CHANGE FINANCIAL LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
For personal use only
CORPORATE DIRECTORY
Directors
Teresa Clarke (Chair)
Ian Leijer (Executive Director)
Harley Dalton (appointed 11 December 2018)
Benjamin Harrison (appointed 11 December 2018)
Ashley Shilkin (resigned 11 December 2018)
Andrew Pipolo (resigned 30 September 2018)
Peter Clare (resigned 31 August 2018)
Company Secretary
Adam Gallagher (appointed 28 February 2019)
Gillian Nairn (resigned 28 February 2019)
Registered Office
Change Financial Limited
Level 11, 82 Eagle Street
Brisbane QLD 4000
Telephone: +61 7 3532 6990
Email: investors@chimpchange.me
Postal Address
Change Financial Limited
GPO Box 5011
Brisbane QLD 4001
Australian Company Number
150 762 351
Australian Business Number
34 150 762 351
Auditors
Pitcher Partners
Level 38
345 Queen Street
BRISBANE QLD 4000
Telephone: +61 7 3222 8444
Fax: +61 7 3221 7779
Website: www.pitcher.com.au
Share Registry
Link Market Services Limited
Telephone: 1300 554 474
Website: www.linkmarketservices.com.au
Website
www.changefinancial.com
ASX Code
CCA
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
TABLE OF CONTENTS
CORPORATE DIRECTORY
TABLE OF CONTENTS
CHAIRMAN’S LETTER
DIRECTORS' REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CORPORATE GOVERNANCE STATEMENT
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DIRECTORS DECLARATION
INDEPENDENT AUDITORS REPORT
ASX ADDITIONAL DISCLOSURE
2
3
4
5
18
19
27
28
29
30
31
32
33
54
55
59
Page 3 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
CHAIR’S LETTER
On behalf of the Board of Directors, it gives me great pleasure to present the 2019 Annual Report for Change
Financial Limited (ASX: CCA). The last year has been pivotal as the Company exited unprofitable businesses
resulting in a significant reduction of operating losses. With this restructuring, the Company proceeded through
the year with great clarity of purpose. Change put all of its resources behind the most promising of its verticals:
its payments and card issuing platform. That investment paid off, as we have now completed the build of the
platform, a key milestone, and are ready to commercialise it.
The final step towards completing the platform was achievement of Payment Card Industry (PCI) compliance,
a set of stringent standards to ensure that the debit and credit card industry is securing customer data
uniformly throughout the industry. The Company received word of this accomplishment just before this annual
report was published.
At the conclusion of 2018, the board made several critical decisions: first, we decided to exit the mobile banking
business; second, we decided to exit the blockchain business; third we undertook a capital raise to fund the
ongoing development of what was then a partially built payments and card issuing platform. Shareholders
should be pleased to know that over the course of the last twelve months, Change successfully executed on
each of those strategic goals, and in addition, secured our first enterprise customer.
The payments and card issuing platform, the Company’s focus at this time, is very promising. The barriers to
entry for this business are very high: development costs and time to market are significant. The Company is
the first newly certified Mastercard processor in the last five years.
The financial services industry is being disrupted with innovative fintech companies offering new products and
services to consumer markets. The issuer processor business is dominated by large, legacy players who lack
the capability to integrate innovation at the pace at which the industry is transforming. Our processor has been
built to fill that gap. We provide flexible features that meet the demands of those disrupting the market.
In December 2018 we welcomed Harley Dalton, Managing Director of Altor Capital, and Ben Harrison, Chief
Investment Officer of Altor Capital, as directors of the Company. Altor Capital is an alternative asset manager
that has been a long-term supporter of the Company and was a major shareholder prior to the Company’s IPO.
Harley has extensive experience in the funds management and investment industry, having founded and
served as Chief Executive Officer at DNR Capital where he grew the business to in excess of A$1 billion funds
under management. Ben sits on a number of Altor investee company boards and his experience extends across
financing and M&A into; investment, strategy, financial management, corporate restructuring, corporate
governance and general management.
I take this opportunity to thank our management and staff, especially our Chief Operating Officer, Clayton
Fossett, for their exemplary hard work over the past year. I also thank my fellow directors for their dedication
to turning this business around.
The effort undertaken by the management and the board has resulted in a significant turning point for the
Company, which paved the way for what we have now: a completed payments and card issuing platform, ready
for commercialisation. In the coming month, we look forward to onboarding our first enterprise customer and
generating our first revenue from this line of business.
I look forward to updating you on our continued success in achieving operational and financial milestones over
the course of the next year.
Teresa Clarke
Chair
Page 4 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
DIRECTORS' REPORT
The Directors present their report together with the financial statements of Change Financial Limited
(Change Financial or Company) consisting of Change Financial Limited and the entities it controlled at the
end of or during the year ended 30 June 2019 (Group).
Directors
The following persons were Directors of Change Financial Limited during the whole of the financial year and
up to the date of this report unless otherwise stated:
Teresa Clarke (Chair)
Ian Leijer (Executive Director)
Harley Dalton (appointed 11 December 2018)
Benjamin Harrison (appointed 11 December 2018)
Ashley Shilkin (resigned 11 December 2018)
Andrew Pipolo (resigned 30 September 2018)
Peter Clare (resigned 31 August 2018)
Principal activities
The Group's principal continuing activity during the year was continuing the build of its payment processor
and providing mobile banking services through its mobile application.
Background on Company and Review of Operations
During the financial year, the Company’s operations have been focused on:
advancing development of its innovative payments and card issuing platform;
•
• monetising the mobile banking consumer business; and
•
divesting from non-core assets, specifically the Ivy Project.
During the first half of the year, the Company engaged management consultants specialised in the payments
and digital financial services industry to review the payments and card issuing business, the Ivy Project and
mobile banking consumer business. Following their review, the Company determined:
•
to focus its efforts on completing the build of its Mastercard payments and card issuing platform,
which it believes offers substantial opportunity given the significant size of the addressable
market, the projected high growth in the market size over the next six years, the high revenue
potential, the limited number of competitors, and the high barriers to entry for new players; and
• while the mobile banking consumer business is leading edge, the underlying revenue metrics and
profitability have struggled to scale. As such, a strategic decision was made to look for other ways
to monetise this operation.
Development of its payment and card issue platform
During the year the Company focused on development of its payment and card issuing platform (Platform).
The Platform aims to provide a payments and financial technology to corporates, financial institutions, fintech
companies, banks and others initially in the US, particularly those lacking a mobile strategy. The Company’s
aim is to provide enterprise customers (and their end customers) more innovative payment infrastructure than
the complexity and legacy issues associated with incumbent providers. The Company is also aiming to leverage
learning from its consumer business and will offer a turn-key mobile banking solution to those banks and
institutions lacking technology capabilities and mobile strategies.
Page 5 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
The Company will be the first to be certified Mastercard Network Gateway Services platform in the last 5 years
and the second in the last 20 years.
The Platform will initially target more than 7,000 FDIC (Federal Deposit Insurance Corporation) banks, 6,000
credit unions and a host of innovative players in the financial services arena across the US with innovative
mobile banking services. The addressable market in the US is approximately a US$50 billion market in 2019,
growing at approximately 20% per annum through to 2025.
Benefits of the Platform
The Company is aiming to provide capabilities above that of incumbent payment processors to deliver a unique
selling point for its Platform. The Company’s Platform will also be paired with its integrated mobile banking
technology to offer an innovative turn-key mobile solution to clients.
Change’s innovative payments and card issuing platform includes the following features:
Program Dashboard – manage payment programs in real-time and configure program and account
settings such as transaction limits and fees charged on an individual customer level.
Data Insights Dashboard – access to data rich information customers need to understand how their
programs are performing. Allowing real-time insights that support day-to-day operations and drive
growth.
API Connectivity – built for connecting and exposing digital assets providing the speed customers are
seeking to roll out programs and new features. This allows delivery of customers’ projects faster than
ever before while also building infrastructure to increase productivity.
Dynamic Controls – refine payments and authorisation controls using a variety of business rules in real-
time to reduce fraud. Includes controlling excess spending and other unwanted behaviour.
Banking as a Service – fully white-labelled customer banking application that allows banks, credit unions
and other providers without a mobile strategy to offer innovative mobile banking applications under
their own brand.
Mastercard Processor – payment processing capability built on Mastercard’s new network gateway.
Ivy Project Divestment
On 11 January 2019, the Company announced it had monetised its investment in the Ivy Project for cash
proceeds of US$1.5 million. The terms of the sale agreement entered into by Change Financial results in the
Company selling its 33% equity stake. In addition, but separate to the sale, the Company has received a
distribution of capital from Ivy Koin LLC. The Company’s divestment of the Ivy Project together with the capital
distribution, represent a significant return on investment.
Mobile Banking Consumer Business
On 21 January 2019, Change Financial reached an agreement with its US banking partner, Central Bank of
Kansas City (CBKC), to restructure the operating cost of the ChimpChange business. Under the agreement,
there is a reduction of fees payable by the Company to CBKC.
In addition, Change Financial has granted CBKC the right to license ChimpChange to other clients in CBKC’s
portfolio. The Company retains all technical IP relating to ChimpChange. As part of the agreement, CBKC have
Page 6 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
agreed to give Change Financial the first right to perform transaction processing on completion of the
Company’s payments processor as well as ancillary services for the ChimpChange platform. This was a
significant initial step in securing the first enterprise client for the Company’s payments processor.
Successful Capital Raising
In addition to the new funding secured from Altor Capital in December 2018 the Company undertook an
entitlement offer to existing shareholders which raised A$597,000. With the placement of shortfall totaling
A$195,000, the Company raised a total of A$792,000 (US$546,100 net of fees).
Options exercised
During the year no shares were issued during the Financial Year pursuant to the exercise of options.
Matters subsequent to the end of the financial year
There were no matters subsequent to the end of the Financial Year other than as disclosed in Note 32.
Likely developments and expected results of operations
Refer to the Review of Operations for further details.
Information on directors
Teresa Clarke (Chair)
Experience and expertise
Ms. Clarke has 30 years experience spanning investment banking, corporate
board directorships, and entrepreneurial starts ups. Teresa started her career
at Goldman Sachs & Co. where she was promoted several times, and was
ultimately named Managing Director in the investment banking division.
Among other major transactions, she led the $3 billion merger to create the
largest home building company in the US.
Her corporate directorships include CIM Finance (SEM:CIM), the first non-bank
institution in Southern Africa to offer Mastercard and Visa credit cards
(Corporate Governance Committee), and ATIO Corporation, a private systems integrator whose board she
chaired. She served on the investment committee of a regional $120 million private equity fund.
She currently serves on the advisory board of Indenseo, a Silicon Valley insurance tech start-up.
She was one of fifteen private sector leaders chosen to serve on President Obama’s Advisory Board on Doing
Business in Africa. She is a member of the Council on Foreign Relations, and Women Corporate Directors.
Ms Clarke is a California native who now spends her time between New York and South Africa, where she
runs Africa.com, a tech/media holding company she founded. Ms. Clarke earned an A.B., cum laude in
Economics, M.B.A. from Harvard Business School, and J.D. from Harvard Law School.
Special responsibilities
Member of the Audit & Risk Committee
Other current ASX directorships
None
Page 7 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Former ASX directorships in last 3 years
None
Interests in shares and options
Nil
Harley Dalton (Non-Executive Director)
Experience and expertise
Founder and director of Altor Capital, responsible for the day to day
management of the business. Responsible for sourcing and negotiating
investments and building the capability of the business and the team.
Harley has over 20 years’ experience in investments and the funds
management industry. His key background and capabilities include leadership,
strategy, negotiation and operational management. He has been actively
involved in taking a number of business to publicly listed status in the
Australian share market, providing capital raising, structuring, debt, equity; and board composition advice in
this process.
Harley was the founder, director and CEO of Dalton Nicol Reid up to 2014, one of Australia’s leading and
recognised Australian Equities fund managers. He grew the business from start up to circa AUD $1billion in
assets under management prior to his exit. Dalton Nicol Reid manages money on behalf of retail, wholesale
and institutional clients both domestically and internationally.
Prior to founding Dalton Nicol Reid, Harley worked for Hartley Poynton Stockbroking.
Harley has a Bachelor of Science from Griffith University, a Graduate Diploma in Applied Finance and Investment and is a
member of The Australian Institute of Company Directors.
Other current ASX directorships
None
Former ASX directorships in last 3 years
None
Special responsibilities
Member of the Audit & Risk Management Committee
Interests in shares and options
402,235 shares in Change Financial Limited held beneficially
2,180,000 options in Change Financial Limited held by Altor Private Equity Ltd
Mr Dalton is the founder and director of Altor Capital Pty Limited (Altor). Altor Capital Management Pty Ltd
(Altor Capital Management), a wholly owned subsidiary of Altor, holds convertible notes in the Company.
Subsequent to year end 19,205,112 convertible notes with a face value of A$1,920,511 were issued to Altor
Capital Management Pty Limited as representative noteholder and security trustee holding Notes on behalf
of investor. Mr Dalton does not have a beneficial interest in any of the convertible notes.
Page 8 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Ian Leijer (Executive Director)
Experience and expertise
Ian has been closely involved with Change Financial since its inception.
Ian is a Chartered Accountant with over 25 years’ experience in financial
analysis, corporate transactions, business strategy and business management.
He was CFO and Company Secretary for over 10 years of former ASX listed
company Avatar Industries Limited which operated globally in a number of
diverse industries including mining services, electronics distribution,
fabrication of building products and printing. Ian started his career with Price
Waterhouse specialising in corporate transactions and valuations before
joining a boutique investment bank.
Ian currently works with a number of entities on business analysis, capital raising (debt & equity) and general
management. Ian also holds a Bachelor of Economics from the University of Sydney, Australia.
Other current ASX directorships
None
Former ASX directorships in last 3 years
None
Special responsibilities
None
Interests in shares and options
3,072,529 shares in Change Financial Limited.
Benjamin Harrison (Non-Executive Director)
Experience and expertise
Ben has extensive experience in advising and investing in companies. He
commenced his career as a project manager for a large international
engineering consulting firm working on a number of infrastructure projects in
Australia and Southeast Asia. He later moved into investment banking, working
for a leading corporate advisory house where over a 5 year period he executed
over $2.0 billion in capital market transactions and $5.5 billion of public M&A
transactions. Ben is active in the venture capital, private equity and private
credit sectors. He currently holds board and advisory roles for a number of private companies.
Special responsibilities
Chair of the Audit & Risk Committee
Other current ASX directorships
Nil
Former ASX directorships in last 3 years
Nil
Interests in shares and options
60,335 shares in Change Financial Limited.
Company secretary
The Company secretary is Mr Adam Gallagher. Mr Gallagher was appointed to the position of Company
secretary on 28 February 2019.
Page 9 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
Meetings of directors
The numbers of meetings of the Company's board of Directors and of each board committee held during the
year ended 30 Jun 2019, and the numbers of meetings attended by each Director were:
Ian Leijer 1
Ben Harrison
Harley Dalton
Teresa Clarke
Andrew Pipolo
Peter Clare
Ashley Shilkin
Full meetings of directors
Audit & Risk Committee
meetings
A
15
4
4
14
5
5
11
B
15
4
4
15
7
5
11
A
1
1
1
1
0
1
1
B
1
1
1
1
0
1
1
1 Mr Leijer attended the Audit & Risk Committee meeting by invitation
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the year
Remuneration report (audited)
The Directors are pleased to present your Company's 2019 remuneration report which sets out remuneration
information for Change Financial Limited's non-executive Directors, executive Directors and other key
management personnel.
Non-executive director remuneration policy
The shareholders of Change Financial Limited on 11 August 2015 approved, for the purposes of the ASX
Listing Rules and the Group’s Constitution, an increase in the maximum aggregate annual non-executive
directors’ fees to A$500,000, with such fees to be allocated to the non-executive directors as the board of
directors may determine.
Executive remuneration policy and framework
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with achievement of
strategic objectives and the creation of value for shareholders and conforms with market practice for delivery
of reward.
The board ensures that executive reward satisfies the following key criteria for good reward governance
practices:
•
•
•
•
•
•
•
•
•
•
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;
performance linkage / alignment of executive compensation;
transparent;
acceptable to shareholders;
alignment to shareholders' interests;
attracts and retains high calibre executives;
alignment to program participants' interests;
rewards capability and experience; and
provides recognition for contribution.
Page 10 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
The executive remuneration and reward framework has two components:
base pay and benefits, including superannuation; and
long term incentives.
(a) Elements of remuneration Base pay and benefits
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base
pay for executives is reviewed annually to ensure the executive's pay is competitive with the market. An
executive's pay is also reviewed on promotion.
There are no guaranteed base pay increases included in any executives' contracts.
(b) Details of remuneration
Details of the remuneration of the directors, the key management personnel of the Group (as defined in
AASB 124 Related Party Disclosures) of Change Financial Limited and the Group are set out in the following
tables.
The key management personnel of Change Financial Limited includes the directors as listed below:
Peter Clare (Chairman) (resigned from Board on 31 August 2018)
Teresa Clarke (Chair) (Executive Chair from 1 September 2018 to 31 December 2018)
•
•
• Ashley Shilkin (Executive Director) (resigned from Board on 11 December 2018)
•
• Andrew Pipolo (Non-Executive Director) (resigned from Board on 30 September 2018)
• Ben Harrison (Non-Executive Director) (appointed 11 December 2018)
• Harley Dalton (Non-Executive Director) (appointed 11 December 2018)
Ian Leijer (Executive Director)
In addition to the directors the following executives that report directly to the Board are key management
personnel:
•
•
Clayton Fossett (Chief Operating Officer)
Young Lee (Chief Financial Officer) (resigned 31 December 2019)
The following table shows details of the remuneration expense recognised for the Group's executive key
management personnel for the current and previous financial year measured in accordance with the
requirements of the accounting standards.
Page 11 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
2019
Name
Short Term Benefits
Cash salary
and fees
Cash
Bonus
US$
US$
Non
Monetary
Benefits
US$
Post
Employment
Benefits
Long
term
benefit
Share
based
payments
Total
US$
US$
US$
US$
Non-executive directors
Teresa Clarke
Harley Dalton
Ben Harrison
Andrew Pipolo
Peter Clare
Subtotal
Executive directors
Teresa Clarke1
Ashley Shilkin
Ian Leijer
Subtotal
Key Management
Clayton Fossett
Young Lee
Subtotal
Total
34,773
17,695
17,695
8,570
10,043
88,776
200,000
90,726
102,471
393,197
180,011
62,200
242,211
724,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,154
-
11,154
7,765
14,666
22,431
33,585
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34,773
17,695
17,695
8,570
10,043
88,776
-
(290,571)
-
(290,571)
200,000
(188,691)
102,471
113,780
21,308
(19,030)
2,278
209,084
57,836
266,920
(288,293)
469,476
1 Ms. Clarke served in an executive capacity from 1 Sep 2018 to 31 Dec 2018
2018
Name
Short Term Benefits
Cash salary
and fees
Cash
Bonus
US$
US$
Non
Monetary
Benefits
US$
Post
Employment
Benefits
Long
term
benefit
Share
based
payments
Total
US$
US$
US$
US$
Non-executive directors
Peter Clare
Ben Harrison
Teresa Clarke
Andrew Pipolo
Subtotal
Executive directors
Ashley Shilkin
Ian Leijer
Subtotal
Key Management
Clayton Fossett
Young Lee
Subtotal
Total
54,178
41,081
39,996
33,131
168,386
214,796
68,253
283,049
167,358
160,070
327,428
778,863
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,579
-
19,579
10,000
-
10,000
-
-
-
-
-
-
19,579
10,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,262
33,262
133,741
-
133,741
10,035
10,035
20,070
54,178
41,081
39,996
66,393
201,648
378,116
68,253
446,369
177,393
170,105
347,498
187,073
995,515
The value of options issued to directors and employees as remuneration is expensed over the vesting period which may
be a number of years. Therefore, the amount for share based payments is not a cash expense and represents the
expense recognised in that financial year for options granted as remuneration in that year and prior years. In the 2018
financial year the amount shown for share based payments for Ashley Shilkin, Clayton Fossett and Young Lee is the
expense recognised for options issued in the 2016 and 2017 financial years. In 2019 the negative amounts are the
options forfeited but not yet vested at the time of forfeiture. There were no options issued to Key Management and
Executive Directors in the 2018 and 2019 financial year.
Page 12 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
(c) Service agreements
Teresa Clarke (Chair) (Executive Chair from 1 Sep 2018 to 31 Dec 2018)
•
•
•
•
Term of agreement – no fixed term;
1 July 2018 to 31 August 2018 – annual fee of US$40,000 payable monthly;
1 September to 31 December 2018 – monthly consulting fee of US$50,000 per month comprising
US$5,833 per month for the role of Chair and US$44,167 per month for executive services;
From 1 January 2019 - annual fee of A$70,000 for the role of Chair payable monthly on pro rata
basis; and
• Reimbursement of specified expenses incurred in undertaking the role
Ian Leijer (Executive Director)
•
•
Services provided through Unimain Pty Ltd (Unimain);
Term of agreement – 6 months unless terminated given one month’s notice, automatically extended
for additional periods of one month each until terminated or a new agreement is entered into.
Unimain receives a consulting fee of A$2,000 per day for services provided by Mr Leijer; and
• Unimain is entitled to reimbursement of specified expenses incurred in providing services.
Harley Dalton (Non-Executive Director)
Term of agreement – no fixed term;
•
• Annual fee of A$50,000 payable monthly on pro rata basis; and
• Reimbursement of specified expenses incurred in undertaking the role
Ben Harrison (Non-Executive Director)
Term of agreement – no fixed term;
•
• Annual fee of A$50,000 payable monthly on pro rata basis; and
• Reimbursement of specified expenses incurred in undertaking the role
Clayton Fossett (COO)
Term of agreement – no fixed term;
•
• Base salary is reviewed annually;
•
•
•
• Mr Fossett is employed under the laws of the State of California, US.
Entitled to reimbursement of specified expenses incurred in his employment;
Can participate under the Company ESOP;
Employment can be terminated giving four month’s notice in writing; and
(d) Equity instrument disclosures relating to key management personnel
(i)
Options issued to Key Management Personnel as remuneration
No options were issued as long-term incentives to Key Management Personnel as remuneration during the
financial period.
Page 13 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
(ii)
Option Holdings
The numbers of options in the Company held during the financial year by each Director of Change Financial
Limited and other key management personnel of the Group, including their personally related parties, are set
out below.
2019
Name
Balance at
the start of
the period
Exercised
during the
year
Lapsed and
Forfeited
during the
year
Balance at
the end of
the period
Total Vested
at 30 June 19
Exercisable
at 30 June 19
Unexercis-
able at
30 June 2019
Directors
Peter Clare
450,000
Ashley Shilkin
3,500,000
Ian Leijer
Teresa Clarke
250,000
250,000
Andrew Pipolo
250,000
Other key
management
Clayton Fossett
550,000
Young Lee
500,000
-
-
-
-
-
-
-
(450,000)
(3,500,000)
(250,000)
(250,000)
(250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(100,000)
450,000
366,667
366,667
83,333
(500,000)
-
-
-
-
2018
Name
Balance at
the start of
the period
Granted
during the
year
Exercised
during the
year
Balance at
the end of
the period
Total Vested
at 30 June 18
Exercisable
at 30 June 18
Unexercis-
able at
30 June 2018
Directors
Peter Clare
750,000
Ashley Shilkin
3,500,000
Ian Leijer
Teresa Clarke
Andrew Pipolo
Other key
management
-
-
-
-
300,000
450,000
450,000
450,000
-
-
-
-
-
3,500,000
1,000,000
1,000,000
2,500,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
250,000
-
-
-
250,000
250,000
-
250,000
Clayton Fossett
650,000
Young Lee
500,000
-
-
100,000
550,000
383,334
383,334
166,666
-
500,000
183,334
183,334
316,666
No option holder (Key Management Personnel or otherwise) has any right under the options to participate in
new issues of securities in the Company made by the Company to its shareholders generally. In the event of
a reconstruction of the capital of the Company or an issue of Bonus shares the option strike price, and/or the
number of options will be adjusted such that no benefit is gained or lost by option holders as a result of that
reconstruction or bonus share issue.
Page 14 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
(iii)
Share holdings
The numbers of shares in the Company held during the financial year by each Director of Change Financial
Limited and other key management personnel of the Group, including their personally related parties, are set
out below. There were no shares granted during the reporting period as compensation.
Year to 30 June 2019
Balance at the start
of the period
Balance at
appointment/
(resignation)
Purchased
Balance at the end
of the period
Directors of Change Financial Limited
Harley Dalton
Ben Harrison
Ian Leijer
Teresa Clarke
Peter Clare
Ashley Shilkin
Andrew Pipolo
Other key management personnel of the Group
Clayton Fossett
Young Lee
Year to 30 June 2018
Directors of Change Financial Limited
Peter Clare
Ashley Shilkin
Ian Leijer
Teresa Clarke
Andrew Pipolo
Other key management personnel of the Group
Clayton Fossett
Young Lee
-
-
2,872,529
-
335,156
67,039
43,668
16,667
402,235
60,335
500,000
(500,000)
11,901,965
(11,901,965)
-
-
-
-
-
-
-
-
200,00
3,072,529
-
-
-
-
-
-
-
-
-
-
-
-
Balance at the
start of the
period
Received during the
year on exercise of
options
Other changes
during the
period
Balance at the
end of the period
200,000
300,000
11,901,965
2,872,529
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
11,901,965
2,872,529
-
-
-
-
Page 15 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
The table below shows for the current year and prior years since listing the total remuneration cost of the key management personnel,
earnings per share (EPS), dividends paid or declared, and the closing price of ordinary shares on ASX at year end
Financial Year
Total Remuneration
$
2016
2017
2018
2019
2,154,698
1,448,892
995,515
469,476
EPS
A$
(0.229)
(0.135)
(0.124)
(0.057)
Dividends
cents
Share Price
$A
0.0
0.0
0.0
0.0
0.56
0.57
0.67
0.049
End of Remuneration Report
Shares under option
Grant Date
Expiry
Strike Price
Vesting Conditions
Number
31 Dec 2014
31 Dec 2019
1 Apr 2015
1 Apr 2015
18 Jan 2017
18 Jan 2018
20 Oct 2019
20 Oct 2020
20 Jan 2020
31 Jan 2021
12 Dec 2018
31 Dec 2020
TOTAL
A$0.40
A$0.49
A$0.49
A$0.657
A$0.92
A$0.01
No
Yes
Yes
Yes
Yes
No
1,500,000
100,000
100,000
740,000
500,000
4,000,000
6,940,000
No shares have been issued during or since the end of the year as a result of the exercise of options
Indemnity and Insurance of officers
Insurance of officers
During the financial year, the Group paid a premium in respect of a contract insuring the directors of the
company (as named above), the company secretary, and all executive officers of the company and of any
related body corporate against a liability incurred as such a director, secretary or executive officer to the
extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature
of the liability and the amount of the premium.
The Group has not otherwise, during or since the financial year, except to the extent permitted by law,
indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate
against a liability incurred as such an officer or auditor.
Page 16 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor's expertise and experience with the Company and/or the Group are important.
Details of amounts paid or payable to the auditor for non-audit services provided during the year are
outlined at note 28 to the financial statements. Based on advice provided by the Audit and Risk Management
Committee, the Directors have formed the view that the provision of non-audit services is compatible with
the general standard of independence for auditors, and that the nature of non-audit services means that
auditor independence was not compromised.
Dividends - Change Financial Limited
The Directors of Change Financial Limited do not recommend the payment of a dividend for the year ending
30 June 2019.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act
2001 is set out on page 18.
Auditor
Pitcher Partners continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2) of the
Corporations Act 2001.
Dated 30 September 2019
Teresa Clarke
Chair
Page 17 of 60
For personal use only
The Directors
Change Financial Ltd
Level 11, 82 Eagle Street
Brisbane QLD 4000
Auditor’s Independence Declaration
As lead auditor for the audit of Change Financial Ltd for the year ended 30 June 2019, I declare
that, to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants.
This declaration is in respect of Change Financial Ltd and the entities it controlled during the year.
PITCHER PARTNERS
J. J. EVANS
Partner
Brisbane, Queensland
30 September 2019
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
CORPORATE GOVERNANCE STATEMENT
The Company is committed to implementing and maintaining good corporate governance policies.
Change Financial Limited’s Corporate Governance Statement has been adopted and structured with
reference to the Australian Securities Exchange (ASX) Corporate Governance Council - Corporate
Governance Principles and Recommendations, 3rd Edition (CGC Recommendations). This statement
reports against the CGC Recommendations.
The Company’s practices are largely consistent with the CGC recommendations. Where the
Company’s corporate governance practices do not correlate with the CGC Recommendations, the
Company is working towards compliance; however, the Board does not consider that all CGC
Recommendations are currently appropriate for the Company due to the current size and scale and
circumstances of its operations. The Board has offered full disclosure and reasons for the adoption of
alternative Company practices and these are summarised in this Corporate Governance Statement.
The Board is of the view that with the exception of the departures from the CGC Recommendations 7777d
below it otherwise complies with the CGC Recommendations.
The information in this statement is current as at 30 September 2019 and has been approved by the Board.
Principle 1 – Lay solid foundations for management and oversight
Functions, powers & responsibilities of the Board
The Board of Directors is pivotal in the relationship between shareholders and management and the role
and responsibilities of the Board underpin the Company’s corporate governance framework. Generally, the
powers and obligations of the Board are governed by the Corporations Act and the general law.
Without limiting those matters, the Board expressly considers itself responsible for the following:
•
•
•
•
•
•
•
•
•
•
•
•
ensuring compliance with the Corporations Act, ASX Listing Rules (where appropriate) and all other
relevant laws;
providing leadership and developing, implementing and monitoring strategic operational and financial objectives
for the Company and the overall performance of the Company;
appointing appropriate staff, consultants and experts to assist in the Company's operations;
ensuring appropriate financial and risk management controls are implemented;
setting, monitoring and ensuring appropriate accountability and a framework for remuneration of
Directors and executive officers;
establishing and overseeing the Company’s process for making timely and balanced disclosure of all
material information in accordance with the ASX Listing Rules;
implementing appropriate strategies to monitor performance of the Board in implementing its functions
and powers;
implementing and overseeing the Company’s risk management framework to enable risk to be
identified, assessed and managed and to set the risk appetite the Board expects Management to
operate within;
appointing the Chairperson;
appointing and removing the Chief Executive Officer and Company Secretary;
approving the appointment and, where appropriate, removal of members of Management;
contributing to and approving Management's development of corporate strategy and performance
objectives;
• monitoring Management's implementation of strategy and performance generally, and ensuring
appropriate resources are available to Management;
Page 19 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
• monitoring the effectiveness of the Company’s governance practices;
•
approving and monitoring the progress of major capital expenditure, capital management and
acquisitions and divestitures;
approving the annual budget;
liaising with the Company's external auditors;
approving and monitoring financial and other reporting systems of the Company (including external
audit) and the integrity of these systems; and
appointing and overseeing Committees where appropriate to assist in the above functions and powers.
•
•
•
•
The Board has delegated to the Executive Chair day to day responsibility for running the affairs of the
Company and to implement the policies and strategy set by the Board. The Board also delegates to senior
management the responsibilities for the day-to-day activities leading toward achievement of the Company’s
strategic direction within agreed boundaries and authority limitations.
Structure of the Board
The policy and procedures for the selection and appointment of new Directors is that candidates are
considered and selected by reference to a number of factors which include, but are not limited to, their
relevant experience and achievements, and credibility within the Company’s scope of activities. Directors
are initially appointed by the full Board subject to election by shareholders at the next Annual General
Meeting.
The Company has procedures in place to ensure that all material information in its possession relevant to a
decision to elect or re-elect a Director (including whether Directors support the election or re-election) is
disclosed in the notice of meeting provided to shareholders.
At each Annual General Meeting the following Directors automatically retire and are eligible for re-
appointment:
•
•
•
any Director who has been elected in the office for a period in excess of three consecutive years or
until the third annual general meeting following her/his appointment, whichever is longer, without
submitting him/herself for re-election;
any Director who was appointed by the Directors during the year to fill a casual vacancy or as an
addition to the existing Directors;
one-third of the Directors or, if their number is not a multiple of three, then the greatest of one or the
number nearest to but not exceeding one-third.
Director and senior executive agreements
New Directors receive a letter of their appointment setting out the material terms of their engagement and
a deed of indemnity, insurance and access. Non-executive Directors are not appointed for fixed terms. All
senior executives, including Executive Directors, also have written agreements, which set out the material
terms of engagement, including a description of position and duties, reporting lines, remuneration
arrangements and termination rights and entitlements.
Contract details of senior executives, which are key management personnel, are summarized in the
Remuneration Report in the Annual Report.
Company Secretary
The Company Secretary is accountable directly to the Board (through the Chairman) for facilitating the
Company’s corporate governance processes and the proper functioning of the Board. Each Director is
entitled to access the advice and services of the Company Secretary.
Page 20 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
In accordance with the Company’s Constitution, the appointment and removal of the Company Secretary is a
matter for the Board as a whole. A copy of the Constitution is available on the Company website under
Corporate Governance and the details of the Company Secretary are set out in the Directors’ Report
contained within the Annual Report.
Diversity
The Board has not adopted a formal Diversity Policy at this stage. The recruitment and selection processes
adopted by the Company ensure that staff and management are selected in a non-discriminatory manner
based on merit. The Company respects and values the competitive advantage of diversity (which includes
but is not limited to gender, age, disability, ethnicity, marital or family status religious or cultural
background), and the benefit of its integration throughout the Company in order to improve corporate
performance, increase shareholder value and maximise the probability of achievement of the Company’s
goals. However, the Board of Directors does not believe that the Company is currently of a sufficient size to
justify the establishment of formal and measurable objectives, having regard to the nature and scale of its
activities.
Board reviews
The Company does not have a formal process for evaluating the performance of the Board, its committees
and individual directors. Due to the Company’s limited resources during the reporting period, no formal
performance evaluation of the Board or its Committees was undertaken during the period.
In the normal course of events the Board informally reviews the performance of Directors and the Board as
a whole.
The Board is provided with the information it needs to discharge its responsibilities effectively. All Directors
have access to corporate governance policies and material contracts entered into by the Company. The
Directors also have access to the Company Secretary for all Board and governance-related issues.
Management reviews
The Company did not during the reporting period have a formal process for periodically evaluating the
performance of its senior executives and the Board did not conduct a formal performance evaluation of
senior executives during the reporting period. The Board regularly informally reviews the performance of
the Company’s senior executives and assesses the achievement of goals and business development and
evaluates compliance issues.
PRINCIPLE 2 – STRUCTURE THE BOARD TO ADD VALUE
Nomination committee
The Board has not formally established a Nominations Committee as the Directors consider that the Board is
not of a size nor are its affairs of such complexity as to justify the formation of this Committee. The Board
considers that it is able to deal efficiently and effectively with Board composition and succession issues
without establishing a separate Nomination Committee and in doing so, the Board will be guided by the
Nomination Charter which is set out in the Company’s Corporate Governance Charter and can be accessed
on the Company’s website under Corporate Governance. The Company will review this position annually and
determine whether a Nominations Committee needs to be established.
Skills and experience
Details of the current Directors, their skills, experience and qualifications plus a record of attendance at
meetings is included in the Directors’ Report within the Annual Report.
Page 21 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
The Company has established a Board Skills Matrix.
At this stage of the Company’s development the Board believes there is an appropriate mix of skills,
experience and diversity on the Board. However the Board will continue to monitor its composition with a
view to ensuring is has an appropriate mix of skills and diversity to enable it to discharge its responsibilities
effectively.
Independence and length of service
The Company’s Board is comprised of Teresa Clarke, Harley Dalton, Benjamin Harrison and Ian Leijer. The
Chair and the Board other than Ian Leijer are non executive directors.
The length of service of each Director as at the date of this financial report is set out below and can be found
in the Directors’ Report within the Annual Report.
Name
Appointment date
Length of service
Teresa Clarke
14 October 2016
Ian Leijer
16 January 2015
Harley Dalton
11 December 2018
Benjamin Harrison
11 December 2018
35 months
56 months
9 months
9 months
Based on the factors listed in the CGC Recommendations as being relevant to assessing independence, the
Board considers the directors, other than Ian Leijer and Harley Dalton, to be independent Director on the
Board as at 30 September 2019. Mr Leijer is considered not to be independent as he is retained in an
executive capacity. Mr Dalton is not considered to be independent as a he is a director of Altor Private
Equity Pty Ltd and shareholder of Altor Capital Pty Ltd who holds 100% of the shares in Altor Private Equity
Limited.
Principle 3 – Act ethically and responsibly
Code of conduct
The Company has established a Corporate Code of Conduct and Corporate Ethics Policy. The Codes require
that Directors, management and employees maintain high standards of integrity and ensure that all business
activities are conducted legally and ethically in compliance with the letter and spirit of both the law and
Company policies. The Code of Conduct and Ethics Policy is set out in the Company’s Corporate Governance
Charter and can be accessed on the Company’s website under Corporate Governance.
Page 22 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
PRINCIPLE 4 – SAFEGUARD INTEGRITY IN CORPORATE REPORTING
Audit Committee
CGC recommendation 4.1 states that the audit committee should consist of a majority of independent
Directors and all be non-executive Directors.
Given the small size of the Board, the Board did not have a separate Audit and Risk Management
Committee during 2019. The Board as a whole, discharged the responsibilities normally undertaken by the
Audit Committee as set out in the Audit and Risk Committee Charter.
The Company believes that given the size and scale of its operations, non-compliance by the Company will
not be detrimental to the Company.
The Company has adopted an Audit and Risk Management Committee Charter setting out the Committee’s
responsibilities once a Committee is re-established as well as reporting requirements. A copy of the Charter
is included in the Corporate Governance Charter and can be accessed on the Company’s website under
Corporate Governance.
The responsibilities of the Audit and Risk Management Committee, once re-established, with respect to
audit are to:
•
•
review and make recommendations to the Board in relation to whether the Company’s financial
statements reflect the understanding of the members of the Committee, and otherwise provide a true
and fair view of the financial position and performance of the Company;
review and make recommendations to the Board in relation to the appropriateness of the accounting
judgments or choices exercised by Management in preparing the Company’s financial statements;
ensure that the quality of financial controls is appropriate for the business of the Company;
review the scope, results and adequacy of external and internal audits;
require the external auditors to report to the Committee;
•
•
•
• monitor corporate conduct and business ethics and ongoing compliance with laws and regulations;
• maintain open lines of communication between the Board, Management and the external auditors, thus
•
•
•
•
enabling information and points of view to be freely exchanged;
review matters of significance affecting the financial welfare of the Company;
ensure that systems of accounting and reporting of financial information to shareholders, regulators
and the general public are adequate and making recommendations in this regard;
review the Company's internal financial control system;
consider and make recommendations regarding the appointment and removal of the external auditor
and approving the remuneration and terms of engagement of the external auditor;
• monitor and review the external auditor's independence, objectivity and effectiveness, taking into
•
consideration relevant professional and regulatory requirements and the performance of the external
auditor; and
develop and implement policy on the engagement of the external auditor to supply non-audit services,
taking into account relevant ethical guidance regarding the provisions of non-audit services by the
external audit firm and make recommendations on any proposal by the external auditor to provide
non-audit services.
Page 23 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
External auditor
Pitcher Partners was appointed as the Company’s external auditor by shareholders at a General Meeting
held on 30 November 2015. Pitcher Partners has advised the Company that their policy of audit partner
rotation requires a change in the lead engagement partner and review partner after a period of five years.
Representatives of Pitcher Partners attend the Annual General Meeting and are available to answer
shareholder questions regarding the audit or the individual statements.
Chief Executive Officer and Chief Financial Officer certification of financial statements.
Prior to the approval of the Group’s financial statements each year, the Chief Operating Officer (acting in the
function of Chief Executive Officer) and the Finance Director (acting in the function of Chief Financial Officer)
confirm in writing to the Board that the financial reports of the Company for the financial year:
•
•
•
present a true and fair view, in all material respects, of the Company’s financial condition and
operational results and are in accordance with relevant accounting standards;
the statement given in accordance with section 295A of the Corporations Act is founded on a sound
system of risk management and internal compliance and control which implements the policies
adopted by the Board; and
the Company’s risk management and internal compliance and control system is operating efficiently
and effectively in all material respects in relation to financial reporting risks.
Principle 5 – Make timely and balanced disclosure
Disclosure and Communications Policy
The Company has adopted a Continuous Disclosure Policy within its Corporate Governance Charter to
ensure compliance with the continuous disclosure requirements of the ASX Listing Rules and the
Corporations Act 2001. The policy sets out the rules and procedures for ASX information disclosure, the
responsibility of the Board, Senior Executives and staff to ensure that price sensitive information is
identified, reviewed by management and disclosed to the ASX in a timely, clear and objective manner and
that all information provided to the ASX is posted on the Company’s website as soon as possible after its
disclosure to ASX.
The Company Secretary is responsible for communications with, and coordinating disclosure of information
to, the ASX.
Directors will receive copies of all announcements released to the ASX and copies of announcements,
including related information, such as financial statements and public presentations, and are aware of and
accountable for the Company’s compliance with regard to continuous disclosure.
Respect the rights of security holders
Shareholder Communication
The annual report which is distributed, or otherwise made available, to all shareholders;
The Company is committed to informing shareholders of all major developments affecting the
operations of the Company and the state of its affairs. Communications with shareholders include:
•
•
•
•
The Annual General Meeting and other general meetings called to obtain shareholder approval
for significant corporate actions, as appropriate;
The quarterly activities report;
The half-year financial report;
Company announcements; and
•
• All of the information available on the Company’s website www.changefinancial.com
Page 24 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
The Company welcomes questions from shareholders at any time and these are answered unless the
information requested is market sensitive and not in the public domain. All announcements to be made by
the Company to the ASX (except disclosures of a routine compliance or administrative nature) will be posted
to the Company’s website.
Information about the Company and its operations including information about the
Company’s corporate governance policies is located at: www.changefinancial.com
Facilitate participation at meetings of security holders.
The Company encourages shareholder participation at its AGMs including by making notices of meetings
available on its website. The Company’s external auditor attends the Company’s AGMs and is available to
answer any questions which shareholders may have about the conduct of the external audit for the relevant
financial year and the preparation and content of the audit report.
Shareholders who are unable to attend meetings of the Company are encouraged to participate in meetings
by way of appointment of a proxy.
Principle 7 – Recognise and manage risk
Risk committee
The Board as a whole has undertaken the responsibilities of the Audit and Risk Management Committee
which are set out in the Audit and Risk Management Committee Charter. A copy of the Charter is included in
the Corporate Governance Charter and can be accessed on the Company’s website under Corporate
Governance.
The responsibilities of the Board with respect to risk management are to:
•
review the adequacy of the Company’s processes for managing risks, including:
(a)
(b)
in relation to any incident involving fraud or other break down of the Company’s internal controls;
in relation to the Company’s insurance program, having regard to the Company’s business and the
insurable risks associated with the business;
ensure the development of an appropriate risk management policy framework that will provide
guidance to Management in implementing appropriate risk management practices throughout the
Company's operations, practices and systems and to oversee this framework;
define and periodically review risk management as it applies to the Company and clearly identifying all
stakeholders;
ensure the Board clearly communicates the Company's risk management philosophy, policies and
strategies to Directors, Management, employees, contractors and appropriate stakeholders;
ensure that the Board and Management establish a risk aware culture which reflects the Company's risk
policies and philosophies;
review methods of identifying broad areas of risk and setting parameters or guidelines for business risk
reviews;
•
•
•
•
•
• make informed decisions regarding business risk management, internal control systems, business
policies and practices and disclosures; and
•
consider capital raising, treasury and market trading activities with particular emphasis on risk
treatment strategies, products and levels of authorities.
The responsibility for undertaking and assessing risk management and internal control effectiveness is
delegated to management under the guidance of the Committee.
Page 25 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Internal audit
The Company does not have an internal audit function due to its current size. The Board gains sufficient
assurance from management undertaking ongoing evaluation of the Company’s internal control and risk
management processes.
Sustainability risks
As a digital banking company, Change Financial faces inherent risks in its activities, primarily financial,
operating and system risks but also including economic, environmental and social sustainability risks. The
Board does not consider that it has material exposure to economic, environmental and social sustainability
risks other than its exposure to general economic conditions in the markets in which it operates.
The Board regularly monitors the operational and financial performance of the Company’s activities. It
monitors and receives advice on areas of operation and financial risk and considers strategies for
appropriate risk management.
Review of risk management framework
The Board did not conduct a formal review of the Company’s risk management processes in the 2019
financial year. During the 2019 financial year the identification and evaluation of risks and the development
and implementation of risk mitigation plans was undertaken by management with oversight from the Board.
Principle 8 – Remunerate fairly and responsibly
Remuneration committee.
The Board has not formally established a Remuneration Committee due to the small size of the Board.
The Board of Directors is responsible for determining and reviewing compensation arrangements for the
Directors and the Executive team. The Board assesses the appropriateness of the nature and amount of
remuneration of such officers on a periodic basis by reference to relevant employment market conditions
with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality
Board and Executive team.
Disclosure of Executive and Non-Executive Director Remuneration policy
The Constitution of the Company provides that the Non-Executive Directors are entitled to remuneration as
determined by the Company in general meeting to be paid as to a fixed amount for each Director.
Additionally, Non-Executive Directors are entitled to be reimbursed for properly incurred expenses. All
Directors have the opportunity to qualify for participation in the Company’s share option plan, subject to the
approval of shareholders.
Details of the Company’s remuneration arrangements for Non-Executive Directors, Executive Directors and
senior Executives including fee rates are set out in the Remuneration Report in the Annual Report.
Share Trading Policy.
The Company’s Share Trading Policy specifically prohibits Directors and senior executives from engaging in
short-term trading in the Company’s securities. The Policy also stipulates that Directors and senior
executives and closely related parties not enter into transactions which limit the economic risk relating to
unvested options held by Directors and Senior Executives. The Share Trading Policy is included in the
Corporate Governance Charter and can be accessed on the Company’s website under Corporate
Governance.
Page 26 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
FINANCIAL REPORT
These financial statements are the consolidated financial statements of the consolidated entity consisting of
Change Financial Limited and its subsidiaries.
The financial statements are presented in the United States currency.
Change Financial Limited is a company limited by shares, incorporated and domiciled in Australia. Its
registered office is:
Level 11, 82 Eagle Street
Brisbane QLD 4000
Its principal place of business is:
Chimpchange LLC
800 Wilshire Blvd,
Los Angeles, CA 90017, USA
A summary of the Group’s operations and its principal activities is included in the directors' report on page 5,
which is not part of these financial statements.
The financial statements were authorised for issue by the Directors on 30 September 2019. The Directors
have the power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All
press releases, financial reports and other information are available at our Shareholders' Centre on our
website: www.changefinancial.com
Page 27 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Year ended 30 June
Revenue
Employee benefits expense
Advertising & marketing expense
Program Expenses
Professional services & insurance
Consulting
Technology & Hosting
Depreciation & amortisation expense
Impairment of software development
Finance Expense
Investment in associate – option cost
Other expense
Profit (loss) before tax
Income tax (expense) benefit
Profit (loss) from continuing operations
Note
2019
US$
2018
US$
4
1,833,301
1,076,868
(1,958,503)
(3,631,036)
5
13
5
(163,283)
(1,899,480)
(655,102)
(1,977,616)
(810,903)
(662,997)
(538,694)
(538,285)
(294,242)
(361,758)
(175,369)
(521,451)
(891,944)
(98,859)
(250,000)
-
-
-
(761,290)
(532,214)
(4,764,888)
(9,047,969)
-
-
(4,764,888)
(9,047,969)
Basic loss per share (US cents per share)
Diluted loss per share (US cents per share)
21
21
(5.7)
(5.7)
(12.4)
(12.4)
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 28 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note
2019
US$
2018
US$
Loss of the year
(4,764,888)
(9,047,969)
Other comprehensive income (loss)
Items that may be reclassified to profit and loss
Exchange differences on translation of parent operations
(109,296)
(82,157)
Total comprehensive income/(loss) from continuing operations
(4,874,184)
(9,130,126)
The consolidated statements above should be read in conjunction with the accompanying notes.
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Annual Report
For year ended 30 June 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June
Notes
Current assets
Cash
Trade and other receivables
Other current assets
Assets held for resale
Total current assets
Non-current assets
Property, plant & equipment
Investment in associate
Intangible assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions
Borrowings
Other current liabilities
Total current liabilities
NET ASSETS
Equity
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
7
8
9
10
11
12
13
14
15
16
17
18
19
25
2019
US$
2018
US$
1,464,976
1,665,967
172,554
109,660
-
69,847
1,637,530
1,845,474
99,999
-
1,737,529
1,845,474
12,981
-
1
86,341
99,999
956,869
12,982
1,143,209
1,750,511
2,988,683
236,496
121,354
1,050,447
39,885
1,448,182
237,164
192,363
-
262,466
691,993
302,329
2,296,690
29,582,499
26,607,205
3,942,740
4,147,507
(33,222,910)
(28,458,022)
302,329
2,296,690
The consolidated statements above should be read in conjunction with the accompanying notes.
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Annual Report
For year ended 30 June 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Contributed
Reserves
Retained
Equity
US$
Earnings
US$
US$
Total
Equity
US$
Balance at 30 June 2017
25,921,031
3,865,897
(19,410,053)
10,376,875
Profit (loss) for the year
Exchange differences on translation of the
parent operation
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Options issued
Contributions
Total
-
-
-
-
(9,047,969)
(9,047,969)
(82,157)
-
(82,157)
(82,157)
(9,047,969)
(9,130,126)
-
363,767
686,174
-
686,174
363,767
-
-
-
363,767
686,174
1,049,941
Balance at 30 June 2018
26,607,205
4,147,507
(28,458,022)
2,296,690
Balance at 1 July 2018
26,607,205
4,147,507
(28,458,022)
2,296,690
Profit (loss) for the year
Exchange differences on translation of the
Parent operation
Total comprehensive income for the year
-
-
-
-
(4,764,888)
(4,764,888)
(109,296)
-
(109,296)
(109,296)
(4,764,888)
(4,874,184)
Transactions with owners in their capacity as owner
Options issued
-
(95,471)
Contributions net of capital raising expenses
2,975,294
-
Total
2,975,294
(95,471)
-
-
-
(95,471)
2,975,294
2,879,823
Balance at 30 June 2019
29,582,499
3,942,740
(33,222,910)
302,329
The consolidated statements above should be read in conjunction with the accompanying notes.
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Annual Report
For year ended 30 June 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 June
Notes
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
R&D tax offset
2019
US$
2018
US$
379,182
948,927
(5,773,710)
(9,314,410)
3,072
-
24,490
79,240
Net cash used in operating activities
20
(5,391,456)
(8,261,753)
Cash flow from investing activities
Distribution received
Payment for property, plant & equipment
Payment for software development
Payment for investment in Ivy Koin
Net cash provided by/(used in) investing activities
Proceeds from financing activities
Proceeds from share issue
Cost of share issues
Proceeds from borrowings
Costs of establishing borrowing facilities
1,300,000
-
-
(15,838)
(82,013)
(273,893)
-
(100,000)
1,217,987
(389,731)
3,167,148
686,176
(191,854)
1,264,744
(112,638)
-
-
Net cash provided by financing activities
4,127,400
686,176
Net increase (decrease) in cash held
(46,069)
(7,965,308)
Reconciliation of cash
Cash at the beginning of the financial year
Net increase (decrease) in cash held
Foreign exchange difference on cash holding
Cash and cash equivalents at end of the year
1,665,967
9,467,512
(46,069)
(7,965,308)
(154,922)
163,763
1,464,976
1,665,967
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 32 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
These financial statements are general purpose financial statements that have been prepared in
accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply
with the other requirements of the law. Accounting Standards include Australian Accounting Standards.
The principal accounting policies adopted in preparing the financial report of the Company and its
consolidated entities (Consolidated Entity or Group) for the year ended 30 June 2019 are stated to
assist in a general understanding of the financial report. For the purposes of preparing the financial
report the Company is a for profit entity.
Change Financial Limited is a company limited by shares incorporated in Australia whose share are
publicly traded on the Australian Securities Exchange.
(a) Compliance with IFRS
The Consolidated Financial Report of Change Financial Limited complies with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(b) Basis of Preparation
The Consolidated Financial Report of Change Financial Limited has been prepared under the historical
cost convention. Cost is based on the fair values of the consideration given in exchange for assets. All
amounts are presented in United States dollars, unless otherwise noted.
(c) Application of new and revised Accounting Standards
The Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective
for the current financial year. New and revised Standards and amendments thereof and
Interpretations effective for the current year that are relevant to the Change Financial Limited include:
(i)
AASB 15 Revenue from contracts with customers
The new standard has been applied from 1 July 2018 replacing AASB 118 Revenue and establishes a
comprehensive framework for determining the timing and quantum of revenue recognised. AASB 15
requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be
entitled in exchange for transferring goods or services to a customer. Revenue is also required to be allocated
to each performance obligation and recognised as the performance obligations have been achieved,
which can be at a point in time, or over time.
AASB 15 has been applied from 1 July 2018 using the modified retrospective method. The application of
this standard has had no impact on the assessment of revenue and no adjustment to the opening
balance of the Group’s equity.
(ii)
AASB 9 Financial instruments
This standard has been applied from 1 July 2018 and replaces AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 includes revised guidance on the classification and
measurement of financial instruments, including a new expected credit loss model for the calculation of
impairment of financial assets, and new general hedge accounting requirements. It also carries forward
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Annual Report
For year ended 30 June 2019
guidance on recognition and derecognition of financial instruments from AASB 139. The group applies
AASB 9 prospectively, with an initial application date of 1 July 2018. The Group has not restated the
comparative information which continues to be reported under AASB 139.
(d) Accounting Standards issued but not effective
The Directors have reviewed all new Standards and Interpretations that have been issued but are not
yet effective for the year ended 30 June 2019. As a result of this review the Directors have determined
that the following standard will have a material impact on the Group:
AASB 16 – This new standard replaces AASB 117 and some lease-related Interpretations. It requires all
leases to be accounted for “on balance sheet” by lessees, other than for short-term and low value asset
leases. The standard also provides new guidance on the definition of a lease and on sale and leaseback
accounting and requires new and different disclosures about leases. The accounting requirements for
lessors remains largely unchanged from AASB 117. Upon implementation on 1 July 2019, based on the
leases in effect at 30 June 2019, this standard will have a material impact on the lease assets / lease
receivables and financial liabilities recorded in the statement of financial position, which we expect to
increase by $484,986 and $476,849, respectively. Retained earnings will increase by $8,137 because the
carrying amount of the lease assets are greater than the carrying amount of the lease liabilities, due
largely to the sub-lease arrangement. We expect the impact on net profit in FY2020 will be a $13,665
net increase in profit before tax. We intend to adopt the modified retrospective approach with practical
expedients available under AASB 16.
The Directors have further determined that there will be no material impacts of any other new or
revised Standards and Interpretations on the group, and therefore, no change is necessary to Group
accounting policies.
(e) Principles of Consolidation
The consolidated financial statements are those of the consolidated entity, comprising the financial
statements of the parent entity and all of the entities the parent controls. The Group controls an entity
where it has the power, for which the parent has exposure or rights to variable returns from its
involvement with the entity, and for which the parent has the ability to use its power over the entities
to affect the amount of its returns.
The financial statements of subsidiaries are prepared for the same reporting period as the parent
entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar
accounting policies which may exist.
All inter-company balances and transactions, including any unrealised profits or losses have been
eliminated on consolidation. Subsidiaries are consolidated from the date on which control is transferred
to the Group and are de-recognised from the date that control ceases.
Non-controlling interests in the result of subsidiaries are shown separately in the consolidated
statement of comprehensive income and consolidated statement of financial position respectively.
(f) Foreign Currency Translations and Balances
Presentation currency
The financial statements of each entity within the consolidated entity are measured using the currency
of the primary economic environment in which that entity operates (the functional currency). The
consolidated financial statements are presented in US dollars which is the consolidated entity’s
functional and presentation currency.
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Annual Report
For year ended 30 June 2019
Transactions and balances
Transactions in foreign currencies of entities within the consolidated group are translated into
functional currency at the rate of exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary
items arising under foreign currency contracts where the exchange rate for that monetary item is fixed
in the contract) are translated using the spot rate at the end of the financial year.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated
Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or
re- statement are recognised as revenues and expenses for the financial year.
•
•
•
•
Current assets and liabilities are translated at the closing rate on reporting date;
Non-current assets are translated at historical cost
Income and expenses are translated at actual exchange rates or average exchange rates for the
period where appropriate; and
All resulting exchange differences are recognised in other comprehensive income.
(g)
Revenue
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is
expected to be entitled in exchange for transferring goods or services to a customer. For each contract
with a customer, the consolidated entity: identifies the contract with a customer; identifies the
performance obligations in the contract; determines the transaction price which takes into account
estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct
good or service to be delivered; and recognises revenue when or as each performance obligation is
satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Revenue from services includes fees charged whenever a ChimpChange customer makes a purchase
using ChimpChange mobile banking platform. The fees are usually a percentage of the transaction
value and are recognised when the transaction has been completed.
Revenue from administration services is recognised in the period it is earned.
Distribution Income
Distribution income is recognised when the right to receive payment has been established.
Interest income
Interest revenue is recognised on a proportional basis using the effective interest method taking into
account the interest rates applicable to the financial assets.
(h)
Income tax
Current income tax expense or revenue is the tax payable on the current period's taxable income based
on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates
when the assets are expected to be recovered or liabilities are settled. Deferred tax liabilities are not
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Annual Report
For year ended 30 June 2019
recognised if they arise from the initial recognition of goodwill.
Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in
a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it
is probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
(i)
Financial Instruments
Non-derivative financial instruments
Non-derivative financial instruments consist of investments in equity and debt securities, trade and
other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are initially recognised at fair value, plus directly attributable
transaction costs (if any), except for instruments recorded at fair value through profit or loss. After
initial recognition, non-derivative financial instruments are measured as described below.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any allowance for expected credit losses. Trade receivables
are generally due for settlement within 30 days.
The consolidated entity 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.
Financial liabilities
Financial liabilities include trade payables, other creditors and loans from third parties including inter-
company balances and loans from or other amounts due to director-related entities.
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less
principal payments and amortisation.
Financial liabilities are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least twelve months after the reporting period.
(j) Property, plant & equipment
Plant and equipment
Plant and equipment carried at cost less accumulated depreciation and, where applicable, any
accumulated impairment losses.
Depreciation
The depreciable amount of all property, plant and equipment is depreciated over their estimated useful
lives commencing from the time the asset is held ready for use. Land and the land component of any
class of property, plant and equipment is not depreciated.
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Annual Report
For year ended 30 June 2019
Class of fixed asset
Motor vehicles under lease
Office equipment
Office fit-out
(k) Software development
Depreciation rates
12.5%
25%
10%
Depreciation basis
Straight line
Straight line
Straight line
Software development costs are capitalised when it is probable that the project will be a success
considering its commercial and technical feasibility; the entity is able to use or sell the asset; the
software will generate probable future economic benefits; the entity has sufficient resource and intent
to complete the development and its costs can be measured reliably.
Capitalised software development expenditure is stated at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the cost over three years. The asset
carrying value is reviewed for impairment annually and amounts are written off to the extent that
realisable future benefits are considered to be no longer probable.
(l)
Impairment of non-financial assets
Intangible assets are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
An impairment loss is recognised where the carrying amount of the asset exceeds its recoverable
amount. The recoverable amount of an asset is defined as the higher of its fair value less costs to sell
and value in use.
(m) Employee benefits
Short term employee benefit obligations
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits
expected to be settled wholly within twelve months of the reporting date are measured at their
nominal amounts based on remuneration rates which are expected to be paid when the liability is
settled. The expected cost of short- term employee benefits in the form of compensated absences such
as annual leave is recognised in the provision for employee benefits. All other short-term employee
benefit obligations are presented as payables.
Long term employee benefit obligations
Liabilities arising in respect of long service leave and annual leave which is not expected to be settled
wholly within twelve months of the reporting date are measured at the present value of the estimated
future cash outflow to be made in respect of services provided by employees up to the reporting date.
Employee benefit obligations are presented as current liabilities in the balance sheet if the entity does
not have an unconditional right to defer settlement for at least twelve months after the reporting date,
regardless of when the actual settlement is expected to occur.
(n) Goods and services tax (GST)
Revenues, expenses and purchased assets in Australia are recognised net of the amount of GST, except
where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the
GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the consolidated statement of financial position are shown inclusive of
GST.
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Annual Report
For year ended 30 June 2019
Cash flows are presented in the consolidated statement of cash flows on a gross basis, except for the
GST component of investing and financing activities, which are disclosed as operating cash flows.
(o) Rounding
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191, related to the 'rounding off' of amounts in the financial statements. Amounts in
the financial statements have been rounded off in accordance with that Legislative Instrument to the
nearest dollar, unless otherwise indicated.
(p) Intangible digital assets
The company has elected to measure its digital assets at cost less amortization and impairment in
accordance with AASB138 Intangible Assets as market volume to date does not demonstrate an active
market.
(q) Ongoing operations
These financial statements have been prepared on a going concern basis which contemplates the
continuity of normal business activity and the realisation of assets and the settlement of liabilities in the
normal course of business.
At 30 June 2019 the Group had net current assets of $289,347 including $1,464,976 of cash and cash
equivalents. Current borrowings of $1,050,447 were repaid by the issue of convertible notes
subsequent to year end. For the year to 30 June 2019 the Group incurred an operating cash outflow of
$5,391,456 and a net loss for the period of $4,764,888.
As set out in the Group’s ASX announcements, the Company underwent a restructure during the year,
including the sale of its interest in the Ivy Project and undertaken a successful capital raising. As a result
of these actions the Company continues to have sufficient funds to meet its short-term objectives of
launching its payments and card issuing platform.
However, the Company will require further capital in the next 12 months in order to develop the
business before it is cash flow positive. This may include further funding from Altor. Nevertheless, the
Directors have concluded that raising additional capital is subject to material uncertainty that may cast
significant doubt over the Group’s ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the normal course of business.
The Board will continue to monitor and pursue the development of fund raising opportunities and
assess its commitment to ongoing expenditure requirements to achieve a sustainable business model.
The Directors believe that the company will be successful in carrying out its plans described above,
therefore, these financial statements have been prepared on a going concern basis.
No adjustments have been made to the financial report relating to the recoverability and classification
of the asset carrying amounts or the amounts and classification of liabilities that might be necessary
should the Group not continue as going concerns.
(r)
Investment in Associates
Associates are those entities over which the Group is able to exert significant influence but which are
not subsidiaries.
Investments in associates are accounted for using the equity method. The carrying amount of the
investment in associates is increased or decreased to recognise the Group’s share of the profit or loss
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Annual Report
For year ended 30 June 2019
and other comprehensive income of the associate, adjusted where necessary to ensure consistency
with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its associates are eliminated to the
extent of the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying
asset is also tested for impairment.
(s) Cash and cash equivalents
For cash-flow presentation purposes, cash and cash equivalents includes cash on hand, deposits held at
call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
(t) Leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the
lessor, are recognised as expenses on a straight-line basis over the lease term.
2.
Critical Accounting Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that may have a financial impact on the entity and that
are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Estimated impairment of intangible assets and other non-current assets
Determining whether non-current assets are impaired requires an estimation of the value in use of
those assets. The value in use calculation requires the directors to estimate the future cash flows
expected to arise from the Group and a suitable discount rate in order to calculate present value.
Where the actual future cash flows are less than expected, a material impairment loss may arise.
Share- based payments transactions
The Group measures the cost of equity settled transactions by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the
Black-Scholes or Binomial model taking into account the terms and conditions upon which the
instruments were granted. The accounting estimates and assumptions relating to equity-settled share-
based payments would have no impact on the carrying amounts of assets and liabilities within the next
annual reporting period but may impact profit or loss or equity.
Digital Assets
At the date of preparation of these financial statements, no Accounting Standard has been developed
that specifically addresses the issue of accounting for digital assets. In the opinion of the directors, the
accounting approach that most aligns with the existing suite of Accounting Standards is to recognise
digital asset holdings as intangible assets. The Company has elected to measure its digital assets at cost
in accordance with Accounting Standard AASB138 Intangible Assets.
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Annual Report
For year ended 30 June 2019
3. Operating Segments
The Group is organised into a single operating segment being the provision of digital banking services.
4. Revenue and other income
Revenue from contracts with customers
Revenue from service fees – volume based
Revenue from service fees – non-volume based
Other revenue and income
Interest revenue
Distribution received
Research & development tax refund
Total Revenue
5. Expenses
Profit / loss before income tax has been determined after:
Amortisation and depreciation
Depreciation of property, plant & equipment
Amortisation of software development costs
Total amortization and depreciation
2019
US$
2018
US$
340,989
110,000
450,989
828,138
145,000
973,138
3,072
24,490
1,300,000
-
79,240
79,240
1,833,301
1,076,868
2019
US$
2018
US$
29,563
145,806
175,369
33,639
487,812
521,451
Share based payments
(254,766)
363,767
Finance Expense
Interest expense
Amortisation of borrowing costs
Total Finance Expense
Amortisation of borrowing costs
60,011
38,848
98,859
38,848
-
-
-
-
Minimum operating lease payments
158,090
149,900
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Annual Report
For year ended 30 June 2019
6.
Income Tax Expense
Reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax expense (credit) at the Australian tax rate of 30% (2018: 30%)
Differences in overseas tax rates
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income
Impairment expense
Share based payments expense
Option fee expense
Other
Current year tax losses not recognised
Income tax expense
2019
US$
2018
US$
(4,764,888)
(9,047,969)
(1,429,466)
(2,713,391)
196,678
384,448
267,583
(76,430)
109,130
75,000
19,970
-
(5,117)
946,665
2,224,930
-
-
Deferred tax assets of $9,492,337 (2018: $8,234,432) in respect of temporary differences and tax losses have not
been recognized.
7. Current assets - Cash and cash equivalents
2019
US$
2018
US$
Cash at Bank
1,464,976
1,665,967
8. Trade and other receivables
2019
US$
2018
US$
Trade & other receivables
172,554
109,660
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.
9. Current assets – Other assets
Prepayments
2019
US$
-
2018
US$
69,847
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Annual Report
For year ended 30 June 2019
10. Assets held for resale
Investment in associate
The investment in associate has been sold with the sale completing after year end.
Refer Note 32 Post Balance Date Events for further details.
11. Property, plant and equipment
Motor vehicles under lease
Accumulated depreciation
Closing carrying value
Office fit-out at costs
Accumulated depreciation
Closing carrying value
Office equipment at cost
Accumulated depreciation
Closing carrying value
2019
US$
99,999
2018
US$
-
2019
US$
-
-
-
-
-
-
63,909
(50,928)
12,981
2018
US$
6,302
(1,870)
4,432
51,605
(7,735)
43,870
98,419
(60,380)
38,039
Total property, plant & equipment
12,981
86,341
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Annual Report
For year ended 30 June 2019
Reconciliation of movement
Reconciliation of the carrying amounts of property, plant & equipment at the beginning and end of the
financial year
Motor
Vehicle
US$
Office
Fit Out
US$
Office
Total
Equipment
US$
US$
4,432
(206)
(4,226)
-
5,050
-
(618)
4,432
43,870
(5,161)
(38,709)
-
49,031
-
(5,161)
43,870
38,039
(24,196)
(862)
12,981
50,620
15,279
(27,860)
38,039
86,341
(29,563)
(43,797)
12,981
104,701
15,279
(33,639)
86,341
2019
Opening carrying amount
Depreciation expense
Disposals/Writeoffs
Closing carrying amount
2018
Opening carrying amount
Additions
Depreciation expense
Closing carrying amount
12. Investment in associate
2019
US$
2018
US$
Investment in associate1
-
99,999
1 Investment in associate reclassified as an asset held for resale in 2019
13. Intangible assets
Patents, trademarks & licenses at costs
ivyKoin tokens at cost
Software development at cost
Accumulated amortisation
Impairment
Total intangible assets
2019
US$
-
1
2018
US$
1,131
1
2,192,927
2,110,914
(1,300,983)
(1,155,177)
(891,944)
-
1
956,869
Page 43 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
Patents,
trademarks &
IvyKoin
Software
Total
licenses
Tokens
Development
US$
US$
US$
US$
2019
Opening carrying amount
Additions
Amortisation expense
Write off
Impairment
Closing carrying amount
2018
1,131
-
(1,131)
-
-
Opening carrying amount
1,131
Additions
Amortisation expense
Net foreign currency movement
-
-
-
Closing carrying amount
1,131
1
-
-
-
-
1
-
1
-
-
1
14. Trade and other payables
Unsecured liabilities
Accounts payable
955,737
82,013
956,869
82,013
(145,806)
(145,806)
-
(1,131)
(891,944)
(891,944)
-
1
1,169,655
1,170,786
273,893
273,894
(487,812)
(487,812)
-
-
955, 737
956,869
2019
US$
2018
US$
236,496
237,164
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of
the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and
are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. The Group has
financial risk management policies in place to ensure that all payables are paid within the credit time frame.
15. Provisions
Unsecured liabilities
Employee leave provisions
2019
US$
2018
US$
121,354
192,363
Page 44 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
16. Current borrowing
Altor funding
Less costs of Altor funding
Total current borrowings
Movement in capitalized cost of Altor funding
Opening Balance
Costs of Altor funding – non cash settled by way of share based payments
Costs of Altor funding – cash
Amortisation of borrowing costs
Closing Balance
2019
US$
1,283,532
(233,085)
1,050,447
-
159,295
112,638
(38,848)
233,085
2018
US$
-
-
-
-
-
-
-
-
The cost of Altor funding including the value of options issued to Altor of US$159,295 (non cash) and cash costs of
US$112,638. The borrowing costs are being amortised over the expected term of the facility (including conversion
to convertible notes) being 3.5 years. Amortisation for the period was US$38,848. On 31 August 2019 Altor loan
funding were repaid by the issue of convertible notes in accordance with the shareholders resolution passed on 12
February 2019.
A summary of the rights and liabilities attaching to the convertible notes (Notes) is detailed below. The summary
does not purport to be exhaustive or to constitute a definitive statement of the rights and liabilities of noteholders,
Altor or the Company.
Summary of Convertible Note Terms
Face Value of Notes
A$0.10
Maturity
Interest
Security
Conversion
31 August 2022
The Notes bear interest from the date of issue at 10% per annum, due quarterly in arrears.
Interest can be paid in Notes or in cash as the Company’s election.
The Notes are secured by a first ranking general security over the Company’s assets
The Noteholders can convert all of the Notes then on issue at any time. Each Note shall convert
into such number of shares as determined in accordance with the following formula (with
fractional entitlements to shares to be rounded up to the nearest whole share):
S = (N x V) / P
Where:
S - the number of Shares in the Company into which each Note will convert
N - number of Notes
V - Face Value
P - (a) the lower of 75% of the 10 day VWAP prior to conversion
; or
(b) $0.10 per Share
Repayment
If not converted earlier the Notes plus any capitalised interest will automatically convert at
maturity. After 24 month the Company can elect to repay the Notes.
Page 45 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
17. Other current liabilities
Other liabilities
39,885
262,466
2019
US$
2018
US$
18. Issued capital
(i)
Share Capital
As at 30 Jun
2019
US$
2018
US$
92,807,174 fully paid ordinary shares1 (30 June 2018: 73,564,879)
29,582,499
26,607,205
1 This amount excludes 6,036,457 shares (30 June 2018– 6,036,457) issued under the Loan Funded Share Plan (LFSP). These shares will be
recognised in Share Capital when the loan advanced under the LFSP to acquire those shares is repaid.
Ordinary shares entitle the holder to participate in the dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held. On a show of hands
every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote and
upon a poll each is share is entitled to one vote.
(ii) Movements in ordinary share capital
Balance at 30 June 20171
Exercise of options – 2018
Balance at 30 June 20181
July 2018 Placement
July 2018 Placement – issue costs
February 2019 Entitlement issue
February 2019 Entitlement offer – issue costs
Number
US$
71,844,410
25,921,031
1,720,469
686,174
73,564,879
26,607,205
6,034,483
-
13,207,812
-
2,600,850
(171,656)
566,298
(20,198)
Balance at 30 June 2019
92,807,174
29,582,499
1 Excludes shares issued under the Loan Funded Share Plan (LFSP). These shares are recognised in Share Capital when the loan advanced under the
LFSP to acquire those shares is repaid. At 30 June 2019 6,036,457 such shares were excluded (2018: 6,036,457). Total fully paid shares on issue at
30 June 2019 was 98,843,631 (2018: 79,601,336).
Ordinary shares entitle the holder to participate in the dividends and the proceeds on winding up of the
Company in proportion to the number of and amounts paid on the shares held. On a show of hands
every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote and
upon a poll each is share is entitled to one vote.
Page 46 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
Capital Management
Management controls the capital of the Company to ensure the Company can fund its operations and
continue as a going concern.
19. Reserves
Share based payment reserve
Foreign currency translation reserve
Total reserves
(a)
Share based payment reserve
Balance at the start of the period
Options issued / (lapsed)
Closing balance
(a)
Foreign currency translation reserve
Opening balance
Exchange differences on translation of parent operation
Closing balance
2019
US$
2018
US$
3,925,361
4,020,832
17,379
126,675
3,942,740
4,147,507
4,020,832
3,657,065
(95,471)
363,767
3,925,361
4,020,832
126,675
(109,296)
17,379
208,832
(82,157)
126,675
Share based payment reserve
The reserve is used to recognise the value of options issued to employers, directors and other parties as
part of their remuneration of as part of their compensation for services provided to the Group.
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial
statements of the holding company to United States dollars.
Page 47 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
20. Reconciliation of profit after income tax to net cash inflow from operating activities
(i) Reconciliation of profit after income tax to net cash used in operating activities
Loss for the year
Depreciation and amortisation
Amortisation of borrowing costs
Share based payments
Loss on disposal of assets
Capitalised interest
Distribution received
Impairment expense
Decrease (increase) in current receivables
Decrease (increase) in other current assets
Increase (decrease) in accounts payable
Increase (decrease) in provisions
Increase (decrease) in other current liabilities
2019
US$
2018
US$
(4,764,888)
(9,047,969)
175,369
521,451
38,848
-
(254,766)
363,767
44,927
60,011
(1,300,000)
891,944
-
-
-
-
(81,010)
(105,046)
69,476
(33,843)
(668)
(59,938)
(50,465)
(220,234)
91,859
7,966
Net cash used in operating activities
(5,391,456)
(8,261,753)
(ii) Non-cash financing and investing activities
2019
US$
2018
US$
Borrowing costs settled by way of share based payments
159,295
-
21. Earnings per share
2019
US$
2018
US$
Loss attributable to ordinary equity holders of Change Financial Limited
(4,764,888)
(9,047,969)
Weighted average number of ordinary shares used as a denominator
in calculating basic earnings per share
84,171,251
72,872,544
Weighted average number of ordinary shares and dilutive potential ordinary shares
used as a denominator calculating diluted earnings per share
84,171,251
72,872,544
Options and other potential equity securities on issue at the end of the period have not been included in the
determination of diluted earnings per share as the Group has incurred a loss for the period and they are therefore
not dilutive in nature.
Page 48 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
22. Dividend
There were no dividends paid, recommended or declared during the current or previous period.
23. Financial risk management
The Group's activities may expose it to a variety of financial risks: market risk (including currency risk,
interest rate risk and price 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.
Risk management is carried out by senior management in consultation with the Board of Directors. The
Board provides principles for overall risk management, as well as direction in specific areas.
Market Risk
Foreign currency risk
Foreign currency risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the entity's functional currency. The risk is
measured using sensitivity analysis and cash flow forecasting. The Group does not use foreign currency
hedges.
At balance date, the Group had the following exposures to Australian dollars (A$).
As at 30 June
Cash at bank
Current assets
Current liabilities
Net monetary assets / liabilities designated in AUD
2019
US$
68,381
58,937
(1,359,345)
(1,232,027)
2018
US$
621,713
67,979
(71,195)
618,497
Interest rate risk
The Group’s main interest rate risk arises from borrowings and cash. Borrowings issued at fixed rates
expose the Group to fair value interest rate risk. Cash at variable rates expose the Group to cash flow
interest rate risk. No hedging instruments are used. As at the reporting date, the Group had cash and
cash equivalents of $1,464,976 (2018: $1,665,967) subject to variable interest rates of 0.2% (2018:
0.6%). At 30 June 2019, if interest rates had changed by +/- 1% from the year-end rates with all other
variables held constant the impact would be immaterial.
Price risk
The Group is not exposed to any significant price risk.
Credit Risk
Credit risk refers to the risk that a counterparty will default on it contractual obligations resulting in a
financial loss to the Group. The Group deemed its credit risk to be minimal as its financial assets are
mainly cash held at BankWest which is a subsidiary of Commonwealth Bank of Australia. No financial
assets are past due and none are impaired.
Page 49 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Liquidity Risk
The Group manages liquidity risk by maintaining adequate cash balances and by continuously
monitoring forecasts and actual cash flows matching maturity profiles of financial assets and liabilities.
Financing arrangements
The Group does not have access to any undrawn borrowing facilities at the end of the reporting period.
Maturities of financial liabilities
At period end the Group had accounts payable of $236,496 (2018: $237,164) and current borrowings of
$1,050,447 (2018: nil) all of which have a maturity of less than 6 months. The current borrowings were
repaid on 31 August 2019 by the issue of convertible notes (refer Note 32 – Post Balance Date Events)
The Group has no other financial liabilities.
24. Subsidiaries
The consolidated financial statements include the assets, liabilities and results of the following
subsidiaries:
Name of Entity
Country of
Incorporation
Equity Type
Holding
Holding
Chimpchange LLC
US
Membership units
Change Labs NZ Pty Ltd (dormant)
Australia
Ordinary Shares
25. Accumulated Losses
As at 30 June
Opening balance of accumulated losses
Loss for the period
Closing balance of accumulated losses
2019
%
100
100
2018
%
100
100
2019
US$
2018
US$
(28,458,022)
(19,410,053)
(4,764,888)
(9,047,969)
(33,222,910)
(28,458,022)
Page 50 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
26. Parent entity financial information
The individual financial statements for the Parent entity show the following aggregate amounts:
As at 30 June
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Shareholders’ equity
Issued Capital
Reserves
Retained Earnings
Total shareholders’ equity
Loss for the period
Total comprehensive loss
2019
US$
2018
US$
242,624
1,514,498
1,185,964
22,030,562
1,428,589
23,545,060
1,126,260
1,126,260
302,329
150,441
150,441
23,394,619
29,582,499
26,607,205
3,942,740
4,147,507
(33,222,910)
(7,360,093)
302,329
23,394,619
(25,862,816)
(1,332,128)
(25,862,816)
(1,332,128)
27. Key management personnel disclosures
Directors
The following persons were directors of Change Financial Limited during the financial year:
Non-executive directors
Peter Clare (resigned 31 August 2018)
Teresa Clarke
Benjamin Harrison (appointed 11 December 2018)
Harley Dalton (appointed 11 December 2018)
Andrew Pipolo (resigned 30 September 2018)
Executive Directors
Ashley Shilkin (resigned 11 December 2018)
Ian Leijer – Executive Director
Other key management personnel
The following persons also had responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, during the financial year. They are employed by Chimpchange LLC
Clayton Fossett – Chief Operating Officer
Young Lee – Chief Financial Officer (resigned 31 December 2018)
Page 51 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
Key management personnel compensation
Short term employee benefits
Non monetary benefits
Post employment benefits
Share based payments
Total
Detailed remuneration disclosures are provided in the remuneration report.
28. Remuneration of auditors
The auditor of Change Financial Limited is Pitcher Partners
As at 30 June
Amounts received or due and receivable for current auditors:
An audit or review of the financial report of the entity and any other
entity in the consolidated group
Other services in relation to the entity and any other entity in the consolidated
group – tax compliance, tax structuring, independent expert report for the initial
public offering
2019
US$
724,184
33,585
-
(288,296)
469,473
2018
US$
778,863
19,579
10,000
187,073
995,515
2019
US$
2018
US$
64,529
58,020
16,976
31,657
Total
112,911
89,677
29. Related Party Transactions
Compensation paid to some directors were paid to director related entities with further details set out in
the Remuneration Report.
Total interest of A$75,219 payable on the Altor loan was capitalised into the loan balance. Interest on
that loan is at the rate of 10% payable quarterly.
A total of 2,180,000 option were issued to Altor. These options were valued at US$159,295 using the Black
& Scholes method of option valuation.
30. Contingent liabilities
The Group has no contingent liabilities.
Page 52 of 60
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Change Financial Limited
Annual Report
For year ended 30 June 2019
31. Commitments
The Group has a property lease commitment relating to the occupancy of the group’s current premise. This lease
was entered into on 1 August 2016 for a 65 month term. The group has future lease payments which are contracted
but not capitalized in the financial statements. This property has been sublet for a similar monthly rental. The
amounts shown below include the gross rental commitment and do not include the future sublease payments. The
total sublease payments to be received in the next 12 month period are $183,99 and in the period later than 12
months and less than 5 year sublease payments of $334,856 are receivable.
Payments contracted for but not recognised in the financial statements:
Not later than 12 months
Later than 12 months but not later than five years
Later than 5 years
Total
32. Post Balance Date Events
2019
US$
162,830
259,434
-
2018
US$
158,090
422,264
-
422,264
580,354
Convertible Notes
On 31 August 2019 the loan balance with Altor was repaid with the proceeds from the issue of
convertible notes in accordance with the shareholder resolution passed at the extraordinary general
meeting held on 12 February 2019.
The total amount owing under the loan as at 31 August 2019 (including capitalised and accrued interest
and a further drawdown of A$50,000) was A$1,920,511. The amount owing was repaid by the issue of
19,205,112 convertible notes.
As a result of this issue the amount shown as current borrowing in the balance sheet as at 30 June 2019
will become a non-current liability of the Company.
Investment in Associate
Subsequent to year end the Company received US$200,000 proceeds from the realisation of its
investment in Ivy Koin LLC and Ivy Blockchain Pty Ltd.
Page 53 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
DIRECTORS DECLARATION
In the opinion of the directors:
(a)
the financial statements and notes set out on pages 27 to 53 are in accordance with the Corporations Act
2001, including:
(i) complying with Australian Accounting Standards and the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance
for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
The directors have been given the declarations by the Executive Chair and chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Chair
30 September 2019
Page 54 of 60
For personal use only
Independent auditor’s report to the members of Change
Financial Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Change Financial Limited “the Company” and its controlled
entities “the Group”, which comprises the consolidated statement of financial position as at 30 June
2019, the consolidated statement of profit or loss, consolidated statement of comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, and notes to the financial statements, including a summary of significant accounting
policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants “the Code” that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the Directors of the Company, would be in the same terms if given to the Directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 1(q) in the financial report which states that the Group’s ability to develop its
processor business before it is cash flow positive is dependent on the Group’s ability to raise further
funding. The matters set forth in Note 1(q) indicate the existence of a material uncertainty that may cast
significant doubt about the Group’s ability to continue as a going concern and, therefore, the Group may
be unable to realise its assets and discharge its liabilities in the normal course of business and at the
amounts stated in the financial report.
Page 55
For personal use only 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.
Key audit matter
How our audit addressed the matter
Our procedures included, amongst others:
that
it has been subject
• Checking to satisfy ourselves that the cash
flow forecast prepared by the Directors is
consistent with that approved by the Board
the
and
appropriate review and approval processes
and controls;
• Discussing with
charged with
governance their funding, business and cash
flow strategies for a period of at least 12
months from date of signing the financial
report;
those
to
• Obtaining supporting documentation
in
relation to alternative funding strategies and
options that the Directors are considering;
• Understanding the Directors’ assumptions
for forecast cash outflows during the period
under review; and
• Assessing
the appropriateness of
the
disclosures included in the financial report.
Going Concern
Refer to Note 1(q) in the Annual Report
The Group has recorded operating losses and
operating cash outflows for a number of years.
The Group has undergone a restructure during
the year which involved the sale of its IvyKoin
investment and the renegotiation of its mobile
banking business agreement with Central Bank of
Kansas City, retaining certain engineering and
customer support functions. This restructure was
undertaken with the view of reducing cost and
focusing on its Enterprise Platform.
The Directors have continued to adopt the going
concern basis of preparation in preparing the
Group Financial Statements, having prepared
detailed cash flow forecasts that are subject
material uncertainty as to whether the Group will
have sufficient cash resources to pay its forecast
liabilities for a period of at least 12 months from
the date
these Financial Statements were
approved.
The Director’s assessment of the Group’s going
concern ability was an area of focus as it requires
significant judgement in determining the key
assumptions supporting the expected future cash
flows, including but not limited to:
•
planned capital raise and drawdowns on
existing convertible note facility;
forecast
development
enterprise platform; and
forecast operating expenses.
expenditure
•
•
on
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
Page 56
For personal use only Other Information
The directors are responsible for the other information. The other information comprises the Corporate
Directory, Directors’ Report, Corporate Governance Practices & Conduct and ASX Additional
Information which was obtained as at the date of our audit report, and any additional other information
that will be included in the Group’s annual report for the year ended 30 June 2019, but does not include
the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover
the other information and accordingly we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with
the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report in this regard.
When we read the additional other information in the Annual Report not yet received, if we conclude
that there is a material misstatement therein, we are required to communicate the matter to the directors
and use our professional judgment to determine the appropriate action to take.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
Page 57
For personal use only If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 16 of the Directors’ Report for the
year ended 30 June 2019. In our opinion, the Remuneration Report of Change Financial Limited, for
the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express
an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
PITCHER PARTNERS
JASON EVANS
Partner
Brisbane, Queensland
30 September 2019
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
Page 58
For personal use only Change Financial Limited
Annual Report
For year ended 30 June 2019
ASX ADDITIONAL DISCLOSURE
Shareholder information at 28 September 2019
33. Shareholding Distribution and Unmarketable Parcels
Size of Shareholder
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
Shares
75,105,791
8,076,191
11,112,108
2,311,249
1,958,534
279,758
98,843,631
Unmarketable Parcels
4,559,641
34. Top 20 Shareholders
% of Issued
Capital
75.98
8.17
11.24
2.34
1.98
0.28
100.00
4.61
Number of
Holders
% of Holders
131
103
448
292
717
414
2,105
1,424
6.22
4.89
21.28
13.87
34.06
19.67
100.00
67,65
Rank
Name
Number of
% of Issued
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
ASHLEY SHILKIN
AVATAR INDUSTRIES PTY LTD
LEMEURICE PTY LTD
BART PROPERTIES PTY LTD
NAREENEN PTY LTD
BOND STREET CUSTODIANS LIMITED
DR ALAN ZHANG
BOND STREET CUSTODIANS LIMITED
MR KIRIL BOITCHEFF + MRS SUZANNE BOITCHEFF
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR DAVID FREDERICK OAKLEY
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
MINTON TRADING PTY LTD
SAPELE PTY LTD
FALCASTLE PTY LTD
MR COLIN MACLEOD + MRS LINDA MACLEOD
MR NEIL EDWIN CASTLES
MR ROSS ALLEN MC DONALD
MR GRAEME DREW + MRS BARBARA JANE DREW
MR MANFRED DIETER LAGERMAN
Top 20 Total
Total Shares on Issue
Shares
11,901,965
10,231,820
3,676,112
2,907,388
2,672,529
2,255,000
2,096,405
1,700,000
1,350,000
1,193,555
1,135,000
1,003,950
1,000,000
900,000
820,200
700,000
675,000
658,239
650,000
590,578
48,117,741
98,843,634
Capital
12.04%
10.35%
3.72%
2.94%
2.70%
2.28%
2.12%
1.72%
1.37%
1.21%
1.15%
1.02%
1.01%
0.91%
0.83%
0.71%
0.68%
0.67%
0.66%
0.60%
48.68
100.00%
Page 59 of 60
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2019
35. Unquoted Options
Option ex price and expiry
Options @ $0.49 expiry 20-Oct-19
Options @$0.40 expiry 31-Dec-19
Options @$0.657 expiry 31-Jan-20
Options @$0.49 expiry 20-Oct-20
Options @$0.01 expiry 31-Dec-20
Options @$0.92 expiry 31-Jan-21
Total
36. Substantial Shareholders
Number of
Number of
Options
Holders
100,000
1,500,000
740,000
100,000
4,000,000
500,000
6,940,000
1
1
4
1
11
5
23
Substantial holders as disclosed in substantial holder notices given to the Company were as follows:
Name of substantial shareholder
Number of shares over which
% of issued
Ashley Shilkin
Avatar Industries Pty Limited
the relevant interest is held
11,901,965
10,231,820
capital
12.04%
10.35%
Page 60 of 60
For personal use only