Annual Report
Cirralto Limited
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ABN 67 099 084 143
For the year ended 30 June 2020
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COMPANY OVERVIEW
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Cirralto Limited (ASX: CRO) is a transaction services business supplying industries with a broad range of B2B payment
services, digital trading software and integration solutions.
Our goal is to convert EFT payments to card payments utilising the BPSP engagement, coupled with our payments
collaboration framework. Our competitive advantages deliver customers end to end e-invoicing integration, rapid
onboarding, digital trust, and automated reconciliation.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
Cirralto Limited
Annual Report, 30 June 2020
ABN: 67 099 084 143
Corporate Governance Statement
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Directory
Shareholder Information
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
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CORPORATE GOVERNANCE STATEMENT
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors support
the principles of Corporate Governance. Where deemed appropriate, the Company follows the best practice
recommendations as set out by the ASX Corporate Governance Council. Where the Company has not followed best
practice for any recommendation, an explanation is given in the Corporate Governance Statement.
The Company’s Corporate Governance Statement is available on the Company’s website at www.cirralto.com.au
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
2
The Directors present their report on the consolidated entity consisting of Cirralto Limited (ASX: CRO) and the
entities it controlled for the financial year ended 30 June 2020 (referred to hereafter as ‘the Company’ or ‘Cirralto’
or ‘the Group’).
The Directors of Cirralto Limited during the year and up to the date of this report are shown below:
Directors
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Mr Peter Richards
Mr Howard Digby
Mr Marcus L’Estrange
Mr Stephen Dale
Mr Adrian Floate
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Mr Peter Richards
Non-Executive Chairman
Appointed 12 January 2018
Non-Executive Director
Appointed 1 August 2019
Non-Executive Director
Appointed 11 November 2014
Resigned 22 July 2019
Non-Executive Director
Appointed 5 April 2014
Managing Director
Appointed 21 September 2018
Executive Director
Appointed 10 November 2016
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Peter Richards is an experienced independent director with over 40 years of international business experience with
global companies including British Petroleum, Wesfarmers Limited, Dyno Nobel Limited and Norfolk Holdings
Limited. During his time at Dyno Nobel, he held a number of senior positions within the North American and Asia
Pacific businesses, before being appointed as Chief Executive Officer based in Australia (2005 to 2008).
Peter has served as non-executive chairman of Elmore Limited (previously known as IndiOre Limited) since 2017,
having being a non-executive director since 2009. He is also Chairman of GrainCorp Limited and Emeco Holdings
Limited. Peter holds a Bachelor of Commerce degree from the University of W.A.
Mr Stephen Dale
Stephen Dale has business experience in telecommunications, logistics, retail furniture and saddlery ventures. Since
2003 he has been a Board member of Saddleworld Australia, a franchised retail group, having served as chairman
and currently is deputy chairman. He has also served as a Board member of Assumption College Kilmore for 14
years. In addition, his current activities include providing support services to the retail sector and development of
a beef cattle breeding stud.
Stephen has held no other directorships of listed corporations in the last three years.
Mr Marcus L’Estrange
Marcus L’Estrange is an engineer with extensive experience in the IT and mining, oil and gas industries. He has been
involved in the start-up of several successful companies within these sectors. He has a diverse range of skills, both
as an engineer and in sales, marketing and business development.
Marcus is a co-founder of Raptor Global Corporation Ltd and is also Chairman of Neopharma Technologies Ltd, a
Director of Drilling Resource Partners Pty Ltd and a Non-Executive Director of Potash Global Ltd.
Marcus ceased being a director of Cirralto Limited on 22 July 2019.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
Mr Adrian Floate
3
Managing director of Cirralto, Adrian Floate is an IT innovator who has been building software for 20 years. He has
founded, built, and sold several technology businesses and worked in Asia, Australia, the UK and US. Adrian has
both private and public company experience at an executive level. He is a business strategist that looks to overcome
complex problems with software automation solutions. Adrian has worked in supply chain management systems
since 1997 and has experience in manufacturing, wholesale distribution, retail and eCommerce.
Adrian’s career includes designing and developing Bunning’s BITS system EDI over IP network, the development
and commercialisation of Australia’s first SET payments gateway, the development and commercialisation of a
Windows Mobile based email platform that pre-dated the Blackberry equivalent technology, designed the CAPlink
EDI network for the automotive industry in conjunction with the Capricorn Society, co-founding the CLANG online
car service portal and in more recent times leading the Appstablishment software team to create award-winning
mobile App’s for business collaboration. He has also been instrumental in providing the online portal to utilise
Cirralto’s conversion software to provide a global online service.
Adrian has held no other directorships of listed corporations in the last three years.
Mr Howard Digby
Howard Digby is a professional business leader with wide ranging international experience across a variety of
industries and markets. He has a proven track record in starting and growing businesses. Howard’s recent director
experience includes exposure to disruptive early stage technology, Israeli based provision of high security and
bandwidth data voice and video communications technology, IT services, including cloud migration and
cybersecurity, cloud-based application software in the healthcare sector, and a Silicon Valley based next generation
memory technology. Howard holds a Bachelor of Engineering (Hons), Mechanical Major from the University of W.A.
Howard has held no other directorships of listed corporations in the last three years.
Interests in the shares and options of the Company and related bodies corporate
As at the date of this report, the interests of the directors in the shares and options of Cirralto Limited were:
Director:
Peter Richards
Stephen Dale
Adrian Floate
Howard Digby
Total
Shares
Options
Held Directly
10,394,737
400,000
16,603,348
666,666
28,064,751
Held Indirectly
13,241,790
1,100,000
42,866,943
7,700,000
64,908,733
Held Directly
7,810,447
100,000
4,150,837
166,666
12,227,950
Held Indirectly
2,598,684
275,000
13,500,000
6,425,000
22,798,684
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
Company Secretary
Mr Justyn Stedwell
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Justyn Stedwell has completed a Bachelor of Business & Commerce (Management & Economics) at Monash
University, a Graduate Diploma of Accounting at Deakin University, a Graduate Diploma in Applied Corporate
Governance with the Governance Institute of Australia and a Graduate Certificate of Applied Finance with Kaplan
Professional.
Justyn has over twelve years’ experience acting as a Company Secretary of ASX listed companies in a wide range of
industries and is currently Company Secretary of several ASX listed companies.
The Company did not pay any dividends during the 2020 financial year (2019: $nil). The Directors do not recommend
the payment of a dividend in respect of the 2020 financial year.
The economic entity’s principal activities during the course of the financial year were the development and
commercialisation of technology assets that enable modernisation of business IT systems via conversion, migration,
and management of server-based legacy data and systems to the cloud.
Dividends
Principal Activities
Remuneration Report
The remuneration report required under section 300A (1) of the Corporations Act 2001 is set out within this report
and forms part of the Directors’ Report.
Review and Results of Operations
Cirralto Limited owns, licenses and operates technology assets and services that enable modernisation of business
IT systems via the conversion, migration and management of server-based legacy data and systems to an integrated
cloud-based solution. The Company supplies a toolbox of digital technologies which enables businesses to retain
essential data while migrating across to cloud-based, fully connected and integrated systems.
The table below details key financial information for the year ended 30 June 2020 (FY20), in comparison to the 2019
(FY19) results.
Revenue from continuing operations
Cost of services rendered
Employee & directors’ benefits expense
Impairment of intangible assets
Share-based payment expense
Other expenses
Income tax expense
Statutory net loss after income tax
30 June 2020 30 June 2019 Movement
$
341,332
(321,861)
(1,345,337)
(3,758,592)
(135,944)
(2,217,545)
-
(7,437,947)
$
670,732
(498,463)
(1,422,798)
(2,537,598)
(681,840)
(1,567,070)
-
(6,037,037)
(329,400)
176,602
77,461
(1,220,994)
545,896
(650,475)
-
(1,400,910)
Revenue for the 2020 reporting period was $341,332 compared to the 2019 revenue of $670,732, representing a
decrease of $329,400 which was largely due to the direct impact of the COVID-19 pandemic. Like much of the
economy, Cirralto’s customers suffered significantly through the national economic downturn.
The graph on the following page shows a breakdown of the total addressable payments market from March 2020
to June 2020.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
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Revenue for the Group fell 48% in April 2020 following a decline of 58% in March 2020. These substantial declines
were fuelled by projects being cancelled or suspended and the Company delivering direct relief in the form of
subscription fee holidays, implementation discounts, free services and deferred payment plans to enable customers
to remain on board and active. The revenue impact of this relief was approximately $285,000.
During the year the Company raised circa $3 million (net of costs) by way of borrowings and convertible notes. The
funds have enabled the completion of development, certification and launch of the Company’s business payment
services products.
The statutory net loss after tax for the FY20 reporting period was $7,437,947 compared to FY19 of $6,037,037.
However, these results reflect a significant item of $3,758,593 in FY20 which represents a non-cash impairment
recognised.
Operating costs (excluding impairments) have decreased compared to last year, following a reduction in the
executive, coupled with a freeze in essential capital expenditure and restructure of the company’s leases.
Closing cash on hand at year end was $273,628 following the utilisation of $1,533,838 for operating activities and
$1,360,255 for software development expenditure (excluding impairment) against collections of $504,263 and
receipt of funds from placements and loans of $3,008,000 (net of costs).
Significant changes in the state of affairs
Other than as referred to elsewhere in this report, there have been no other significant changes in the state of
affairs.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
Going concern
6
The financial report has been prepared on the basis that the Group is a going concern, which contemplates the
continuity of normal business activity, the realisation of assets and the settlement of liabilities in the normal course
of business.
For the year ended 30 June 2020 the Group recorded a net loss of $7,437,947 (2019: $6,037,037) and at 30 June
2020 had a net working capital deficit of $2,516,006 (2019: $16,068) and a net liability position of $2,494,170 (2019:
net asset position of $3,087,614). The Group also recorded a net cash outflow in operating activities for the year
ended 30 June 2020 of $1,533,838 (2019: $2,198,096).
The Group’s ability to continue as a going concern and to meet its commitments as and when they fall due is
dependent on the Group meeting its future cash forecasts, deferring or converting its debts and/ or securing
additional funding.
Subsequent to reporting date, the Group raised $2,712,000 (before costs) through a share placement to
institutional and professional investors as well as an additional $397,710 (before costs) through a pro-rata non-
renounceable entitlement offer.
The Group has also commenced implementing steps to restructure its balance sheet and core operations. This has
included the retiring of debt, the closure of the Company’s office locations and streamlining operations. The
implementation of these changes has seen the Company reduce its operating costs.
The Directors are also confident that the Group will be successful in securing additional funding through the issue
of new debt or equity instruments, should the need arise. The Directors are also aware that the Group has the
option, if necessary, to defer certain expenditure or abandon certain projects and reduce costs in order to minimise
such funding requirements.
Based on these facts, the Directors consider the going concern basis of preparation to be appropriate for this
financial report. Should the Group be unsuccessful in raising additional funds through the issue of new debt or
equity instruments, or if the Group does not achieve its planned operational forecasts, there is a material
uncertainty which may cast significant doubt whether the Group will be able to continue as a going concern and
therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the
amounts stated in the financial report.
The financial statements do not include any adjustments relative to the recoverability and classification of recorded
asset amounts or, to the amounts and classification of liabilities that might be necessary should the Group not
continue as a going concern.
Subsequent events after the balance date
In July 2020, the Group issued a total of 267,421,918 shares in settlement of its financial liabilities. 189,921,918
shares were issued at $0.005 per share on conversion of $949,610 of convertible loan notes. 77,500,000 shares
were issued at $0.005 per share to settle other liabilities of $387,500 which were included in trade and other
payables as at 30 June 2020.
During July and August 2020, the Group settled the liability with Obsidian Global LLC. 32,208,374 shares were issued
for $0.005 per share with a further 59,999,937 shares issued on 18 August 2020 at $0.009474 per share. The
remainder of the liability was paid in cash on 27 August 2020.
On 14 August 2020 the Company undertook a share placement to institutional and sophisticated investors, issuing
271,000,000 shares to raise $2,712,000 (before costs). The Funds raised under the share placement will be used to
support growth, further development of its payments’ products, debt reduction, marketing, costs associated with
the completion of the acquisition of Appstablishment Pty Ltd and general working capital requirements.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
7
On 2 October 2020 the Company issued 397,709,616 listed options with an expiry of 28 July 2023 raising $397,710
(before costs). The options were issued under a pro-rata non-renounceable entitlement issue of options
(announced on 7 September 2020) to eligible shareholders on the basis of one (1) option for every eligible four (4)
shares held (Option Issue). The purpose of the Options Issue was to recognise the support and loyalty the Company
has received from its Shareholders to date.
The impact of the Coronavirus (COVID-19) pandemic is ongoing as at 30 June 2020 and 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.
Likely developments and expected results
The likely developments in the economic entity’s operations, to the extent that such matters can be commented
upon, are covered in the Review and Results of Operations.
The Group is currently not subject to any particular and significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
Environmental regulation
Share Options
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Shares under Option
As at the date of this report, there existed the following unlisted options:
Date Granted
7 September 2017
15 December 2017
3 May 2018
3 May 2018
3 May 2018
28 February 2019
2 May 2019
24 July 2020
24 July 2020
Expiry Date
30 June 2022
15 December 2020
30 November 2020
3 May 2021
3 May 2021
28 February 2022
2 May 2021
28 July 2022
28 July 2023
Exercise Price
$0.045
$0.045
$0.077
$0.054
$0.082
$0.040
$0.025
$0.025
$0.025
Number of Shares
Under Option
27,000,000
5,500,000
3,000,000
4,500,000
7,500,000
5,000,000
18,401,282
15,400,000
145,400,000
231,701,282
Vested &
Exercisable
20,250,000
5,500,000
3,000,000
4,500,000
7,500,000
5,000,000
18,401,282
15,400,000
145,400,000
224,951,282
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Indemnification and Insurance of Directors and Officers
During the financial year, the Company held an insurance policy to indemnify Directors and Officers against certain
liabilities incurred as a Director or Officer, including costs and expenses associated in successfully defending legal
proceedings. The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify
the Directors or Officers of the Company or any related body corporate against any liability incurred as such a
Director or Officer. In accordance with commercial practice, the insurance policy prohibits disclosure of the terms
of the policy, including the nature of the liability insured against and the amount of premium.
The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the
Company against a liability incurred as auditor.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
Proceedings on Behalf of the Company
8
No proceedings have been brought or intervened on behalf of the Company with leave of the Court under section
237 of the Corporations Act 2001.
The Company has reviewed its corporate governance practices against the ASX Corporate Governance Council’s
Corporate Governance Principles and Recommendations (3rd edition) and the Company’s corporate governance.
The Corporate Governance Statement is available at www.cirralto.com.au.
During the financial year, 18 Board meetings were held. During the year there were no committees of the Board.
The following table sets out the number of Directors’ meetings held during the financial year and the number of
meetings attended by each Director (while they were a Director).
Board Meetings
Number Eligible to
Attend
18
1
18
18
17
Number Attended
18
1
18
18
15
During the year the following fees were paid or payable for services provided by the auditor:
Audit and review of financial statements
Non-audit services
Auditor’s Independence Declaration
The Auditor’s Independence Declaration for the year ended 30 June 2020 has been received and can be found on
page 18.
2020
$
65,960
-
65,960
2019
$
70,329
5,500
75,829
Corporate Governance
Meetings of Directors
Director:
Peter Richards
Marcus L’Estrange
Stephen Dale
Adrian Floate
Howard Digby
Audit Services
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
9
The Directors present the Company’s remuneration report for the financial year ended 30 June 2020 (FY20)
(Report).
The Report has been prepared in accordance with the disclosure requirement of the Corporations Act 2001 (Cth),
the regulations made under the Act and Australian Accounting Standard AASB 124: Related Party Disclosures and
outlines the remuneration arrangements for the Key Management Personnel of the Group (KMP) during FY20. KMP
are those persons who directly or indirectly had authority and responsibility for planning, directing and controlling
the Group’s activities during the reporting period.
The Report contains the following sections:
a) Key management personnel (KMP) covered in this report
b) Remuneration policy and link to performance
c) Elements of executive remuneration
d) Link between executive remuneration and performance
e) Overview of non-executive director remuneration
f) Remuneration expenses for KMP
g) Contractual arrangement with KMPs
h) Use of remuneration consultants
i) Voting and comments made at the Company’s 2019 Annual General Meeting
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a) Key management personnel covered in this report
Name
Non-Executive Directors
Peter Richards
Marcus L’Estrange
Howard Digby
Stephen Dale
Executive Directors
Mr Adrian Floate
Position
Term as KMP
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Full financial year
Ceased 22 July 2019
Appointed 1 August 2019
Full financial year
Managing Director
Full financial year
b) Remuneration and link to performance
Remuneration Policy
The remuneration of all Executives and Non-Executive Directors, Officers and Employees of the Company is
determined by the Board.
The Company is committed to remunerating Senior Executives and Executive Directors in a manner that is market-
competitive and consistent with best practice, including in the interests of shareholders. From time to time, the
Board may engage external remuneration consultants to assist with this review.
Executive Remuneration policies and framework
We reward executives with a level and mix of remuneration appropriate to their position, responsibilities and
performance, in a way that aligns with the business strategy. Executives receive fixed remuneration and variable
remuneration consisting of short-term incentive (STI) and long-term incentive (LTI) opportunities.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
The chart below provides a summary of the structure of executive remuneration in FY20:
10
Structure of Executive Remuneration FY20
Fixed Remuneration
Base salary + superannuation + benefits
Variable Remuneration
STI plan
Cash
LTI plan
Options
(5 years)
Maximum 25 % of Base salary
subject to the achievement of
annual performance conditions
Vest upon achievement of set
performance conditions
Remuneration mix- target
The target remuneration mix for the CEO for FY20 is shown in figure 2 below. It reflects the STI opportunity for the
current year that will be available if the performance conditions are satisfied. There were no LTIs granted during
the year.
As for the remainder of the Board, there were no STis in place as at 30 June 2020.
Target remuneration mix for FY20
c) Elements of executive remuneration
Fixed remuneration
Executives may receive their fixed remuneration as cash. Fixed remuneration is reviewed annually, or on
promotion. It is benchmarked against market data for comparable roles in companies in a similar industry and with
similar market capitalisation. The Board aims to position executives at or near the median, with flexibility to take
into account capability, experience, and value to the organisation and performance of the individual.
Superannuation is included in fixed remuneration. There were no increases to fixed remuneration during this
financial year.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
11
Short-term incentives
The purpose of a performance-based bonus is to reward individual and team based on performance in line with
Company objectives. Consequently, performance-based remuneration is paid to an individual where the
individual’s performance clearly contributes to a successful outcome for the Company. This is regularly measured
by Key Performance Indicators (KPIs).
The Company uses a number of KPIs to determine achievement, depending on the role of the Executive being
assessed.
These include:
successful contract negotiations;
successful revenue generation;
•
•
• achievement of project milestones within budget and on time; and
• achievement of software launch milestones.
The Company has set clear targets for the executives and managing director. These include:
improving the Company’s payments interchange margin and cost pricing by entering into new agreements with
global acquiring network;
• growing the Company’s market capitalisation above $200 million;
•
•
• achieving post tax profitability in the 2021 financial year.
completing the merger with Appstablishment Software Group within the Q4 2020;
continuing month on month customer growth above 7%; and
Long-term incentives
Howard Digby was issued 4,500,000 options by shareholders’ approval at an AGM on 24 July 2020. Options are
granted subject to continuous service on the Board and can only be converted on completion of 12 months of
service as a Non-Executive Director.
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ESOP Rules
Eligibility
Instrument
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Terms and
conditions
applicable to an
offer under the
ESOP
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Forfeiture and
termination
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
Executive Incentive Grants
12
The establishment of Cirralto Limited’s Employee Share Option Plan (ESOP) was approved by shareholders at the
2017 annual general meeting. The ESOP is designed to provide long-term incentives to eligible employees and
executive directors of the Group to assist in the motivation, retention and reward of participants. The key terms of
the ESOP are outlined below:
The plan is open to all employees of the Group, or other person (eligible employees) declared
by the Board to be eligible.
Grants will comprise options. Each option represents a right to acquire one ordinary share in
the Company subject to the satisfaction of the applicable vesting conditions, the exercise of
the option and payment of the exercise price.
The Board has absolute discretion to determine the terms and conditions applicable to an
offer under the ESOP including:
• any conditions to be satisfied before an option will be granted
• any vesting, performance or other conditions required to be satisfied before options vest
and may be exercised
the options exercise period
the closing date and expiry date
•
• any applicable issue price or exercise price
•
Options will lapse if performance conditions are not met. In the event of employment
cessation, the eligible participant will have 90 days from the date of cessation of the
employment agreement to exercise any vested options, or as the Board expressly determines.
Unexercised options will lapse after 90 days of the date of termination of the employment
agreement, or as the Board expressly determines.
d) Link between executive remuneration and performance
Statutory performance indicators
We aim to align our executive remuneration to our strategic and business objectives and the creation of shareholder
wealth. The table below shows measures of the Group’s financial performance over the last five years as required
by the Corporations Act 2001.
Company Performance
Revenue ($)
Net loss before tax ($)
Net loss after tax ($)
Key management remuneration ($)
Share price at the end of year ($)
Dividend ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
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2020
341,332
(7,437,947)
(7,437,947)
433,245
0.01
-
(1.01)
(1.01)
2019
670,732
(6,037,037)
(6,037,037)
1,258,769
0.01
-
(0.013)
(0.013)
2018
301,553
(6,440,644)
(6,440,644)
1,288,805
0.06
-
(0.02)
(0.02)
2017
37,955
(1,938,065)
(1,938,065)
365,153
0.04
-
(0.03)
(0.03)
2016
6,000
(1,773,798)
(1,773,798)
162,000
0.01
-
(0.03)
(0.03)
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
e) Overview of non-executive director remuneration
13
Non-Executive Directors are remunerated out of the maximum aggregated amount approved by shareholders and
at a level that is consistent with industry standards. In determining non-executive fees, the Board aims to ensure
that remuneration practices are:
competitive and reasonable, enabling the Company to attract and retain key talent;
•
• aligned to the Company’s strategic and business objectives and the creation of shareholder value;
•
• acceptable to shareholders.
transparent and easily understood; and
The maximum annual Non-Executive Directors fee pool limit is $250,000 and was approved by shareholders at the
annual general meeting on 30 November 2006.
The table below summarises Board fees payable to Non-Executive Directors for FY20 (inclusive of superannuation
where applicable):
Board fees
Chair
NED
$
30,000
30,000
All Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment.
The letter summarises the Board policies and terms, including remuneration, relevant to the office of director. Non-
Executive Directors may be reimbursed for expenses reasonably incurred in attending to the Group’s affairs. Non-
Executive Directors may receive performance-based bonuses but not retirement allowances. Prior shareholder
approval is required to participate in any issue of equity.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
f) Remuneration expenses for KMP
14
The following table sets out the details of the remuneration of the directors and the key management personnel of the Group for the financial year ended 30 June 2020.
KMP
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Non-Executive Directors
Peter Richards
Marcus L’Estrange3
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Stephen Dale
Howard Digby
Executive Directors
Adrian Floate
Fixed Remuneration
Salary & Fees
$
30,000
39,077
30,000
27,500
Post-
employment
benefits1
$
-
-
-
-
Other2
$
-
-
-
-
275,000
26,125
11,043
401,577
26,125
11,043
Annual &
Long Service
Leave
$
-
-
-
-
-
-
Variable Remuneration
STI Bonus
accrued
LTI Value of
Equity
Total
$
30,000
39,077
30,000
43,767
$
-
-
-
16,267
103,414
415,582
119,681
558,426
$
-
-
-
-
-
-
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1. Post-employment benefits comprise superannuation payments and any voluntary fee sacrifice to superannuation.
2. Other comprises of travel allowance payments.
3. Marcus L’Estrange ceased being a director of Cirralto Limited on 22 July 2019.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
15
The following table sets out the details of the remuneration of the directors and the key management personnel of the Group for the financial year ended 30 June 2019.
KMP
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Non-Executive Directors
Peter Richards
Marcus L’Estrange
Stephen Dale
Executive Directors
Michael Mulvey2
Adrian Floate
Salary & Fees
$
28,583
30,000
30,000
136,121
275,000
-
-
-
7,105
26,125
499,704
33,230
Fixed Remuneration
Post-
employment
benefits1
$
Other Annual & Long
Service
Leave
$
$
Variable Remuneration
STI Bonus
accrued
LTI Value of
Equity
Total
$
-
-
-
-
-
-
$
$
103,799
-
-
254,479
136,042
132,382
30,000
30,000
397,705
597,162
494,320
1,187,249
-
-
-
-
-
-
-
-
-
-
159,995
159,995
1. Post-employment benefits comprise superannuation payments and any voluntary fee sacrifice to superannuation.
2. Michael ceased being a director of Cirralto Limited on 21 September 2018.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
Other transactions with key management personnel and their related parties
16
During the financial year, related interests of Adrian Floate received a total of $2,450,367 (2019: $1,191,000) in
additional IT service fees.
Refer to note 19 for further details.
Options Granted as part of Remuneration
During the year ended 30 June 2020, a resolution was taken for 4,500,000 options exercisable at 2.5c with an expiry
date of 28 July 2023 to be granted to Howard Digby. This has been taken into account for the purposes of calculating
the share-based options reserve as at year end.
KMP interests in CRO shares
The table below details the movements in the number of shares held by KMP during FY20 and the comparative year
FY19. Up until the date of this report, there have been changes to the interests held which have been shown in the
tables below:
Ordinary shares
Directors:
Peter Richards
Stephen Dale
Marcus L’Estrange
Adrian Floate
Howard Digby
Balance at
the start of
the year
No
Received as
part of
remuneration
No
10,216,850
1,500,000
16,746,944
55,870,291
-2
84,334,085
-
-
-
-
-
Disposals
/other
No
Balance at
the end of
the year
No
Balance at
the date of
this report
No
- 13,936,527
1,500,000
-
(16,746,944) 1
-
- 55,870,291
666,666
(16,746,944) 71,973,484
23,636,527
1,500,000
-
59,470,291
8,366,666
92,973,484
Additions
No
3,719,677
-
-
-
666,666
4,386,343
1 Balance at 22 July 2019 when Marcus L’Estrange ceased being a director of Cirralto Limited.
2
Balance at 1 August 2019 when Howard Digby was appointed a director of Cirralto Limited.
2019
Ordinary shares
Directors:
Peter Richards
Stephen Dale
Marcus L’Estrange
Adrian Floate
Balance at the
start of the
year
No
Received as
part of
remuneration
No
Additions
No
Disposals
/other
No
Balance at the
end of the
year
No
1,000,000
1,500,000
34,413,611
38,260,312
75,173,923
6,322,113
2,894,737
-
-
-
-
5,050,063
12,559,916
15,454,653 11,372,176
-
-
(17,666,667)
-
(17,666,667)
10,216,850
1,500,000
16,746,944
55,870,291
84,334,085
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) continued
g) Contractual arrangement with KMPs
17
The following Directors and Senior Executives were under contract during the year ended 30 June 2020:
Directors
Peter Richards
Mr Stephen Dale
Mr Howard Digby
Executives
Mr Adrian Floate
Title
Agreement
Commenced
Details
Duration
Notice
Required
Non-Executive
Director,
Chairman
Non-Executive
Director
Non-Executive
Director
Executive
Director
13 December
2017
Director’s fee of $2,500 per
month
No Fixed
Term
No Notice
Period
5 April 2014
1 August
2019
Director’s fee of $2,500 per
month
Director’s fee of $2,500 per
month
10
November
2016
Fixed fee of $25,094
including superannuation
per month
No Fixed
Term
No Fixed
Term
No Fixed
Term
No Notice
Period
No Notice
Period
3 months
h) Use of remuneration consultants
l
Cirralto Limited did not use a remuneration consultant during the current financial year.
i) Voting and comments made at the Company’s 2019 Annual General Meeting
The Company did not receive any specific feedback at the AGM or throughout 2020 on its remuneration practices.
The Company received 99.62% of ‘for’ votes in relation to its remuneration report for the year ended 30 June 2020.
End of Remuneration Report (Audited)
Signed in accordance with the resolution of the Board of Directors.
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Adrian Floate
Managing Director
9 October 2020
Auditor’s
Corporations Act 2001
independence declaration under Section 307C of
the
To the directors of Cirralto Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the year ended
30 June 2020 there have been:
(i)
(ii)
no contraventions of the auditor’s independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
Nexia Perth Audit Services Pty Ltd
Muranda Janse Van Nieuwenhuizen | Director
Perth
9 October 2020
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
19
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
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Revenue from continuing operations
Cost of services rendered
Other Income
Employee & directors’ benefits expense
Depreciation and amortisation expense
Impairment of intangible assets
Consulting fees
Legal and other professional fees
Regulatory listing fees
Occupancy expenses
Share-based payment expense
Other expenses
Finance costs
Movement in fair value of financial liabilities
Loss before income tax
Income tax expense
Loss after income tax
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Loss for the year after income tax attributable to owners of Cirralto
Limited
Other comprehensive loss for the year, net of tax
Total comprehensive loss for the year attributable to owners of
Cirralto Limited
Loss per share for the year ended attributable to the members of
Cirralto Limited
- Basic (loss) per share (cents per share)
- Diluted (loss) per share (cents per share)
Note
4a
4b
5a
5b
5b/ 13
5c
17
5d
6
Consolidated
30 June
2020
$
341,332
30 June
2019
$
670,732
(321,861)
181,704
(1,345,337)
(793,201)
(3,758,593)
(280,421)
(150,434)
(48,396)
(71,217)
(135,944)
(688,215)
(349,084)
(18,280)
(7,437,947)
-
(7,437,947)
(498,463)
7,939
(1,422,798)
(290,664)
(2,537,598)
(51,575)
(119,613)
(58,546)
(204,754)
(681,840)
(837,243)
(12,614)
-
(6,037,037)
-
(6,037,037)
(7,437,947)
-
(6,037,037)
-
(7,437,947)
(6,037,037)
7
7
(1.01)
(1.01)
(1.30)
(1.30)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
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Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Property, plant & equipment
Right-of-use asset
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liability
Provisions
Financial liabilities
Total current liabilities
Total liabilities
Net assets / (liabilities)
Equity
Contributed equity
Reserves
Accumulated losses
Total equity / (deficiency)
20
Consolidated
Note 30 June 2020 30 June 2019
$
$
8
9
11
10
13
14
10
15
273,628
321,085
373,852
968,565
7,059
14,777
-
21,836
990,401
100,942
328,312
131,864
561,118
4,402
-
3,099,280
3,103,682
3,664,800
1,598,013
15,901
48,906
1,821,751
3,484,571
554,260
-
22,926
-
577,186
3,484,571
(2,494,170)
577,186
3,087,614
16
17
61,123,783
2,901,954
(66,519,907)
(2,494,170)
60,195,983
2,185,687
(59,294,056)
3,087,614
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
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Balance as at 1 July 2018
Note
Contributed
Equity
$
56,238,006
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Loss for the year
Total Comprehensive loss
for the year
Transactions with owners
in their capacity as owners:
Issue of share capital
Transaction costs related
to share issue
Adjustment relating
to ConvertU2 Online
Share-based payment transactions
Balance as at 30 June 2019
Balance as at 1 July 2019
Loss for the year
Total Comprehensive loss
for the year
Transactions with owners
in their capacity as owners:
Issue of share capital
Transactions costs related
to share issue
Lapsed options
Share-based payment transactions
Convertible notes
Balance as at 30 June 2020
-
-
4,182,520
(224,543)
-
-
60,195,983
60,195,983
-
-
1,029,855
16
16
16
16
16
17
17
15
21
Total
Equity/
(Deficiency)
$
Consolidated
Other
Reserve
s
Share Based
Payment
Reserves
Accumulated
Losses
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
1,503,847
(53,257,042)
4,484,811
-
-
-
-
(6,037,037)
(6,037,037)
(6,037,037)
(6,037,037)
-
-
4,182,520
(224,543)
-
681,840
2,185,687
23
-
(59,294,056)
23
681,840
3,087,614
2,185,687
(59,294,056)
3,087,614
-
-
-
(7,437,947)
(7,437,947)
(7,437,947)
(7,437,947)
-
1,029,855
(102,055)
-
-
-
61,123,783
-
-
-
600,000
600,000
-
(212,096)
328,363
-
2,301,954
-
212,096
-
-
(66,519,907)
(102,055)
-
328,363
600,000
(2,494,170)
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
22
Consolidated
Note
30 June
2020
$
30 June
2019
$
504,263
(2,043,788)
(92,313)
98,000
(1,533,838)
743,245
(2,930,453)
(10,888)
-
(2,198,096)
21
(1,360,255)
(6,106)
(1,366,361)
(1,763,182)
(5,125)
(1,768,307)
582,900
(61,225)
3,008,000
(96,000)
(360,790)
3,072,885
3,722,489
(224,543)
-
-
-
3,497,946
172,686
100,942
273,628
(468,457)
569,399
100,942
8
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Bank charges and interest paid
Government grants and tax incentives
Net cash (used in) operating activities
Cash flows from investing activities
Payment for intangible assets
Acquisition of non-current assets
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of share issue costs
Proceeds from borrowings
Payment of lease liabilities
Payment of borrowings
Net cash inflow from financing activities
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Net (decrease)/increase in cash and cash equivalents
Cash at beginning of financial year
Cash at end of financial year
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 1 Corporate Information
23
Cirralto Limited (referred to as “Cirralto” or the “Company”) is a company limited by shares, incorporated in
Australia whose shares are publicly traded on the Australian Securities Exchange (ASX: CRO). The consolidated
financial statements of the Company as at and for the year ended 30 June 2020 comprise the Company and its
subsidiaries (collectively referred to as the “Group”).
A description of the nature of the Group’s operations and its principal activities is included in the review of
operations and activities in the Directors’ Report, which does not form part of this financial report.
Note 2 Summary of Significant Accounting Policies
a) Basis of preparation
These general-purpose financial statements for the year ended 30 June 2020 have been prepared in accordance
with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
(AASB) and the Corporations Act 2001. Cirralto Limited is a for-profit entity for the purpose of preparing the financial
statements.
Compliance with IFRS
(i)
The consolidated financial statements and notes of the Group also comply with International Financial Reporting
Standards (IFRS) and interpretations adopted by the International Accounting Standards Board.
Historical cost convention
(ii)
The financial statements have been prepared on a historical cost basis, except for available for sale financial assets
and financial assets and liabilities at fair value through profit or loss, which have been measured at fair value. The
financial report is presented in Australian dollars.
New and amended standards adopted by the Group
(iii)
The Group had adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
AASB that are mandatory for the current reporting period.
The Group has adopted AASB 16 from 1 July 2019 which has resulted in changes in the classification, measurement
and recognition of leases. The new standard requires recognition of a right-of-use asset (the leased item) and a
financial liability (to pay rentals). The exceptions are short-term leases and leases of low value assets.
The lease liability is initially measured at the present value of the lease payments that are not paid at commencement
date, discounted using the rate implied in the lease. As this rate is not readily determinable, the Group has used its
incremental borrowing rate.
Right-of-use assets are depreciated on a straight-line basis over the term of the lease (or the useful life of the leased
assets, whichever is shorter). Depreciation starts on the commencement date of the lease.
Where leases have a term of less than 12 months or relate to low value assets, the Group has applied the optional
exemptions to not capitalise these leases and instead account for the lease expense on a straight-line basis over
the lease term.
(iv)
Impact on adoption of AASB 16
The Group has adopted AASB 16 using the modified retrospective approach under which reclassification and
adjustments arising from the new leasing rules are recognised in the opening Statement of Financial Position on 1
July 2019. Under this approach, there is no initial impact on retained earnings and comparatives have not been
restated.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
24
a) Basis of preparation (continued)
On adoption of AASB 16, the Group recognised lease liabilities of $103,441 in relation to leases which had previously
been classified as operating leases under the principles of AASB 117. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as at 1 July 2019.
The lessee’s incremental borrowing rate applied to lease liabilities on 1 July 2019 was 15%.
An extension option is included in one of the property leases. In determining the lease term, management
considers all facts and circumstances that create an economic incentive to exercise an extension option. In the
Group’s recognition of the lease, the option to extend has not been taken into account as the option has not been
taken up post 30 June 2020.
On initial application right-of-use assets were measured at the amount equal to the lease liability and recognised
in the Statement of Financial Position as at 1 July 2019.
In the Statement of Cashflows, the Group has recognised cash payments for the principal portion of the lease
liability within financing activities, cash payments for the interest portion of the lease liability as interest paid within
operating activities and short-term lease payments and payments for lease of low-value assets within operating
activities.
The adoption of AASB 16 resulted in the recognition of right-of-use assets of $14,777 and lease liabilities at the
reporting date of $15,901 in respect to all leases, other than short-term leases and leases of low value assets.
The net impact on retained earnings on 1 July 2019 was $nil.
b) Principles of consolidation and equity accounting
The consolidated financial statements comprise the financial statements of Cirralto Limited and its subsidiaries as
at 30 June each year. Control is achieved where the consolidated entity is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power to direct
the activities of the entity. The financial statements of the subsidiaries are prepared for the same reporting period
as the parent company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and
expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Unrealised
losses are eliminated unless costs cannot be recovered.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company and cease to be
consolidated from the date on which control is transferred out of the Company.
The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of
accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the
liabilities and contingent liabilities assumed at the date of acquisition.
Minority interests not held by the Company are allocated their share of net profit after tax in the Consolidated
Statement of Profit or Loss and Other Comprehensive Income and are presented within equity in the Consolidated
Statement of Financial Position, separately from parent shareholders’ equity.
c) Going concern
The financial report has been prepared on the basis that the Group is a going concern, which contemplates the
continuity of normal business activity, the realisation of assets and the settlement of liabilities in the normal course
of business.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
25
c) Going concern (continued)
For the year ended 30 June 2020 the Group recorded a net loss of $7,437,947 (2019: $6,037,037) and at 30 June
2020 had a net working capital deficit of $2,516,006 (2019: $16,068) and a net liability position of $2,494,170 (2019:
net asset position of $3,087,614). The Group also recorded a net cash outflow in operating activities for the year
ended 30 June 2020 of $1,533,838 (2019: $2,198,096).
The Group’s ability to continue as a going concern and to meet its commitments as and when they fall due is
dependent on the Group meeting its future cash forecasts, deferring or converting its debts and/ or securing
additional funding.
Subsequent to reporting date, the Group raised $2,712,000 (before costs) through a share placement to
institutional and professional investors as well as an additional $397,710 (before costs) through a pro-rata non-
renounceable entitlement offer.
The Group has also commenced implementing steps to restructure its balance sheet and core operations. This has
included the retiring of debt, the closure of the Company’s office locations and streamlining operations. The
implementation of these changes has seen the Company reduce its operating costs.
The Directors are also confident that the Group will be successful in securing additional funding through the issue
of new debt or equity instruments, should the need arise. The Directors are also aware that the Group has the
option, if necessary, to defer certain expenditure or abandon certain projects and reduce costs in order to minimise
such funding requirements.
Based on these facts, the Directors consider the going concern basis of preparation to be appropriate for this
financial report. Should the Group be unsuccessful in raising additional funds through the issue of new debt or
equity instruments, or if the Group does not achieve its planned operational forecasts, there is a material
uncertainty which may cast significant doubt whether the Group will be able to continue as a going concern and
therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the
amounts stated in the financial report.
The financial statements do not include any adjustments relative to the recoverability and classification of recorded
asset amounts or, to the amounts and classification of liabilities that might be necessary should the Group not
continue as a going concern.
d) Operating segments
Operating segments are presented using the “management approach”, where the information presented is on the
same basis as the internal reports provided to the Board of Directors and the Executive Management Team (the
chief operating decision maker).
An operating segment is a component of an entity that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses relating to transactions with any of the Company’s
other components) whose operating results are regularly reviewed by the entity’s chief operating decision maker
to make decisions about resources to be allocated to the segments, assess its performance and for which discrete
financial information is available.
A geographical segment is a distinguishable component of the entity that is engaged in providing products or
services within a particular economic environment and is subject to risks and returns that are different to those of
segments operating in other economic environments.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
26
e) Cash and cash equivalents
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Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand
and short-term deposits with an original maturity 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 purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are included within interest-
bearing loans and borrowings in current liabilities on the Consolidated Statement of Financial Position.
f) Trade and other receivables
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with
no intention of selling the receivables. They are included in current assets, except for those with maturities greater
than 12 months after the balance date which were classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for
settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Investments and other financial assets
Investments and other financial assets are measured at either fair value through profit or loss, or available-for-sale
investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in
the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Company
determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-
evaluates this designation at each financial year-end.
All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the
Company commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets
under contracts that require delivery of the assets within the period established generally by regulation or
convention in the marketplace.
h) Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over
their estimated useful lives.
The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable
amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
27
h) Property, plant and equipment (continued)
The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the
cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its
fair value.
Impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable
amount. The asset or cash-generating unit is then written down to its recoverable amount. For plant and
equipment, impairment losses are recognised through profit or loss.
An item of property, plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is included in Profit or Loss
in the year the asset is derecognised.
Intangible assets
i) Goodwill
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but is tested for
impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired
and is carried at cost less accumulated impairment losses. Gains or losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to benefit from the business
combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which
goodwill is monitored for internal management purposes, being the operating segments.
ii) Software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Development
costs that are directly attributable to the design and testing of identifiable and unique software products controlled
by the group are recognised as intangible assets when the following criteria are met:
it is technically feasible to complete the software so that it will be available for use
•
• management intends to complete the software and use or sell it
•
•
• adequate technical, financial and other resources to complete the development and to use or sell the software
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic benefits
are available, and
the expenditure attributable to the software during its development can be reliably measured.
•
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is
ready for use.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
28
i) Intangible assets (continued)
iii) Research and development
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Research expenditure and development expenditure that do not meet the criteria in (ii) above are recognised as an
expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a
subsequent period.
iv) Amortisation methods and useful lives
The Group amortises intangible assets with a limited useful life using the straight-line method over the following
periods:
IT Development and software
3 – 5 years
j) Trade and other payables
Trade payables and other payables are carried at amortised cost due to their short-term nature and represent
liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid. The
amounts are unsecured and are usually paid within 30 days of recognition.
Interest- bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of
issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount
or premium on settlement.
Gains and losses are recognised in Profit or Loss when the liabilities are derecognised and as well as through the
amortisation process.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to
extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or loss, which is
measured as the difference between the carrying amount of the financial liability and the fair value of the equity
instruments issued.
Convertible notes are recorded as equity where the Company has no contractual obligation to deliver cash to the
not holder.
Where convertible notes are redeemable for a fixed number of equity instruments the fair value of a convertible
note is determined using a market interest rate for an equivalent non-convertible note. This amount is recorded as
a liability on an amortised cost basis until extinguished on conversion or maturity of the note. The remainder of the
proceeds is allocated to the conversion option. This is recognised and included in shareholders’ equity, net of
income tax effects.
Where convertible notes are redeemable for a variable number of equity instruments, the embedded derivative
being the conversion options is recognised at fair value. Movements in fair value are recorded in the Statement of
Profit or Loss. The host debt is recognised at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting period.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
29
l) Share-based payment transactions
The Company provides benefits in the form of share-based payments to all employees. The establishment of Cirralto
Limited’s Employee Share Option Plan (ESOP) was approved by shareholders at the 2017 annual general meeting.
The ESOP is designed to provide long-term incentives to eligible employees and executive directors of the Group to
assist in the motivation, retention and reward of participants. Under the ESOP, eligible participants may be offered
options which may be subject to vesting conditions set by the Board. Details of the Plan rules are set out within the
remuneration report and within note 17.
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The cost of these equity-settled transactions is measured by reference to the fair value of the equity instruments
at the date at which they are granted. The estimation of the fair value of the awards requires judgement with
respect to the appropriate valuation methodology. The choice of valuation methodology is determined by the
structure of the awards, particularly the vesting conditions. The estimation of any market-based performance
conditions is incorporated into the valuation model used to determine the fair value of the awards whereas non-
market-based performance conditions are not included in the determination of fair value. The cost of equity-settled
transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become
fully entitled to the award (the vesting date).
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The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:
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the extent to which the vesting date has expired and
the Company’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is
made for the likelihood of market performance conditions being met as the effect of these conditions is
included in the determination of fair value at grant date.
The Profit or Loss charge or credit for a period represents the movement in cumulative expense recognised as at
the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional
upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any modification that increases the total fair value of
the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of
modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award
are treated as if they were a modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of
earnings per share.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
30
m) Contributed equity
Ordinary share capital is recognised at the fair value of the consideration received by the company. Any transaction
costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds
received. Ordinary share capital bears no special terms or conditions affecting income or capital entitlements of
the shareholders.
Revenue is recognised for a contract with a customer when certain criteria are met:
n) Revenue recognition
(i)
Revenue from contracts with customers
a signed contract is in place;
each party’s rights and obligations can be determined;
-
-
- payment terms are identified;
-
-
the transaction has commercial substance; and
it is probable that the consideration will be collectable.
At contract inception, Cirralto will assess the goods or services promised in a contract with a customer and shall
identify as a performance obligation each promise to transfer to the customer. Cirralto provides the following
services under contracts with customers:
1. Hardware supply;
2. Data migration and implementation services;
3.
4. Support services.
Integration services (SAAS) and licence fees; and
Revenue is recognised when the performance obligation is satisfied either over time or at a point in time. Revenue
in regard to hardware supply is recognised at the point in time the product is delivered to the customer. Revenue
from data migration and implementation services, integration services and licence fees are recognised at the point
in time that the services are provided. Revenue from support services is recognised over time, spread over the
period to which the services relate.
(ii)
Interest
Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying
amount of the financial asset.
(iii)
Other income
Other income is recognised when it is received.
(iv)
Research and development tax refund
The research and development tax refund is not recognised until there is a reasonable assurance that the Company
will comply with the conditions attaching to the refund and that the refund will be received.
(v)
Government Grants
Government grants are not recognised until there is reasonable assurance that the entity will comply with the
conditions attaching to it, and that the grant will be received. Receipt of a grant does not of itself provide conclusive
evidence that the conditions attaching to the grant have been or will be fulfilled.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
31
o) Income tax
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Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes, except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests
in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised,
except:
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable
that the temporary difference will reverse in the foreseeable future and taxable profit will be available against
which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
Tax consolidation legislation
Cirralto Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 July 2006.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
32
o) Income tax (continued)
The head entity, Cirralto Limited, and the controlled entities in the tax consolidated group continue to account for
their own current and deferred tax amounts. The Company has applied the “separate tax payer within the group
approach” in determining the appropriate amount of current taxes and deferred taxes to allocate to members of
the tax consolidated group.
In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
p) Goods and Service Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item
as applicable; and
receivables and payables, which are stated with the amount of GST included. The net amount of GST
recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
Statement of Financial Position.
•
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are
classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
q) Earnings per share
Basic earnings per share
(i)
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the company, 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 year.
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Diluted earnings per share
(ii)
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 additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
•
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
33
r) Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition date fair values of the assets transferred and/or liabilities
incurred by the acquirer. All acquisition costs are expensed as incurred to profit and loss.
On acquisition of a business, the Company assesses the financial assets acquired and liabilities assumed for
appropriate classification in accordance with the contractual terms, economic conditions, the Company’s
accounting policies and other pertinent conditions in existence at the acquisition date.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets and liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition date.
The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when
the acquirer receives all the information possible to determine fair value.
Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any
such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate
of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and
its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated
to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to
which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount,
the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent
with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment
loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates
used to determine the asset’s recoverable amount since the last impairment loss was recognised.
If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount
cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried
at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the
depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual
value, on a systematic basis over its remaining useful life.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
34
t) Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to continually make judgments, estimates and
assumptions based on experience and other factors, including expectations of future events that may have an
impact on the Company. All judgments, estimates and assumptions made are believed to be reasonable based on
the most current set of circumstances available to management. Actual results may differ from the judgments,
estimates and assumptions. Significant judgments, estimates and assumptions made by management in the
preparation of these financial statements are outlined below:
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of certain assets and liabilities within the next annual reporting period are:
Impairment of goodwill and Intangible assets
(i)
The Company tests annually or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other intangible assets have suffered any impairment, in accordance with the accounting policy stated
above. This requires an estimation of the recoverable amount of the cash-generating units (CGU) to which the
goodwill and intangible assets are allocated. The recoverable amount of a CGU is determined based on value-in-
use calculations which require the use of assumptions.
In performing the value-in-use calculations, the Group has applied the following key assumptions:
• Revenue forecasts for a four-year forecast period based on detailed FY20 budget and FY21-FY23 projections;
• A growth rate to extrapolate cashflows beyond the three-year period of 2.5%; and
• A discount rate applied to forecast cash flows of 15.4%.
Discount rates reflect the Group’s estimate of the time value of money and the risks specific to the CGU that are
not already reflected in the cash flows. Growth rates are considered appropriate given the specific industry in
which the Group operates and its business risks.
Following the assessment at 30 June 2020, the Group recorded an expense of $3,758,593 relating to the impairment
of intangible assets (refer to Note 13).
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Estimation of useful lives of assets
(ii)
Estimated useful lives of depreciable property, plant and equipment assets are reviewed on a regular basis and at
each reporting date and necessary adjustments are recognised in the current, or current and future reporting
periods, as appropriate.
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Share-based payments
(iii)
The Group measures the cost of equity-settled transactions with management and other parties 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
Black-Scholes valuation method, taking into account the terms and conditions upon which the equity instruments were
granted. The assumptions in relation to the valuation of the equity instruments are detailed in Note 16. 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 expenses and equity.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 2 Summary of Significant Accounting Policies (continued)
35
t) Critical accounting judgements, estimates and assumptions (continued)
Convertible notes
The fair value of convertible notes is determined at the end of each reporting date. The fair value is determined
using a market interest rate. The compound convertible notes are subsequently recognised on an amortised cost
basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the
conversion option and recognised in shareholders equity. All other convertible notes are recognised at fair value
through profit and loss.
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
activities 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 Group unfavourably as at the reporting date
or subsequently as a result of the Coronavirus (COVID-19) pandemic.
Note 3 Financial risk management objectives and policies
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The 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 interest rate, foreign exchange and other price risks, and ageing analysis for
credit risk.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and
agrees policies for managing each of the risks identified below.
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
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Market risk
Consolidated
US dollars
Assets
2020
$
2019
$
Liabilities
2020
$
2019
$
-
-
805,413
-
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 3 Financial risk management objectives and policies (continued)
36
The Group had net liabilities denominated in foreign currencies of $805,413 as at 30 June 2020 (2019: $nil). Based on
this exposure, had the Australian dollar weakened by 5%/strengthened by 5% (2019: weakened by 5%/strengthened
by 5%) against these foreign currencies with all other variables held constant, the Group’s profit before tax for the
year would have been $40,270 lower/$40,270 higher (2019: $nil lower/$nil higher). The actual foreign exchange gain
for the year ended 30 June 2020 was $60,189 (2019: loss of $3,671).
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is not exposed to any significant interest rate 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 adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
using a probability or default approach. This approach is considered representative across all customers of the Group
based on recent sales experience, historical collection rates and forward-looking information that is available. A loss
allowance of $14,231 has been recognised as at 30 June 2020.
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
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and
liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date amount to $1,000,000. The facility is provided by a related party
of the Group – Appstablishment Pty Ltd and may be drawn at any time. As of 30 June 2020 and of the date of the
financial report there is no present liability under the loan.
Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows
disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in
the statement of financial position.
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F
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 3 Financial risk management objectives and policies (continued)
37
l
y
n
o
Consolidated – 2020
Non-interest bearing
Trade payables
Other payables
Interest-bearing – fixed rate
Third party loans
Convertible notes
Lease liability
e
s
u
Total
Weighted average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
-
-
733,558
838,862
45%
10%
10%
331,314
2,265,118
15,901
4,184,753
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Fair value of financial instruments
Note 4 Revenue and other income
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o
s
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e
p
r
o
F
4a Revenue
Revenue from contracts with customers
4b Other Income
Interest revenue
ATO Cash Boost Subsidy
Jobkeeper Subsidy
Other income
Consolidated
2020
$
341,332
341,332
354
100,000
78,857
2,495
181,706
2019
$
670,732
670,732
430
-
-
7,509
7,939
The aggregate amount of contracted revenue for which performance obligations have not been met at 30 June
2020 is $119,799. This revenue is expected to be recognized in quarter 1 of FY2021.
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 5 Expenses
38
Consolidated
2020
$
2019
$
438,745
906,592
1,345,337
692,929
729,869
1,422,798
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y
n
o
5a
e
s
u
l
5c
a
n
o
s
r
5d
e
p
r
o
F
(i)
Employee & Directors’ benefits expense
Directors’ remuneration*
Employee & company secretary fees
*An additional $119,681 of directors’ remuneration is included in share based payment expense
5b Depreciation, amortisation & impairment expenses
Depreciation
Amortisation
Total depreciation & amortisation expense
Impairment charges:
Goodwill
Intangible assets
Consulting fees
Corporate & funding strategy services
Other consulting services
Finance Costs
Interest on loans
Transaction fees
Bank fees
269,208
523,993
793,201
18,872
271,792
290,664
2,650,895
1,107,698
3,758,593
825,811
1,711,787
2,537,598
5,000
275,421
280,421
258,071
88,677
2,336
349,084
30,000
21,575
51,575
11,320
-
1,294
12,614
Note 6 Income tax expense
The Company has not recognised any deferred tax assets or liabilities in respect to the current year (2019: $nil).
At 30 June 2020, the net deferred tax assets have not been brought to account as realisation is not currently regarded
as probable. Deferred tax assets on losses will only be available for recoupment if:
The Company derives future assessable income of a nature and of an amount sufficient to enable the benefits
from the deduction for the losses to be realised;
The Company continues to comply with the conditions for deductibility imposed by the law; and
No changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the
losses.
(ii)
(iii)
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 6 Income tax expense (continued)
39
Tax consolidation
Cirralto Limited and its wholly owned Australian subsidiaries have formed an income tax consolidated group from 1
July 2006 under the tax consolidation regime. Cirralto Limited is the head entity of the consolidated tax group.
Reconciliation between prima facie tax on loss from
ordinary activities to statutory income tax expense:
Loss before income tax expense from continuing
operations
Prima facie tax (benefit) on loss from ordinary
activities before income tax at 27.5% (2019: 27.5%)
Tax effect of:
Add:
Impairment of assets
Non-deductible expenses
Temporary differences not recognised
Less:
Non-assessable income
Losses carried forward not recognised
Income tax benefit/(expense)
Unrecognised deferred tax assets and (liabilities)
as at 30 June 2020 comprise:
Trade & other receivables
Other assets
Trade & other payables
Provisions
Unused tax losses
Unrecognised deferred tax assets and (liabilities) before set-off
Set-off of deferred tax liabilities
Net unrecognised deferred tax asset
Consolidated
2019
$
2020
$
(7,437,947)
(6,037,037)
(2,045,435)
-
-
1,033,613
17,155
168,699
(27,500)
853,468
-
Deferred tax
assets
$
36,858
-
16,986
13,450
8,221,269
8,288,562
(22,674)
8,274,375
(1,660,185)
-
-
697,839
2,880
(31,329)
-
990,795
-
Deferred tax
liabilities
$
-
(14,188)
-
-
-
(14,188)
14,188
-
The tax losses identified above have been estimated on the basis of available information. It has not been
determined if the company has met the continuity of ownership test to enable all or part of these losses to be
utilised.
In addition to the assessed loss and other net future income tax deductions on which deferred tax has not been
recognised at 30 June 2020 as set out in the table above, the Company also has estimated accumulated capital
losses of $856,779 on which deferred tax has not been recognised. Such capital losses may only be utilised against
potential future capital gains.
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F
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 7 Earnings per share
40
Basic earnings or loss per share are calculated by dividing net profit or loss for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted
earnings or loss per share amounts are calculated by dividing the net profit or loss attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the
weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
Share options are considered to be anti-dilutive.
The following reflects the income and share data used in the basic and
diluted earnings per share computations:
Loss after income tax expense from continuing operations
Weighted average number of ordinary shares outstanding during the
year used in the calculation of basic EPS
Weighted average number of ordinary shares outstanding during the
year used in the calculation of diluted EPS
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Note 8 Cash and cash equivalents
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y
n
o
e
s
u
l
a
n
o
s
r
e
p
Cash at bank and in hand
Note 9 Trade and other receivables
r
o
F
Trade receivables
Other Debtors
Interest free loans to employees
Interest free loans to shareholders
Other receivables
Consolidated
2020
$
2019
$
(7,437,947)
(6,037,037)
735,527,856 465,107,341
735,527,856 465,107,341
(1.30)
(1.30)
(1.01)
(1.01)
Consolidated
2020
$
273,628
273,628
2019
$
100,942
100,942
Consolidated
2020
$
180,388
72,000
9,600
12,000
47,097
321,085
2019
$
212,568
-
52,006
27,999
35,739
328,312
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 9 Trade and other receivables (continued)
41
(a) Fair value and credit risk
Due to the short-term nature of the receivables, their carrying value is assumed to approximate their fair value. The
maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the
Company’s policy to transfer (on-sell) receivables to special purpose entities.
(b) Interest rate risk
Detail regarding interest rate risk exposure is disclosed in Note 3.
Note 10 Right-of-use assets and lease liability
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e
s
u
l
a
n
o
s
r
e
p
r
o
F
Right-of-use assets
Recognised on 1 July 2019 on adoption of AASB 16
Less: Depreciation expense
Closing balance as at 30 June 2020
Lease liability
Recognised on 1 July 2019 on adoption of AASB 16
Add: Interest expense
Less: Principal payments
Closing balance as at 30 June 2020
Short term leases
Leases of low value assets
Lease payments not recognised as lease liability
Total cash outflow for the year relating to leases was $167,217.
Consolidated
2019
$
-
-
-
-
-
-
-
2020
$
103,441
(88,664)
14,777
103,441
8,460
(96,000)
15,901
Consolidated
30 June 2020
$
41,214
8,212
49,426
30 June 2019
$
-
-
-
Lease payments not recognized as a liability
Lease payments expensed during the year and thus not included in the measurement of the lease liability are as
follows:
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 11 Other current assets
l
y
n
o
Prepaid insurance
Prepaid software licences
Other assets
42
Consolidated
2020
$
24,923
262,703
86,329
373,852
2019
$
8,710
-
123,154
131,864
Note 12 Controlled entities
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Country of Incorporation
Percentage Owned (%) 1
2020
%
2019
%
Australia
Australia
Australia
100%
-1
100%
100%
Parent Entity:
Cirralto Limited
Subsidiaries of Cirralto Limited:
Cirralto Business Services Pty Ltd
ConvertU2 Online Pty Ltd2
1 Percentage of voting power is in proportion to ownership
2 Entity was deregistered from 24 April 2020
Note 13 Intangible assets
e
s
u
l
a
n
o
s
r
e
p
Software development – at cost (a)
Less: Provision for impairment
Less: Accumulated amortisation
r
o
F
Goodwill on acquisition of CBS – at cost (b)
Less: Provision for impairment
Consolidated
2020
$
3,690,987
(2,819,484)
(871,503)
-
2019
$
2,507,682
(1,711,787)
(347,510)
448,385
2,650,895
(2,650,895)
-
3,476,706
(825,811)
2,650,895
Total Intangible assets
-
3,099,280
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 13 Intangible assets (continued)
43
(a) Software development costs
Software consists of capitalised development costs. Development costs consist of customised applications that
integrate data through the use of cloud enabled technologies, specifically the Poolbox solution. The directors assessed
the useful life of the asset as 5 years.
As at 30 June 2020, the Company performed impairment testing of its cash-generating unit. Management tested the
recoverable amount of the Group CGU adopting the value in use method related only to revenue recognized in relation
to the software development costs. The discount rate applied was 15.4%.
The Group assessed that the recoverable value of its CGU was less than its carrying value at the reporting date.
Accordingly, an impairment of the CGU of $2,819,484 was recognised, bringing the carrying value of the software
development assets to $nil.
(b) Goodwill
Goodwill represents other intangible assets of the business not explicitly recognised on the balance sheet and
includes assembled workforce, technical expertise, distribution channels, customer service capability, product and
service support and geographic presence. It will not be deductible for tax purposes. The Group tests whether
goodwill has suffered any impairment on an annual basis.
As at 30 June 2020, the Company performed the relevant impairment testing of its cash-generating unit.
Management tested the recoverable amount of the Group CGU adopting the value in use method. The discount
rate applied was 15.4%. The relevant CGU is the entity as a whole.
The Group assessed that the recoverable value of its CGU was less than its carrying value at the reporting date and
accordingly an impairment of $2,650,895 was recognised against goodwill, bringing the carrying value of the
software development assets to $nil.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
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o
e
s
u
l
a
n
o
s
r
e
p
r
o
F
Opening balance at 1 July 2018
Additions
Amortisation
Impairment of intangible assets and goodwill
Closing balance at 30 June 2019
Opening balance at 1 July 2019
Additions
Amortisation
Impairment of intangible assets and goodwill
Closing balance at 30 June 2020
Goodwill
Software
3,476,706
-
-
(825,811)
2,650,895
679,282
1,752,682
(271,792)
(1,711,787)
448,385
2,650,895
-
-
(2,650,895)
-
448,385
1,360,255
(700,942)
(1,107,698)
-
Total
$
4,155,988
1,752,682
(271,792)
(2,537,598)
3,099,280
3,099,280
1,360,255
(700,942)
(3,758,593)
-
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 14 Trade and other payables
l
y
n
o
Current
Unsecured liabilities:
Trade payables
Sundry payables and accrued expenses
Note 15 Financial Liabilities
e
s
u
Convertible Notes issued between August and
December 2019 (note 15a)
Convertible Notes issued to Obsidian (note 15b)
Convertible Notes issued in June (note 15c)
Other Loans
44
Consolidated
2020
$
2019
$
759,150
838,863
1,598,013
172,838
381,422
554,260
Consolidated
At Amortised Cost
$
At Fair Value
$
Total
$
652,991
535,818
-
331,314
1,520,123
71,343
230,285
-
-
301,628
724,334
766,103
-
331,314
1,821,751
15a. Convertible Notes Issued between August and December 2019
The convertible loan notes were issued to various lenders between August 2019 and December 2019 at an issue
price of $1 per note. The notes are convertible into ordinary shares of the Company at any time between the date
of issue of the notes and their settlement date, which is 12 months from the date of issue. The loan notes are
redeemable for cash or convertible at a deemed issue price per share of 80% of the lowest volume weighted
average price (VWAP) in the 10 trading days prior. Interest of 10% (per annum) accruing monthly is payable of the
convertible note liability.
The net proceeds received from the issue of the convertible loan notes have been split between a financial liability
at amortised cost and a financial liability carried at fair value, representing the embedded option to convert the
financial liability into equity of the Company.
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o
s
r
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F
Proceeds of issue of convertible loan notes
Fair value of derivative liability
Host debt liability
Convertible loan notes converted to equity
Convertible loan notes repaid in cash
Transaction Costs
Interest charged
Fair value movement
Carrying value of liabilities at 30 June 2020
$
1,240,000
(173,075)
(1,066,925)
447,053
130,000
76,334
(132,869)
(4,852)
(724,334)
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 15 Financial Liabilities (continued)
45
The interest expensed for the year is calculated by applying an effective interest rate of 45% to the liability
component for period since the loan notes were issued.
15b. Convertible Notes issued to Obsidian Global GP, LLC.
The convertible loan notes were issued on 17 March 2020 at an issue price of US$1 per note. The notes are
convertible into ordinary shares of the Company at any time between the date of issue of the notes and their
settlement date. On issue, the loan notes were convertible at the lesser of $0.01 per share and 90% of the lowest
daily VWAP during the 10 actual trading days prior to the conversion notice date. There is no interest payable on
the convertible note liability.
The net proceeds received from the issue of the convertible loan notes have been split between a financial liability
at amortised cost and a financial liability carried at fair value, representing the embedded option to convert the
financial liability into equity of the Company.
Proceeds of issue of convertible loan notes
Fair value of derivative liability
Host debt liability
Transaction Costs
Interest charged
Fair value movement
Foreign exchange movement
Carrying value of liabilities at 30 June 2020
$
800,000
(216,857)
(583,143)
21,120
(64,807)
(13,428)
91,012
(766,103)
The interest expensed for the year is calculated by applying an effective interest rate of 56% to the liability
component for the period since the loan notes were issued.
15c. Convertible Notes issued in June 2020
The convertible loan notes were issued on 15 June 2020 at an issue price of $1 per note. The notes are convertible
into ordinary shares of the Company at any time between the date of issue of the notes and their settlement date.
The loan notes are convertible at $0.005 per share. The loan notes are convertible at the election of either the note
holder or the Company. As there is no contractual obligation for the Company to make repayment in cash the
convertible notes have been recognised in equity at a value of $600,000.
15d. Other Loans
Other loans include principal and interest payable on loans drawn down during the year. All amounts are repayable
in less than 12 months.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 16 Contributed equity
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y
n
o
Ordinary shares
46
Consolidated
2020
$
61,123,783
61,123,783
2019
$
60,195,983
60,195,983
Ordinary shares
Ordinary shareholders have the right to receive dividends as declared and, in the event of winding up the Company,
to participate in the proceeds from the sale of all surplus assets in proportion to the number of and moneys paid
up on shares held. The fully paid ordinary shares have no par value. Ordinary shareholders are entitled to one vote,
either in person or by proxy at a meeting of the Company.
2020
2019
No. Shares
$
No. Shares
$
Consolidated
660,257,705
60,195,983
342,670,240 56,238,006
83,271,427
79,830,967
823,360,099
582,900 317,587,465
-
447,053
(102,055)
-
61,123,783
4,182,520
-
(224,543)
660,257,705 60,195,983
Rights issue and share placements
Share issue via conversion of convertible notes
Transactions costs related to share issue
Closing balance
Ordinary shares
l
Opening balance
e
s
u
a
n
o
s
r
e
p
Note 17 Reserves
Reserves
2020
$
2019
$
2,301,954
600,000
2,901,954
2,185,687
-
2,185,687
Share Based Payment Reserves
Convertible note Reserve on initial recognition (refer note 15)
Closing balance
r
o
F
Total expenses arising from share-based payment transactions recognized during the year:
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 17 Reserves (continued)
Share Based Payment Reserves
Share Based Payment Reserves
Opening Balance
Unlisted options issued during the year
Options expired during the year
Vesting charge on previously issued options
Closing balance
Share based payment expense
Total Options and Performance Rights
•
•
•
•
•
Included in share based payment expense
Included in consultancy expense
Included in prepayments
Included in capitalised share issue costs
Included in capitalised borrowing costs
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o
e
s
u
l
a
n
o
s
r
e
p
47
Consolidated
2020
$
2019
$
2,185,687
328,365
(212,096)
119,676
2,301,954
1,503,847
116,000
-
565,840
2,185,687
Consolidated
2020
$
328,373
328,373
135,944
58,900
29,445
40,830
63,254
328,373
194,844
133,529
2019
$
681,840
681,840
681,840
-
-
-
-
681,840
681,840
-
Total share based payments recognised in profit and loss
Total share based payments recognised in statement of financial position
The establishment of Cirralto Limited’s Employee Share Option Plan (ESOP) was approved by shareholders at the
2017 annual general meeting. The ESOP is designed to provide long-term incentives to eligible employees and
executive directors of the Group to assist in the motivation, retention and reward of participants. Details of the
Plan rules are set out within the remuneration report.
r
o
F
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
48
Note 17 Reserves (continued)
The following table represents the various securities issued by the Company during the year and their fair value:
Fair values of awards
Grant
date
Award type
Vesting
date
Vesting conditions
Expiry
date
Number of
options
Fair
value
Exercise
price
$
$
Director options
issued to Howard
Digby
24 July
2021
The options vest 12
months from date of
issue on the condition
that Mr. Digby remains a
director of the Company
for that period.
Issued to Canary
Capital Pty Ltd for
facilitation of
private placement
Issued to Obsidian
Global LLC. As part
of convertible
security
agreement
Issued to Canary
Capital Pty Ltd for
corporate advisory
services
Issued to Canary
Capital Pty Ltd for
facilitation of
convertible note
transactions
Total
24 July
2020
None
24 July
2020
None
24 July
2020
None
24 July
2020
None
28 July
2023
24 July
2023
28 July
2022
28 July
2023
28 July
2022
4,500,000 0.0039
0.0250
10,400,000 0.0039
0.0250
8,000,000 0.0026
0.0250
22,500,000 0.0039
0.0250
15,400,000 0.0027
0.0250
60,800,000
The above options were subject to shareholder approval which was obtained at 24 July 2020. As they all relate to
transactions which occurred during the year the relevant expense has been recorded in the year ending 30 June
2020. The estimation of the fair value of the awards requires judgement with respect to the appropriate
methodology. The choice of valuation methodology is determined by the structure of the awards, particularly the
vesting conditions. The fair value for the options granted was determined by using the Black-Scholes model or
Binomial model as appropriate.
24 July
2020
24 July
2020
24 July
2020
24 July
2020
24 July
2020
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o
e
s
u
l
a
n
o
s
r
e
p
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F
Valuation assumptions
2020
2019
Volatility
95%
Risk free Interest rate 0.27% - 0.28%
175.1% -
176.8%
2%
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 17 Reserves (continued)
49
Set out below are summaries of options granted during the year:
Consolidated
2020
2019
Average
exercise
price per
share
option $
0.056
0.025
(0.052)
-
0.029
Number of
options
91,796,713
60,800,000
(7,296,713)
-
145,300,000
Average
exercise
price per
share
option $
0.053
0.003
-
-
0.056
Number of
options
54,796,713
37,000,000
-
-
91,796,713
e
s
u
As at 1 July
Granted during the year
Expired during the year
Forfeited during the year
As at 30 June
Note 18 Segment reporting
At 30 June 2020 the weighted average contractual life of the above options was 2.02 years (2019: 2.99).
l
The Group’s operating segment is based on the internal reports that are reviewed and used by the Board of
Directors (being the Chief Operating Decision Maker (‘CODM’)) in assessing performance and in determining the
allocation of resources. The Group operates predominantly in the IT industry and a single geographic segment being
Australia.
At regular intervals, the CODM is provided management information at a Group level for the entity’s cash position,
the carrying values of intangible assets and a cash flow forecast for the next twelve months of operation. On this
basis, no segment information is included in these financial statements.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 19 Related party disclosure
50
Director and key management personnel related entities
The following entities have been determined to be related party entities:
Entity
CU2 Global Pty Ltd
Raptor Global
Corporation Ltd
Appstablishment Pty
Ltd
Appstablishment
Software Group Pty
Ltd
Director/Key Management Personnel
CU2 Global Pty Ltd (“CU2G”) is a related party entity. It is an associate of
Cirralto Limited. Mr Stephen Dale is a director of both Cirralto Limited and
CU2G.
Raptor Global Corporation Ltd (“Raptor”) is a related party entity. Mr Marcus
L’Estrange was a director of Cirralto Limited and Raptor.
Appstablishment Pty Ltd (“Appstablishment”) is a related party entity. Mr
Adrian Floate is a shareholder through his interests in Appstablishment
Software Group.
Appstablishment Software Group Pty Ltd (“ASG”) is a related party entity. Mr
Adrian Floate is a shareholder through his interests in Rare Air Nominees Pty
Ltd.
Floating Assets Trust Floating Assets Trust is a related party entity in which Mr Adrian Floate has a
Rare Air Nominees
Pty Ltd
Humedale Pty Ltd
beneficial interest.
Rare Air Nominees Pty Ltd (“Rare Air”) is a related party entity. Mr Adrian
Floate is a director of both Cirralto Limited and Rare Air.
Humedale Pty Ltd is a related party entity. Mr Stephen Dale is a director of both
Cirralto Limited and Humedale Pty Ltd.
Shares Issued to Related Entities
No shares were issued to related entities during the year.
Directors and key management personnel
Disclosures relating to directors and key management personnel are set out in the remuneration report in the
directors’ report and note 19.
Transactions with related parties
During the year, services have been provided by or to directors’ related entities as follows:
Director
Entity
Nature
2020
$
2019
$
Services provided by directors’ related entities
Mr Adrian Floate
Appstablishment Pty Ltd
IT services
2,450,367
1,191,000
Services provided to directors’ related entities
Mr Adrian Floate
Appstablishment Pty Ltd
IT services
105,339
92,211
Total payable as at year end
440,933
39,257
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 19 Related party disclosure (continued)
51
Parent entity
Cirralto Limited is the ultimate parent entity.
As at 30 June Cirralto Ltd had intercompany loans with subsidiaries of $7,410,742 (2019: 6,527,356) . These loans
carry no interest charge and have no set date for repayment. All intercompany transactions are eliminated on
consolidation. A provision for impairment has been made, refer to note 22.
Subsidiaries & associates
Interests in subsidiaries and associates are set out in note 12.
Note 20 Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Company
is set out below:
Consolidated
2020
$
2019
$
438,745
692,929
119,681
558,426
494,320
1,187,249
Short-term employee benefits:
Cash salary, fees and short-term compensation
Long-term employee benefits
Share-based payments
Shareholding
Refer to the remuneration report which contains the number of shares in the parent entity held during the financial
year by each director and other members of key management personnel of the Company, including their personally
related parties.
Option holding
Refer to the remuneration report which contains the number of options granted to directors during the 2020 financial
year.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 21 Cash flow information
a) Reconciliation of Cash Flow from Operations with Loss before Income Tax
Loss before Income Tax
Cash flows excluded from loss attributable to operating activities
Non-cash Flows in Loss
Depreciation, amortisation & impairment charges
Share-based payments
Non-cash loans to employees and shareholders
Non-cash issue of shares to Directors in lieu of wages and fees
Other non-cash adjustments
Changes in fair value of financial liabilities
Finance costs
FX movements
Impairment on receivables
Deferred revenue
Lease repayments included in finance cost
Changes in assets and liabilities:
(Increase)/Decrease in trade and other receivables
(Increase)/Decrease in other current assets
Increase/(Decrease) in trade payables, accruals and provisions
Net cash used in operating activities
b) Non-cash investing and financing activities
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Conversion of debt to equity (refer note 15)
The above reflects where repayments have been made via the issue of ordinary shares
52
Consolidated
2020
$
2019
$
(7,437,947)
(6,037,037)
4,551,793
194,834
-
-
-
18,120
277,095
60,222
4,675
(119,799)
96,000
2,828,262
681,840
80,005
380,025
(2,487)
-
-
-
9,555
-
-
(7,227)
(241,887)
1,069,735
(1,533,838)
(3,776)
(3,522)
(130,961)
(2,198,096)
2020
$
447,053
2019
$
-
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 22 Parent entity information
53
As at and throughout, the financial year ended 30 June 2020, the parent company of the consolidated entity was
Cirralto Limited. The results and financial position of the parent entity are detailed below:
Statement of profit or loss and other comprehensive
income
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Loss after income tax
Total comprehensive loss
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net Assets/(liabilities)
Equity
Contributed equity
Share-based payment reserve
Accumulated losses
Total Assets/(deficiency)
Consolidated
2020
$
2019
$
(2,469,923)
(2,469,923)
(12,900,906)
(12,900,906)
131,290
-
131,290
904,271
-
904,271
216,678
382
217,060
164,184
-
164,184
(772,981)
52,876
61,123,783
2,901,954
(64,798,718)
(772,981)
60,195,983
2,185,687
(62,328,795)
52,876
Note 23 Auditor’s remuneration
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Remuneration of the auditor of the parent entity for:
Auditing and Reviewing the Financial Report and interim financial statements
Tax and accounting advice
Consolidated
2020
$
65,960
-
65,960
2019
$
70,329
5,500
75,829
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Note 24 Events occurring after the reporting date
54
In July 2020, the Group issued a total of 322,004,599 shares in settlement of its financial liabilities. 189,921,918
shares were issued at $0.005 per share on conversion of $949,610 of convertible loan notes. 77,500,000 shares
were issued at $0.005 per share to settle other liabilities of $387,500 which were included in trade and other
payables as at 30 June 2020.
During July 2020, the Group settled the liability with Obsidian Global LLC. 32,208,374 shares were issued for $0.005
per share with a further 59,999,937 shares issued on 18 August 2020 at $0.009474 per share. The remainder of the
liability was paid in cash on 27 August 2020.
On 14 August 2020 the Company undertook a share placement to institutional and sophisticated investors, issuing
271,000,000 shares to raise $2,712,000 (before costs). The Funds raised under the share placement will be used to
support growth, further development of its payments’ products, debt reduction, marketing, costs associated with
the completion of the acquisition of Appstablishment Pty Ltd and general working capital requirements.
On 2 October 2020 the Company issued 397,709,616 listed options with an expiry of 28 July 2023 raising $397,710
(before costs). The options were issued under a pro-rata non-renounceable entitlement issue of options
(announced on 7 September 2020) to eligible shareholders on the basis of one (1) option for every eligible four (4)
shares held (Option Issue). The purpose of the Options Issue was to recognise the support and loyalty the Company
has received from its Shareholders to date.
The impact of the Coronavirus (COVID-19) pandemic is ongoing as at 30 June 2020 and 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.
Note 25 Contingent assets/liability
The Company is currently engaged in a dispute with an unrelated third party in relation to an alleged breach of
agreement. The Directors are of the opinion it is unlikely that the unrelated party would be able to demonstrate
any material loss, even if it were able to establish the claim. Accordingly, no provision has been recognised in the
financial statements.
There are no other contingent liabilities or assets as at 30 June 2020.
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
DIRECTORS’ DECLARATION
The directors of Cirralto Limited declare that:
55
in the directors’ opinion the financial statements and notes and the Remuneration Report in the Directors’
Report set out on pages 9 to 17 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving 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
complying with Australian Accounting Standards and Corporations Regulations 2001 and other
mandatory financial reporting requirements; and
the financial report also complies with International Financial Reporting Standards as issued by the
International Accounting Standards Board as disclosed in note 2(a); and
subject to note 2(c), there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they become due and payable.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to section 295(5)(a) of the Corporations Act
2001.
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Dated in Perth on 9 October 2020
Adrian Floate
Managing Director
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Independent Audit Report to the Members of Cirralto Limited
Report on the financial report
Opinion
We have audited the financial report of Cirralto Limited (“the Company”), including its subsidiaries (“the
Group”) which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of comprehensive income, consolidated statement of changes in equity and
consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Company is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the ‘auditor’s responsibilities for the audit of the financial
report’ section of our report. We are independent of the entity in accordance with the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES
110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(c) in the financial report, which indicates that, for the year ended 30 June
2020, the Group incurred a net loss of $7,437,947 and had cash outflows from operating activities of
$1,533,838. As at 30 June 2020, the Group had a cash balance of $273,628, a working capital deficit
of $2,516,006 and a net liability position of $2,494,170. As stated in Note 2(c), these events and
conditions, along with other matters as set forth in Note 2(c), indicate that a material uncertainty exists
that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material Uncertainty
Related to Going Concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
56
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Key audit matter
Impairment of intangible assets
(Notes 5b and 13 of the financial report)
Given the constantly changing and competitive
nature of the industry in which the Group
operates as well as net operating losses and net
operating cash outflows in the current and prior
financial years, there is a risk that there could be
a material impairment to goodwill and intangible
asset balances. Determination as to whether or
not there is an impairment in relating to an asset
involves
or Cash Generating Unit (CGU),
significant judgement about the future cash flows
and plans for these assets and CGUs.
The impairment of the goodwill and intangible
assets was a key audit matter because the
impairment model involved key assumptions and
judgements which had material impacts on the
impairment assessments.
How our audit addressed the key audit
matter
Our audit procedures included, amongst others:
We
held
various
discussions with
management to understand the assumptions
used in the impairment model;
We assessed whether the CGU appropriately
included all directly attributable assets and
liabilities;
We assessed the reasonableness of the cash
flow projections used in the impairment
models;
We assessed the accuracy of management’s
2020 forecast against actual results;
We assessed the reasonableness of key
assumptions including the discount rate,
forecast growth rates and terminal growth
rate assumptions;
We also performed sensitivity analysis by
adjusting the key inputs into the cash flow
projection; and
We evaluated
the adequacy of
the
disclosures included in the financial report.
Convertible securities issued during the
year
Our audit procedures included, amongst others:
(Note 15 of the financial report)
We obtained and read a copy of the relevant
The Group entered into a number of convertible
loan agreements during the year ending 30 June
2020. The terms of some of these agreements
were complex and management consulted with
an external expert to assess the appropriate
accounting treatment and to value the embedded
derivative components of the agreements.
The Group has recognised the convertible note
liabilities at amortised cost, fair value through
profit or loss and equity as appropriate in terms
of AASB 9: Financial Instruments and AASB 132:
Financial Instruments: Disclosure and
Presentation, depending on the terms of the
agreements.
This was a key audit matter due to the complex
nature of the transactions, the material impacts
on the financial report and the level of judgement
required in accounting for the agreements.
agreements;
We obtained a copy of the accounting advice
and valuations provided by managements
expert and assessed
inputs and
assumptions used;
the
We challenged the assumptions used by the
experts and held discussions with them to
understand their methodology;
We assessed the professional competence,
objectivity and experience of managements’
external expert;
We assessed the journal entries raised to
ensure that they reflected the movement in
the drawdowns and repayments for the year
ended 30 June 2020;
the
assessed
and
measurement of the transactions in relation
to the agreement; and
recognition
We
We assessed the accounting treatment and
disclosure in accordance with AASB 9 and
AASB 132.
57
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Other information
The directors are responsible for the other information. The other information comprises the information
in the Cirralto Limited annual report for the year ended 30 June 2020, but does not include the
consolidated financial report and the auditor’s report thereon.
Our opinion on the consolidated financial report does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated 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 the
other information we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the consolidated 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 consolidated financial report, the directors are responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either intend to liquidate the entity or
to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibility 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
Australian
at:
http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our auditor’s report.
Assurance
Standards
Auditing
website
Board
and
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
58
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 17 of the Directors’ Report for the
year ended 30 June 2020. In our opinion, the Remuneration Report of Cirralto 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.
Nexia Perth Audit Services Pty Ltd
Muranda Janse Van Nieuwenhuizen
Director
Perth
9 October 2020
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CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
Corporate Directory
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DIRECTORS
Mr Peter Richards (Non-Executive Chairman)
Mr Howard Digby (Non-Executive Director)
Mr Adrian Floate (Managing Director)
Mr Stephen Dale (Non-Executive Director)
REGISTERED OFFICE
Suite 103, Level 1, 2 Queen Street
Melbourne, VIC 3000
AUDITOR
Nexia Perth Audit Services Pty Ltd
Level 3
88 William Street, Perth WA 6000
STOCK EXCHANGE LISTING
The Company is listed on the Australian Securities
Exchange.
Home Exchange – Melbourne, Australia
Code:
ASX:CRO
COMPANY WEBSITE
www.cirralto.com.au
COMPANY SECRETARY
Mr Justyn Stedwell
OPERATIONAL OFFICE
Level 13, 333 George
Street
Sydney, NSW, 2000
SOLICITOR
Pointon Partners
Level 14
565 Bourke Street
Melbourne, VIC 3000
BANKER
Westpac Banking
Corporation
360 Collins Street,
Melbourne VIC 3000
SHARE REGISTRY
Automic Registry Services
Level 3, 30 Holt Street
Surry Hills, NSW 2012,
Australia
Telephone: 1300 288 664
(local)
+612 9698 5414
(international)
www.automic.com.au
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
ADDITIONAL STOCK EXCHANGE INFORMATION
61
Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set
out below. The information is effective as at 16 September 2020.
The Company does not currently have any shareholders deemed as substantial shareholders.
Substantial shareholders
Top 20 Shareholders
Name of Shareholder
RARE AIR NOMINEES PTY LTD
MR KEIRAN JAMES SLEE
COMSEC NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
MR ADRIAN JASON FLOATE
CANARY CAPITAL PTY LTD
MR DAVID MATTHEW WOOD
MR CHRISTOPHER MAY
BAGA RIVER PTY LTD
MR MARK ANDREW LINNEY
MR JODET DURAK
MR PETER DAVID KOLLER
KYRIACO BARBER PTY LTD
MR STEPHEN SHARRATT
MR PETER IAN RICHARDS &
MRS CAROL RICHARDS
MR CHRISTOPHER MARK JANSON
MRS DALIAH PATEL
PETER RICHARDS
TAOS PTY LTD
MR ANDREW MURRAY GREGOR
Total
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Range of Shareholders
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
No of Shares
42,866,943
30,600,000
22,511,589
18,604,007
16,603,348
16,325,000
16,289,000
15,013,159
15,000,000
14,350,000
14,323,321
14,000,000
13,775,000
13,500,000
13,241,790
11,229,862
10,700,000
10,394,737
10,007,103
10,000,000
329,334,859
Total holders
61
28
40
3,496
1,866
5,491
Units
13,754
78,087
379,077
146,328,491
1,444,192,859
1,590,992,268
% Held of Issued
Ordinary Capital
2.69%
1.92%
1.41%
1.17%
1.04%
1.03%
1.02%
0.94%
0.94%
0.90%
0.90%
0.88%
0.87%
0.85%
0.83%
0.71%
0.67%
0.65%
0.63%
0.63%
20.70%
% of Issued
Capital
0.00%
0.00%
0.02%
9.20%
90.77%
100.00%
CIRRALTO LIMITED
FINANCIAL REPORT 30 JUNE 2020
62
Based on the price per security of 0.034 being the closing price of securities on 15 September 2020, the number of
holders with an unmarketable holding is 628, with total 6,652,239 Shares, amounting to 0.42% of Issued Capital.
Unlisted Options
27,000,000 unlisted options with an exercise price of $0.045 per option are held by 2 individual shareholders.
5,500,000 unlisted options with an exercise price of $0.045 per option are held by 15 individual shareholders.
4,521,274 unlisted options with an exercise price of $0.047 per option are held by 15 individual shareholders.
3,000,000 unlisted options with an exercise price of $0.077 per option are held by 3 individual shareholders.
4,500,000 unlisted options with an exercise price of $0.054 per option are held by 1 individual shareholder.
7,500,000 unlisted options with an exercise price of $0.082 per option are held by 1 individual shareholder.
5,000,000 unlisted options with an exercise price of $0.040 per option are held by 1 lead broker.
18,401,282 unlisted options with an exercise price of $0.025 per option are held by 12 individual shareholders.
15,400,000 unlisted options with an exercise price of $0.025 per option are held by 1 lead broker.
142,400,000 unlisted options with an exercise price of $0.025 per option are held by 9 individual shareholders.
The voting rights attached to ordinary shares are set out below:
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.
Voting rights
Ordinary shares
Share buy-back
There is no current on-market share buy-back.
Shareholder Enquiries
Shareholders with enquiries about their shareholdings should contact the share registry.
For change of address, change of name, consolidation of shareholdings, shareholders should contact the Share
registry to obtain details of the procedure required for any of these changes.
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