 30 of 44
< 3031–6061–90> 90$$$$$$$Jun-2018Trade receivables42,659 - - - - 26,975 15,684 Other receivables5,639 - - - - - 5,639 Total48,298 - - - - 26,975 21,323 Jun-2017Trade receivables196,536 - 25,184 - 11,000 27,481 132,871 Other receivables6,715 - - - - - 6,715 Total203,251 - 25,184 - 11,000 27,481 139,586 Past Due but Not Impaired(Days Overdue)Within Initial Trade TermsPast Due and ImpairedGross Amount
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
8.
Intangible assets
Capitalised development
Cost:
Balance at beginning of year
Additions from internal development
Employment costs
Administration overheads
Contract development
Balance at end of year
Accumulated research and development tax incentive:
Balance at beginning of year
R&D tax incentive benefit
Balance at end of year
Accumulated amortisation and impairment:
Balance at beginning of year
Amortisation
Impairment losses
Balance at end of year
Carrying amount at end of period
Consolidated
2018
$
2017
$
3,237,894
1,512,006
1,332,925
793,341
839,188
6,203,348
786,713
328,451
610,724
3,237,894
( 1,347,744)
( 878,850)
( 2,226,594)
( 680,401)
( 667,343)
( 1,347,744)
( 191,767)
-
( 725,289)
( 917,056)
3,059,698
-
-
( 191,767)
( 191,767)
1,698,383
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Carrying amount at beginning of year
Additions from internal development
R&D tax incentive benefit
Amortisation and impairment losses
Carrying amount at end of period
1,698,383
2,965,454
( 878,850)
( 725,289)
3,059,698
831,605
1,725,888
( 667,343)
( 191,767)
1,698,383
Capitalised development costs relate to the development of new techniques to provide enhanced secure content management
capability. As at 30 June 2018 the completion percentage is approximately 55%. As development costs are still a work in progress
no amortisation has been recorded.
The recoverable amount of the entity's capitalised development costs has been determined by a value-in-use calculation using a
discounted cash flow model, based on a 5 year projection period approved by management.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. The following
key assumptions were used in the discounted cash flow model for the new products:
a.
b.
50% pre-tax discount rate;
projected revenue growth rate based on expected customer acceptance of subscription based model, expected hardware and
enterprise revenues;
3-5% per annum increase in operating costs and overheads.
c.
The discount rate of 50% pre-tax reflects management’s estimate of the time value of money and the entity’s weighted average cost
of capital adjusted for the product, the risk free rate and the volatility of the share price relative to market movements.
Management believes the projected revenue growth rate is prudent and justified, based on its market analyses and evaluation.
There were no other key assumptions for the product.
Based on the above, no impairment charge has been applied as the discounted recoverable amount for the product exceeds the
capitalised development.
Page 31 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
8.
Other intangible assets (continued)
Sensitivity
As disclosed in note 1, the directors have made judgements and estimates in respect of impairment testing of capitalised
development cost. Should these judgements and estimates not occur the resulting capitalised development cost carrying amount
may decrease. The sensitivities are as follows:
a.
Revenue would need to decrease by more than 8.2% for the product before capitalised development cost would need to be
impaired, with all other assumptions remaining constant;
The discount rate would be required to increase to 57.3% for the product before capitalised development cost would need to
be impaired, with all other assumptions remaining constant.
b.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of product's
capitalised development cost is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable
9.
Bank overdrafts
Bank overdraft (secured)
Financing arrangements
Unrestricted access was available at the reporting date to the overdraft as follows:
Bank overdraft (secured)
Used at reporting date
Unused at reporting date
Total facility
The consolidated entity has an overdraft facility of $300,000, secured by personal assets of the
two executive directors and one senior executive.
10.
Interest-bearing loans and borrowings
Current
Unsecured insurance premium funding loan
Secured bank loan
Financing arrangements
Unrestricted access was available at the reporting date to the secured bank loan as follows:
Bank overdraft (secured)
Used at reporting date
Unused at reporting date
Total facility
The company secured bank loan facility of $300,000, is secured by personal assets of two of the
three executive directors.
11. Trade and other payables
Current
Unsecured liabilities:
Trade payables
Accrued expenses
Other creditors
Loans from directors
All payables are due within 12 months.
12. Provisions
Current
Annual leave
Long service leave
Page 32 of 44
Consolidated
2018
$
2017
$
-
229,479
-
300,000
300,000
229,479
70,521
300,000
-
300,000
300,000
24,989
300,000
324,989
300,000
-
300,000
300,000
-
300,000
172,777
363,559
108,092
-
644,428
634,176
198,367
271,394
135,426
1,239,363
226,157
88,466
314,623
73,389
105,982
179,371
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
12. Provisions (continued)
Non-current
Long service leave
Lease make good
Consolidated
2018
$
2017
$
38,049
72,780
110,829
20,833
72,780
93,613
Movements in provisions
Movements in each class of provision during the current financial year are set out below:
Analysis of provisions:
Balance at beginning of year
Additional provisions
Amounts used
Balance at end of year
Provision for employee benefits
Employee
Benefits
Lease
incentive
200,204
275,918
( 123,450)
352,672
72,780
-
-
72,780
Total
272,984
275,918
( 123,450)
425,452
Provision for employee benefits represents amounts accrued for annual leave and long service leave.
The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued
for long service leave entitlements that have vested due to employees having completed the required period of service. Based
on past experience, the company does not expect the full amount of annual leave or long service leave balances classified as
current liabilities to be settled within the next 12 months. However, these amounts must be classified as current liabilities since
the company does not have an unconditional right to defer the settlement of these amounts in the event employees wish to
use their leave entitlement.
The non-current portion for this provision includes amounts accrued for long service leave entitlements that have not yet
vested in relation to those employees who have not yet completed the required period of service.
Make good provision
A provision of $72,780 has been recognised by the consolidated entity for estimated make good costs in respect of the head
office premises. The lease has a life of 6 years and the company has an obligation to make good the premises at the end of
the lease term.
13. Tax balances
Assets
Current
Provision for reseach and development tax incentive
Non-current
Deferred tax asset
Deferred tax on tax losses not recognised
Deferred tax asset comprises temporary differences attributable to:
922,061
627,871
710,260
( 617,510)
92,750
338,861
( 255,410)
83,451
Jun-18
Deferred tax asset on:
Accrued income and prepayments
Property, plant and equipment
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Tax losses
Net amount
Opening
balance
Credited
(charged) to
profit or loss
Credited
(charged)
directly to equity
Changes in tax
rates
Closing
balance
( 6,663)
( 1,148)
54,386
2,504
20,234
14,138
255,410
338,861
4,605
( 2,872)
42,599
( 21,678)
( 5,274)
( 8,080)
362,099
371,399
Page 33 of 44
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
( 2,058)
( 4,020)
96,985
( 19,174)
14,960
6,058
617,509
710,260
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
13. Tax balances (continued)
Jun-17
Deferred tax asset on:
Accrued income and prepayments
Property, plant and equipment
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Tax losses
Net amount
14. Equity - Issued capital
Ordinary shares - fully paid
Ordinary shares - paid to $0.0936
Ordinary shares - paid to $0.0000
Capital raise fees
Issued ordinary shares
Balance at beginning of year
Share split (3:1)
Share issues
Share issue
Share issue
Share issue
Receipts - partly paid shares
Receipts - options
Share forfietures
Capital raise fees
Net increase (decrease) during year
Balance at end of year
Opening
balance
Credited
(charged) to
profit or loss
Credited
(charged)
directly to equity
Changes in tax
rates
Closing
balance
( 46,586)
12,586
55,848
23,485
32,478
16,748
-
94,559
36,041
( 12,685)
3,192
( 19,025)
( 9,538)
( 1,214)
255,410
252,181
-
-
-
-
-
-
-
-
Date
2018
No
2018
$
83,096,982
7,466,518
2017
Oct-17
Nov-17
Apr-18
-
720,000
-
83,816,982
10,214,651
20,429,302
-
12,254,904
29,338,125
12,060,000
-
-
( 480,000)
-
73,602,331
83,816,982
3,882
( 1,049)
( 4,654)
( 1,956)
( 2,706)
( 1,396)
-
( 7,879)
2017
No
9,226,874
587,777
400,000
-
10,214,651
-
-
( 698,829)
6,767,689
1,234,003
8,460,000
-
-
-
1,754,651
-
-
1,754,651
10,214,651
1,000,000
3,129,400
2,010,000
85,692
7,423
-
( 698,829)
5,533,686
6,767,689
6,139,400
85,692
7,423
( 698,829)
5,533,686
( 6,663)
( 1,148)
54,386
2,504
20,234
14,138
255,410
338,861
2017
$
1,424,354
55,000
-
( 245,351)
1,234,003
490,500
-
988,854
-
( 245,351)
743,503
1,234,003
988,854
( 245,351)
743,503
Reconciliation of cash proceeds from issue of shares
Share issues
Partly paid shares
Options
Capital raise fees
Cash proceeds from issue of shares
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the
number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have
a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
Capital risk management
The consolidated entity's objectives 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 optimum capital structure to reduce the cost
of capital.
Page 34 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
14. Equity - Issued capital (continued)
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total
borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
15. Equity - Share-based payments reserve
Balance at beginning of year
Arising on share-based payments
Balance at end of year
Share options
Consolidated
2018
$
2017
$
317,774
413,972
731,746
89,823
227,951
317,774
The company issues equity-settled share based payments to certain entities. Under AASB 2 these are measured at fair value at the
date of the grant. This amount is expensed on a straight line basis over the vesting period based on the company’s estimate of the
number of shares that will eventually vest.
The weighted average fair value of the share options granted during the financial year to 30 June 2018 is $0.085 (2017: $0.26 after
share split, $0.76 before split). Options were valued using a binomial option pricing model (2017: fundamental option pricing model).
Where relevant, the expected life used in the model has been adjusted based on management's best estimate for the effects of non-
transferability, exercise restrictions, and behavioural considerations.
Inputs into the valuation model:
Grant date share price
Exercise price
Expected volatility
Option life
Early exercise multiple
Dividend rate
Risk-free interest rate
Share option value (2017: Binomial valuation,
2016: Fundamental valuation)
At start of period
Granted
Exercised
Lapsed
At end of period
Date exercisable
Expiry date
(a) Date of compleyion of capital raising
(b) 4 years from date of completion
16. Dividends
2018
2017
$0.107
$0.102
70%
5 years
2 years
$0.00
2.63%
$0.20
$0.12
70%
3 years
2.5 years
$0.00
2.65%
$0.20
$0.20
70%
5 years
2 years
$0.00
2.65%
$1.00
$0.24
70%
4 years
-
$0.00
2.00%
$0.047
$0.106
$0.088
$0.780
-
-
-
4,289,880
7,500,000
1,200,000
-
-
-
-
-
-
4,289,880
10-Oct-17
10-Oct-22
7,500,000
01-Feb-18
01-Feb-21
1,200,000
22-May-18
01-Jul-23
$
2.0%
2.0%
587,777
-
-
(a)
(b)
$
Dividends arrangements
Dividends paid during the fiancial year
Franking credits
Franking credits available for subsequent financial years based on a rate of 27.5%
-
-
15,549
15,549
Page 35 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
17. Financial instruments
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated
entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and
beta analysis in respect of investment portfolios to determine market risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the
Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and hedges financial risks within the consolidated entity's operating units.
Finance reports to the Board on a monthly basis.
Market risk
Foreign exchange risk
The consolidated entity is not exposed to any significant foreign exchange risk.
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the
consolidated entity to interest rate risk. The policy is to maintain 100% of current borrowings at variable rates.
The consolidated entity's bank loan outstanding, totalling $300,000 (2017: $300,000), is an interest only loan. Monthly cash outlays
of approximately $1,300 (2017: $1,300) per month are required to service the interest payments. An official increase/decrease in
interest rates of 100 (2017: 100) basis points would have an adverse/favourable effect on profit before tax of $3,000 (2017: $3,000)
per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. In
addition, minimum principal repayments of $0 (2017: $0) are due during the year ending 30 June 2019 (2017: 30 June 2018).
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated
entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and
setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum
exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for
impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The
consolidated entity does not hold any collateral.
Guarantees
A financial institution has provided bank guarantees secured over the term deposit account.
18. Events after the reporting period
In July 2018 the company commenced the process to undertake an initial public offer in August 2018 to raise additional capital of
$8,000,000. The capital raise was fully subscribed and the investment funds have been received. The company was listed on the
Australian Stock Exchange on 21 September 2018. In July 2018 share options at 1.9% of capital were issued and in September
2018 the lead managers of the initial public offer were issued share options at 6% of capital. In August 2018 archTIS Solutions Pty
Ltd, a subsidiary of the parent entity established an office in the Czech Republic. archTIS Solutions Pty Ltd will engage and manage
a software development team based in the Czech Republic. The company's Product Manager and Product Requirements, Learning,
Marketing and Capability Development Manager have relocated to the Czech Republic to manage and lead the development team.
There has not been any other matter or circumstance occurring subsequent to the end of the financial year that has significantly
affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the
company in future financial years.
Page 36 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
19. Cash flow information
Reconciliation of cash flow from operations with profit (loss) after income tax
Profit (loss) after income tax
Non-cash flows in profit (loss):
- Depreciation and amortisation
-
-
Impairment of capitalised development
Loss on disposal of property plant & equipment
Changes in operating assets and liabilities, net of the effects of purchase and disposal of
subsidiaries:
-
-
-
-
-
-
-
-
(Increase) decrease in trade and other receivables
(Increase) decrease in accrued revenue
(Increase) decrease in prepayments
(Increase) decrease in research and development assets
Increase (decrease) in trade and other payables
Increase (decrease) in income taxes payable
Increase (decrease) in employee benefits
Increase (decrease) in share based payment reserve
Consolidated
2018
$
2017
$
( 2,091,466)
( 1,132,202)
7
8
60,915
156,507
-
63,627
-
-
185,755
16,015
( 76,054)
( 1,517,822)
( 637,665)
( 303,489)
152,468
413,972
665,972
131,927
( 31,932)
( 866,778)
41,746
( 234,586)
14,045
227,951
Net cash provided by (used in) operating activities
( 3,640,864)
( 1,120,230)
20. Operating lease commitments
a.
Operating lease commitments
Non-cancellable operating leases contracted for but not recognised in the financial
statements
Payable – minimum lease payments:
not later than one year
between two and five years
-
-
- more than five years
184,258
328,121
-
512,379
179,708
518,111
-
697,819
21. Contingent liabilities and contingent assets
Estimates of the potential financial effect of contingent liabilities that may become payable:
Share options
Share options were issued as part of the capital raising process during the year. Details of such share options are disclosed at
note 15. Further share options were issued after balance date and are detailed in Note 18.
Guarantees
A financial institution has provided bank guarantees secured over the term deposit account.
22. Transactions with related parties
Parent entity
archTIS Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 25.
Key management personnel
Disclosures relating to key management personnel are set out in note 26.
Transactions with related parties
The following transactions occurred with related parties:
Loans to related parties:
Loans to directors
Loans to related parties:
Loans from directors
Page 37 of 44
Consolidated
2018
$
2017
$
-
-
9,494
135,426
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
22. Transactions with related parties (continued)
Transactions with subsidiaries
The following transactions occurred with subsidiaries:
Purchase of 100% of share capital of archTIS Solutions Pty Ltd
Purchase of 100% of share capital of archTIS Services Pty Ltd
23. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit (loss) after income tax
Total comprehensive income
Statement of profit or loss and other comprehensive income
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Retained profits (accumulated losses)
Total equity
Consolidated
2018
$
2017
$
10
10
20
-
-
-
Parent
2018
$
2017
$
( 2,091,466)
( 2,091,466)
( 1,132,202)
( 1,132,202)
2,823,754
6,129,339
1,259,051
1,369,880
4,759,459
6,767,689
731,746
( 2,739,976)
4,759,459
1,017,735
2,970,082
1,973,202
2,066,815
903,267
1,234,003
317,774
( 648,510)
903,267
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and its subsidiaries are not party to any deeds of cross guarantee under which each company guarantees the
debts of the others.
Contingent liabilities and contingent assets
Contingent liabilities and contingent assets are set out in note 21.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except for the
following:
-
-
-
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
24. Acquisition of subsidiaries
On 23 May 2018 archTIS Limited acquired 100% of the ordinary shares of archTIS Services Pty Ltd for the total consideration
transferred of $10 and archTIS Solutions Pty Ltd for the total consideration transferred of $10.
Details of the acquisitions are as follows:
archTIS Solutions Pty Ltd
Cash and cash equivalents
Net assets acquired
Cash used to acquire subsidiaries, net of cash acquired
Share capital
Less: cash and cash equivalents
Net cash used
Page 38 of 44
Fair value
10
10
10
( 10)
-
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
24. Acquisition of subsidiaries (continued)
archTIS Services Pty Ltd
Cash and cash equivalents
Net assets acquired
Cash used to acquire subsidiaries, net of cash acquired
Share capital
Less: cash and cash equivalents
Net cash used
25.
Interests in subsidiaries
Fair value
10
10
10
( 10)
-
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in
accordance with the accounting policy described in note 1:
Name
archTIS Solutions Pty Ltd
archTIS Services Pty Ltd
Principal place of business / Country of
incorporation
Australia
Australia
Ownership interest
2018
2017
100%
100%
-
-
Consolidated
2018
$
2017
$
1,123,219
93,849
( 24,370)
103,853
-
1,296,551
681,656
51,315
9,003
227,951
-
969,925
68,663
9,161
77,824
25,968
12,500
38,468
116,292
23,000
662
23,662
-
-
-
23,662
26. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management
personnel of the consolidated entity is set out below:
Short-term benefits
Post-employment benefits
Other long-term benefits
Share-based payments
Termination benefits
The remuneration of directors and key executives is determined by the Board having regard to
the performance of individuals and market trends.
27. Auditor's remuneration
During the financial year the following fees were paid or payable for services provided by RSM,
the auditor of the company, its network firms and unrelated firms:
Audit services - RSM
-
-
auditing or reviewing the current year financial reports
auditing or reviewing the prior year financial report
Other services - RSM
-
-
Investigating accountants report
Research & development tax incentive review
28. Correction of prior period errors
During the year, a total of $2,271,553 was reclassified from income tax benefits for the 2012 to 2017 financial years: $923,809 to
income from research and development claim and $1,347,744 as an offset to capitalised development costs. The research and
development claim was incorrectly included in tax benefit instead of being split between income from research and development and
capitalised development expenditure.
The abovementioned misstatements in the previous years' financial statements represents a prior period accounting error which
must be accounted for retrospectively. Consequently, the consolidated entity has adjusted all comparative amounts presented in the
current periods financial statements affected by the accounting errors as follows:
Page 39 of 44
archTIS Limited
ABN 79 123 098 671
Notes to the financial statements
for the year ended 30 June 2018
28. Correction of prior period errors (continued)
Statement of profit and loss and other comprehensive income
for the year ended 30 June 2012
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
for the year ended 30 June 2013
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
for the year ended 30 June 2014
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
for the year ended 30 June 2015
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
for the year ended 30 June 2016
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
Statement of profit and loss and other comprehensive income
for the year ended 30 June 2017
Income from research and development claim
Profit (Loss) before income tax
Income tax benefit (expense)
Net profit (loss) for the year from continuing operations
Statement of financial position
at 30 June 2016
Non-current assets
Other non-current assets
Total non-current assets
Total assets
Net assets
Equity
Accumulated losses
Total equity
Statement of financial position
at 30 June 2017
Non-current assets
Other non-current assets
Total non-current assets
Total assets
Net assets
Equity
Accumulated losses
Total equity
Page 40 of 44
Previously
reported
Adjustment
Restated
-
96,096
( 21,916)
74,180
-
26,441
17,636
44,077
-
( 195,718)
71,884
( 123,834)
34,848
34,848
( 34,848)
-
93,873
93,873
( 93,873)
-
73,896
73,896
( 73,896)
-
-
53,075
34,250
87,325
183,101
183,101
( 183,101)
-
-
551,967
477,443
1,029,410
412,204
412,204
( 1,092,605)
( 680,401)
34,848
130,944
( 56,764)
74,180
93,873
189,969
( 115,789)
74,180
73,896
( 121,822)
( 2,012)
( 123,834)
183,101
236,176
( 148,851)
87,325
412,204
964,171
( 615,162)
349,009
-
( 1,246,981)
782,122
( 464,859)
125,887
125,887
( 793,230)
( 667,343)
125,887
( 1,121,094)
( 11,108)
( 1,132,202)
1,512,006
1,780,711
3,137,014
1,744,416
1,164,093
1,744,416
( 680,401)
( 680,401)
( 680,401)
( 680,401)
831,605
1,100,310
2,456,613
1,064,015
( 680,401)
( 680,401)
483,692
1,064,015
3,046,127
3,300,091
4,317,826
2,251,011
( 1,347,744)
( 1,347,744)
( 1,347,744)
( 1,347,744)
1,698,383
1,952,347
2,970,082
903,267
699,234
2,251,011
( 1,347,744)
( 1,347,744)
( 648,510)
903,267
archTIS Limited
ABN 79 123 098 671
Directors' declaration
30 June 2018
In the directors' opinion:
a.
b.
c.
d.
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2018 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors:
Stephen Smith
Chairman
27 September 2018
Perth, WA
Page 41 of 44
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
archTIS LIMITED
Opinion
We have audited the financial report of archTIS Limited. (the Company) and its subsidiaries (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, and 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) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2018, but does not include the financial report and the
auditor's report thereon.
Page 42 of 44
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.
This description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 11 of the directors' report for the year ended
30 June 2018.
In our opinion, the Remuneration Report of archTIS 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.
RSM AUSTRALIA PARTNERS
Canberra, Australian Capital Territory
Dated: 27 September 2018
RODNEY MILLER
Partner
Page 43 of 44
archTIS Limited
ABN 79 123 098 671
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 20 September 2018.
The company was admitted to the official list of the ASX on 21 September 2018. It is and will be using its money in a manner
consistent with its business objectives.
The company has no current on-market buy back.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
The Trust Company (Australia) Limited
Cyber Security Investment Partners Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mr Bruce Talbot
Mr Daniel Chun Leung Lai
Possum Hill Pty Ltd
Redhill Holdings Ltd
Mr David Graham Wood
J P Morgan Nominees Australia Limited
Ajava Holdings Pty Ltd
3STRZS Pty Ltd
Goldjazz Pty Ltd
Conleroy Pty Ltd
Bremy Keane Investments Pty Ltd
Mr Amit Gupta
Myube Investments Pty Ltd
Egmont Pty Ltd
Bickham Court Superannuation Pty Ltd
Bond Street Custodians Limited
7Sundays Pty Ltd
Unquoted equity securities
Number of holders of ordinary
shares
-
-
50
196
129
375
-
Ordinary shares
Number held
12,425,000
12,254,904
8,875,000
7,286,436
7,284,252
7,284,252
2,787,129
2,737,500
2,450,000
1,950,000
1,931,250
1,875,000
1,400,000
1,350,000
1,350,000
1,268,750
1,250,000
1,200,000
1,175,000
1,000,000
79,134,473
% of total shares
issued
10.03%
9.90%
7.17%
5.88%
5.88%
5.88%
2.25%
2.21%
1.98%
1.57%
1.56%
1.51%
1.13%
1.09%
1.09%
1.02%
1.01%
0.97%
0.95%
0.81%
63.89%
Number on issue
Number of
holders
13
14,589,880
Options over ordinary shares issued
Substantial holders
Substantial holders in the company are set out below:
The Trust Company (Australia) Limited
Cyber Security Investment Partners Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mr Bruce Talbot
Mr Daniel Chun Leung Lai
Possum Hill Pty Ltd
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
There are no other classes of equity securities.
12,425,000
12,254,904
8,875,000
7,286,436
7,284,252
7,284,252
10.03%
9.90%
7.17%
5.88%
5.88%
5.88%
Page 44 of 44