Annual
Report
ArchTIS Limited
AR9
2019/2020
Corporate Directory
Directors
Miles Jakeman AM
Daniel Lai
Leanne Graham
Company Secretary
James Palmer
Registered Office
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Principal Place of Business
Level 3, archTIS House
10 National Circuit
Barton ACT 2600
Share Register
Automic
Auditor
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 Listing
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/
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Table of Contents
Letter from the Chairman
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 Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Declaration
Independent Auditor’s Report to the Members of archTIS Limited
Shareholder Information
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6
19
20
21
22
23
49
50
51
55
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Letter from the Chairman
A DEFINING YEAR FOCUSED ON ESTABLISHING PRODUCT-MARKET FIT & ASSOCIATED SALES
OPPORTUNITIES
I am pleased to present a pivotal report regarding archTIS operations and its priorities during the year ended
30 June 2020.
KEY HIGHLIGHTS
The past 12 months have been an extremely busy and productive period for the Company. Key milestones
included:
Launching the Kojensi software platform, which provides a highly secure and trusted platform for
sharing sensitive and classified files and document collaboration, into its target Government market
and securing early adopter clients. Clients won included the Commonwealth Attorney Generals
Department, Commonwealth Ombudsman and the Australian Criminal Intelligence Agency. This
validated Kojensi’s market demand. As part of this validation, the Group continued to refine and add
features to the core product in order to offer its customers an enhanced experience in the cloud and
on-premise. In some cases, this additional research and development effort was part-funded
customers.
Establishing a solid sales pipeline, to be further executed over the next 12 months. This is paying
dividends and has resulted in just under a $5.2m in contract renewals and new wins in the first quarter
of this financial year, which is more than double the entire prior year.
Commencing a measured pivot to sell the Kojensi platform into industries servicing the Government,
which that also need to share sensitive and classified information. This culminated in wins with Curtin
University and Northrop Grumman. The Curtin University opportunity also provided product
development opportunities in securing Big Data analytics.
Developing a partner and channel business to further expose the Kojensi platform to the market and
increase sales opportunities. In this regard, a key partnership agreement was signed with DXC
Technologies during the year. DXC will offer Kojensi as a managed service to their National Security
Community clients opening significant growth opportunities for Kojensi sales and a pathway to access
up to 7,000 users in the Australian National Intelligence Community. A reseller agreement was also
signed with TEAM Asparona to sell Kojensi in New Zealand.
Signing three strategic reseller deals with: Nucleus Cyber, Appsian and Axiomatics to enable archTIS
to provide holistic trusted information sharing solutions across the Microsoft collaboration suite, ERP
systems and Big Data Lakes respectively.
FUNDING
In May 2020, the Group successfully raised $2.3 million through a share placement and a Share Purchase
Plan. This vital funding provides the Company with the cash runway that it needs to convert its sales pipeline
and continue the sales momentum into FY21.
BOARD AND MANAGEMENT
It has been a pleasure to work with my colleagues on the archTIS Board and I appreciate all their efforts during
the year. I would also like to thank Daniel, his executive team, and all the staff for their efforts in what has been
a very busy year.
Shareholders will have noted that, shortly after the end of FY20, archTIS announced it was continuing its
business optimisation process. This involved reducing the number of directors from six to three and
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2
establishing a strengthened strategic advisory capability through the formation of an advisory group led by
former board chair and non-executive director, Stephen Smith. We are particularly thankful for his efforts, as
well as those of former directors Bruce Talbot and Wayne Zekulich, both of whom have agreed to help the
company continue with its growth aspirations supported by retired Brigadier Alison Creagh AM CSC and Mr
Jeremy Waine, a former Corporate finance and M&A specialist.
The revised board consists of myself as Independent Chair, Leanne Graham as Independent Non-Executive
Director, and Daniel Lai as Executive Director/CEO.
OUTLOOK
With product-market fit now being established and the veracity of the underlying technology proven, there are
many opportunities to continue growing the archTIS business in both public and private markets. We expect
growth to be organic and from selected merger and acquisition opportunities should they arise.
Finally, thanks to our shareholders for their support during the year.
Yours sincerely,
Miles Jakeman AM
21 September 2020
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2
Letter from the CEO
Dear Shareholders,
Thank you for your support for what was a transformational year for archTIS, as we laid the foundations to
achieve our vision of becoming a leading global security company.
In April 2019 archTIS completed the build and accreditation of Kojensi, archTIS’ secure information sharing
platform for sensitive and classified information. During FY2020 our focus was to successfully launch Kojensi,
build market awareness, create sales opportunities and secure early clients. The Company has achieved all of
this with pleasing results exemplified by the recent landmark $4.2m Australian Department of Defence contract
win.
Over the past 12 months archTIS successfully won a number of high-profile Government clients, including: The
Aged Care Royal Commission, The Commonwealth Attorney General’s Department, The Australian Criminal
Intelligence Agency and The Commonwealth Ombudsmen; validating our target government market for
Kojensi. In January 2020 we diversified to commercial industries that work with Government, with our first wins
in the Education and Space sector with Curtin University, and the Defence Industry sector, with Northrup
Grumman, a global military system integrator.
This success has demonstrated the broad appeal of Kojensi. Most importantly these sales have secured
annual recurring revenue which we expect to grow as clients continue to use Kojensi to share their trusted
information with external parties.
archTIS has also invested in development of its channel and partnership strategy, with DXC (one of the world’s
largest system integrators) signing a deal to demonstrate and sell Kojensi to Intelligence agencies. Other
partnership developments include Thales, KPMG, Oracle, Microsoft and Nucleus Cyber. We are already
seeing positive results from these investments in FY2021.
Business development activities across the year resulted in over 350 demonstrations of Kojensi, both locally
and internationally. These activities have generated a sales pipeline of over $15m of opportunities to be
executed against in FY2021. This has come at a time when the Australian Prime Minister has announced a
significant increase in targeted cyber-attacks across the country against government institutions, industry and
businesses. This was followed by the announcement of a $1.67bn investment into Cyber Security by the
Morrison government and a further $15bn investment to deal with the information and cyber security needs
within the Australian Department of Defence across the next 10 years. archTIS is in a strong position to
capitalise on this large market opportunity.
The archTIS leadership team has taken a number of steps in FY2020 to strengthen the Company’s cash
position and build a strong sales pipeline for execution. In June 2020, archTIS successfully completed a
placement and a share issuance to raise a combined $2.24m in additional capital for sales growth. archTIS
has also reduced its monthly operational expenditure by 32% since March 2020 as expenses shifted from
software development to sales and marketing.
Finally, archTIS recently announced a streamlined Board of Directors, and the creation of an Advisory Board.
This has seen our inaugural Chairman Stephen Smith and Non-Executive Director Wayne Zekulich move from
the Board of Directors to the Advisory Board where they will focus on driving new sales opportunities. Founder
and Executive Director Bruce Talbot has also stepped down from his role as a Director to concentrate on
growth opportunities. I would like to personally thank them for their dedication and service to archTIS, without
which archTIS would not be in such a strong position to drive the company and shareholder value forward in
FY2021.
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2
I welcome and look forward to working with Dr Miles Jakeman, who accepted the role as new Chairman, and
Ms Leanne Graham on the Board. I also would like to welcome Mr Jeremy Waine and Brigadier Alison Creagh
as additional members of the Advisory Board. Together with the dedicated team at archTIS we look forward to
establishing archTIS as a global leading Information Security company in 2021.
Yours sincerely,
Daniel Lai
CEO
21 September 2020
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DIRECTORS’ REPORT
30 JUNE 2020
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 2020.
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:
Miles Jakeman (appointed to the Board 13 February 2020. Appointed Chair 31 July 2020)
Daniel Lai
Leanne Graham
Bruce Talbot (resigned 31 July 2020
Stephen Smith (resigned 31 July 2020)
Wayne Zekulich (resigned 31 July 2020)
Company Secretary
Baden Bowen has held the role of Company Secretary from February 2018 until his resignation on 31 July 2020.
James Palmer, CFO for the Group was appointed in his stead on 31 July 2020.
Directors and Meetings of Directors
The qualifications and experience of directors, including current and recent directorships, are detailed below:
Dr Miles Jakeman AM
Chairman of the Board
Miles co-founded and was the CEO of Australian software and technology success story, The Citadel Group
Limited (“Citadel”). During his time as CEO of Citadel, he grew Citadel from a start-up to a company with over
300 employees and a market capitalisation of $400 million.
Interest in Shares and Options: 540,000 options
Other current directorships: GetBusy plc (AIM:GetB), Fifth Domain Pty Ltd, The Shepherd Centre Charity,
Manteena Security Australia Pty Ltd
Former directorships (last 3 years): Executive Director and Deputy Chairman of Citadel Group.
Daniel Lai
CEO
Daniel is a founding member of the Company and has successfully developed the business with its partners to
be recognised by the Australian and United States Departments of Defence as a thought leader in information
sharing strategies. Most importantly Daniel has direct experience in implementing organisational change to
address the real challenges businesses confront today in a rapidly evolving environment.
Interest in Shares and Options: 7,410,616 ordinary shares and 1,800,000 options
Other current directorships: None
Former directorships (last 3 years): None
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DIRECTORS’ REPORT
30 JUNE 2020
Leanne Graham
Non-Executive Director
With over 30 years in the software sector, Leanne has assisted technology companies with her broad
experience and SaaS expertise. In 2018, Ms. Graham was awarded the New Zealand Order of Merit for her
services to the software industry. Her current ASX listed boards are Bid Energy, AppsVillage, ArchTIS and
VPCL.
Interest in Shares and Options: 50,000 ordinary shares and 540,000 options
Other current directorships: Executive Chairman of VPCL Limited and Non-Executive Director of BidEnergy
Limited.
Former directorships (last 3 years): Non- Executive Director of AppsVillage (resigned 10 June 2020)
Stephen Smith
Chairman of the Board (1 July 2019 – 31 July 2020)
Stephen Smith was a member of the House of Representatives from 1993 to 2013. He served as a minister in
the Rudd and Gillard Governments, including as Minister for Foreign Affairs (2007‑2010), Minister for Trade
(2010), and Minister for Defence (2010‑2013). Stephen has also served as a board member for two not-for-
profit organisations including Perth USAsia Centre and LNG Marine Fuel Institute.
Interest in Shares and Options: 1,080,000 options
Other current directorships: Chairman of Sapien Cyber Board from 16 Sept 2019.
Former directorships (last 3 years): None
Wayne Zekulich
Non-Executive Director (1 July 2019 – 31 July 2020)
Wayne is a consultant with extensive banking and investment banking experience covering mergers and
acquisitions, arranging and underwriting financings and debt and equity capital markets. Wayne is a member
of the Curtin Business School of Accounting Advisory Board and the John Curtin Gallery Board, a member of
the University of Western Australia Audit Committee and a Board member of ARTrinsic Inc.
Interest in Shares and Options: 100,000 ordinary shares and 540,000 options
Other current directorships: None
Former directorships (last 3 years): None
Bruce Talbot
Executive Director (1 July 2019 – 31 July 2020)
Bruce has been involved in the creation, implementation and management of advanced computer security
systems and capabilities. He has over 20 years’ experience in the Australian
Defence Force and a further 20 years in the commercial sector working for CA Technologies, Hitachi Data
Systems, Airservices Australia and the Australian Federal Police.
Interest in Shares and Options: 7,486,436 ordinary shares and 1,080,000 options
Other current directorships: None
Former directorships (last 3 years): None
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2
DIRECTORS’ REPORT
30 JUNE 2020
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June
2020, and the number of meetings attended by each director were:
Number of Meetings Held*
Number Attended
Miles Jakeman (appointed 13 Feb
20)
Stephen Smith
Daniel Lai
Bruce Talbot
Leanne Graham
Wayne Zekulich
7
15
15
15
15
15
6
15
15
15
15
14
* 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
Principal Activities
During the financial year the principal continuing activities of the Group consisted of:
Sales of a secure information management and collaboration software: Kojensi either in-cloud or on-premise
Consulting and solutions services for secure information sharing and inter-organisational collaboration
related to the above software sales.
Dividends
No dividends were paid during the financial year.
Review of Operations
Over the previous 12-month period, archTIS launched its Kojensi platform into its target Government market and
focused on securing early adopter clients. Clients won included the Commonwealth Attorney Generals
Department, Commonwealth Ombudsman and the Australian Criminal Intelligence Agency. This validated
Kojensi’s market demand. Other activities included business development and marketing which resulted in
building a significant sales pipeline to be converted over the next 12 months. This is paying dividends and has
resulted in just under a $1m in contract renewals and new wins in the first quarter of this financial year.
In January 2020 the company pivoted to sell the Kojensi platform to industries servicing the Government that
need to share sensitive and classified information including the Defence, University Research and Space
industries. This culminated in wins with Curtin University and Northrop Grumman. The Curtin University
opportunity has also has provided product development opportunities in securing Big Data analytics.
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2
DIRECTORS’ REPORT
30 JUNE 2020
A particular focus over the last 12 months has been the development of a partner and channel business to further
expose the Kojensi platform to the market and increase sales opportunities. A key partnership agreement was
signed with DXC Technologies during the year. DXC will offer Kojensi as a managed service to their National
Security Community clients opening significant growth opportunities for Kojensi sales and a pathway to access
up to 7,000 users in the Australian National Intelligence Community. A reseller agreement was signed with TEAM
Asparona to sell Kojensi in New Zealand.
The Group also signed three strategic reseller deals with: Nucleus Cyber, Appsian and Axiomatics to enable
archTIS to provide holistic trusted information sharing solutions across the Microsoft collaboration suite, ERP
systems and Big Data Lakes respectively.
The Group also continued to refine and add features to its core product in order to offer its customers enhanced
experience whether the solution is in the cloud or on-premise. In some cases, this additional research and
development effort was funded in-part by customers. In May 2020, the Group successfully raised $2.1 million
(net of transaction costs) through a share placement and a Share Purchase Plan. This vital funding will give the
Company the cash runway it needs to convert its sales pipeline and continue the sales momentum into FY21.
The investment into these activities cumulated in a loss for the consolidated entity after providing for income tax
and non-controlling interest amounted to $3,725,369 (30 June 2019 $3,931,517).
Effects of Coronavirus (COVID-19) pandemic on the Company
The Company took early and positive steps to protect its employees, clients and the public by initiating work
from home practices. archTIS staff worked remotely using Kojensi as our remote access platform. The initial
effect of the pandemic was to slow the conversion of sales pipeline as potential customers delayed IT projects
to focus on the immediate impacts to their business. However cyber security and trusted information shared
quickly emerged as a growing issue with most companies as they sent their workforce to work remotely from
their homes. This has highlighted the need for our product more than ever and created a greater market need
and increased our sales pipeline in the medium to long term.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the year.
Matters subsequent to the end of the financial year
Board changes
On 22 July 2020, the Company announced that it is continuing its business optimisation process following the
recent successful capital raising with the board and management arrangements streamlined and a new advisory
group formed.
This involved reducing the number of directors from six to three and establishing a strengthened strategic
advisory capability through the formation of an advisory group led by former board chair and non-executive
director, Stephen Smith.
The revised board consists of Miles Jakeman AM as Chair with Leanne Graham and CEO, Daniel Lai.
General Meeting
Further, as part of finalising the formalities relating to the recent successful capital raise, on 27 August 2020 the
Company held a General Meeting where shareholders approved to:
ratify a number of prior issues of shares/share options; and,
issue a number of shares and share options to advisors and directors.
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DIRECTORS’ REPORT
30 JUNE 2020
No other matter or circumstance has arisen since 30 June 2020 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.
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 ensure 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
20 Nov 2019
1 Jul 2023
13 Feb 2020
13 Feb 2023
30 Jun 2020
1 Jul 2023
$ 0.10
$ 0.12
$ 0.20
$ 0.24
$ 0.12
$ 0.20
$0.20
$0.20
$0.10
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
250,000
540,000
500,000
20,879,880
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DIRECTORS’ REPORT
30 JUNE 2020
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.
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 $275,000 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.
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2
DIRECTORS’ REPORT
30 JUNE 2020
REMUNERATION REPORT (audited) (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
Miles Jakeman AM
Key Management Personnel
Matthew Kluken
Nick Main
Marcelle Newbound
Phillip Dean
James Palmer
Sarah Young
Chairman
Managing Director & Chief Executive Officer
Executive Director & Chief Architect
Non-executive Director
Non-executive Director
Non-executive Director
Head of Business Development & Sales
Chief Technology Officer
Head of People & Customer Experience
Principal Consultant
Chief Financial Officer (from 16 December 2019 onwards)
Chief Financial Officer (16 July 2019 – 29 October 2019)
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DIRECTORS’ REPORT
30 JUNE 2020
Details of remuneration (cont.)
Short-term
Salary
Cash
Bonus
Fees
Share
Based
Pay-
ments
Post
employ
-ment
Super
$
$
$
$
$
Long
Term
Benefit
s
Long
Service
Leave
$
% of
salary
assoc.
with
perfor-
mance
Options
as a %
of total
Total
$
%
%
-
- 273,600
-
- 273,600
20,194
- 232,871
22%
2020
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Miles Jakeman
AM*
Executive Directors
Daniel Lai
Bruce Talbot
75,000
-
50,000
16,667
230,054
230,054
Key Management Personnel
Philip Dean
Matthew Kluken
177,457
161,872
-
-
-
-
-
-
-
50,805
Nick Main
Marcelle
Newbound
Sarah Young
James Palmer**
2019
125,832
70,806
-
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
-
11,254
7,125
5,627
5,627
-
4,750
10,577
1,583
-
-
-
-
93,379
60,383
60,377
28,827
18,757
18,567
3842
271,220
11,254
18,567
3842
263,717
11,254
16,858
3,015 208,585
54,756
-
-
-
-
-
-
-
-
83,300
-
-
-
-
-
-
-
-
11,913
6,727
-
- 137,744
-
-
-
-
-
77,533
83,300
123,771
75,573
75,573
-
-
41,646
20,823
54,750
20,823
7,125
4,750
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
Matthew Kluken
175,436
23,526
Nick Main
Marcelle
Newbound
-
262,400
56,353
-
-
17,473
2,931 219,366
11%
-
- 262,400
5,333
285
61,971
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12%
9%
9%
37%
7%
4%
5%
-
-
-
-
-
34%
28%
28%
21%
14%
17%
29%
34%
-
-
-
-
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2
DIRECTORS’ REPORT
30 JUNE 2020
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
AR902 Class
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Executive Directors
Daniel Lai
Bruce Talbot
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 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
1 Feb 21
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
$ 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
Key Management Personnel
Phillip Dean
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
AR906 Class – Granted under the Performance and Rights Plan Management Personnel
Martin Tucek
Debra Tucek
AR908 Class
Non-Executive Directors
Miles Jakeman
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
13 Feb 20 13 Feb 20 13 Feb 23
13 Feb 20 13 Feb 21 13 Feb 23
13 Feb 20 13 Feb 22 13 Feb 23
$ 0.20
$ 0.20
$0.20
$ 0.041
$ 0.041
$0.041
180,000
180,000
180,000
During the year AR908 options were granted to a newly appointed director over unissued fully paid ordinary
shares in the company. The options are exercisable by the holder from the vesting date. 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.
16
2
DIRECTORS’ REPORT
30 JUNE 2020
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
Non-Executive Directors
Stephen Smith
Leanne Graham
Wayne Zekulich
Miles Jakeman
Executive Directors
Daniel Lai
Bruce Talbot
-
50,000
100,000
-
7,347,252*
7,486,436*
Key Management Personnel
Matthew Kluken
Nick Main
Marcelle Newbound
Phillip Dean
160,000
-
-
7,284,252*
-
-
-
-
-
-
-
-
-
-
* 7,284,252 each are held in escrow until 21 September 2020
Option holding
-
-
-
-
-
-
-
-
-
-
50,000
100,000
36,364
-
181,819
-
-
-
-
-
-
-
-
-
7,410,616
7,486,436
341,819
-
-
7,284,252
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
Miles Jakeman
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
-
-
-
540,000
-
-
800,000
800,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,080,000
540,000
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.
17
2
DIRECTORS’ REPORT
30 JUNE 2020
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 24 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 58.
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
Miles Jakeman AM
Chair
21 September 2020
Canberra, ACT
18
2
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue
Cost of Sales
Gross Profit
Other Income
Sales and Marketing
General Administration
Loss before Income Tax
Income Tax (Expense) / Benefit
Other Comprehensive Income
Note
2020
$
2019
$
3(a)
3(b)
4
5
548,747
(303,929)
244,818
1,022,210
(227,590)
794,620
670,775
(477,528)
(4,163,433)
(3,725,369)
-
-
370,672
(269,955)
(4,734,103)
(3,838,766)
(92,751)
-
Total Comprehensive income for the year
(3,725,369)
(3,931,517)
Basic earnings per share
31
Cents
(2.94)
Cents
(3.28)
The accompanying notes form part of these financial statements.
19
2
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
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
Right of use asset
Deferred tax
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Employee benefits
Lease Liability
Other Current Liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Provisions
Lease Liability
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits (accumulated losses)
Note
2020
$
2019
$
6
6
7
8
18
9
10
11
18
12
13
14
15
16
17
2,428,648
3,255,200
-
58,896
194,943
886,008
-
161,835
113,435
1,494,825
3,568,495
5,025,295
39,356
4,261,450
1,052,957
-
107,214
4,383,182
-
-
5,353,763
4,490,396
8,922,259
9,515,691
140,708
256,590
-
219,140
116,079
291,171
767,098
28,346
74,249
1,241,383
1,343,978
-
296,816
-
281,698
835,104
19,049
72,780
-
91,829
2,111,077
926,933
6,811,182
8,588,758
19
20
21
15,713,392
13,701,686
1,808,050
1,613,150
(10,710,260)
(6,726,078)
TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS
OF ARCHTIS LIMITED
6,811,182
8,588,758
The accompanying notes form part of these financial statements.
20
2
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated
Balance at 1 July 2019
Adoption of AASB16
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
Note
Issued capital
$
Reserves
$
Retained
profits
$
Total equity
$
13,701,686
1,613,150
(6,726,078)
8,588,758
-
-
-
(258,814)
(258,814)
-
(3,725,369)
(3,725,369)
2,250,873
-
-
2,250,873
-
(239,167)
-
-
-
-
-
194,900
-
-
-
-
-
(239,167)
-
194,900
21
19
19
19
20
20
Balance at 30 June 2020
19,20
15,713,392
1,808,050
(10,710,261)
6,811,181
Balance at 1 July 2018
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
21
19
19
19
20
20
6,767,689
786,331
(2,794,561)
4,759,459
-
-
(3,931,517)
(3,931,517)
8,000,000
500
(1,066,503)
-
-
-
-
-
1,258
825,561
-
8,000,000
-
500
-
(1,066,503)
-
-
1,258
825,561
Balance at 30 June 2019
19,20
13,701,686
1,613,150
(6,726,078)
8,588,758
The accompanying notes form part of these financial statements.
21
2
STATEMENT OF CASHFLOW
FOR THE YEAR ENDED 30 JUNE 2020
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
COVID-19 Government cash boost
Interest received
Interest paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net proceeds from issue of shares
Settlements of secured bank loans
Repayments under leases
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.
Note
Consolidated
2020
$
2019
$
777,694
(5,109,408)
1,494,825
50,750
38,786
(90,434)
(2,837,787)
1,072,619
(7,749,491)
1,087,420
-
45,187
(4,590)
(5,548,855)
(3,640)
(3,640)
24,412
24,412
2,116,554
-
(101,679)
2,014,875
(826,552)
3,255,200
2,428,648
7,383,497
(300,000)
-
7,083,497
1,559,054
1,696,146
3,255,200
30
9
6
22
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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
(a) Going concern
The
financial statements have been
prepared on the going concern basis, which
contemplates continuity of normal business
activities and the realisation of assets and
discharge of liabilities in the normal course of
business.
The consolidated group incurred a loss after
tax of $3,725,369 (2019 $3,931,517) and
had net operating cash outflows of
$2,837,787 (2019: $5,548,855). The entity
has prepared a cash flow forecast which
indicates that the entity has sufficient cash to
meet its debts as and when they fall due and
payable.
The Directors believe that it is reasonably
foreseeable that the consolidated entity will
continue as a going concern and that it is
appropriate to adopt the going concern basis
in the preparation of the financial report after
consideration of the following factors:
•
•
•
•
The consolidated entity is currently
exploring sales opportunities with
various potential customers across the
Government and Private sectors;
Following a successful capital raising in
May 2020 the Group has cash at bank
as at 30 Jun ’20 of $2.5 million;
Cash operating costs of the business
have been reduced to the minimum
level in order to maximise the cash
runway to allow time for conversion of
the sales opportunities; and,
if necessary, the Company will consider
additional capital
raising activities
through the issue of new share capital.
(b) New or
Standards
adopted
amended Accounting
Interpretations
and
The Group has adopted all of the new or
and
amended Accounting Standards
Interpretations
the Australian
issued by
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.
Lease liabilities - current (AASB 16)
227,789
Lease liabilities - non-current (AASB 16)
1,278,618
AASB 16 Leases
As above
1,506,407
1 Jul 19
$
Right-of-use asset (AASB 16)
(1,947,723)
Accumulated amortisation as at 1 July 2019
(AASB 16)
Make good asset as at 1 July 2019 (AASB
117)
689,819
21,233
Lease incentive liability (AASB 117)
(10,922)
Reduction in opening retained earnings as
at 1 July 2019
258,814
Right-of-use assets
A right-of-use asset is recognised at the
commencement date of a lease. The right-of-
use asset is measured at cost, which
comprises the initial amount of the lease
liability, adjusted for, as applicable, any lease
the
payments made at or before
commencement date net of any
lease
incentives received, any initial direct costs
incurred, and, except where included in the
cost of inventories, an estimate of costs
expected to be incurred for dismantling and
removing the underlying asset, and restoring
the site or asset.
Right-of-use assets are depreciated on a
straight-line basis over the unexpired period
of the lease or the estimated useful life of the
asset, whichever is the shorter. Where the
consolidated entity expects
to obtain
ownership of the leased asset at the end of
the lease term, the depreciation is over its
estimated useful life. Right-of use assets are
subject to impairment or adjusted for any re-
measurement of lease liabilities.
a
asset
The consolidated entity has elected not to
recognise
and
right-of-use
corresponding lease liability for short-term
leases with terms of 12 months or less and
leases of low-value assets. Lease payments
on these assets are expensed to profit or loss
as incurred.
1 Jul 19
$
328,121
-
Lease liabilities
for
for
The consolidated entity has adopted AASB
16 from 1 July 2019. The standard replaces
lessees
'Leases' and
AASB 117
eliminates the classifications of operating
leases and finance leases. Except for short-
term leases and leases of low-value assets,
right-of-use assets and corresponding lease
liabilities are recognised in the statement of
financial position. Straight-line operating
lease expense recognition is replaced with a
depreciation charge
the right-of-use
assets (included in operating costs) and an
interest expense on the recognised lease
liabilities (included in finance costs). In the
earlier periods of the lease, the expenses
associated with the lease under AASB 16 will
be higher when compared to lease expenses
under AASB 117. However, EBITDA
(Earnings Before Interest, Tax, Depreciation
and Amortisation) results improve as the
operating expense
is now replaced by
interest expense and depreciation in profit or
loss. For classification within the statement
of cash flows, the interest portion is disclosed
in operating activities and the principal
portion of the lease payments are separately
disclosed in financing activities. For lessor
accounting,
not
substantially change how a lessor accounts
for leases.
standard
does
the
Impact of adoption
AASB 16 was adopted using the modified
retrospective approach and as such the
comparatives have not been restated. The
impact of adoption on opening retained
profits as at 1 July 2019 was as follows:
Operating lease commitments as at 1 July
2019 (AASB 117)
Finance lease commitments as at 1 July
2019 (AASB 117)
add: lease commitments on likely exercise
of option to extend lease
1,599,346
less: future interest charges based on the
weighted average incremental borrowing
rate of 6.2%
(421,060)
Lease liabilities (AASB 16)
1,506,407
is
lease
liability
recognised at
A
the
commencement date of a lease. The lease
liability is initially recognised at the present
value of the lease payments to be made over
the term of the lease, discounted using the
interest rate implicit in the lease or, if that rate
the
cannot
consolidated entity's incremental borrowing
determined,
readily
be
23
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
lease
less any
rate. Lease payments comprise of fixed
payments
incentives
receivable, variable lease payments that
depend on an index or a rate, amounts
expected to be paid under residual value
guarantees, exercise price of a purchase
option when the exercise of the option is
to occur, and any
reasonably certain
anticipated
termination penalties. The
variable lease payments that do not depend
on an index or a rate are expensed in the
period in which they are incurred.
Lease liabilities are measured at amortised
cost using the effective interest method. The
carrying amounts are remeasured if there is
a change in the following: future lease
payments arising from a change in an index
or a rate used; residual guarantee; lease
term; certainty of a purchase option and
termination penalties. When a lease liability
is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit
or loss if the carrying amount of the right-of-
use asset is fully written down.
(b) Basis of preparation
These general-purpose financial statements
have been prepared in accordance with
Australian Accounting Standards and
Interpretations
the Australian
issued by
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
under
historical
financial statements have been
The
cost
the
prepared
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
financial
and equipment and derivative
instruments.
Critical accounting estimates
The preparation of the financial statements
requires the use of certain critical accounting
estimates. It also requires management to
exercise its judgement in the process of
applying the 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 the
results of the Group only. Supplementary
information about
is
disclosed in note 27.
the parent entity
controlling interest in the subsidiary together
with any cumulative translation differences
recognised in equity. The Group recognises
the fair value of the consideration received
and the fair value of any investment retained
together with any gain or loss in profit or loss.
(d) Principles of consolidation
(e) Foreign currency translation
The consolidated
financial statements
incorporate the assets and liabilities of all
subsidiaries of archTIS Limited ('company' or
'parent entity') as at 30 June 2020 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 controls
an entity when the Group is exposed to, or
has rights to, variable returns from its
involvement with the entity and has the ability
to affect those returns through its power 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.
in
Intercompany transactions, balances and
unrealised gains on transactions between
the Group are eliminated.
entities
Unrealised losses are also eliminated unless
the transaction provides evidence of the
impairment of
transferred.
Accounting policies of subsidiaries have
been changed where necessary to ensure
consistency with the policies adopted by the
Group.
the asset
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
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
the
Non-controlling interest in the results and
equity of subsidiaries are shown separately
in the statement of profit or loss and other
comprehensive
statement of
income,
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
the assets
it derecognises
subsidiary,
liabilities and non-
including goodwill,
The financial statements are presented in
Australian dollars, which is archTIS Limited's
functional and presentation currency.
Foreign currency transactions
the dates of
Foreign currency transactions are translated
into Australian dollars using the exchange
the
rates prevailing at
transactions. Foreign exchange gains and
losses resulting from the settlement of such
transactions and from the translation at
financial year-end exchange
rates of
monetary assets and liabilities denominated
in foreign currencies are recognised in profit
or loss.
Foreign operations
liabilities of
foreign
The assets and
operations are translated into Australian
dollars using the exchange rates at the
reporting date. The revenues and expenses
of foreign operations are translated into
the average
Australian dollars using
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
inter-organisational
It
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
the contract with a
Group:
customer;
performance
obligations in the contract; determines the
transaction price which takes into account
estimates of variable consideration and the
the
time value of money; allocates
separate
transaction
identifies
identifies
price
the
the
to
24
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
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.
and the adjustment recognised for prior
periods, where applicable.
tax assets and
Deferred
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:
Variable consideration within the transaction
price, if any, 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
to a
variable consideration
constraining principle whereby revenue will
only be recognised to the extent that it is
highly probable that a significant reversal in
the
revenue
recognised will not occur. The measurement
constraint continues until the uncertainty
associated with the variable consideration is
subsequently resolved. Amounts received
that are subject to the constraining principle
are recognised as a refund liability.
is subject
cumulative
amount
of
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
to receive
payment is established.
the right
(f)
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
jurisdiction,
adjusted by the changes in deferred tax
assets and
to
temporary differences, unused tax losses
liabilities attributable
for each
rate
tax
that
• When the deferred income tax asset or
liability arises from the initial recognition
of goodwill or an asset or liability in a
transaction
is not a business
combination and that, at the time of the
transaction,
the
neither
affects
accounting nor taxable profits; or
• When the taxable temporary difference
in
is
subsidiaries,
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.
interests
or
associated with
associates
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
temporary differences and
losses.
those
The carrying amount of recognised and
tax assets are
unrecognised deferred
reviewed at each reporting date. Deferred
tax assets recognised are reduced to the
extent that it is no longer probable that future
taxable profits will be available for the
carrying amount to be recovered. Previously
unrecognised deferred
tax assets are
recognised to the extent that it is probable
that there are future taxable profits available
to recover the asset.
Deferred tax assets and liabilities are offset
only where there is a legally enforceable right
to offset current tax assets against current
tax liabilities and deferred tax assets against
deferred tax liabilities; and they relate to the
same taxable authority on either the same
taxable entity or different taxable entities
which intend to settle simultaneously.
archTIS Limited (the 'head entity') and its
wholly-owned Australian subsidiaries have
formed an income tax consolidated group
under the tax consolidation regime. The
head entity and each subsidiary in the tax
consolidated group continue to account for
their own current and deferred tax amounts.
The tax consolidated group has applied the
'separate taxpayer within group' approach in
determining the appropriate amount of taxes
to allocate
tax
consolidated group.
to members of
the
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
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
the asset
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.
Deferred tax assets and liabilities are always
classified as non-current.
(h) 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
financial
position.
the statement of
(i) 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.
25
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
Trade receivables are generally due for
settlement within 30 days.
the
Collectability of trade receivables is reviewed
on an ongoing basis. Debts which are known
to be uncollectable are written off by
reducing
the carrying amount directly
provision for impairment of 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
financial
receivables. Significant
difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial
reorganisation and default or delinquency in
payments (more than 60 days overdue) are
considered
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
to short-term
rate. Cash
receivables are not discounted if the effect of
discounting is immaterial.
flows relating
indicators
that
the
Other
amortised cost,
impairment.
receivables are
less any provision
recognised at
for
(j)
Investments and other
assets
financial
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
their
classification. Classification is determined
based on the purpose of the acquisition and
subsequent
other
reclassification
categories is restricted.
fair value depending on
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
there
financial assets
Impairment of financial assets
The Group assesses at the end of each
is any
reporting period whether
objective evidence that a financial asset or
group of
impaired.
Objective evidence
includes significant
financial difficulty of the issuer or obligor; a
breach of contract such as default or
delinquency in payments; the lender granting
to a borrower concession due to economic or
legal reasons that the lender would not
otherwise do; it becomes probable that the
borrower will enter bankruptcy or other
financial reorganisation; the disappearance
of an active market for the financial asset; or
observable data indicating that there is a
measurable decrease in estimated future
cash flows.
The amount of the impairment allowance for
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.
is
(l) Property, plant and equipment
Each class of plant and equipment is stated
at historical
less accumulated
depreciation and impairment. Historical cost
includes expenditure
is directly
attributable to the acquisition of the items.
cost
that
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 life of the assets, whichever
is shorter.
An item of property, plant and equipment is
derecognised upon disposal or when there is
no future economic benefit to the 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
an
The
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.
is made between
A distinction
finance
leases, which effectively transfer from the
lessor to the lessee substantially all the risks
and benefits incidental to the ownership of
leased assets, and operating leases, under
which
retains
substantially all such risks and benefits.
lessor effectively
the
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.
Operating
lease payments, net of any
incentives received from the lessor, are
charged to profit or loss on a straight-line
basis over the term of the lease.
Lease incentives under operating leases are
recognised as a liability and amortised on a
straight-line basis over the life of the lease
term.
(n)
Intangible assets
Finite life intangible assets are subsequently
measured at cost less amortisation and any
impairment. The gains or losses recognised
in profit or loss arising from the derecognition
of intangible assets are measured as the
difference between net disposal proceeds
and the carrying amount of the intangible
asset. The method and useful lives of finite
life intangible assets are reviewed annually.
Changes
the expected pattern of
consumption or useful life are accounted for
prospectively by changing the amortisation
method or period.
in
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 its costs can
Capitalised
be measured
development costs are amortised on a
reliably.
26
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
systematic basis matched to the future
economic benefits over the useful life of the
project.
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
to
which
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"".
the assistance
intended
is
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
if events or changes
Intangible assets that have an indefinite
useful life are not subject to amortisation and
are tested annually for impairment, or more
frequently
in
circumstances indicate that they might be
impaired. Other non-financial assets are
reviewed for impairment whenever events or
changes in circumstances indicate that the
carrying amount may not be recoverable. An
impairment loss is recognised for the amount
by which
the asset's carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher of an
asset's fair value less costs of disposal and
value-in-use. The value-in-use is the present
value of the estimated future cash flows
relating to the asset using a pre-tax discount
rate specific to the asset or cash-generating
unit to which the asset belongs. Assets that
do not have independent cash flows are
grouped together to form a cash-generating
unit.
(p) Trade and other payables
These amounts represent liabilities for 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.
The liability for annual leave and long service
leave that is not expected to be settled within
the reporting date, are
12 months of
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
(q) Borrowings
the
are
and
borrowings
fair value of
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
has a present
(legal or constructive)
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 and
uncertainties surrounding the obligation. If
the
is material,
provisions are discounted using a current
pre-tax rate specific to the liability. The
increase in the provision resulting from the
passage of time is recognised as a finance
cost.
time value of money
(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
for
long-term
The Group's obligations
employee benefits are presented as non-
current provisions in its statement of financial
position, except where the Group does not
have an unconditional
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.
right
Defined
expense
contribution
superannuation
to
Contributions
contribution
superannuation plans are expensed in the
period in which they are incurred.
defined
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
services. Cash-settled
rendering
transactions are awards of cash for the
exchange of services, where the amount of
cash is determined by reference to the share
price.
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.
27
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
The cost of equity-settled transactions are
recognised as an expense with a
corresponding increase in equity over the
vesting period. The cumulative charge to
profit or loss is calculated based on the grant
date fair value of the award, the best
estimate of the number of awards that are
likely to vest and the expired portion of the
vesting period. The amount recognised in
profit or loss for the period is the cumulative
amount calculated at each reporting date
less amounts already recognised in previous
periods.
The cost of cash-settled transactions is
initially, and at each reporting date until
vested, determined by applying the Binomial
into
option
consideration the terms and conditions on
which the award was granted.
pricing model,
taking
The cumulative charge to profit or loss until
settlement of the liability is calculated as
follows:
•
•
during the vesting period, the liability at
each reporting date is the fair value of
the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until
settlement of the award, the liability is
the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in
profit or loss. The ultimate cost of cash-
settled transactions is the cash paid to settle
the liability.
are
taken
conditions
in determining
into
Market
consideration
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
remaining
any
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
is
remaining expense
the award
for
recognised over
period, unless the award is forfeited.
the
remaining vesting
If equity-settled awards are cancelled, it is
treated as if it has vested on the date of
cancellation, and any remaining expense is
recognised
new
replacement award is substituted for the
cancelled award, the cancelled and new
award
they were a
modification.
immediately.
treated as
is
a
If
if
(u) Fair value measurement
When an asset or liability, financial or non-
financial, is measured at fair value for
recognition or disclosure purposes, the fair
value is based on the price that would be
received to sell an asset or paid to transfer a
liability in an orderly transaction between
market participants at the measurement
date; and assumes that the transaction will
take place either: in the principal market; or
in the absence of a principal market, in the
most advantageous market.
value
is measured using
Fair
the
assumptions that market participants would
use when pricing the asset or liability,
assuming they act in their economic best
interests. For non-financial assets, the fair
value measurement is based on its highest
and best use. Valuation techniques that are
appropriate in the circumstances and for
which sufficient data are available
to
measure fair value, are used, maximising the
use of relevant observable
inputs and
minimising the use of unobservable inputs.
the
inputs used
Assets and liabilities measured at fair value
are classified, into three levels, using a fair
value hierarchy that reflects the significance
of
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.
in making
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
latest valuation and a
applied
comparison, where applicable, with external
sources of data.
the
in
(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
the GST
Revenues, expenses and assets are
recognised net of the amount of associated
GST, unless
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
financial
in
position.
the statement of
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.
and
contingencies
are
Commitments
disclosed net of
the amount of GST
recoverable from, or payable to, the tax
authority.
28
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1. Significant Accounting Policies
Conceptual Framework
Reporting (Conceptual Framework)
for Financial
(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
that have recently been
Interpretations
issued or amended but are not yet
mandatory, have not been early adopted by
the consolidated entity
the annual
reporting period ended 30 June 2020. The
consolidated entity's assessment of the
impact of these new or amended Accounting
Standards and Interpretations, most relevant
to the consolidated entity, are set out below.
for
to annual
Standards. Where
revised Conceptual Framework
is
The
applicable
reporting periods
beginning on or after 1 January 2020 and
early adoption is permitted. The Conceptual
Framework contains new definition and
recognition criteria as well as new guidance
that affects several
on measurement
Accounting
the
consolidated entity has relied on the existing
framework in determining its accounting
policies for transactions, events or conditions
that are not otherwise dealt with under the
Australian Accounting Standards,
the
consolidated entity may need to review such
policies under the revised framework. At this
time, the application of the Conceptual
Framework is not expected to have a
material impact on the consolidated entity's
financial statements.
29
2
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2: Critical Accounting Judgements, Estimates and Assumptions
in
the
The preparation of the financial statements requires management to
make judgements, estimates and assumptions that affect the
financial statements. Management
reported amounts
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
to be
expectations of
reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within
the next financial year are discussed below.
future events, management believes
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 assumptions relating to equity-settled share-based
payments would have no impact on the carrying amounts of assets
and liabilities within the next annual reporting period but may impact
profit or loss and equity.
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 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 respect of all employees at the
reporting date. In determining the present value of the liability,
estimates of attrition rates and pay increases through promotion and
inflation have been taken into account.
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
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.
the
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the
Coronavirus (COVID-19) pandemic has had, or may have, on the
consolidated entity based on known information. This consideration
extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which
the consolidated entity operates. Other than as addressed in specific
notes, there does not currently appear to be either any significant
impact upon the financial statements or any significant uncertainties
with respect to events or conditions which may impact the
consolidated entity unfavourably as at the reporting date or
subsequently as a result of the Coronavirus (COVID-19) pandemic.
30
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 3. Revenue
(a) Revenue from contracts with customers
Product Licence and Implementation Revenue
Product Maintenance
Consulting
(b) Other Revenue
Government Grants (i)
Interest Income
Other Income
Consolidated
2020
$
2019
$
231,781
20,483
296,483
548,747
664,219
6,556
-
670,775
606,613
4,440
411,157
1,022,210
279,746
78,774
12,152
370,672
(i) Government grants include an amount of $100,000 received as a cash flow boost for employers as part of the
Australian Government’s response to the COVID-19 pandemic. The Company was not eligible for Jobkeeper
payments.
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 2020, 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
2020
$
2019
$
77,489
187,858
1,532,346
(872,050)
925,643
375,561
242,418
2,529,972
(1,353,827)
1,794,124
50,266
830,394
880,660
67,525
115,819
183,344
-
-
-
-
783,905
783,905
276,768
276,768
31
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 4. Expenses (cont’d)
(e) Finance Costs
Interest and finance charges paid/payable
(f) Contractors
Payments to contractors
(g) Hosting Charges
Hosting charges
Note 5. Income Tax Expense
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
90,434
90,434
785,477
785,477
254,663
254,663
2020
$
(593,614)
593,614
-
-
-
-
-
2,236,075
2,236,075
252,410
252,410
2019
$
(821,832)
821,832
92,751
-
92,751
Profit before income tax
(3,725,369)
(3,838,766)
Tax at the statutory rate of 27.5%
(1,024,476)
(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
Amortisation of Assets
Income from Government Stimulus
Income from Research & Development Claim
Sub-total
Current year deferred tax not recognised
Deferred tax asset derecognised
1,281
2,279
21,309
404,060
184,592
(27,706)
(154,954)
430,862
593,614
-
593,614
2,035
2,200
103,279
203,244
-
-
(76,930)
233,828
821,832
92,751
914,583
Income tax expense
-
92,751
A net deferred tax asset of $2,429,907 ($2,087,977 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.
32
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 6 Current Assets – Cash and Cash Equivalents
Cash and cash equivalents
Cash on hand
Cash at bank
Cash on deposit
Consolidated
2020
$
-
2,428,648
-
2019
$
250
2,054,950
1,200,000
2,428,648
3,255,200
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
Balance as per statement of cash flows
2,428,648
3,255,200
2,428,648
3,255,200
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 (2019: nil).
Consolidated
2020
$
41,422
-
41,422
2019
$
135,551
(41,080)
94,471
-
17,474
-
58,896
4,097
29,680
33,587
161,835
33
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 7. Current Assets – Trade and Other Receivables (cont’d)
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
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
Carrying
Amount
2020
$
Provision for
Bad Debts
2020
$
40,804
-
618
-
-
-
-
-
41,422
-
Consolidated
2020
$
60,156
61,645
73,142
2019
$
58,800
54,635
-
194,943
113,435
Consolidated
2020
$
-
-
-
2019
$
72,779
(51,546)
21,233
117,383
(104,917)
12,466
262,557
(235,667)
26,890
117,383
(86,139)
31,244
258,916
(204,179)
54,737
39,356
107,214
34
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous year are set out below:
Balance at 30 June 2018
Additions
Disposals - written down value
Depreciation expense
Balance at 30 June 2019
Additions
AASB 16 Adjustment
Depreciation expense
Leasehold
Improvements
$
33,365
-
-
(12,132)
21,233
-
(21,232)
-
Office
equipment
$
46,265
4,840
-
(19,861)
31,244
-
-
(18,778)
Computer
equipment
$
73,507
19,572
(3,870)
(34,472)
54,737
3,640
-
(31,487)
Total
$
153,137
24,412
(3,870)
(66,465)
107,214
3640
(21,232)
(50,266)
Balance at 30 June 2020
12,466
-
26,890
39,356
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.
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.
35
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 10. Non-current Assets – Intangibles (cont’d)
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.
2020
Cost
Balance at 1 July 2019
Commercialisation of development to software
Additions
Written down
Balance at 30 June 2020
Note 10. Non-current Assets – Intangibles (cont’d)
Accumulated amortisation
Balance at 1 July 2019
Amortisation
Impairments
Balance at 30 June 2020
Internally
Generated
Software
$
3,202,566
347,695
-
-
3,550,261
(115,819)
(671,243)
-
(787,062)
Consolidated
Development
In Progress
$
1,296,435
(347,695)
549,511
-
1,498,251
Total
$
4,499,001
-
549,511
-
5,048,512
-
-
-
-
(115,819)
(671,243)
-
(787,062)
Net book value at 30 June 2020
2,763,199
1,498,251
4,261,450
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
Net book value at 30 June 2019
Internally
Generated
Software
$
-
3,202,566
-
-
3,202,566
-
(115,819)
-
(115,819)
3,086,747
Consolidated
Development
In Progress
$
3,059,698
(3,202,566)
2,223,208
(783,905)
1,296,435
-
-
-
-
1,296,435
Total
$
3,059,698
-
2,223,208
(783,905)
4,499,000
-
(115,819)
-
(115,819)
4,383,182
36
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 10. Non-current Assets – Intangibles (cont’d)
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 4.5-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:
17% post-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 current sales pipeline, projected sales through current reseller partners, sales
through new partnerships with resellers and increased users with existing customers;
Management believes the projected revenue growth rate is prudent and justified, based on its market analyses and
evaluation.
3-5% per annum increase in operating costs and overheads.
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 56% for the internally generated software and 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 99% for the internally generated software and capitalised
development projects before there would need to be impair either asset, with all other assumptions remaining constant.
Note 11. Right of Use Asset
2020
Cost
Balance at 1 July 2019
Adjustment to lease arrangement
Balance at 30 June 2020
Accumulated amortisation
Balance at 1 July 2019
Amortisation
Balance at 30 June 2020
Net book value at 30 June 2020
Land and
Building
$
1,947,723
(45,796)
1,901,927
(689,819)
(159,151)
(848,970)
1,052,957
37
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 12. Current Liabilities – Trade and Other Payables
Trade Payables
Other Payables
Note 13. Current Liabilities - Borrowings
Secured Bank Loan
The Group has no bank overdraft or loan facilities as at 30 June 2020.
Note 14. Current Liabilities – Employee Benefits
Employee Benefits
Consolidated
2020
$
117,520
23,188
2019
$
192,744
63,846
140,708
256,590
Consolidated
2020
$
-
-
2019
$
-
-
Consolidated
2020
$
2019
$
219,140
296,816
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
2020
$
85,783
2019
$
100,669
38
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 15. Current Liabilities - Other
Accrued Expenses
Deferred Revenue
Note 16. Non-Current Liabilities – Employee Benefits
Employee Benefits
Note 17. Non-Current Liabilities – Provisions
Lease Make Good
Consolidated
2020
$
112,831
178,341
2019
$
281,698
-
291,172
281,698
Consolidated
2020
$
28,346
2019
$
19,049
Consolidated
2020
$
74,249
2019
$
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 18. Deferred Tax
Assets
Current
Consolidated
2020
$
2019
$
Provision for research and development tax incentive
886,008
1,494,825
Non-current
Deferred tax asset
-
-
39
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 18. Deferred Tax (cont’d)
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
-
92,751
2,058
4,020
(96,985)
19,174
(14,960)
(6,058)
-
(92,751)
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2020
Deferred tax asset on:
Accrued Income &
prepayments
Property, plant & equip.
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Tax Losses
Net amount
2019
Deferred tax asset on:
Accrued Income &
prepayments
Property, plant & equip.
Provisions
Costs of raising equity
Accrued expenditure
Lease incentives
Tax Losses
Net amount
40
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 19. Equity – Issued Capital
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
Ordinary shares - fully paid
Ordinary shares - paid to $0.00
Capital raise fees
164,021,946
-
-
123,096,982
-
-
17,717,891
-
(2,004,499)
15,467,018
-
(1,765,322)
164,021,946
123,096,982
15,713,392
13,701,686
Date
Shares
Issue price
$
Movements in ordinary share capital
Details
Balance
Issue of shares
Options called
Share forfeitures
Share issue transaction costs (net tax)
Balance
Issue of shares
Issue of shares
Share issue transaction costs (net tax)
30-Jun-18
Sep-18
Jul-18
Jul-18
Sep-18
30-Jun-18
18-May-20
15-Jun-20
Jun-20
83,816,982
40,000,000
-
(720,000)
-
123,096,982
29,820,418
11,104,545
-
Balance
30-Jun-20
164,021,946
$0.20
$0.055
$0.055
6,767,689
8,000,000
500
-
(1,066,503)
13,701,686
1,640,123
610,750
(239,167)
15,713,392
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.
41
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 20. Equity – Reserves
Foreign Currency Reserve
Share Based Payments Reserve
2020
2019
$
1,258
1,806,792
1,808,050
$
1,258
1,611,892
1,613,150
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 30 June 2018
Foreign Currency Reserve
Share based payments
Balance at 30 June 2019
Foreign Currency Reserve
Share based payments
Directors, Key Management Personnel and
Secretary
Investor Relations Advisory
Cost of capital Raise
Sundry Bal (Not material)
Balance at 30 June 2020
Share
Based
Payments
$
786,331
-
825,561
1,611,892
77,478
12,563
104,848
11
1,806,792
Consolidated
Foreign
Currency
$
-
1,258
-
1,258
-
-
-
-
-
-
Total
$
786,331
1,258
825,561
1,613,150
-
77,478
12,563
104,848
11
1,808,050
42
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 21. Equity – Retained Profits
Retained losses at the beginning of the financial year
Adoption of AASB16
Losses after income tax expense for the year
Retained losses at the end of the financial year
Note 22. 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
2020
2019
$
(6,726,078)
(258,814)
(3,725,369)
(10,710,261)
$
(2,794,561)
-
(3,931,517)
(6,726,078)
Consolidated
2020
$
2019
$
15,549
15,549
Note 23. 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.
43
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 23. 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 24. Key Management Personnel Disclosures
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share Based Payments
Consolidated
2020
2019
$
$
1,600,202
106,283
10,699
74,351
1,791,535
1,853,767
136,825
12,262
363,992
2,366,846
Note 25. 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
2020
$
2019
$
66,500
67,442
-
20,000
20,000
15,968
24,745
40,713
86,500
108,155
44
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 26. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2020
$
2019
$
3,064
190,599
-
3,064
137,522
328,121
Operating lease commitments includes contracted amounts for office 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 27. 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
Payment for Corporate Advisor services from Gemelli
Payment for Corporate Advisor services from Amicaa/MST
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
2020
$
10,500
-
36,000
210,962
-
-
-
-
2019
$
71,347
962,500
-
-
-
-
2,000
7,345
257,462
1,043,192
45
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 27. Related Party Transactions (cont.)
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.
Note 28. 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
Net assets
Equity
Issued capital
Reserves
Retained profits (accumulated losses)
2020
$
2019
$
(3,725,369)
(3,928,217)
3,559,088
5,018,062
8,922,259
9,515,692
651,019
835,105
2,111,077
926,934
6,811,182
8,592,058
15,713,392
1,808,050
(10,710,260)
13,701,686
1,613,150
(6,722,778)
Total equity
6,811,182
8,592,058
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.
46
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 29. 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
2020
%
100%
100%
100%
2019
%
100%
100%
100%
Note 30. Reconciliation of profit after income tax expense to net cash from operating activities
2020
2019
$
$
Loss after income tax expense for the year
(3,725,369)
(3,931,517)
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
Increase)/ decrease in revenue in advance
880,660
-
90,052
-
69,352
(73,142)
(7,010)
32,231
(549,511)
(273,829)
608,817
(68,379)
-
178,341
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)
-
Net cash from operating activities
(2,837,787)
(5,548,855)
47
2
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 2020
Note 31. 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
2020
$
(3,725,369)
2019
$
(3,931,517)
Number
Number
126,672,995
119,993,339
Cents
(2.94)
Cents
(3.28)
Note 32. Matters subsequent to the end of the financial year
Board changes
On 22 July 2020, the Company announced that it is continuing its business optimisation process following the
recent successful capital raising with the board and management arrangements streamlined and a new advisory
group formed.
This involved reducing the number of directors from six to three and establishing a strengthened strategic
advisory capability through the formation of an advisory group led by former board chair and non-executive
director, Stephen Smith.
The revised board consists of Miles Jakeman AM as Chair with Leanne Graham and CEO, Daniel Lai.
General Meeting
Further, as part of finalising the formalities relating to the recent successful capital raise, on 27 August 2020 the
Company held a General Meeting where shareholders approved to:
ratify a number of prior issues of shares/share options; and,
issue a number of shares and share options to advisors and directors.
COVID-19
As the impact of the Coronavirus (COVID-19) pandemic is ongoing, it is not practicable to estimate the potential
impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on
measures imposed by the Australian Government and other countries, such as maintaining social distancing
requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2020 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.
48
2
DIRECTORS DECLARATION
30 JUNE 2020
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 2020 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
Miles Jakeman AM
Chairman
21 September 2020
Canberra
49
2
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of archTIS Limited for the year ended 30 June 2020, 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: 21 September 2020
RODNEY MILLER
Partner
50
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 2020, 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:
giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(i)
(ii)
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.
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.
We have determined the matters described below to be the key audit matters to be communicated in our report.
51
Key Audit Matter
How our audit addressed this matter
Going concern
Refer to Note 1(a) in the financial statements
For the year ended 30 June 2020, the Group had
incurred a net loss of $3,725,371, net cash outflows
from operating activities of $2,837,787 and net cash
outflows from investing activities of $3,640.
The directors have prepared the financial report on
the going concern basis. The directors’ assessment
of the Group’s ability to continue as a going concern
is based on a cashflow forecast.
Our audit procedures included the following:
• Critically assessing the directors' reasons as to
why they believe it is appropriate to prepare the
financial report on a going concern basis.
• Reviewing the current financial position of the
Group
• Assessing the appropriateness and mathematical
accuracy of the cash flow forecasts and budgets
prepared by management.
We determined this assessment of going concern to
be a key audit matter due to the significant judgments
involved in preparing the cashflow forecast, and the
potential impact of the results of management’s
assessment.
• Challenging the reasonableness of key
assumptions used.
• Performing sensitivity testing on these
assumptions.
Disclosures relating to going concern can be found at
Notes 1(a).
• Assessing the adequacy of the going concern
disclosures in the financial report (Note 1(a)).
Capitalisation of assets, including useful lives, amortisation and impairment
Refer to Note 10 in the financial statements
There are a number of areas where judgments
significantly impact the carrying value of intangible
assets, and their respective amortisation profile.
These areas are as follows:
policies, as per AASB 138.
Our audit procedures included the following:
• Evaluated the appropriateness of capitalisation
•
•
•
the decision to capitalise or expense costs,
as per AASB 138 Intangible Assets;
the annual asset life and impairment review,
as per AASB 136 Impairment of Assets; and
significant changes that have taken place
during the period or are expected to take
place in the near future, which will impact the
extent to which, or manner in which, an asset
is used or is expected to be used.
Changes in these judgments have a significant
impact on the results of the Group. Accordingly, this
was considered a key audit matter.
Disclosures relating to the capitalisation and
impairment of assets can be found at Notes 1(n),
1(o), 2 and 10.
• Tested a sample of costs capitalised to
determine whether capitalisation was
appropriate.
• Evaluated the reasonableness of management’s
assessment of expected future economic
benefits that are attributable to the intangible
assets.
We assessed the application of the Group’s annual
asset life review. This included the judgments made
by the Group on:
•
the appropriateness of assets lives applied in the
calculation of amortisation.
Our audit procedures in relation to management's
assessment of impairment included:
• Evaluating the valuation methodology used.
• Evaluating the reasonableness of key
assumptions including the cashflow forecasts,
revenue growth rates, discount rates and other
inputs used in the model.
We evaluated the adequacy of disclosures included
in Notes 1(n), 1(o), 2 and 10.
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 2020, 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.
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 21 to 26 of the directors' report for the year ended
30 June 2020.
In our opinion, the Remuneration Report of archTIS Limited., for the year ended 30 June 2020, 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: 21 September 2020
RODNEY MILLER
Partner
SHAREHOLDER INFORMATION
30 JUNE 2020
The shareholder information set out below was applicable as at 18 September 2020.
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 2020, 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
238
2,401
936
1,389
195
5,159
563
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:Ordinary shares
Hsbc Custody Nominees(Australia) Limited
Daniel Chun Leung Lai
Bruce Talbot
Possum Hill Pty Ltd
Mr Peter Robert Woodland
Mr David Wood
Citicorp Nominees Pty Limited
Bond Street Custodians Limited
Mr Ottmar Weiss
Mr Miles Gareth Jakeman
Redhill Holdings Ltd
Mr David Frederick Oakley
Power Invest Pty Ltd
Pershing Australia Nominees Pt Y Ltd
Mr Arya Ehteshami
Oceanfront Properties Pty Ltd
Cityscape Asset Pty Ltd
Monex Boom Securities (Hk) Ltd
Invia Custodian Pty Limited
Mst Financial Services Pty Ltd
Amicaa Advisors Pty Ltd
Ligon 205 Pty Ltd
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
Number
held
14,081,783
% of total
shares issued
8.30%
7,320,616
7,286,436
7,284,252
5,528,336
3,155,682
2,781,264
2,200,000
1,968,450
1,454,545
1,333,668
1,270,000
1,268,750
1,202,132
1,100,220
1,050,000
1,040,694
1,028,563
1,000,000
1,000,000
1,000,000
909,091
4.32%
4.30%
4.30%
3.26%
1.86%
1.64%
1.30%
1.16%
0.86%
0.79%
0.75%
0.75%
0.71%
0.65%
0.62%
0.61%
0.61%
0.59%
0.59%
0.59%
0.54%
66,264,48264,482 39.07%
103,327,505
60.93%
55
2
SHAREHOLDER INFORMATION
30 JUNE 2020
Unquoted Options
Expiring 10 Oct 2022 exercisable at $0.10 escrowed until 21 Sep 2020
Expiring 28 Aug 2023 exercisable at $0.10
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 Jul 2021 exercisable at $0.20
Expiring 05 Sep 2022 exercisable at $0.24 escrowed until 21 Sep 2020
Expiring 01 Feb 2021 exercisable at $0.12
Expiring 01 Jul 2023 exercisable at $0.20
Expiring 13 Feb 2023 exercisable at $0.20
Expiring 01 Jul 2023 exercisable at $0.20
Totals
Substantial Holders
The substantial holders in the Company are listed below:
HSBC CUSTODY NOMINEES(AUSTRALIA) LIMITED
DANIEL CHUN LEUNG LAI
BRUCE TALBOT
POSSUM HILL PTY LTD
MR PETER ROBERT WOODLAND
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number
On issue
Number of
holders
4,289,880
500,000
7,200,000
1,200,000
1,600,000
4,930,000
300,000
250,000
540,000
500,000
21,309,880
3
1
7
2
2
13
1
1
1
1
32
Ordinary shares
Number
held
14,081,783
% of total
shares issued
8.30%
7,320,616
7,286,436
7,284,252
5,528,336
4.32%
4.30%
4.30%
3.26%
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.
56
2