2018/2019
Annual
Report
archTIS
AR9
Corporate Directory
Directors
Stephen Smith
Daniel Lai
Bruce Talbot
Leanne Graham
Wayne Zekulich
Company Secretary
Baden Bowen
Registered Office
Principal Place of Business
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Share Register
Auditor
Automic
Level 2, 267 St Georges Terrace
Perth, WA 6000
RSM Australia Partners
Equinox Building 4, Level 2
70 Kent Street
Deakin, ACT 2600
Stock Exchange
archTIS Limited shares are listed on the
Australian Securities Exchange (ASX: AR9)
Website
www.archtis.com
Corporate Governance
Statement
www.archtis.com/company/investor-relations/
archTIS Annual Report | 2
Table of Contents
archTIS at a Glance
archTIS’ Technology and Products
archTIS’ Experience and History
archTIS’ Partners
Board of Directors and Senior Management
archTIS’ Differentiators
Letter From the CEO and Directors’ Report
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flow
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Declaration
Independent Auditor’s Report to the Members of archTIS Limited
Shareholder Information
04
06
08
10
12
14
15
26
27
28
29
30
55
56
57
60
archTIS Annual Report | 3
archTIS at a Glance
archTIS’ vision is to be the company that the
world trusts with its most valuable information.
23
Highly skilled staff
employed
Core Value #1
Collaboration
120+
Demonstrations of
Kojensi Gov held
Core Value #2
Trust
Core Value #3
Responsibility
Company founded in
2006 and listed in 2018
9 April
2019
Commercial launch of
Kojensi Gov
Core Value #4
Innovation
9
Partnerships
archTIS Annual Report | 4
archTIS’ vision is to be the company that the
world trusts with its most valuable information.
Highlight
$4.2m
Kojensi Gov passes
IRAP assessment
Development & soft-
ware assets created
Highlight
archTIS signs reseller
agreeement with Team
Asparona
50%
Full-time female
employees
$606,613
Kojensi revenue for
2019
Signed Attorney
General’s Department
as first govt. client
Highlight
$4.75m
Highlight
Kojensi Gov added to
Cloud Services Panel
Investment proceeds
remaining for 2020
Kojensi Gov demon-
strated to NATO
archTIS Annual Report | 5
The Global Problem We Solve
Empowering organisations to share information with confidence
The digital age has created new and better ways of work-
Foreign actors and cyber criminals are targeting this infor-
ing smarter and faster, anywhere, anytime. Through digital
mation, which can threaten national security and lead to
collaboration organisations have:
• Increased productivity
financial and reputational harm.
• Discovered new economic opportunities
archTIS creates solutions that facilitate secure sharing
• Improved the creation of new public policies
and collaboration of documents and data to empower
• Improved the delivery of services
governments, industry and Defence, worldwide, to share
However, collaborating on and sharing sensitive, valuable,
unique security model, known as Attribute Based Access
or classified information, poses risks to organisations and
Control (ABAC), to each of our solutions, allowing individ-
government, making it difficult to do safely.
uals to define the rules of who accesses their information.
information with confidence. To achieve this we apply a
The ABAC model applies attributes to things like documents and users. Here is a simplified example of ABAC
applied to document sharing and collaboration, as used in Kojensi Gov.
A role is applied to the document
A user has attributes
If the roles match the attributes, the
Our applications of ABAC
user is granted access
Kojensi Gov
LAUNCHED
Kojensi Field
IN DEVELOPMENT
Kojensi
IN DEVELOPMENT
Secure content and collaboration
Field appliance which will enable secure
TOP SECRET information sharing
platform, hosted in the cloud, for
access to information in remote loca-
platform, for collaborating on highly
multi-agency and industry collaboration.
tions for military or emergency personnel.
classified information.
archTIS Annual Report | 6
The Global Problem We Solve
Kojensi Gov
Connect. Create. Collaborate. Securely.
Kojensi Gov, launched in April 2019, is a PROTECTED cloud service that enables government and industry to securely
share and collaborate on classified information up to the PROTECTED level. Kojensi Gov’s industry leading attribute
based security model makes the platform unique. User and document attributes control the flow of information and
facilitate secure sharing within your agency and across agencies and their industry partners.
Keep documents
secure
Ensure compliance
Increase productivity
Collaborate with
anyone
Collaboration that is simple, secure and effective
Distributed Administration
There are no super users inside of Kojensi
Gov, you control the data you create or
upload and who you share it with.
Secure Online Editing
Create, share and co-author documents,
tracking your changes as
you go.
Security Controls and Settings
Use the security controls to decide who
will access your documents, including
security level, organisation and country.
Inter-agency Collaboration
Collaborate within your agency, with
other agencies and industry
partners at different security levels.
Tasks and Workflows
Set tasks and workflows for yourself and
others, helping you to better communicate
and meet deadlines.
Document Version Control
A fully integrated content and records
management system allows you to retain
and access all versions of a document.
archTIS Annual Report | 7
13 Years of Experience
archTIS’ founders Daniel, Bruce and Phillip
product Kojensi Gov. archTIS’ products and
started archTIS in 2006 with the idea to solve
services are built on years of experience
a global critical problem - how to share infor-
solving information sharing challenges. The
mation securely. For many years the company
difference lies in security, at archTIS we put
worked in the TOP SECRET space, building
security first.
solutions for those with highly classified
information, such as Defence. This experi-
ence helped to shape the company’s flagship
2007
Whole of Defence
2009
International Intelligence
2011
Architecture of Single
Identitiy Management
Surveillance &
Information Environment
Framework
Reconnaissance
for Defence
Backbone
2017
Top Secret Information
Sharing Network
Requirements
Assessment
2008
archTIS receives
4D architecture
accreditation
2012
Data management solu-
tion for helicopter docks
(Naval ships)
2016
Patent for ABAC
application
2006
archTIS is founded
by three friends
with an idea.
2008
Patent for multi-lev-
2014
archTIS goes on
2016
archTIS starts
2017
Appointed new chairman
el security USI
Digital Transformation
development of
of the board: Ex minister
Agency’s DTA Cloud
Kojensi Gov
for Defence Stephen
Marketplace
Smith
2007
Gen 1 Trusted
2009
Gen 2 Trusted
Information Sharing
Information Sharing
platform
platform
2016
Gen 3 Trusted
Information Sharing
2017
Proof of Concept (POC)
platform
with Department of
Finance
Services
Corporate
Product
archTIS Annual Report | 8
FY19
2018
archTIS list on
2019
archTIS expands overseas through
Australian Securities
reseller agreement with New
Exchange (ASX) as AR9
Zealand based Team Asparona
2018
archTIS forms strategic
2019
Kojensi Gov receives
2019
archTIS’ product
partnership and
endorsement from DTA
Kojensi Gov passess
reseller agreement with
and is added to the
iWRAP assessment
Axiomatcs
Cloud Services Panel
2018
Created first generation
of Kojensi Field for
2018
Attorney General’s de-
2019
AG’s Beta program
2019
Version 1.1 of Kojensi Gov
Papua New Guinea
partment (AG’s) signs
Extended to Royal
released following feed-
Government
on as Beta client
Commission
back from Beta clients
archTIS Annual Report | 9
Our Partnerships
Vault Cloud
Cloud Provider
Vault Cloud provides a secure, sovereign cloud for
government and critical Infrastructure. archTIS and
Vault have partnered together to deliver Kojensi Gov
for Australian Government PROTECTED collaboration
requirements.
Team Asparona
Reseller and Strategic Partner
Team Asparona is a New Zealand-based company pro-
viding Enterprise Content Management software ser-
vices to the New Zealand Government. Using its estab-
lished network of government clients, Team Asparona
is working with archTIS as a reseller of Kojensi Gov.
Team Asparona also has a strong international repu-
tation with a presence in Europe and the United States
through its relationship with Team Informatics.
Agile Digital
Partner
Agile Digital are experts in digital strategy and agile
software delivery. archTIS partners with Agile Digital
as a key development and sales partner for Federal
Government agencies.
SME Gateway
Partner
SME Gateway provides support to Australian SMEs
delivering projects and expert professional/technical
capability across Australia. The SME Gateway/archTIS
partnership is designed to provide SME Gateway’s
members access to the Kojensi platform for classified
collaboration for both bid and successful project work
where higher levels of security are required.
archTIS Annual Report | 10
Jacobs
Partner
Jacobs’ mission is to be the world’s premier design,
engineering, construction and technical services firm
delivering end-to-end innovative solutions that provide
superior value to clients. Jacobs partners with archTIS
to bring the Kojensi platform to its existing and poten-
tial clients.
Axiomatics
Partner
Axiomatics is the premier vendor of dynamic authorisa-
tion delivered through Attribute Based Access Control
(ABAC) solutions. archTIS partners with Axiomatics
to extend Kojensi’s ABAC document and file security
model for organisations requiring dynamic authorisa-
tion of their critical data.
Oracle
Partner
Oracle is one of the world’s leading global software
companies. As an Oracle Gold partner archTIS utilises
key Oracle capabilities to make the Kojensi platform a
scaleable platform to meet the enterprise needs of our
clients. Oracle is also partnering with archTIS to bring
the Kojensi platform to existing Oracle clients.
DXC Technology
Partner
DXC is the world’s leading independent end-to-end IT
services company, helping clients harness the power
of innovation. The DXC and archTIS partnership will de-
liver the Kojensi platform to key government agencies,
as well as open future opportunities at a global scale.
AWS
Development & Cloud Provider
archTIS utilises the Amazon Web Services platform to
provide a global development platform for its team.
archTIS and AWS are partnering to offer the Kojensi
platform to key clients both in Australia and across the
world.
archTIS Annual Report | 11
Board of Directors
Left to right: Stephen Smith, Daniel lai, Bruce Talbot, Leanne Graham, Wayne Zekulich
Stephen Smith
Chairman of the Board
sector working for CA Technologies, Hitachi Data Systems,
Airservices Australia and the Australian Federal Police.
Interest in Shares and Options: 7,396,436 ordinary shares and
Stephen Smith was a member of the House of Representatives
1,080,000 options
from 1993 to 2013. He served as a minister in the Rudd and
Other current directorships None
Gillard Governments, including as Minister for Foreign Affairs
Former directorships (last 3 years) None
(2007-2010), Minister for Trade (2010), and Minister for
Defence (2010-2013). Stephen has also served as a board
member for two not-for-profit organisations including Perth
Leanne Graham
Non-Executive Director
USAsia Centre and LNG Marine Fuel Institute.
With over 30 years in the software sector, Leanne has assisted
Interest in Shares and Options: 1,080,000 options
technology companies with her broad experience and SaaS
Other current directorships: Member of Sapien Cyber Board
expertise. In 2018, Ms. Graham was awarded the New Zealand
from 1 Sept., and Chairman of Sapien Cyber Board from 16
Order of Merit for her services to the software industry. Her
Sept.
current ASX listed boards are Bid Energy, AppsVillage, archTIS
Former directorships (last 3 years): None
and VPCL.
Daniel Lai
archTIS CEO
Interest in Shares and Options: 50,000 ordinary shares and
540,000 options
Other current directorships: Executive Chairman of VPCL
Daniel is a founding member of the Company and has suc-
Limited, Non-Executive Director of BidEnergy Limited and Non-
cessfully developed the business with its partners to be rec-
Executive Director of AppsVillage
ognised by the Australian and United States Departments of
Former directorships (last 3 years): None
Defence as a thought leader in information sharing strategies.
Most importantly Daniel has direct experience in implement-
ing organisational change to address the real challenges
Wayne Zekulich
Non-Executive Director
businesses confront today in a rapidly evolving environment.
Wayne is a consultant with extensive banking and investment
Interest in Shares and Options: 7,284,252 ordinary shares and
banking experience covering mergers and acquisitions, ar-
1,800,000 options
ranging and underwriting financings and debt and equity capi-
Other current directorships None
tal markets. Wayne is a member of the Curtin Business School
Former directorships (last 3 years) None
of Accounting Advisory Board and the John Curtin Gallery
Bruce Talbot
Consultant and Executive Director
Board, a member of the University of Western Australia Audit
Committee and a Board member of ARTrinsic Inc.
Interest in Shares and Options: 100,000 ordinary shares and
Bruce has been involved in the creation, implementation and
540,000 options
management of advanced computer security systems and
Other current directorships: None
capabilities. He has over 20 years experience in the Australian
Former directorships (last 3 years): None
Defence Force and a further 20 years in the commercial
archTIS Annual Report | 12
Senior Management
Left to right: Daniel Lai, Sarah Young, Matthew Kluken, Marcelle Newbound
Daniel Lai
archTIS CEO
Matthew Kluken
Business Development Manager
Daniel has extensive industry experience in successfully de-
Matthew has 25 years experience in the Information and
livering outcomes as part of a senior executive team to both
Communication Technologies Industry in Sales, Marketing,
government and commercial organisations. Most importantly
Technical and Cusomter Experience in large multinational
Daniel has direct experience in implementing organisational
technology and advisory companies such as Gartner, NetApp,
change to address the real challenges businesses confront
CA Technologies and Oracle. His primary focus is building
today in a rapidly evolving environment.
archTIS’s presence with Federal and State Government, as well
Sarah Young
archTIS CFO
as building their partner eco-system supporting this market,
both within Australia and internationally.
Sarah has over 18 years experience in finance and strategy,
including executive level responsibility for business case, val-
Marcelle Newbound
Customer and Employee Success Manager
uation and pricing models, financial, budgeting and cashflow
Marcelle has over 14 years of experience working in the
management, product and corporate development, and stake-
Information and Communication Technologies sector across
holder management (managing and raising over A$8 billion of
multi-national companies,
including Deloitte, Thales and
funds). Sarah has been a key finance/strategy executive for
Peoplebank. Marcelle’s experience spans across driving strate-
E*Trade, Ubitrade and Colonial First State, and has managed
gy, maturing process and policy, creating customer onboarding
international direct investment portfolios including Rubicon
and training and Account Management. Marcelle is focused
Japan Trust and Evolution/Lehman Bros.
on optimizing the employee and customer experience to drive
satisfaction and product renewal.
Nick Main
archTIS CTO
Nick brings over 20 years experience in Information and
Communication Technologies across both public and private
sectors. Having filled executive roles in government organisa-
tions as well as across service providers, vendors and global
system integrators he has built expertise across a broad range
of technology. Nick delivers technology leadership across se-
curity, infrastructure, architecture, engineering and Information
and Communication Technologies transformation, maintaining
focus on the alignment of business and technology outcomes.
archTIS Annual Report | 13
Our Differentiators
Australian business
Founded in Australia, headquartered in Canberra
archTIS’ solutions are created specifically for Australian government and industry
requirements, by an Australian company. archTIS understands the problems faced
by government and industry in Australia and has direct experience solving these
problems.
Kojensi Gov is hosted within an ASD accredited cloud provider, locally, enabling
governent and industry to feel secure knowing their data is safe.
Experienced in the TOP SECRET space
13 years experience creating solutions for sharing information at TOP SECRET
archTIS’ experience and products are born out of the TOP SECRET areas of govern-
ment. archTIS recieved accreditation to TOP SECRET by the US and AU governments
for its first information sharing platform. archTIS has used this experience to deliver
the same security model to a PROTECTED platform for secure sharing and collabo-
ration, known as Kojensi Gov.
Unlike others, archTIS’ solutions are developed with security as a foundation rather
than an afterthought.
User focused solutions
Solutions created based on user feedback, to be simple and intuitive
archTIS’ solutions are devloped closely with government partners to create user-cen-
tric solutions. The Kojensi Gov platform is based on how users work, not how prod-
ucts force people to work. archTIS’ product team use the “agile” method to ensure
the development of the product is focused on user feedback.
Kojensi Gov is a modern, user friendly platform that is simple and effective to use for
government and their partners.
This provides us with a unique oppotunity to capture markets including govern-
ment to government, government to industry, multi-coalition and multi-domain.
archTIS Annual Report | 14
Letter from the CEO
Daniel Lai, archTIS CEO
Dear shareholders,
Thank you for your support through what has been a busy year
for archTIS, including the successful launch of Kojensi Gov,
new strategic partnerships and product enhancements. We
commence the 2020 financial year with strong momentum
and remain focused on securing a number of key commercial
contracts, expected to convert in the coming months.
I would like to highlight a number of significant achievements
from this financial year:
The commercial launch of Kojensi Gov in April, and subse-
General’s Department, and extension of this to include the
quent 120+ product demonstrations to both the government
Aged Care Royal Commission. This provides us with valuable
and private sector. Advanced commercial discussions are
feedback for the product.
Commencement of the Beta program with the Attorney
now progressing with government organisations and compa-
nies in the private sector.
The conversion of archTIS’ Beta client the Attorney General’s
Department, our first client of Kojensi Gov, in September this
Expanding on our partnerships and reseller networks,
year. This proves the demand for Kojensi Gov’s unique differ-
including most notably our strategic and reseller agree-
entiator allowing collaboration of information classified at the
ment with TEAM Asparona (a leading New Zealand-based
PROTECTED level between government and industry
software provider for government). This provides a direct
sales channel into New Zealand’s government, Defence and
On behalf of the Board and Senior Management Team I would
intelligence sectors through TEAM Asparona’s existing client
like to thank our staff and shareholders for their ongoing con-
base.
tribution and commitment to the Company. We are focused
on delivering our strategy and vision, and look forward to
Kojensi Gov’s inclusion on the Digital Transformation
converting more commercial contracts in the coming months.
Agency’s (DTA) cloud Marketplace earlier this year. Inclusion
on this panel shortens the procurement process for Kojensi
Sincerely, Daniel Lai (archTIS CEO)
Gov across Australian Commonwealth, State and Territory
governments, universities and local councils.
The completion of the International Registered Assessors
Program (IRAP) assessment for Kojensi Gov. Passing
this assessment allows our product to hold PROTECTED
information, delivering on key compliance requirements for
government.
archTIS Annual Report | 15
DIRECTORS’ REPORT
30 JUNE 2019
The directors present their report, together with the financial statements, on the Group (referred to hereafter
as the 'Group') 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 2019.
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
• Daniel Lai
• Bruce Talbot
Company Secretary
• Leanne Graham
• Wayne Zekulich
Baden Bowen has held the role of Company Secretary since February 2018. Mr Bowen has over 35 years
accounting and company secretary experience in commercial and financial roles, including financial
accounting, external and internal audit. He has served as Director and company secretary for a number of
public and private companies and is a fellow of the Institute of Chartered Accountants in Australia.
Directors and Meetings of Directors
The qualifications and experience of directors, including current and recent directorships, are detailed on pages
12 to 13 of the Annual Report.
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June
2019, and the number of meetings attended by each director were:
Number of Meetings Held*
Number Attended
Stephen Smith
Daniel Lai
Bruce Talbot
Leanne Graham
Wayne Zekulich
11
11
11
11
11
11
10
10
11
11
* Held represents the number of meetings held during the time the director held office.
The Directors have determined that the Group’s operations continue not to be of a sufficient magnitude to
require the Board Committees outlined in the Corporate Governance Plan. The Board is carrying out the duties
that would ordinarily be assigned to each committee under the written terms of reference for that committee
16
DIRECTORS’ REPORT
30 JUNE 2019
Principal Activities
During the financial year the principal continuing activities of the Group consisted of:
• Development of a cloud based, secure (PROTECTED) information management and collaboration software
(Kojensi.gov)
• Consulting and solutions services for secure information sharing and inter-organisational collaboration
Dividends
No dividends paid during the financial year.
Review of Operations
The loss for the consolidated entity after providing for income tax and non-controlling interest amounted to
$3,931,517 (30 June 2018 (re-stated: $2,146,051)).
The consolidated entity focused on product development of Kojensi.gov with a consequent reduction in
consulting and services revenues. During the year, the company capitalised costs related to development of
Kojensi.gov and other attribute-based access control (ABAC) algorithms that are expected to be recouped in
the future. A successful conclusion from research and development is inherently risky. The Group launched
the first commercialised version of Kojensi.gov in April 2019, and is focused on converting sales opportunities
to future revenue.
In order to meet the funding requirements of the future research and development, an initial public offer (IPO)
in August 2018 raised additional capital of $8,000,000 ($7,383,497 net cash proceeds). The IPO was
successfully completed in September 2018 and the Group was listed on the Australian Stock Exchange on 21
September 2018. As at 30 June 2019 the Group has maintained cash (or cash equivalents) of $3,255,200 (44%
of net capital proceeds of the IPO). In addition, a Research and Development tax grant of $1,494,825 is
expected to be received by October 2019.
In August 2018, archTIS Solutions Pty Ltd, a subsidiary of the parent entity established an office in the Czech
Republic to engage and manage a software development team based in the Czech Republic. In May 2019, after
the substantial completion of product development, the Czech office was closed. The Group continues to
utilise contractor resources in the European Union for development of updated versions of Kojensi.gov.
Significant changes in the state of affairs
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.
Matters subsequent to the end of the financial year
No other matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may
significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in
future financial years.
17
DIRECTORS’ REPORT
30 JUNE 2019
Likely developments and expected results of operations
Information on likely developments in the operations of the Group 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 Group.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
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.
Proceedings on behalf of the 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 Group, or to intervene in any proceedings to which the company is a party for the
purpose of taking responsibility on behalf of the Group for all or part of those proceedings.
Shares under option
Unissued ordinary shares of archTIS Limited under option at the date of this report are as follows:
Grant Date
Expiry Date
Exercise Price
Number under Option
10 Oct 2017
10 Oct 2022
01 Feb 2018
1 Feb 2021
22 May 2018
1 Jul 2023
05 Sep 2018
5 Sept 2022
01 Feb 2018
1 Feb 2021
06 Jul 2018
5 July 2021
$ 0.10
$ 0.12
$ 0.20
$ 0.24
$ 0.12
$ 0.20
Total options on issue
* Vest in three equal tranches at 1 Feb 2018, 1 Feb 2019 and 1 Feb 2020
4,289,880
7,200,000 *
1,200,000
5,000,000
300,000 *
1,600,000
19,589,880
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.
18
DIRECTORS’ REPORT
30 JUNE 2019
REMUNERATION REPORT (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, 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.
Overview of remuneration approach and framework
From time to time, the Board of Directors ('the Board') reviews the remuneration arrangements for its Directors
and Executive Officers, to ensure reward for performance is competitive and appropriate for the results
delivered. The performance of the Group 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 remuneration of Directors and other key management personnel is not directly linked to the Group’s
performance.
The remuneration of Directors and other key management personnel is fixed annually. Bonuses are structured
to reward outstanding performance against agreed Key Performance Indicators (KPI’s) including financial and
non-financial metrics.
The Group did not engage a remuneration consultant to provide recommendations in respect of the
remuneration of key management personnel.
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.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a
general meeting. The company’s Constitution provides that the maximum annual aggregate remuneration for
non-executive directors will be not more than a fixed sum determined by a general meeting. Post admission to
the Official list of the ASX, this was determined to be $250,000 per annum.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
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.
19
DIRECTORS’ REPORT
30 JUNE 2019
REMUNERATION REPORT (audited) (cont.)
Executive remuneration (cont.)
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 Group
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 Group 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 Group's direct competitors.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables. The
key management personnel of the Group consisted of the following personnel of archTIS Limited:
Directors
Stephen Smith
Daniel Lai
Bruce Talbot
Leanne Graham
Wayne Zekulich
Key Management Personnel
Matthew Kluken
Nick Main
Marcelle Newbound
Phillip Dean
Martin Tucek
Deborah Tucek
Gregory Ginnivan
Chairman
Managing Director & Chief Executive Officer
Executive Director & Chief Architect
Non-executive Director
Non-executive Director
Head of Business Development & Sales
Chief Technology Officer
Head of People & Customer Experience
Principal Consultant
Product Manager (resigned 1 May 2019)
Product & Capability Manager (resigned 1 Mar 2019)
Senior Account Executive (resigned 21 Dec 2018)
Changes since the end of the reporting period
Sarah Young was appointed Chief Financial Officer on 16 July 2019.
20
DIRECTORS’ REPORT
30 JUNE 2019
REMUNERATION REPORT (audited) (cont.)
Details of remuneration (cont.)
Short-term
Salary
Cash
Bonus
Other
Share
Based
Pay-
ments
Post
employ-
ment
Super
$
$
$
$
$
Long
Term
Benefits
Long
Service
Leave
$
% of
salary
assoc.
with
perfor-
mance
Options
as a %
of total
Total
$
%
%
2019
Non-Executive Directors
Stephen Smith
Wayne Zekulich
Leanne Graham
Executive Directors
Daniel Lai
Bruce Talbot
75,000
50,000
-
230,054
230,054
Key Management Personnel
Philip Dean
Martin Tucek
Debra Tucek
180,054
241,634
176,128
Gregory Ginnivan
125,337
-
-
-
-
-
Matthew Klulken
175,436
23,526
Nick Main
Marcelle
Newbound
-
56,353
2018 – restated *
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
James Hyndes
Executive Directors
Daniel Lai
Bruce Talbot
25,000
-
16,667
-
219,221
250,372
Key Management Personnel
Matthew Kluken**
41,036
Phillip Dean
Martin Tucek
Deborah Tucek
200,054
166,340
150,000
Gregory Ginnivan***
11,196
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41,646
20,823
54,750
20,823
7,125
4,750
-
-
-
-
123,771
75,573
75,573
-
-
-
-
-
-
262,400
-
69,410
20,531
3,015 323,010
41,646
20,531
3,015 295,246
41,646
17,106
3,015 241,850
64,000
17,856
64,000
14,323
11,777
- 296,490
- 254,451
- 137,114
-
-
-
-
17,473
2,931 219,366
11%
-
- 262,400
5,333
285
61,971
-
61,580
2,375
20,833
30,790
1,583
30,790
22,500
114,480
-
-
-
-
-
-
88,955
51,623
49,040
- 136,980
-
-
-
-
-
-
-
102,633
17,343
3,001 342,198
61,580
20,302
(30,372) 301,882
-
3,888
-
44,924
61,580
17,105
3,001 281,740
-
-
-
15,943
14,250
1,060
- 182,283
- 164,250
-
12,256
* Correction of prior period error for the year ended 30 June 2018 for error in treatment of share based payments (refer note 4)
** Represents remuneration from 7 March 2018 to 30 June 2018
*** Represents remuneration from 14 May 2018 to 30 June 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34%
28%
28%
21%
14%
17%
29%
34%
-
-
-
-
69%
60%
63%
84%
30%
20%
-
22%
-
-
-
21
DIRECTORS’ REPORT
30 JUNE 2019
REMUNERATION REPORT (audited) (cont.)
Share-based compensation
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:
Grant Date
Vesting
Date
Expiry Date
Exercise
Price
Value
Per Opt
Number under
Option
ACTU02 Class
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Executive Directors
Daniel Lai
Bruce Talbot
Key Management Personnel
Phillip Dean
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 19
1 Feb 20
1 Feb 19
1 Feb 20
1 Feb 19
1 Feb 20
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 18
1 Feb 19
1 Feb 20
1 Feb 19
1 Feb 20
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.12
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
$ 0.106
360,000
360,000
180,000
180,000
180,000
180,000
600,000
600,000
360,000
360,000
1 Feb 18
1 Feb 18
1 Feb 19
1 Feb 20
1 Feb 21
1 Feb 21
$ 0.12
$ 0.12
$ 0.106
$ 0.106
360,000
360,000
ACTU06 Class – Granted under the Performance and Rights Plan Management Personnel
Martin Tucek
Debra Tucek
26 Jul18
26 Jul 18
26 Jul18
26 Jul 18
26 Jul18
26 Jul 18
na
26 Jul 18
na
na
26 Jul 21
na
26 Jul 21
na
na
$ 0.20
$ 0.20
$ 0.20
$ 0.20
$ 0.20
$ 0.12
NA
$ 0.12
NA
NA
800,000
800,000
800,000
400,000
400,000
During the year ACTU06 options were granted, in accordance with the Performance and Rights Options Plan,
over unissued fully paid ordinary shares in the company. Some options were subject to performance conditions
associated with Key Performance Indicators. The options are exercisable by the holder from the vesting date.
All options above options vested are to lapse within one month of the Eligible Participant to the Plan ceasing
to be an employee.
There has not been any alteration to the terms or conditions of either grant of ACTU02 or ACTU06 options,
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. Options granted carry no dividend or voting rights.
22
DIRECTORS’ REPORT
30 JUNE 2019
REMUNERATION REPORT (audited) (cont.)
Share-based compensation (cont.)
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 Group, including their personally related parties, is set out below:
Opening
Balance
Received as part
of remuneration
Additions
Disposals
Closing Balance
-
-
-
50,000
-
-
50,000
100,000
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Executive Directors
Daniel Lai
Bruce Talbot
Key Management Personnel
Matthew Kluken
Nick Main
Marcelle Newbound
Phillip Dean
-
-
-
7,284,252*
7,346,436*
-
-
-
7,284,252*
-
-
-
-
-
-
-
-
-
100,000
90,000
140,000
160,000
-
-
-
-
-
-
-
-
-
7,347,252
7,486,436
160,000
-
-
7,284,252
* 7,284,252 each are held in escrow until 21 September 2020
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 Group, including their personally related parties, is set out
below:
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Executive Directors
Daniel Lai
Bruce Talbot
Key Management Personnel
Martin Tucek
Debra Tucek
Matthew Kluken
Nick Main
Marcelle Newbound
Phillip Dean
Opening
Balance
1,080,000
540,000
540,000
1,800,000
1,080,000
-
-
-
-
-
1,080,000
Granted
Exercised
Expired/
Forfeited /Other
Closing Balance
-
-
-
-
-
800,000
800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,080,000
540,000
540,000
1,800,000
1,080,000
800,000
800,000
-
-
-
1,080,000
This concludes the remuneration report, which has been audited.
23
DIRECTORS’ REPORT
30 JUNE 2019
Auditor
RSM Australia Partners (“RSM”) continues in office in accordance with section 327 of the Corporations Act
2001.
Non-audit services
Details of the amounts paid or payable to RSM for non-audit services provided during the financial year by the
auditor are outlined in note 23 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 RSM's behalf), is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 24 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 RSM; 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 RSM'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.
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.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
is included on page 56.
24
DIRECTORS’ REPORT
30 JUNE 2019
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
Chair
30 September 2019
Canberra, ACT
25
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Consolidated
2019
$
Restated
2018
$
Previously
Reported
2018
$
1,022,210
(227,590)
794,620
573,827
(1,462)
572,365
573,827
(1,462)
572,365
Note
3(a)
3(b)
370,672
227,896
(269,955)
(160,873)
227,896
(160,873)
4
(4,734,103)
(2,794,738)
(2,740,154)
(3,838,766)
(2,155,350)
(2,100,765)
Revenue
Cost of Sales
Gross Profit
Other Income
Sales and Marketing
General Administration
Loss before Income Tax
Income Tax (Expense) / Benefit
(92,751)
9,299
9,299
Other Comprehensive Income
-
-
-
Total Comprehensive income for the year
(3,931,517)
(2,146,051)
(2,091,466)
Basic earnings per share
29
Cents
(3.28)
Cents
(3.89)
Cents
(3.79)
The accompanying notes form part of these financial statements.
26
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
2019
Consolidated
2018
Note
$
Restated
$
2018
Previously
Reported
$
ASSETS
Current assets
Cash and cash equivalents
Short term investments
Trade and other receivables
Other assets
Tax assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Employee benefits
Other Current Liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Provisions
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits (accumulated losses)
TOTAL EQUITY ATTRIBUTABLE TO THE
OWNERS OF ARCHTIS LIMITED
3,255,200
1,638,668
1,638,668
6
6
7
8
-
161,835
113,435
17
1,494,825
57,478
89,154
116,393
922,061
57,478
89,154
116,393
922,061
9
10
17
11
12
13
14
15
16
18
19
20
5,025,295
2,823,754
2,823,754
107,214
4,383,182
-
153,137
3,059,698
92,750
153,137
3,059,698
92,750
4,490,396
3,305,585
3,305,585
9,515,691
6,129,339
6,129,339
256,590
-
296,816
281,698
280,869
300,000
314,623
363,559
280,869
300,000
314,623
363,559
835,104
1,259,051
1,259,051
19,049
72,780
91,829
38,049
72,780
110,829
38,049
72,780
110,829
926,933
1,369,880
1,369,880
8,588,758
4,759,459
4,759,459
13,701,686
6,767,689
6,767,689
1,613,150
786,331
731,746
(6,726,078)
(2,794,561)
(2,739,976)
8,588,758
4,759,459
4,759,459
The accompanying notes form part of these financial statements.
27
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Consolidated
Note
Issued capital
$
Reserves
$
Retained
profits
$
Total equity
$
Balance at 1 July 2018
6,767,689
786,331
(2,794,561)
4,759,459
Total Comprehensive Income
Transactions with owners in their capacity as
owners:
Issue of share capital
Option fees
Capital raise fees
Foreign exchange reserve
Share-based payments
20
18
18
18
19
19
-
-
(3,931,517)
(3,931,517)
8,000,000
500
(1,066,503)
-
-
-
8,000,000
500
-
(1,066,503)
1,258
1,258
-
825,561
-
825,561
Balance at 30 June 2019
13,701,686
1,613,150
(6,726,078)
8,588,758
Balance at 1 July 2017
Total Comprehensive Income
1,234,003
317,774
(648,510)
903,267
-
-
(2,091,466)
(2,091,466)
Transactions with owners in their capacity as
owners:
Issue of share capital
Capital raise fees
Share-based payments
6,232,515
(698,829)
-
-
-
413,972
-
-
-
6,232,515
(698,829)
413,972
Balance at 30 June 2018
10,11
6,767,689
731,746
(2,739,976)
4,759,459
Adjustment for accounting error
Share-based payments
19
-
54,585
(54,585)
-
Balance at 30 June 2018 (restated)
6,767,689
786,331
(2,794,561)
4,759,459
The accompanying notes form part of these financial statements.
28
STATEMENT OF CASHFLOW
FOR THE YEAR ENDED 30 JUNE 2019
Note
Consolidated
2019
$
2018
$
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Receipts from R&D Tax Incentive
Interest received
Interest paid
1,072,619
(7,749,491)
1,087,420
45,187
(4,590)
819,938
(5,232,107)
793,231
8,293
(30,219)
Net cash provided by (used in) operating activities
29
(5,548,855)
(3,640,864)
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
Settlements of 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
The accompanying notes form part of these financial statements.
24,412
24,412
(43,539)
(43,539)
12
6
7,383,497
(300,000)
7,083,497
1,559,054
1,696,146
3,255,200
5,533,686
-
5,533,686
1,849,283
(153,137)
1,696,146
29
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 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
the years
presented, unless otherwise stated.
to all
The financial report does not include any
adjustments relating to the amounts or
classification of
recorded assets or
liabilities that might be necessary if the
group does not continue as a going concern.
(b) New
or
Accounting
amended
Standards and Interpretations adopted
The Group 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
that are not yet
mandatory, have not been early adopted.
Interpretations,
The following Accounting Standards and
Interpretations are most relevant to the
Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July
2018. The standard
introduced 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 that are solely principal and interest. A
debt investment shall be measured at fair
value through other comprehensive income
if it is held within a business model whose
objective is to both hold assets in order to
collect contractual cash flows which arise
on specified dates that are solely principal
and interest as well as selling the asset on
the basis of its fair value. All other financial
assets are 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
consideration
contingent
recognised in a business combination) in
other comprehensive income ('OCI'). Despite
these requirements, a financial asset may
be irrevocably designated as measured at
fair value through profit or loss to reduce the
effect of, or eliminate, an accounting
liabilities
mismatch.
financial
For
or
(a) Going concern
The consolidated financial statements have
been prepared on a going concern basis,
which assumes continuity of normal
business activities and the realisation of
assets and liabilities in the ordinary course
of business.
The consolidated group incurred a loss after
tax of $3,931,517 (2018 $2,091,466) and had
net operating cash outflows of $5,548,855
(2018: $3,640,864). The entity has prepared
a cash flow forecast which indicates that
the entity does not have sufficient cash to
meet
expenditure
minimum
commitments and support its current level
of corporate overheads.
its
The above gives rise to the existence of a
material uncertainty that casts significant
doubt on the ability of the group to continue
as a going concern, and therefore whether it
will realise its assets and extinguish its
liabilities in the normal course of business,
and at the amounts stated in the financial
report.
The Directors believe there are reasonable
grounds that the business will continue as a
going concern after taking into account the
following factors:
•
•
•
the forecast of future sales based on
the commercial launch of kojensi in
April 2019, its acceptance by several
proof of concept partners and outlook
demand forecasting;
identification
cost
reductions and improving personnel
utilisation; and
the Company will
if necessary,
consider additional capital
raising
activities through the issue of new
share capital
overhead
of
Accordingly, the Directors believe that the
group will be able to continue as a going
concern and that it is appropriate to adopt
the going concern basis in the preparation
of the financial report.
30
designated at fair value through profit or
loss, 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). 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 use an 'expected
credit loss' ('ECL') model to recognise an
allowance. Impairment is measured using a
12-month ECL method unless the credit risk
on a financial instrument has increased
significantly since
in
which case the lifetime ECL method is
adopted. For
receivables, a simplified
approach to measuring expected credit
losses using a
loss
allowance is available. There was no impact
to the financial statements.
initial recognition
lifetime expected
AASB 15 Revenue
Customers
from Contracts with
for
The Group has adopted AASB 15 from 1 July
2018. The standard provides a single
revenue
comprehensive model
recognition. The core principle of the
standard is that an entity shall recognise
revenue to depict the transfer of promised
goods or services to customers at an
amount that reflects the consideration to
which the entity expects to be entitled in
exchange for those goods or services.
The standard introduced a new contract-
based revenue recognition model with a
measurement approach that is based on an
allocation of the transaction price. This is
described further in the accounting policies
below. Credit risk is presented separately as
an expense rather than adjusted against
revenue. Contracts with customers are
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.
Customer acquisition costs and costs to
fulfil a contract can, subject to certain
criteria, be capitalised as an asset and
amortised over the contract period.
There was no
statements.
impact to the financial
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
(b) 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 historical
financial statements have been
The
prepared under
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
the use of certain critical
requires
It also requires
accounting estimates.
management to exercise its judgement in
the process of applying
the Group'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.
(c) Parent company information
In accordance with the Corporations Act
2001, these financial statements present
only.
the
the
Supplementary
parent entity is disclosed in note 27.
of
information about
the Group
results
(d) 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 2019 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 'Group'.
Subsidiaries are all those entities over
which the Group has control. The Group
is
controls an entity when the Group
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
Group. They are de-consolidated from the
date that control ceases.
Intercompany transactions, balances and
unrealised gains on transactions between
the Group are eliminated.
entities
in
losses are also eliminated
Unrealised
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
Group.
The acquisition of subsidiaries is accounted
the acquisition method of
for using
accounting. A change in ownership interest,
without the loss of control, is accounted for
as an equity
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.
transaction, where
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 Group. Losses incurred by
the Group are attributed to the non-
controlling interest in full, even if that results
in a deficit balance.
Where the Group
loses control over a
subsidiary,
it derecognises the assets
including goodwill,
liabilities and non-
the subsidiary
interest
controlling
in
together with any cumulative translation
differences recognised in equity. The Group
recognises
the
fair
consideration received and the fair value of
any investment retained together with any
gain or loss in profit or loss.
value
the
of
(e) Foreign currency translation
The financial statements are presented in
Australian dollars, which
is archTIS
Limited's
functional and presentation
currency.
Foreign currency transactions
currency
transactions
Foreign
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
rates of
financial year-end exchange
liabilities
assets
monetary
denominated
in foreign currencies are
recognised in profit or loss.
and
Foreign operations
liabilities of
The assets and
foreign
operations are translated into Australian
dollars using the exchange rates at the
reporting date. The revenues and expenses
of foreign operations are translated into
Australian dollars using
the average
exchange rates, which approximate the
rates at the dates of the transactions, for the
foreign exchange
period. All
differences are
in other
comprehensive income through the foreign
currency reserve in equity.
recognised
resulting
The foreign currency reserve is recognised
in profit or loss at disposition of the foreign
operation or net investment.
(f) Revenue recognition
The Group earns revenues from consulting
services, the sale of solution services and
software for secure information sharing and
It
inter-organisational
recognises revenue as follows:
collaboration.
Revenue from contracts with customers
Revenue is recognised at an amount that
reflects the consideration to which the
Group is expected to be entitled in exchange
for transferring goods or services to a
customer. For each contract with a
customer, the Group: identifies the contract
with a customer; identifies the performance
obligations in the contract; determines the
transaction price which takes into account
estimates of variable consideration and the
time value of money; allocates the
31
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
(f) Revenue recognition (cont)
(g)
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
to
temporary differences, unused tax losses
and the adjustment recognised for prior
periods, where applicable.
liabilities attributable
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:
the
from
• When the deferred income tax asset or
initial
liability arises
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
interests
• When the taxable temporary difference
in
is associated with
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
to
the
price
separate
transaction
performance obligations on the basis of the
relative stand-alone selling price of each
distinct good or service to be delivered; and
recognises revenue when or as each
performance obligation is satisfied in a
manner that depicts the transfer to the
customer of
the goods or services
promised.
any,
price,
within
consideration
if
the
Variable
transaction
reflects
concessions provided to the customer such
as discounts, rebates and refunds, any
potential bonuses receivable from the
customer and any other contingent events.
Such estimates are determined using either
the 'expected value' or 'most likely amount'
method. The measurement of variable
consideration is subject to a constraining
principle whereby revenue will only be
recognised to the extent that it is highly
probable that a significant reversal in the
amount of cumulative revenue recognised
will not occur. The measurement constraint
continues until the uncertainty associated
with
is
subsequently resolved. Amounts received
that are subject to the constraining principle
are recognised as a refund liability.
consideration
variable
the
Rendering of services
Revenue from a contract to provide services
is recognised over time as the services are
rendered based on either a fixed price or an
hourly rate.
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.
32
relate to the same taxable authority on
either the same taxable entity or different
intend to settle
taxable entities which
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.
(h) 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 Group'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
is cash or cash
period; or the asset
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
Group'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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
(h) Current and non-current classification
(k)
Investments and other financial assets
(cont)
Deferred tax assets and liabilities are always
classified as non-current.
(i) 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.
(j) 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.
of
of
for
receivables
impairment
difficulties
that
Collectability of
is
trade
reviewed on an ongoing basis. Debts which
are known to be uncollectable are written off
by reducing the carrying amount directly
provision
trade
receivables is raised when there is objective
evidence that the Group will not be able to
collect all amounts due according to the
original terms of the receivables. Significant
financial
debtor,
the
probability
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.
receivables are
recognised at
less any provision for
Other
amortised cost,
impairment.
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
other
reclassification
subsequent
categories is restricted.
to
Financial assets are derecognised when the
rights to receive cash flows from the
financial assets have expired or have been
transferred and the Group has transferred
substantially all the risks and rewards of
ownership.
is
Impairment of financial assets
The Group assesses at the end of each
reporting period whether there
is any
objective evidence that a financial asset or
group of financial assets
impaired.
Objective evidence
includes significant
financial difficulty of the issuer or obligor; a
breach of contract such as default or
lender
in payments;
delinquency
granting to a borrower concession due to
economic or legal reasons that the lender
would not otherwise do;
it becomes
probable that the borrower will enter
bankruptcy
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.
other
the
or
The amount of the impairment allowance for
is the
financial assets carried at cost
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.
(l) Property, plant and equipment
Each class of plant and equipment is stated
less accumulated
at historical cost
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 Improv. Term of lease
Office furniture
& equipment
Computer
Equipment
2-4 years
2-4 years
residual values, useful
The
lives and
depreciation methods are reviewed, and
adjusted if appropriate, at each reporting
date.
Leasehold improvements and plant and
equipment under lease are depreciated over
the unexpired period of the lease or the
estimated useful
the assets,
whichever is shorter.
life of
An item of property, plant and equipment is
derecognised upon disposal or when there
is no future economic benefit to the Group.
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.
(m) Leases
of whether
determination
The
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
the
ownership of leased assets, and operating
leases, under which the lessor effectively
retains substantially all such risks and
benefits.
incidental
to
33
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
the future economic benefits over the useful
life of the project.
amount by which the asset's carrying
amount exceeds its recoverable amount.
and
research
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
development
expenditure that has been incurred by the
Group. 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
in
accordance with AASB120 Accounting for
Government Grants and Disclosure of
Government Assistance.
as Government Grants
As such, RTDI refunds are recognised when
there is a sufficient degree of certainty that
the Group 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 Group
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"".
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.
(o)
Impairment of non-financial assets
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
is recognised for the
impairment
loss
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.
(p) Trade and other payables
liabilities for
These amounts represent
goods and services provided to the Group
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.
(q) Borrowings
are
fair value of
and borrowings
the
initially
Loans
recognised at
the
consideration received, net of transaction
costs. They are subsequently measured at
amortised cost using the effective interest
method.
(r) 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.
(s) Provisions
Provisions are recognised when the Group
(legal or constructive)
has a present
obligation as a result of a past event, it is
probable the Group 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
the
and
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
uncertainties
surrounding
(m) Leases (cont)
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 Group will
obtain ownership at the end of the lease
term.
lease payments, net of any
Operating
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.
(n)
Intangible assets
life
intangible
are
Finite
assets
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.
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 Group is able to use or sell the
asset; the Group has sufficient resources;
and intent to complete the development and
reliably.
its costs can be measured
are
development
Capitalised
amortised on a systematic basis matched to
costs
34
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
the passage of time is recognised as a
finance cost.
(t) 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 that is 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.
Other long-term employee benefits
for
The Group's obligations
long-term
employee benefits are presented as non-
current provisions
its statement of
in
financial position, except where the Group
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
to defined contribution
Contributions
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
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.
services.
of
The cost of equity-settled transactions are
measured at fair value on grant date. Fair
value is independently determined using the
Binomial option pricing model that takes
into account the exercise price, the term of
the option, the impact of dilution, the share
price at grant date 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 Group 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
in
previous periods.
recognised
The cost of cash-settled transactions is
initially, and at each reporting date until
vested, determined by applying the Binomial
into
option
consideration the terms and conditions on
which the award was granted.
pricing model,
taking
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.
are
taken
conditions
into
Market
consideration
in determining fair value
therefore any awards subject to market
vest
conditions
irrespective of whether or not that market
condition has been met, provided all other
conditions are satisfied.
considered
are
to
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
any
remaining
modification that increases the total fair
value of the share-based compensation
benefit as at the date of modification.
vesting
period,
for
If the non-vesting condition is within the
control of the Group or employee, the failure
to satisfy the condition is treated as a
cancellation. If the condition is not within
the control of the Group or employee and is
not satisfied during the vesting period, any
remaining expense
is
recognised over the remaining vesting
period, unless the award is forfeited.
the award
for
If equity-settled awards are cancelled, it is
treated as if it has vested on the date of
cancellation, and any remaining expense is
new
immediately.
recognised
replacement award is substituted for the
cancelled award, the cancelled and new
award
if they were a
modification.
is treated as
If
a
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
35
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
(u) Fair value measurement
(v)
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.
(w) Dividends
Dividends are recognised when declared
during the financial year and no longer at the
discretion of the company.
(x) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by
dividing the profit attributable to the owners
of archTIS Limited, excluding any costs of
servicing equity other than ordinary shares,
by the weighted average number of ordinary
shares outstanding during the financial
year, adjusted for bonus elements
in
ordinary shares issued during the financial
year.
Diluted earnings per share
Diluted earnings per share adjusts the
figures used in the determination of basic
earnings per share to take into account the
after income tax effect of interest and other
financing costs associated with dilutive
potential ordinary shares and the weighted
average number of shares assumed to have
been issued for no consideration in relation
to dilutive potential ordinary shares.
(y) 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
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.
incurred
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
in other receivables or other
included
payables
in the statement of financial
position.
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.
is measured using
the
Fair
value
that market participants
assumptions
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
inputs and
use of relevant observable
minimising the use of unobservable inputs.
that
reflects
hierarchy
Assets and liabilities measured at fair value
are classified, into three levels, using a fair
the
value
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
latest valuation and a
comparison, where applicable, with external
sources of data.
in the
36
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.
(z) New Accounting Standards
and
Interpretations not yet mandatory or
early adopted
Accounting
and
New
Interpretations not yet mandatory or early
adopted
Standards
Australian Accounting Standards and
Interpretations that have recently been
issued or amended but are not yet
mandatory, have not been early adopted by
the Group for the annual reporting period
ended 30 June 2019. The Group's
assessment of the impact of these new or
amended Accounting Standards and
Interpretations, most relevant to the Group,
are set out below.
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.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 1. Significant Accounting Policies
(z) New Accounting Standards
and
Interpretations not yet mandatory or
early adopted (cont)
prepayments,
A liability corresponding to the capitalised
lease will also be recognised, adjusted for
incentives
lease
received, initial direct costs incurred and an
estimate of any future restoration, removal
or dismantling costs.
lease
lease expense
Straight-line operating
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 expenses
associated with the lease under AASB 16
will be higher when compared to lease
expenses under AASB 117.
lease,
the
by
expense
However, EBITDA (Earnings Before Interest,
Tax, Depreciation and Amortisation) results
will be improved as the operating expense is
replaced
and
interest
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,
standard does not
substantially change how a lessor accounts
for
leases. The Group will adopt this
standard from 1 July 2019. The directors
expect that the adoption will result in lease
assets and liabilities being recognised on
the balance sheet and there will be change
in how related expenses are incurred. The
estimated financial impact is:
the
Total Assets increased by $281,230
Total Liabilities increased by $235,585
Net Assets reduced
by $ 17,355
37
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 2. Critical Accounting Judgements, Assessments and Estimations
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 Group 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
In
respect of all employees at the reporting date.
determining the present value of the liability, estimates of
attrition rates and pay increases through promotion and
inflation have been taken into account.
Lease make good provision
A provision has been made for the anticipated costs for
future restoration of
leased premises. The provision
includes future cost estimates associated with closure of
the premises. The calculation of this provision requires
assumptions such as application of closure dates and cost
estimates. The provision recognised for each site
is
periodically reviewed and updated based on the facts and
circumstances available at the time. Changes to the
estimated future costs for sites are recognised in the
statement of financial position by adjusting the asset and
the provision. Reductions in the provision that exceed the
carrying amount of the asset will be recognised in profit or
loss.
to make
The preparation of the financial statements requires
management
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
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.
the circumstances. The
Share-based payment transactions
The Group 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 the Binomial model taking into
account the terms and conditions upon which the
instruments were granted. The accounting estimates and
to equity-settled share-based
assumptions
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.
relating
Finite life intangible assets
The Group tests annually, or more frequently if events or
changes in circumstances indicate impairment, whether
finite 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 Group 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 Group recognises liabilities
for anticipated tax audit issues based on the Group's current
understanding of the tax law. Where the final tax outcome 3
38
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 3. Revenue
(a) Revenue from contracts with customers
Product Licence and Implementation Revenue
Product Maintenance
Consulting
(b) Other Revenue
Government Grants
Interest Income
Other Income
Consolidated
2019
$
2018
$
606,613
4,440
411,157
1,022,210
9,123
-
564,703
573,826
279,746
78,774
12,152
370,672
208,571
8,293
11,032
227,896
Product Licence and Implementation Revenue
Product Licence and Implementation Revenue includes revenue from archTIS solutions developed, customised and
maintained for customers. For the year ended 30 June 2019, this includes development versions of Kojensi, and Kojensi
Field delivered to Australian and international government departments.
Consulting
Consulting Revenue includes archTIS services relating to IT engineering, systems integration and security consulting.
Note 4. Expenses
(a) Employee Benefits
Share Based Payments
Superannuation expenses
Other Employee Benefits
less : capitalised to software development
(b) Depreciation and Amortisation Expense
Depreciation - property, plant and equipment
Amortisation - intangibles
(c) Written down Intangible Expense
Intangible expense written down
(d) Operating Lease Expense
Rental expenses on operating leases
2019
Consolidated
2018
Restated
$
$
2018
Previously
Reported
$
375,561
242,418
2,529,972
(1,353,827)
1,794,124
480,537
212,584
2,341,676
(1,142,028)
1,892,769
108,178
212,584
2,341,676
(1,142,028)
1,520,410
67,525
115,819
183,344
60,915
-
60,915
60,915
-
60,915
783,905
783,905
-
-
-
-
276,768
276,768
143,868
143,868
143,868
143,868
Correction of prior period error
Correction of prior period error for the year ended 30 June 2018 for :
•
share-based payment of $372,359 were not recognised in relation to ACTU02 options vested during the financial year. These
options relate to employee benefits. This misstatement represents a prior period accounting error which must be accounted
for retrospectively due to its materiality. Consequently, the Group has adjusted all comparative amounts presented in the
current period financial statements affected by the accounting error, and
a reversal ($317,774) of the Mandalay options brought forward from 2016 that were cancelled at the same time ACTU02
options were issued. These options are not related to employee benefits.
•
39
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 5. Income Tax Expense
2019
Consolidated
2018
Restated
Note
$
$
Income tax expense
Deferred tax
Deferred tax not recognised
Deferred tax derecognised
Deferred tax on tax losses not recognised
Income tax expense / (income)
17
(821,832)
821,832
92,751
0
92,751
(371,224)
362,100
(175)
(9,299)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax
Tax at the statutory rate of 27.5%
(3,838,766)
(1,055,660)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
Sundry Items
Share-based payments
Research & Development Expenditure
Income from Research & Development Claim
Sub-total
Current year deferred tax not recognised
Deferred tax asset derecognised
Adjustment recognised for prior periods
2,035
2,200
103,279
1,504
-
44,761
203,244
232,590
(76,930)
233,828
821,832
92,751
(57,357)
221,498
362,100
-
(175)
914,583
361,925
2018
Previously
Reported
$
(371,224)
362,100
(175)
(9,299)
(2,100,765)
(577,710)
1,504
-
29,749
232,590
(57,357)
568,586
362,100
(175)
361,925
Income tax expense
92,751
(9,299)
(9,299)
A net deferred tax asset of $1,961,280 ($1,539,864 relating to tax losses) has not been recognised on the basis it is not
probable that taxable profit will be available against which the temporary differences may be utilised while the company is
claiming the refundable research and development tax offset.
Note 6 Current Assets – Cash and Cash Equivalents
Consolidated
2019
2018
$
250
2,054,950
1,200,000
$
-
1,638,668
57,478
3,255,200
1,696,146
Cash and cash equivalents
Cash on hand
Cash at bank
Cash on deposit
40
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 6 Current Assets – Cash and Cash Equivalents (cont)
Reconciliation to cash and cash equivalents at the end of the financial year
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:
Balances as above
3,255,200
1,696,146
Balance as per statement of cash flows
3,255,200
1,696,146
Note 7. Current Assets – Trade and Other Receivables
Trade Receivables
Less : Bad debt provision
Other Receivables
GST Receivable
Interest Receivable
Allowance for expected credit losses
The Group has made no allowance for expected credit losses for the current
financial year (2018 : nil).
The ageing of the receivables and allowance for expected credit losses provided
for above are as follows :
Not overdue
0 - 3 months overdue
3 - 6 months overdue
Over 6 months overdue
Note 8. Current Assets – other
Security Deposit
Prepayments
Accrued Income
Consolidated
2019
2018
$
135,551
(41,080)
94,471
4,097
29,680
33,587
$
42,659
-
42,659
5,639
40,856
-
161,835
89,154
Carrying
Amount
2019
$
Provision for
Bad Debts
2019
$
88,018
-
-
47,533
-
-
-
(41,080)
135,551
(41,080)
Consolidated
2019
$
58,800
54,635
-
2018
$
-
109,315
7,078
113,435
116,393
41
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 9. Non-current Assets – Property, Plant and Equipment
Leasehold improvements - at cost
Less : Accumulated Depreciation
Office equipment - at cost
Less : Accumulated Depreciation
Computer equipment - at cost
Less : Accumulated Depreciation
Consolidated
2019
$
72,779
(51,546)
21,233
2018
$
72,779
(39,413)
33,366
117,383
(86,139)
31,244
112,542
(66,278)
46,264
258,916
(204,179)
54,737
243,214
(169,707)
73,507
107,214
153,137
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous year are set out below :
Balance at 1 July 2017
Additions
Disposals - written down value
Depreciation expense
Leasehold
Improvements
$
45,495
-
-
(12,130)
Office
equipment
$
53,191
10,119
-
(17,045)
Computer
equipment
$
71,827
33,420
-
(31,740)
Total
$
170,513
43,539
-
(60,915)
Balance at 30 June 2018
Additions
Disposals - written down value
Depreciation expense
33,365
-
-
(12,132)
46,265
4,840
-
(19,861)
73,507
19,572
(3,870)
(34,472)
153,137
24,412
(3,870)
(66,465)
Balance at 30 June 2019
21,233
31,244
54,737
107,214
Note 10. Non-current Assets – Intangibles
The proportion of product design and development expenses, less any tax incentive applicable, that create a benefit in future years,
and meet certain requirements are capitalised as an intangible asset. These capitalised costs (intangibles) are then amortised to
the Profit and Loss Statement over the estimated life of the asset created. The carrying value of intangibles is reviewed for
impairment whenever events indicate that the carrying value may not be recoverable.
The main intangible assets recognised during the financial period were technology/ in-process development, and internally
generated computer software.
Internally-generated software development
Internally-generated software development costs qualify for capitalisation when the Group can demonstrate all of the following:
•
•
•
•
•
•
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or sell it;
Its ability to use or sell the intangible asset;
That the intangible asset will generate probable future economic benefits;
The availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
The expenditure attributable to the intangible asset can be reliably measured during development.
42
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 10. Non-current Assets – Intangibles (cont)
Internally-generated software development costs have a finite useful life and are amortised on a straight-line basis over its
estimated useful life. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the
effect of any changes in estimate being accounted for on a prospective basis.
The software development asset has a useful life of five years and is amortised on a straight-line basis commencing from the time
the asset is held ready for use. The internally developed software asset, Kojensi.gov, was commercialised and launched in April
2019. Accordingly, this asset is amortised from this date.
Costs which are incurred after the general release of internally-generated software or costs which are incurred in order to enhance
existing products are expensed in the period in which they are incurred and included within research and development expense in
the financial statements.
Technology/ In-process Research and Development
Research and development expenditure during the research phase of a project is recognised as an expense when incurred.
Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future
economic benefits and these benefits can be measured reliably. The Group assesses the eligibility of development costs for
capitalisation on a project-by-project basis.
Development costs capitalised are assessed annually for impairment. Costs capitalised to a project that is unlikely to deliver future
economic benefits are recognised as an expense at the date of impairment.
2019
Cost
Balance at 1 July 2018
Commercialisation of development to software
Additions
Written down
Balance at 30 June 2019
Accumulated amortisation
Balance at 1 July 2018
Amortisation
Impairments
Balance at 30 June 2019
Internally
Generated
Software
$
-
3,202,566
-
3,202,566
-
(115,819)
-
(115,819)
Consolidated
Development
In Progress
$
3,059,698
(3,202,566)
2,223,208
(783,905)
1,296,435
-
-
-
-
Total
$
3,059,698
-
2,223,208
(783,905)
4,499,000
-
(115,819)
-
(115,819)
Net book value at 30 June 2019
3,086,747
1,296,435
4,383,182
43
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 10. Non-current Assets – Intangibles (cont)
Internally
Generated
Software
$
Consolidated
Development
$
2018
Cost
Balance at 1 July 2017
Additions
Written down
Balance at 30 June 20198
Accumulated amortisation
Balance at 1 July 2017
Amortisation
Impairments
Balance at 30 June 2018
Net book value at 30 June 2018
-
-
-
-
-
-
-
-
-
1,698,383
2,086,604
(725,289)
3,059,698
-
-
-
-
Total
$
1,698,383
2,086,604
(725,289)
3,059,698
-
-
-
-
3,059,698
3,059,698
The recoverable amount of the Group’s Intangible Assets 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. The 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:
•
50% pre-tax discount rate
This discount rate 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.
• Projected revenue growth rate based on expected customer acceptance of Kojensi Gov and associated ABAC (Attributed Based
Access Control) software sales
Management believes the projected revenue growth rate is prudent and justified, based on its market analyses and evaluation.
•
Increase in operating costs and overheads in line with projected revenue growth
Based on the above, no impairment charge has been applied as the discounted recoverable amount for the product exceeds the
capitalised development.
Judgements and estimates in respect of the above impairment testing have been made. Should these judgements and estimates
not occur the resulting capitalised development cost carrying amount may decrease. The sensitivities are as follows :
• Revenue would need to decrease by more than 5.4% for the internally generated software, and 20% for capitalised development
projects before there would need to be impair either asset, with all other assumptions remaining constant;
•
The discount rate would be required to increase to 55% for the internally generated software, and 61% for capitalised
development projects before there would need to be impair either asset, with all other assumptions remaining constant.
44
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 11. Current Liabilities – Trade and Other Payables
Trade Payables
Other Payables
Note 12. Current Liabilities - Borrowings
Secured Bank Loan
The Group has no bank overdraft or loan facilities as at 30 June 2019.
Note 13. Current Liabilities – Employee Benefits
Employee Benefits
Consolidated
2019
$
192,744
63,846
2018
$
172,777
108,092
256,590
280,869
Consolidated
2019
$
-
-
2018
$
300,000
300,000
Consolidated
2019
$
296,816
2018
$
314,623
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances.
The entire amount is presented as current, since the Group does not have an unconditional right to defer settlement.
However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months :
Employee Benefits obligation expected to be settled after 12
months
Consolidated
2019
$
100,669
2018
$
88,466
45
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 14. Current Liabilities - Other
Accrued Expenses
Note 15. Non-Current Liabilities – Employee Benefits
Employee Benefits
Note 16. Non-Current Liabilities – Provisions
Lease Make Good
Consolidated
2019
$
2018
$
281,698
363,559
281,698
363,559
Consolidated
2019
$
19,049
2018
$
38,049
Consolidated
2019
$
72,780
2018
$
72,780
Lease Make good
The provision represents the value of the estimated costs to make good the premises leased by the Group at the end of the lease
term.
Note 17. Deferred Tax
Assets
Current
Consolidated
2019
$
2018
$
Provision for research and development tax incentive
1,494,825
922,061
Non-current
Deferred tax asset
-
92,751
46
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 17. Deferred Tax (cont)
Deferred tax asset comprises temporary differences attributable to:
Opening
balance
Credited
(charged) to
profit or loss
$
$
Credited
(charged)
directly to
equity
$
Changes in
tax rates
Closing
balance
$
$
(2,058)
(4,020)
96,985
(19,174)
14,960
6,058
2,058
-
-
-
4,020
(96,985)
19,174
-
-
-
-
-
-
-
-
-
(14,960)
-
-
-
(6,058)
-
-
-
92,751
(92,751)
-
-
-
(6,663)
(1,148)
54,386
2,504
20,234
14,138
83,451
4,605
(2,872)
42,599
(21,678)
(5,274)
(8,080)
9,300
-
-
-
-
-
-
-
-
-
-
-
-
(2,058)
(4,020)
96,985
(19,174)
14,960
6,058
-
-
92,751
2019
Deferred tax asset on:
Accrued Income &
prepayments
Property, plant & equip.
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Net amount
2018
Deferred tax asset on:
Accrued Income &
prepayments
Property, plant & equip.
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Net amount
47
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 18. Equity – Issued Capital
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
Ordinary shares - fully paid
Ordinary shares - paid to $0.00
Capital raise fees
123,096,982
-
-
123,096,982
83,096,982
720,000
-
83,816,982
15,467,018
-
7,466,518
-
(1,765,322)
13,701,686
(698,829)
6,767,689
Date
Shares
Issue price
$
Movements in ordinary share capital
Details
Balance
Share split (3:1)
Issue of shares
Issue of shares
Issue of shares
Partly paid shares
Options called
Share forfeitures
Share issue transaction costs (net tax)
1-Jul-17
Oct-17
Nov-17
Apr-18
Balance
Issue of shares
Options called
Share forfeitures
Share issue transaction costs (net tax)
30-Jun-18
Sep-18
Jul-18
Jul-18
Sep-18
10,214,651
20,429,302
12,254,904
29,338,125
12,060,000
-
-
(480,000)
-
83,816,982
40,000,000
-
(720,000)
-
$0.08
$0.11
$0.17
$0.20
1,234,003
-
1,000,000
3,129,400
2,010,000
85,692
7,423
-
(698,829)
6,767,689
8,000,000
500
-
(1,066,503)
13,701,686
Balance
30-Jun-19
123,096,982
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.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives are to prudently manage capital so as 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.
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 Group may adjust the amount of dividend paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
48
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 19. Equity – Reserves
Foreign Currency Reserve
Share Based Payments Reserve
2019
Consolidated
2018
Restated
$
1,258
1,611,892
1,613,150
$
-
786,331
786,331
2018
Previously
Reported
$
-
731,746
731,746
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations
to Australian dollars.
Share Based Payments Reserve
This reserve is used to recognise equity-settled share-based payments to certain suppliers, directors and employees. Under AASB
2, options granted are measured at fair value at the date of the grant, using a Binomial valuation. The valuation of each tranche of
options granted is expensed on a straight lint basis over the vesting period.
Movements in Reserves
Movements in each class of reserve during the current and previous financial year are set out below :
Balance at 1 July 2017
Share based payments
Balance at 30 June 2018
Adjustment for ACTU02 Options
Adjustment for cancelled “Mandalay Options”
Total Adjustment
Balance at 30 June 2018 (restated)
Revaluation – gross
Share based payments
ACTU03 – tranche 1 (fully vested 5 Sep 18)
ACTU02 – tranche 2 (fully vested 1 Feb 19)
ACTU02 – tranche 3 (vest 1 Feb 20)
ACTU06 – tranche 1 (fully vested 26 Jul 18)
Share Based
Payments
$
317,774
413,972
731,746
372,359
(317,774)
54,585
786,331
450,000
133,985
113,576
128,000
Consolidated
Foreign
Currency
$
-
-
-
-
-
-
-
1,258
-
-
-
-
Total
$
317,774
413,972
731,746
372,359
(317,774)
54,585
786,331
1,258
450,000
133,985
113,576
128,000
Balance at 30 June 2019
1,611,892
1,258
1,613,150
Correction of prior period error
Correction of prior period error for the year ended 30 June 2018 for :
•
•
share-based payment of $372,359 were not recognised in relation to ACTU02 options vested during the financial year. This
misstatement represents a prior period accounting error which must be accounted for retrospectively due to its materiality.
Consequently, the Group has adjusted all comparative amounts presented in the current period financial statements affected
by the accounting error, and
a reversal ($317,774) of the Mandalay options brought forward from 2016 that were cancelled at the same time ACTU02
options were issued
49
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 20. Equity – Retained Profits
Retained losses at the beginning of the financial year
Losses after income tax expense for the year
2019
$
(2,794,561)
(3,931,517)
Consolidated
2018
Restated
$
(648,510)
(2,146,051)
2018
Previously
Reported
$
(648,510)
(2,091,466)
Retained losses at the end of the financial year
(6,726,078)
(2,794,561)
(2,739,976)
Note 21. Equity – Dividends
Dividends
No dividends were paid or declared during the year.
Franking Credits
Franking credits available for subsequent financial years based on a tax rate of
27.5%
Consolidated
2019
$
2018
$
15,549
15,549
Note 22. Financial Instruments
The Group’s activities expose it to a variety of financial risks: market risk, and credit risk and liquidity risk. The Group’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 Group. The Group uses different methods to measure different types of risk to which it is exposed.
These methods include sensitivity analysis in the case of foreign exchange and other price risks, and ageing analysis for credit risk.
Risk management is carried out under policies approved by the Board of Directors ('the Board'). These policies include identification
and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits.
Market risk
Foreign exchange risk
The Group is not exposed to any significant foreign exchange risk.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is not exposed to any interest risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group has a strict code of credit. The Group has adopted a lifetime expected loss allowance in estimating expected credit
losses to trade receivables using fixed rates of credit loss provisioning. These provisions are considered representative across all
customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is
available. There are no guarantees against any receivable but management closely monitors the receivable balance on a monthly
basis and is in regular contact with customers to mitigate risk.
50
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 22. Financial Instruments (cont.)
Credit risk (cont.)
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure
of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period
greater than 1 year.
Liquidity risk
Credit risk refers to the risk that the Group maintains sufficient liquid assets to pay debts as and when they become due and
payable. The Group manages liquidity risk by maintaining adequate cash reserves.
Note 23. Key Management Personnel Disclosures
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share Based Payments
2019
Consolidated
2018
Restated
$
$
1,853,767
136,825
12,262
363,992
2,366,846
1,123,219
93,849
(24,370)
463,433
1,656,131
2018
Previously
Reported
$
1,123,219
93,849
(24,370)
103,853
1,296,551
Correction of prior period error
As per note 4 and 19, there has been a correction of a prior period error for the year ended 30 June 2018, where an additional
$359,580 share-based payments expense relating to key management personnel needs to be recognised in relation to ACTU02
options vested during the financial year. This misstatement represents a prior period accounting error which must be accounted
for retrospectively due to its materiality. Consequently, the Group has adjusted all comparative amounts presented in the current
period financial statements affected by the accounting error.
Note 24. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor of the
company, and its network firms:
Audit services - RSM
Audit or review of the financial statements
Other services - RSM
Independent Accountants Report
Research and Development Tax Grant
Consolidated
2019
$
2018
$
67,442
77,825
15,968
24,745
40,713
25,968
12,500
38,468
108,155
116,292
51
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 25. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
190,599
184,258
137,522
328,121
328,121
512,379
Operating lease commitments includes contracted amounts for offices and equipment under non-cancellable operating leases
expiring within one to ten years with, in some cases, options to extend. The leases have various escalation clauses. On renewal,
the terms of the leases are renegotiated.
Note 26. Related Party Transactions
Parent Entity
archTIS Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Associates
There are no associates.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the directors'
report.
Transactions with related parties
The following transactions occurred with related parties:
Payments for services from other related parties:
Payment for Corporate Advisor services from Jindalee Partners
Payment for Corporate Advisor services from CPS Global
Transactions with subsidiaries:
Purchase of 100% of share capital of archTIS Solutions Pty Ltd
Purchase of 100% of share capital of archTIS Services Pty Ltd
Loan to archTIS Solutions Pty Ltd
Purchase of 100% of share capital of archTIS EU s.r.o
Consolidated
2019
$
71,347
962,500
-
-
2,000
7,345
1,043,192
2018
$
-
-
10
10
-
-
20
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
52
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 27. Parent Entity Information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss
Loss after income tax
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
2019
$
Parent
2018
Restated
$
2018
Previously
Reported
$
(3,928,217)
(2,146,053)
(2,091,468)
5,018,062
2,823,754
2,823,754
9,515,692
6,129,339
6,129,339
835,105
1,259,051
1,259,051
926,934
1,369,880
1,369,880
Net assets
Equity
Issued capital
Reserves
Retained profits (accumulated losses)
8,592,058
4,759,458
4,759,458
13,701,686
1,613,150
(6,722,778)
6,767,689
786,331
(2,794,561)
6,767,689
731,746
(2,739,976)
Total equity
8,592,058
4,759,459
4,759,459
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.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for Investments
in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 28. Interest in Subsidiaries
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:
archTIS Solutions Pty Limited
archTIS Services Pty Limited
archTIS EU s.r.o
Country of
Incorporation
Australia
Australia
Czech Republic
Ownership Interest
2019
%
100%
100%
100%
2018
%
100%
100%
na
53
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Note 29. Reconciliation of profit after income tax expense to net cash from operating activities
2019
Consolidated
2018
Restated
$
$
2018
Previously
Reported
$
Loss after income tax expense for the year
(3,931,517)
(2,146,053)
(2,091,468)
Adjustments for:
Depreciation and amortisation
Impairment of capitalised development
Share-based payments
Foreign exchange differences
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease in accrued revenue
(Increase) decrease in prepayments
(Increase) decrease in other assets
(Increase) in development assets
Increase/(decrease) in trade and other payables
Increase (decrease) in income taxes payable
Increase / (decrease) in employee benefits
(Increase)/ decrease in other provisions
183,344
783,905
375,560
1,258
72,681
(7,078)
54,680
(58,800)
(1,991,570)
(24,279)
(520,733)
(36,807)
(449,500)
60,915
156,507
468,557
-
185,755
16,015
(76,054)
-
(1,517,822)
(637,665)
(303,489)
152,468
60,915
156,507
413,972
-
185,755
16,015
(76,054)
-
(1,517,822)
(637,665)
(303,489)
152,468
-
-
Net cash from operating activities
(5,548,855)
(3,640,864)
(3,640,864)
Correction of prior period error
As per note 4 and 19, there has been a correction of a prior period error for the year ended 30 June 2018.
Note 30. Earnings Per Share
Loss after income tax attributable to the owners
Weighted average number of ordinary shares used in
calculating basic earnings per share
Basic earnings per share
Consolidated
Restated
2019
$
(3,931,517)
2018
$
(2,146,051)
Previously
Reported
2018
$
(2,091,468)
Number
Number
Number
119,993,339
55,227,645
55,227,645
Cents
(3.28)
Cents
(3.89)
Cents
(3.79)
54
DIRECTORS’ DECLARATION
30 JUNE 2019
In the directors' opinion:
•
•
•
•
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 Group's financial
position as at 30 June 2019 and of its performance for the financial year ended on that date; and
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 directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
On behalf of the directors
___________________________
Stephen Smith
Chairman
30 September 2019
Canberra
55
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of archTIS Limited for the year ended 30 June 2019, 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: 30 September 2019
RODNEY MILLER
Partner
56
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 2019, the consolidated statement of
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 2019 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.
Material Uncertainty Related to Going Concern
We draw attention to Note 1 (a) in the financial report, which indicates that the Company incurred a net loss after
tax of $3,931,517 during the year ended 30 June 2019 and, had net operating cash outflows of $5,548,855. As
stated in Note 1 (a), these events or conditions, along with other matters as set forth in Note 1 (a), indicate that a
material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
57
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How our audit addressed this matter
Accounting for intangible asset
Refer to Note 10 in the financial statements
At 30 June 2019 the Company has intangible assets
with a carrying value of $4,383,182, being capitalised
development costs in respect to software.
We focused on this area due to the size of the
intangible asset balance and the risk that the amounts
capitalised do not meet
recognition and
measurement criteria under AASB 138 Intangible
Assets.
the
In addition, there is a risk that the carrying value is
impaired under AASB 136 Impairment of Assets.
Management
impairment
assessment over the balance of intangible assets.
performed
has
an
For the year ended 30 June 2019 management have
performed an
the
goodwill balance by:
impairment assessment over
•
•
calculating the value in use using a forecast
discounted cash flow model. These models used
cash flows (revenues, expenses and payroll
expenditure) for 5 years. These cash flows were
then discounted to net present value using the
Company’s weighted average cost of capital
(WACC); and
comparing the resulting value in use to the book
values.
Our audit procedures in relation to the capitalisation of
intangibles assets included;
• Assessing whether the Group’s capitalisation
policies were in compliance with AASB 138;
• Testing a sample of capitalised development
costs to ensure they met the recognition and
measurement criteria of AASB 138;
• Reviewing the reasonableness of management’s
assessment of expected future economic benefits
that are attributable to the intangible assets; and
• Testing the completeness of the capitalised asset
by reviewing expense nominal ledgers for costs
not capitalised
the
Our audit procedures in relation to management's
assessment of impairment included:
• assessing the valuation methodology used in;
•
reasonableness
rates, discount
key
challenging
assumptions, including the cashflow projections,
revenue growth
rates, and
sensitivities used; and
the
checking
cashflow models, and reconciling input data to
supporting evidence, such as approved budgets
and considering the reasonableness of these
budgets.
the mathematical accuracy of
of
•
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 2019, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and 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.
58
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 19 to 23 of the directors' report for the year ended
30 June 2019.
In our opinion, the Remuneration Report of archTIS Limited., for the year ended 30 June 2019, 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: 30 September 2019
RODNEY MILLER
Partner
59
SHAREHOLDER INFORMATION
30 JUNE 2019
The shareholder information set out below was applicable as at 18 September 2019.
On 21 September 2018, the company was admitted to the official list of the Australian Securities Exchange (ASX). For the period
from listing to the 30 June 2019, the company used the cash and assets in a form readily convertible to cash that it had at the time
of admission in a way 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
HSBC Custody Nominees (Australia) Limited
Mr Bruce Talbot
Mr Daniel Chun Leung Lai
Possum Hill Pty Ltd
Redhill Holdings Ltd
7Sundays Pty Ltd
Bond Street Custodians Limited
Ajava Holdings Pty Ltd
Goldjazz Pty Ltd
Cityscape Asset Pty Ltd
Mr David Graham Wood
Invia Custodian Pty Limited
Conleroy Pty Ltd
Celtic Capital Pty Ltd
Egmont Pty Ltd
Mr Amit Gupta
Mr Ottmar Weiss
Myube Investments Pty Ltd
Mr Leo David Barry
Top 20 Holders of Ordinary Shares
Total Remaining Holders Balance
Of the above ordinary shares, 25,482,151 shares are escrowed until 21 September 2020.
60
8
25
80
224
139
476
18
Ordinary shares
Number
held
% of total shares
issued
15,090,641
12,457,107
12.26%
10.12%
7,286,436
7,284,252
7,284,252
2,787,129
2,500,000
2,200,000
1,950,000
1,875,000
1,757,929
1,500,000
1,437,500
1,400,000
1,391,569
1,250,000
1,060,000
1,059,359
1,050,078
1,000,000
73,621,252
49,475,730
5.92%
5.92%
5.92%
2.26%
2.03%
1.79%
1.58%
1.52%
1.43%
1.22%
1.17%
1.14%
1.13%
1.02%
0.86%
0.86%
0.85%
0.81%
59.81%
40.19%
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
Unquoted Options
Expiring 10 Oct 2022 exercisable at $0.10 escrowed until 21 Sep 2020
Expiring 01 Feb 2021 exercisable at $0.12 escrowed until 21 Sep 2020
Expiring 01 Jul 2023 exercisable at $0.20 escrowed until 21 Sep 2020
Expiring 05 Sep 2022 exercisable at $0.24 escrowed until 21 Ser 2020
Expiring 01 Feb 2021 exercisable at $0.12
Expiring 05 Jul 2021 exercisable at $0.20
Totals
Substantial Holders
The substantial holders in the Company are listed below:
The Trust Company (Australia) Limited
HSBC Custody Nominees (Australia) Limited
Mr Bruce Talbot
Mr Daniel Chun Leung Lai
Possum Hill Pty Ltd
Ordinary shares
Number
On issue
Number of
holders
4,289,880
7,200,000
1,200,000
5,000,000
300,000
1,600,000
19,589,880
3
7
2
14
1
2
29
Ordinary shares
Number
held
15,090,641
12,457,107
7,286,436
7,284,252
7,284,252
% of total
shares issued
12.26%
10.12%
5.92%
5.92%
5.92%
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.
61
Level 3
10 National Circuit
Barton ACT 2600
Australia
1300 ARCHTIS
+61 2 6162 2792
info@archtis.com
www.archtis.com
twitter.com/arch_tis
linkedin.com/company/archtis/