CHANGE FINANCIAL LIMITED
APPENDIX 4E
FINANCIAL REPORT YEAR ENDED 20 JUNE 2020
Entity Details
Name of entity
ABN
Change Financial Limited
34 150 762 351
Details on reporting period
Current period
Previous corresponding period
Year ended 30 June 2020
Year ended 30 June 2019
Reporting currency
Unless otherwise stated all amounts in this report are stated in United States Dollars.
Results for announcement to the market
Year to 30 June
2020
US$000
2019
Change
Change
US$000
US$000
%
Revenue from ordinary activities
258
1,833
(1,575)
down 86%
Loss from ordinary activities
(3,513)
(4,765)
1,252
down 26%
Loss for the period attributable to
members
Basic EPS – US cents per share (loss)
Diluted EPS – US cents per share
(loss)
Net tangible assets at 30 June (US
cents per share
(3,513)
(4,765)
1,252
down 26%
(2.8)
(2.8)
(5.7)
(5.7)
-2.9
down 51%
-2.9
down 51%
0.008
0.003
+.005
up 167%
Dividends
No dividends have been declared or paid in the current and previous financial period.
For personal use only
CHANGE FINANCIAL LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2020
For personal use only
CORPORATE DIRECTORY
Directors
Benjamin Harrison (Chairman)
Ian Leijer (Executive Director)
Harley Dalton
Company Secretary
Adam Gallagher
Registered Office
Change Financial Limited
Level 11, 82 Eagle Street
Brisbane QLD 4000
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
Email: investors@changefinancial.com
Share Registry
Postal Address
Change Financial Limited
GPO Box 5011
Brisbane QLD 4001
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 2020
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
6
20
21
29
30
31
32
33
34
35
61
62
66
Page 3 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
CHAIRMAN & CEO’S LETTER
Dear Shareholders,
2020 has brought significant challenges to the world as a whole and, like all aspects of society, Change
Financial has had to adapt.
Change Financial has proven to be resilient in adjusting to the changes in managing and operating our
business in the 2020 climate. Change Financial has, for a number of years, had a ‘Work from Home’ Policy in
place under our Business Continuity Plan and as such the transition by our entire team to remote working
during lockdowns has proven to be relatively seamless.
Our thoughts and sympathies go to all those adversely affected by the events of the last year.
Change Platform
It has been a significant year for the Company, in completing the build of our payments processor and card
issuing platform (Platform) and achieving critical milestones in late 2019 with PCI DSS Certification and
Mastercard® Registration of our Platform. Our sincere thanks to our partners and an amazing Change team of
dedicated professionals that realized our strategic business plans. Following this, we immediately
commenced the commercialisation phase and onboarded the Platform’s first customer in partnership with
our U.S. banking partner, Central Bank of Kansas City (CBKC). Our focus is now set on securing new clients
directly and in conjunction with CBKC who have identified a number of customers to onboard to Change’s
Platform in 2020 and 2021.
We believe that Change is extremely well placed to now start onboarding its pipeline of identified potential
customers and also service the significant addressable market available to the Company. Industry tailwinds
have also picked up and COVID-19 has been the catalyst in the move towards digital payments. Change is the
critical infrastructure provider that connects existing licensed banks with modern API-driven brands (e.g.
fintech’s). This infrastructure layer is called Banking as a Service (BaaS).
Corporate Activity in the Payments and Card Issuing Space
The past year has seen corporate activity in the payments and card issuing space heating up. Some of the
more notable transactions include, consumer financial services platform SoFi, who announced in April 2020
that it was acquiring payments and bank account infrastructure company Galileo for US$1.2 billion. Like
Change, Galileo provides APIs that allow fintech companies to easily create bank accounts and issue physical
cards, among myriad other services.
Further in May 2020, U.S.-based payments and card issuing fintech, Marqeta, raised US$150 million at a
US$4.3 billion valuation ahead of a planned IPO at double that valuation. Marqeta and Afterpay also
announced they have partnered to expand Afterpay’s buy now, pay later presence in the U.S.
As one of the few U.S. payment and card issuing platform completed in recent years, Change is in a strong
position to continue capitalising on the world’s move to cashless, virtual and online payments that has also
been accelerated by the COVID-19 pandemic. The Change Platform was built from the ground up to address
today’s payment needs without the complexity and legacy of traditional issuer processors and forms a key
part of the payments infrastructure for products and companies offering cashless payments.
Page 4 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
Our Staff and Shareholders
We would also like to thank our staff, who have worked tirelessly, often remotely, and made many sacrifices
for the Company to ensure the finalisation of our Platform and that customers continue to receive the level
of customer service they have become used to from Change.
We would also like to extend a thanks to our supportive shareholders. The board is extremely positive on the
future prospects of the business and we look forward to updating you on our continued success in achieving
operational and financial milestones over the course of the next year.
Benjamin Harrison
Alastair Wilkie
Chairman
CEO
Page 5 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
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 2020 (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:
Benjamin Harrison (Chairman)
Ian Leijer
Harley Dalton
Teresa Clarke (resigned 30 June 2020)
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
Development of its payment and card issue platform
During the year the Company hit significant milestones in relation to its payments and card issuing platform
(Platform). The Company received final PCI DSS sign off and Mastercard® Registration of its Platform. The
first customer then launched on the Platform in partnership with Change’s U.S. sponsor bank. This was the
first step in commercialising and generating first revenues from the Platform.
About Change Platform
The Change Platform is PCI DSS certified and Mastercard registered which allows the Company to offer
Banking as a Service (BaaS) to its customers.
The 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.
Page 6 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
Revenue Model
Customers are all different and revenue lines vary depending on the customer’s payments and product
offering. Change can earn revenue from its customers in the following ways:
Set Up and
Services
Processing Fees
Non-Financial
Transactions
Platform Recurring
Software License
Fees
White Label App
and Technology
Fees
Risk and
Operations
Management
Professional
Services
Value added
Services
Customers are charged one-time set-up fees to onboard to Change’s Platform and
Systems Maintenance fees along with Customer Technical Support are chargeable
recurrent services.
Change’s Platform provides the payments infrastructure and a connection to the
global payment rails Change earns a fee from its customer for payment
authorisation, funds transfers, API calls and card loads.
Our Platform provides a number of services beyond processing payments and earns
fees for card printing and production, SMS, XML, email messaging/notifications and
record updates.
The Change platform provides its customers with support and program dashboards
including data insights to manage their payments products with real-time data and
access. Fees are earned on a monthly recurring revenue basis per customer and
user over the life of our contracts.
Digital driven customer experiences are now the new normal and our platform
provides a consumer facing mobile app that our clients are able to white-label for
their end users running on the Change Platform. Fees are earned on a monthly
recurring revenue basis over the life of our contracts.
The Change Platform includes Decision Intelligence (DI) solution, a real-time
authorization decisioning solution to approve genuine transactions. Change also
monitors and executes recurrent security risk processes including Office of Foreign
Assets Control (OFAC) along with key functions such as disputes and chargebacks.
These Risk Management Solutions attract ongoing fees.
Change provides clients with the necessary resources for business analysis, custom
engineering development and issue investigation (e.g. a client may want to offer a
new payment product or service to their end user that requires a customization or a
new engineering requirement on the payment rails.)
Customer support services provided directly or through third parties, including
telephone and online access to customer support agents and Interactive Voice
Response (IVR) technology.
Sponsorship of Falls Fintech
During the year Change become a partner and sponsor of the Falls Fintech Accelerator program, an initiative
of “Central Payments” the payments division CBKC. Change joins other partners and sponsors including
industry leaders Mastercard, Discover and Ubiquity.
As an Advocate sponsor, Change will play an active role in the program, and as a result have direct access to
emerging new payments businesses and fintech’s. Falls Fintech is a versatile, product-focused program
created to accelerate market availability of innovative financial products from promising early-stage fintech’s.
Sponsored by Central Payments, the fastest-growing prepaid and debit card issuer in the US, Falls Fintech
provides a tailored 10-week curriculum that exposes fintech’s to a bundling of subject matter experts and
mentorship from a network of best-in-class payments partners.
Page 7 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
Successful Capital Raising
During the year the Company executed on a number of successful capital raising initiatives. As announced on
1 April 2020, the Company and Central Bank of Kansas City (CBKC), entered into a Subscription Agreement
whereby CBKC agreed to make an initial investment of US$0.25 million in Change. In addition, CBKC and the
Company have also signed a non-binding term sheet where CBKC can make further investments in the
Company of up to US$2.75 million. CBKC has completed its initial investment of US$0.25 million and
discussions to finalise the further investment are ongoing.
The Company also completed a A$5.14 million Entitlement Offer. The Company received applications from
Eligible Shareholders and investment commitments from sophisticated and professional shareholders,
including Directors, for the full raising amount.
Options exercised
During the year 4,000,000 ordinary 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 33.
Likely developments and expected results of operations
Refer to the Review of Operations for further details.
Information on directors
Benjamin Harrison (Chairman)
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
1,420,670 shares in Change Financial Limited (1,300,000 acquired since year end)
Page 8 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Harley Dalton (Non-Executive Director)
Experience and expertise
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 is currently a Director of Altor Capital. Prior to this he was the founder
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.
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
2,304,470 shares in Change Financial Limited held beneficially (1,500,000 acquired after year end and
3,000,000 held non beneficially acquired after year end).
Harley is a director of Altor Capital Pty Ltd (Altor). Altor Capital Management Pty Ltd (Altor Capital
Management), a wholly owned subsidiary of Altor, held convertible notes in the Company until the notes were
converted to ordinary shares in May 2020. Altor Capital Management held the notes as a representative
noteholder and security trustee holding convertible notes on behalf of unrelated investors.
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
Page 9 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Special responsibilities
None
Interests in shares and options
4,072,529 shares in Change Financial Limited.
Company secretary
The Company secretary is Mr Adam Gallagher.
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 2020, and the numbers of meetings attended by each Director were:
Full meetings of directors
Audit & Risk Committee
meetings
Number
attended
Number eligible
to attend
Number
attended
Number eligible
to attend
10
11
11
10
11
11
11
11
3
3
3
3
3
3
3
3
Ben Harrison
Harley Dalton
Ian Leijer 1
Teresa Clarke
1 Mr Leijer attended the Audit & Risk Committee meeting by invitation
Remuneration report (audited)
The Directors are pleased to present your Company's 2020 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;
Page 10 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
•
•
•
•
•
•
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.
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:
Teresa Clarke (Chair - resigned 30 June 2020)
•
• Ben Harrison (Non-Executive Director) (Chairman from 1 July 2020)
• Harley Dalton (Non-Executive Director)
•
Ian Leijer (Executive Director)
In addition to the directors the following executives that report directly to the Board are key management
personnel:
• Alastair Wilkie (Chief Executive Officer – appointed 25 October 2019)
•
Clayton Fossett (Chief Operating Officer)
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 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
2020
Name
Short Term Benefits
Post-
Employment
Benefits
Long
term
benefit
Share
based
payments
Total
Non-executive directors
Teresa Clarke1
Harley Dalton3
Ben Harrison3
Subtotal
Executive directors
Ian Leijer
Subtotal
Key Management
Alastair Wilkie2
Clayton Fossett
Subtotal
Cash
salary
and fees
US$
47,006
59,8163
59,8163
166,638
68,047
68,047
111,535
210,596
322,131
Non-
Monetary
Benefits
US$
-
-
-
-
-
-
-
-
-
-
-
-
-
10,763
10,763
10,018
-
10,018
Total
556,816
10,763
10,018
1 Ms Clarke resigned effective 30 June 2020
2 Mr Wilkie was appointed 25 October 2019
3 Includes US$24,371 each of management & consulting services. Refer to section (e) below
US$
US$
US$
US$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
47,006
59,816
59,816
166,638
68,047
68,047
127,511
34,894
162,405
249,064
256,253
505,317
162,405
740,002
2019
Name
Non-executive directors
Teresa Clarke
Harley Dalton
Ben Harrison
Andrew Pipolo2
Peter Clare3
Subtotal
Executive directors
Teresa Clarke1
Ashley Shilkin4
Ian Leijer
Subtotal
Key Management
Clayton Fossett
Young Lee5
Subtotal
Total
Short Term Benefits
Post-
Employment
Benefits
Long
term
benefit
Share
based
payments
Total
Cash salary
and fees
US$
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
Non-
Monetary
Benefits
US$
-
-
-
-
-
-
-
11,154
-
11,154
7,765
14,666
22,431
33,585
US$
US$
US$
US$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
2 Mr Pipolo resigned 30 September 2018
3 Mr Clare resigned 31 August 2018
4Mr Shilkin resigned 11 December 2018
5Mr Lee resigned 31 December 2018
Page 12 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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. Negative
amounts are the options forfeited but not yet vested at the time of forfeiture.
No amounts of remuneration are performance related
(c) Service agreements
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 with a
minimum of A$72,000 per annum; 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.
•
Payment for services outside the normal scope of the ordinary duties of the director at a rate of
A$2,000 per day.
Ben Harrison (Non-Executive Chairman)
Term of agreement – no fixed term;
•
• Annual fee of A$50,000 payable monthly on pro rata basis;
• Reimbursement of specified expenses incurred in undertaking the role;
•
Payment for services outside the normal scope of the ordinary duties of the director at a rate of
A$2,000 per day.
Alastair Wilkie (CEO)
Term of agreement – no fixed term;
•
• Base salary of A$260,000 per annum (including statutory superannuation contributions) which is
reviewed annually;
Initial grant of options (details in subsection (d) below);
Entitled to reimbursement of specified expenses incurred in his employment.
•
•
Clayton Fossett (COO)
Entitled to reimbursement of specified expenses incurred in his employment;
Term of agreement – no fixed term;
•
• Base salary of $215,000 per annum which is reviewed annually;
•
• Can participate under the Company ESOP;
•
• Mr Fossett is employed under the laws of the State of California, US.
Employment can be terminated giving four months’ notice in writing; and
Page 13 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
(d) Equity instrument disclosures relating to key management personnel
(i)
Options issued to Key Management Personnel as remuneration
The following options were issued to Alastair Wilkie on 28 October 2019:
Tranche
Expiry
Term
(years)
Strike Price
A$
Fair Value at
Grant Date
A$
Number
Vesting
Conditions
% Vested
At 30 June 20
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Total
28 Oct 2022
28 Oct 2022
28 Oct 2022
28 Oct 2022
3
3
3
3
0.001
0.200
0.260
0.320
0.219
0.113
0.098
0.086
500,000
1,000,000
1,000,000
1,000,000
3,500,000
Yes
Yes
Yes
Yes
Nil%
Nil%
Nil%
Nil%
The vesting conditions for the options are set out as follows:
Completion of one year’s employment
Tranche 1 & 2:
After 10 customers have onboarded
Tranche 3:
When the Company is at operation breakeven
Tranche 4:
The following options were issued to Clayton Fossett effective 5 December 2019 (ratified by the Board on 20
August 2020:
Number
Expiry
Term
(years)
Strike Price
A$
Fair Value at
Grant Date
A$
Number
Vesting
Conditions
Vested
At 30 June 20
Tranche 1
5 Dec 2022
3
0.200
0.043
750,000
Vest
immediately
100%
(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.
Page 14 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
2020
Name
Directors
Ben Harrison
Harley Dalton
Ian Leijer
Teresa Clarke
Other key
management
Balance at
the start of
the period
Granted
during the
year
Lapsed and
Forfeited
during the
year
Balance at
the end of
the period
Total Vested
at 30 June 20
Exercisable
at 30 June 20
Unexercis-
able at
30 June 20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Clayton Fossett
450,000
750,000
(350,000)1
850,000
850,000
850,000
Alastair Wilkie
-
3,500,000
-
3,500,000
-
-
3,500,000
1 Options which lapsed had been granted on 10 January 2017
2019
Name
Balance at
the start of
the period
Granted
during the
year
Lapsed &
forfeited
during the
year 1
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
-
-
-
-
-
(450,000)
(3,500,000)
(250,000)
(250,000)
(250,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Clayton Fossett
550,000
-
(100,000)
450,000
366,667
366,667
83,333
1 Options which lapsed were forfeited or otherwise expired had been granted on 18 April 2016
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 15 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
(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 2020
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
Other key management personnel of the Group
Clayton Fossett
Alastair Wilkie
1 Including shares received on conversion of convertible notes
2Issued as part of the entitlement offer
402,235
60,335
3,072,529
-
38,800
-
-
-
-
-
-
-
402,2352
60,3352
804,470
120,670
1,000,0002
4,072,529
-
-
3,643,6441
-
38,800
3,643,644
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
Young Lee
Clayton Fossett
-
-
2,872,529
-
-
-
500,000
(500,000)
11,901,965
(11,901,965)
-
-
38,800
-
-
-
335,156
67,039
43,668
16,667
402,235
60,335
200,000
3,072,529
-
-
-
-
-
-
-
-
-
-
-
38,800
Page 16 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
(e) Other Transactions with Key Management Personnel
The following transactions with key management personnel and their associated entities:
A director, Mr H Dalton is a director and controlling shareholder of Altor Capital Pty Limited which wholly
owns Altor Advisory Partners Pty Limited (AAP). The Company engaged AAP to act as lead manager and
arranger for Change’s capital raising during the year. The contract was based on normal commercial terms
and conditions. The Company also engaged AAP to provide accounting and bookkeeping services. These
services were provided on normal commercial terms. Also during the year Mr Dalton provided management
and consultancy services to the Company beyond the scope of his role as a director. The Company paid AAP
for the services of Mr Dalton on normal commercial terms and this amount is included in the amount paid to
Mr Dalton in subsection (b) above.
A director, Mr Benjamin Harrison is CIO of Altor Capital Limited and was the nominated appointee of Altor in
2018 when Mr Harrison joined the Board. During the year Mr Harrison provided management and
consultancy services to the Company beyond the scope of his role as a director. The Company paid AAP for
the services of Mr Harrison on normal commercial terms and this amount is included in the amount paid to
Mr Harrison in subsection (b) above.
Transactions with Key Management Personnel
Amounts recognised as expense
Accounting and book keeping fees
Amounts recognised in equity (cost of funds raised)
Capital raising & management fees
(f) Additional Information
2020
US$
2019
US$
10,091
256,184
-
-
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
US$
2016
2017
2018
2019
2020
2,154,698
1,448,892
995,515
469,476
740,002
EPS
US$
(0.229)
(0.135)
(0.124)
(0.057)
(0.028)
Dividends
cents
Share Price
$A
0.0
0.0
0.0
0.0
0.0
0.56
0.57
0.67
0.049
0.105
End of Remuneration Report
Page 17 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Shares under option
Unissued ordinary shares of Change Financial Limited under option at the date of this report are as follows;
Grant Date
Expiry
Strike Price
Number
1 Apr 2015
18 Jan 2018
28 Oct 2019
28 Oct 2019
28 Oct 2019
28 Oct 2019
5 Dec 2019
TOTAL
20 Oct 2020
31 Jan 2021
28 Oct 2022
28 Oct 2022
28 Oct 2022
28 Oct 2022
5 Dec 2022
A$0.49
A$0.92
A$0.001
A$0.20
A$0.26
A$0.32
A$0.20
100,000
400,000
500,000
1,000,000
1,000,000
1,000,000
750,000
4,750,000
4,000,000 ordinary shares were issued during the year as a result of the exercise of options. Theses options
had been granted on 12 December 2018 with a strike price of A$0.01 No shares have been issued since year
end 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.
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.
Page 18 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Dividends - Change Financial Limited
The Directors of Change Financial Limited do not recommend the payment of a dividend for the year ending
30 June 2020 (2019: $Nil).
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 20.
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 31 August 2020
Benjamin Harrison
Chairman
Page 19 of 67
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The Directors
Change Financial Ltd
Level 11, 82 Eagle Street
Brisbane QLD 4000
Auditor’s Independence Declaration
In relation to the independent audit for the year ended 30 June 2020, 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; and
(ii) no contraventions of APES110 Code of Ethics for Professional Accountants (including
Independence Standards).
This declaration is in respect of Change Financial Limited and the entities it controlled during the
year.
PITCHER PARTNERS
DAN COLWELL
Partner
Brisbane, Queensland
31 August 2020
For personal use only Change Financial Limited
Annual Report
For year ended 30 June 2020
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 21 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
• 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.
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.
Page 22 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
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.
Page 23 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
Appointment date
Length of service
Name
Ian Leijer
16 January 2015
Harley Dalton
11 December 2018
Benjamin Harrison
11 December 2018
67 months
20 months
20 months
Based on the factors listed in the CGC Recommendations as being relevant to assessing independence, the
Board considers the directors not to be independent. 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 and Altor Advisory Partners Pty Ltd. Mr Harrison is Chief Investment Officer of Altor
Capital Pty Ltd and was the nominee of Altor Private Equity Limited to the Board in December 2018.
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.
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;
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Change Financial Limited
Annual Report
For year ended 30 June 2020
•
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.
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 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
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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 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 report which is distributed, or otherwise made available, to all shareholders;
•
•
•
The quarterly activities report;
The half-year financial report;
The Annual General Meeting and other general meetings called to obtain shareholder approval
for significant corporate actions, as appropriate;
• Company announcements; and
• All of the information available on the Company’s website www.changefinancial.com
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)
in relation to any incident involving fraud or other break down of the Company’s internal controls;
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Change Financial Limited
Annual Report
For year ended 30 June 2020
(b)
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.
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.
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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 28 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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 and principal place of business is:
Level 11, 82 Eagle Street
Brisbane QLD 4000
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 31 August 2020. 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 29 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
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
2020
US$
2019
US$
4
258,312
1,833,301
(1,684,449)
(1,958,503)
(41,736)
(163,283)
(125,964)
(655,102)
(378,204)
(810,903)
(485,911)
(538,694)
(503,006)
(294,242)
(12,481)
(175,369)
-
(891,944)
(259,794)
(98,859)
-
(250,000)
(279,407)
(761,290)
(3,512,640)
(4,764,888)
5
13
5
6
-
-
(3,512,640)
(4,764,888)
Basic loss per share (US cents per share)
Diluted loss per share (US cents per share)
21
21
(2.8)
(2.8)
(5.2)*
(5.2)*
*The number of shares for the 2019 comparative and up to the entitlement offer issue date have been adjusted for the
effect of the entitlement offer.
The Group has initially applied AASB16 at 1 July 2019 using the modified retrospective approach. Under this approach
comparative information is not restated and the cumulative effect of initially applying AASB16 is recognised in the
accumulated losses (refer Note 1).
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 30 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note
2020
US$
2019
US$
Loss of the year
(3,512,640)
(4,764,888)
Other comprehensive income (loss)
Items that may be reclassified to profit and loss
Exchange differences on translation of parent operations
134,843
(109,296)
Total comprehensive income/(loss) from continuing operations
(3,377,797)
(4,874,184)
The Group has initially applied AASB16 at 1 July 2019 using the modified retrospective approach. Under this approach
comparative information is not restated and the cumulative effect of initially applying AASB16 is recognised in the
accumulated losses (refer Note 1).
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 31 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June
Current assets
Cash
Trade and other receivables
Lease receivable – current
Other current assets
Assets held for resale
Total current assets
Non-current assets
Property, plant & equipment
Lease receivables – non current
Intangible assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions
Lease liabilities - current
Borrowings
Other current liabilities
Total current liabilities
Non-current liabilities
Lease liabilities – non current
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Notes
2020
US$
2019
US$
7
8
12
9
10
11
12
13
14
15
12
16
17
12
18
19
25
2,966,200
1,464,976
231,875
161,980
5,563
3,365,618
-
3,365,618
172,554
-
-
1,637,530
99,999
1,737,529
-
12,981
189,472
1
-
1
189,473
12,982
3,555,091
1,750,511
631,393
154,285
153,287
276,381
121,354
-
-
1,050,447
111,165
-
1,050,130
1,448,182
179,388
179,388
-
-
1,229,518
1,448,182
2,325,573
302,329
34,767,894
29,582,499
4,266,699
3,942,740
(36,709,020)
(33,222,910)
2,325,573
302,329
The Group has initially applied AASB16 at 1 July 2019 using the modified retrospective approach. Under this approach
comparative information is not restated and the cumulative effect of initially applying AASB16 is recognised in the
accumulated losses (refer Note 1).
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 32 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Contributed
Reserves
Accumulated
Equity
US$
US$
Losses
US$
Total
Equity
US$
Balance at 30 June 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 owners
Options issued (note 32)
-
(95,471)
Contributions net of capital raising expenses (note 18)
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
Balance at 1 July 2019
29,582,499
3,942,740
(33,222,910)
302,329
Adjustment of accumulated losses upon application of AASB16
-
-
26,530
26,530
Adjusted balance at 1 July 2019
29,582,499
3,942,740
(33,196,380)
328,859
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 owner
-
-
-
-
(3,512,640)
(3,512,640)
134,843
134,843
-
-
134,843
(3,512,640)
(3,377,797)
Options issued (note 32)
-
189,116
Contributions net of capital raising expenses (note 18)
5,185,395
-
Total
5,185,395
189,116
-
-
-
189,116
5,185,395
5,374,511
Balance at 30 June 2020
34,767,894
4,266,699
(36,709,020)
2,325,573
The Group has initially applied AASB16 at 1 July 2019 using the modified retrospective approach. Under this approach
comparative information is not restated and the cumulative effect of initially applying AASB16 is recognised in the
accumulated losses (refer Note 1).
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 33 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
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
Interest paid
US Government grant – PPP program
R&D tax offset
2020
US$
2019
US$
4,102
379,182
(3,117,723)
(5,773,710)
22,807
(22,456)
230,000
14,224
3,072
-
-
-
Net cash used in operating activities
20
(2,869,046)
(5,391,456)
Cash flow from investing activities
Distribution received
Proceeds from sale of property, plant & equipment
Payment for software development
Receipts from sublease excluding (interest received)
Proceeds from sale of Ivy Koin
Net cash provided by/(used in) investing activities
Proceeds from financing activities
Proceeds from share issue
Proceeds from convertible note funding
Cost of funding
Proceeds from borrowings
Costs of establishing borrowing facilities
Payments of lease liabilities (excluding interest paid)
Net cash provided by financing activities
-
500
-
147,148
200,000
347,648
1,300,000
-
(82,013)
-
-
1,217,987
3,372,572
3,167,148
951,391
(218,405)
-
-
-
(191,854)
1,264,744
(112,638)
(139,395)
-
3,966,163
4,127,400
Net increase (decrease) in cash held
1,444,765
(46,069)
Reconciliation of cash
Cash at the beginning of the financial year
Net increase (decrease) in cash held
Foreign exchange difference on cash holding
1,464,976
1,665,967
1,444,765
(46,069)
56,459
(154,922)
Cash and cash equivalents at end of the year
7
2,966,200
1,464,976
The Group has initially applied AASB16 at 1 July 2019 using the modified retrospective approach. Under this approach
comparative information is not restated and the cumulative effect of initially applying AASB16 is recognised in the retained
earnings (refer Note 1).
The consolidated statements above should be read in conjunction with the accompanying notes.
Page 34 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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 2020 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 new and amended Australian Accounting Standards and Australian
Accounting Standards Review Board (AASB) interpretations that are mandatory for the current
reporting period and relevant to the Group. Other than AASB 16 (refer note (d)) adoption of these
standards and interpretations had not resulted in any material changes to the Group’s half year
financial report.
(d) Adjustment recognised on adoption of AASB 16
AASB 16 Leases supersedes AASB 117 Leases. AASB 16 introduces a single lessee accounting model and
eliminates the classification between operating and finance leases. All leases are required 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 Group has adopted AASB 16 on 1 July 2019 using the modified retrospective approach. Under this
approach, comparative information is not restated and the cumulative effect of initially applying AASB
16 is recognised in retained earnings/(accumulated losses).
The Group’s leasehold properties comprise one office leases which has previously been classified as an
operating lease. In addition, the Group has entered into a back-to-back property sublease for that
office lease. Under this arrangement the cash flows substantially offset each other.
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Change Financial Limited
Annual Report
For year ended 30 June 2020
From 1 July 2019 the Group recognises a right-of-use asset (ROU) and a lease liability at the
commencement date which is initially measured on a present value basis. For back-to-back leases,
however, as the term of the sublease is for the whole of the remaining term of the head lease, the ROU
is derecognised and a lease receivable is recognised for the lease payments receivable.
Lease liabilities / receivables recognised on implementation of AASB 16 as 1 July 2019:
As at 1 July 2019 (US$)
Current
Non-current
Total
Lease
Receivable
148,621
349,980
498,601
Lease
Liability
140,716
331,355
472,071
The net impact of the implementation of US$26,530 has been recognised directly in retained
earnings/(accumulated losses).
During the year ended 30 June, finance costs arising from lease payments amounted to US$20,232 and
interest revenue arising from lease receipts amounted to US$19,444.
Reconciliation of operating lease commitments to lease liabilities at transition date
The following table reconciles the Group’s operating lease commitments at 30 June 2019 to the lease
liabilities recognised upon transition at 1 July 2019:
As at 1 July 2019
Operating lease commitments at 30 June 2019
Additional commitment due to lease extension
Impact of discounting
Lease liabilities at 1 July 2019
$US
422,264
87,337
(37,530)
472,071
Practical expedients applied
In applying AASB 16 for the first time, the Group has applied the following practical expedients as
permitted by the standard:
•
•
•
•
Applied the exemption not to recognise right-of-use assets and lease liabilities for low value
leases or leases with less than 12 months of lease term;
Applied the use of a single discount rate to the portfolio of leases with similar characteristics.
The rate applied was the Group’s weighted average borrowing rate of 5%;
Applied the use of hindsight in determining the lease term where the contract contains options
to extend the lease; and
Relied on previous assessments on whether leases are onerous.
(e) 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 2020. As a result of this review the Directors have determined
there will be no material impacts of any new or revised Standards and Interpretations on the group,
and therefore, no change is necessary to Group accounting policies.
Page 36 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
(f) 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.
(g) 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.
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.
(h)
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
Page 37 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
Grant income
Grant income is recognised when the right to receive a grant is probable. Where grant income is
directly related to expenditure of the Company the grant income is recognised in the period in which
the applicable expenditure is spent. To the extent the grant income is received in advance of applicable
expenditure being spent then grant income is recognised as deferred income.
(i)
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
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.
(j)
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
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Annual Report
For year ended 30 June 2020
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.
(k) 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.
Class of fixed asset
Motor vehicles under lease
Office equipment
Office fit-out
(l) 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.
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Annual Report
For year ended 30 June 2020
(m) 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.
(n) 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.
(o) 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.
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.
(p) 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.
(q) 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.
Page 40 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
(r) Ongoing operations
These financial statements have been prepared on a going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and the settlement of liabilities in
the ordinary course of business.
At the date of this report the group remains in a development and growth phase of operations. The
Directors are of the view that the group's payments and card issuing platform (Platform) is
commercially viable and are confident that the business will become sustainable in future years
through forecast revenue growth. Currently the group is in a strong cash position with no external
borrowings and limited contractual commitments over the next 12 months. If required, the group has
the ability to scale back future expenditure to ensure the group will continue as a going concern.
Until such time as the group's revenues grow to a level that is sufficient to enable the group to meet its
financial commitments as and when they fall due the group will be dependent on raising further capital
in future years.
(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
Group as lessee
Until the end of the 2019 financial year, leases of property were classified as ‘operating leases’.
Expenses incurred under operating leases were previously charged to the profit and loss on a straight-
line basis.
From 1 July 2019, leases are now recognised ‘on balance sheet’ as a right-of-use asset with a
corresponding lease liability. Each lease payment is allocated between the liability and finance cost. The
right-of-use asset is depreciated over the lease term on a straight-line basis or over the useful life
where title to the asset transfers at the end of the lease. Assets and liabilities arising from a lease are
initially measured on a present value basis.
Depreciation on right-of-use assets and interest on lease liabilities is recognised in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income.
Payments associated with short term leases (generally less than 12-month terms) and leases of low
value have continued to be recognised on a straight-line basis as an Other Expense in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income.
The principal portion of the lease payments are recognised as a financing cash flow and the interest
portion of the lease payments are recognised as an operating cash flow in the Consolidated Statement
of Cash Flows.
The Group uses critical judgements in determining the lease term. Extension options are only included
in the lease term where management considers that it is probable that the option will be exercised.
Group as lessor
The Group has entered into back-to-back lease arrangements. Where the terms of the lease transfer
substantially all the risks and rewards of ownership to the sublessee and/or the term of the sub-lease is
Page 41 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
for the whole of the remaining term of the head lease, these arrangements are classified as finance
leases.
Amounts due from finance leases are recognised as a lease receivable at the amount of the Group’s net
investment in the leases, the right-of-use asset relating to the underlying lease is derecognised.
Finance lease income is allocated to the accounting periods so as to reflect a constant periodic rate of
return on the Group’s net investment outstanding in respect of the lease.
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 (refer note 32). 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.
Leases
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost
and depreciated on a straight-line basis over the unexpired term of the lease. Right-of-use assets are subject to
impairment and adjusted for any remeasurement of lease.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially
recognised at the present value of the lease payments to be made over the term of the lease. The
carrying amount of the lease is remeasured if there is a change in future lease payments (arising from a
change in index or a rate used), the residual guarantee or the lease term. The remeasurement is an
adjustment to the corresponding right-of-use asset, lease receivable (in the case of sub-leases) or to
profit and loss.
Page 42 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Trade and other receivables
The Group makes judgements as to its ability to collect receivables and provides for a portion of
receivables when collection becomes doubtful. Evidence of impairment may include indications that
the debtor is experiencing financial difficulty, default or delinquency in interest or principal payments,
the probability that they will enter bankruptcy or other financial reorganisation and observable data
indicating that there is a measurable decrease in the estimated future cash flows, such as changes in
arrears of economic conditions that correlate with defaults. Collectability of trade and other receivables
is reviewed on an ongoing basis. Trade and other receivables, which are known to be uncollectable, are
written off. An allowance for expected credit losses is established. In measuring expected credit losses
a provision matrix for trade receivables is used. The provision matrix is based on historical credit losses,
adjusted for any material expected changes to future credit risk, refer to note 8 for details of the trade
and other receivables.
Deferred tax assets
No members of the Group have generated taxable income in the financial year and as such the group
continues to carry forward tax losses that give rise to deferred tax assets. Given that the Group’s
projects remain in early stages, it is unlikely that the Group will generate taxable income in the near
future. Taking this into account, the deferred tax assets have not been recognised in the financial
statements as the management does not believe that the members of the Group satisfy the criteria set
out in AASB112.
3. Operating Segments
The Group is organised into a single operating segment being the provision of digital banking services
and a single geographic segment, being the United States of America.
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 income - leases
Interest income - other
US Government grant – Paycheck Protection Program (PPP) (refer Note 17)
Gain on the sale of assets (refer Note 10)
Distribution received
Research & development tax refund
Total Revenue
2020
US$
4,101
-
4,101
20,232
919
118,835
100,001
2019
US$
340,989
110,000
450,989
-
3,072
-
-
-
1,300,000
14,224
79,240
258,312
1,833,301
Page 43 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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
Share based payments expense (credit)
Superannuation expense
Finance Expense
Interest expense - lease
Interest expense - other
Amortisation of borrowing costs
Total Finance Expense
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% (2019: 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
2020
US$
2019
US$
12,481
-
12,241
189,116
10,018
19,444
166,656
73,694
259,794
29,563
145,806
175,369
(254,766)
-
-
60,011
38,848
98,859
2020
US$
2019
US$
(3,512,640)
(4,764,888)
(1,053,792)
(1,429,466)
(258,076)
196,678
-
267,583
56,735
(76,430)
-
(4,276)
75,000
19,970
1,259,400
946,665
-
-
Deferred tax assets of $10,451,737 (2019: $9,492,337) in respect of temporary differences and tax losses have not
been recognized.
Page 44 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
7. Current assets - Cash and cash equivalents
Cash at Bank
2,966,200
1,464,976
2020
US$
2019
US$
8. Trade and other receivables
Trade receivables
Other receivables
Total trade & other receivables
2020
US$
124,614
107,261
231,875
2019
US$
57,833
114,721
172,554
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. They are generally due for settlement within 30 days
and are non-interest bearing. Trade and other receivables of US$122,371 (2019:US$32,773) are past due but not
impaired.
9. Current assets – Other assets
Prepayments
10. Assets held for resale
Investment in associate
2020
US$
5,563
2019
US$
-
2020
US$
2019
US$
-
99,999
In 2020 the Group received US$200,000 from the sale of its investment in Ivy Koin LLC and Ivy Blockchain Pty Ltd
resulting in gain on sale of US$100,001.
Page 45 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
11. Property, plant and equipment
Office equipment at cost
Accumulated depreciation
Closing carrying value
Total property, plant & equipment
2020
US$
63,909
(63,909)
-
-
2019
US$
63,909
(50,928)
12,981
12,981
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
Equipment
US$
Total
US$
-
-
-
-
4,432
(206)
(4,226)
-
-
-
-
-
43,870
(5,161)
(38,709)
-
12,981
(12,481)
(500)
-
38,039
(24,196)
(862)
12,981
12,981
(12,481)
(500)
-
86,341
(29,563)
(43,797)
12,981
2020
Opening carrying amount
Depreciation expense
Disposals/(Write-offs)
Closing carrying amount
2019
Opening carrying amount
Depreciation expense
Disposals/write-offs
Closing carrying amount
Page 46 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
12. Leases
Lease receivables
Lease receivables - current
Lease receivables – non-current
Total lease receivables
Lease liabilities
Lease liabilities – current
Lease liabilities – non-current
Total lease liabilities
Reconciliation of movement
Opening lease receivables on liabilities recognised on adoption of AASB 16 on
1 July 2019
Interest accrued
Lease repayments
Balance as at 30 June 2020
2020
US$
2019
US$
161,980
189,472
351,452
153,287
179,388
332,675
-
-
-
-
-
-
Lease
Receivable
US$
498,601
20,232
Lease
Liability
US$
472,071
19,444
(167,381)
(158,840)
351,452
332,675
Lease liabilities are in relation to a property lease for office space in Los Angeles. This lease was entered into on 1
August 2016 for a 65-month term. This property has been sublet for a similar monthly rental and the lease
payments to be received are recognised as lease receivables.
The total sub-lease payments to be received in the next 12-month period are $175,258 (2019: $183,999) and the
period later than 12 months and less than 5 years $193,7855 (2019:334,856)
The Group also rents office space on a month to month basis. The expense relating to this short-term lease is
US$51,777 included in other expenses.
Page 47 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
13. Intangible assets
IvyKoin tokens at cost
Software development at cost
Accumulated amortisation
Impairment
Total intangible assets
2020
US$
2019
US$
1
1
2,192,927
2,192,927
(1,300,983)
(1,300,983)
(891,944)
(891,944)
1
1
Patents,
trademarks &
licenses
US$
IvyKoin
Tokens
US$
Software
Total
Development
US$
US$
-
-
-
-
-
1,131
-
(1,131)
-
1
-
-
-
-
1
1
-
-
-
1
-
-
-
-
-
-
1
-
-
-
-
1
955,737
82,013
956,869
82,013
(145,806)
(145,806)
(891,944)
(891,944)
-
-
(1,131)
1
2020
Opening carrying amount
Additions
Amortisation expense
Write off
Impairment
Closing carrying amount
2019
Opening carrying amount
Additions
Amortisation expense
Impairment
Write off
Closing carrying amount
Page 48 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
14. Trade and other payables
Unsecured liabilities
Accounts payable
Accrued expenses
Other payables
Total trade and other payables
2020
US$
420,813
179,692
30,888
631,393
2019
US$
236,496
-
39,885
276,381
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
16. Borrowings
Altor funding
Less costs of Altor funding
Total current borrowings
Movement in capitalized cost of funding
Opening Balance
Costs of Altor funding – non-cash settled by way of share-based payments
Costs of funding – cash
Amortisation of borrowing costs (refer note 5)
Transfer to equity on conversion of notes (refer note 18(ii))
2020
US$
2019
US$
154,285
121,354
2020
US$
-
-
-
233,085
-
43,051
(73,694)
(202,442)
2019
US$
1,283,532
(233,085)
1,050,447
-
159,295
112,638
(38,848)
-
Closing Balance
-
233,085
Page 49 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
The loan from Altor Capital (an entity related to the director Harley Dalton) as at 30 June 2019 was a under a term
loan facility of A$2,000,000 (Loan). This loan facility was replaced by an issue of convertible notes (Notes) that was
approved by shareholders at an Extraordinary General Meeting (EGM) on 12 February 2019. The notes were issued
on 29 August 2019.
The Convertible Notes issued under Tranche 1 of the Altor Funding (Altor Notes) were issued at a face value of
$0.10 with a maturity of 36 months from the date of first issue. The loan and subsequent issued Notes were
secured by a first ranking security over the Group’s assets. The Notes had a conversion price of the lesser of A$0.10
or 75% of the 10-day VWAP of the Company’s shares prior to conversion. A coupon of 10% per annum was to be
paid quarterly in arrears. The Company can elect to pay the interest by way of cash or additional Notes. On
maturity the Notes convert to shares.
Convertible Notes were also issued in November 2019 (November Notes) were at a face value of A$0.10 with a
maturity of 36 months from the date of first issue. The Notes were unsecured. The November Notes had a
conversion price of the lesser of A$0.10 or 75% of the 10-day VWAP of the Company’s share price prior to
conversion. A coupon of 12% was to be paid quarterly in arrears. The Company can elect to pay the interest by way
of cash or additional Notes. On maturity the Notes convert to shares.
At election of the holder, the Notes could be converted before maturity, subject to certain restrictions. The Notes
may also be redeemed prior to maturity at the request of the Company, subject to the agreement of the holder.
The redemption price includes 130% of the interest payable for the remainder of the term.
In May 2020 all convertible notes and capitalised interest were converted to ordinary shares at a conversion price
of A$0.05. Refer note 18 for further details.
17. Other current liabilities
Deferred grant income
Total other current liabilities
2020
US$
111,165
111,165
2019
US$
-
-
During the financial year the Change Financial LLC received US$230,000 under the Paycheck Protection
Program (PPP). Under the terms of the program the money is initially advanced as a loan and then the
Company is to apply to have the loan waived subject to meeting certain spending criteria. It is
reasonably likely that Change Financial LLC will meet the criteria to have the loan waived and therefore
the funds advanced have been treated as a government grant in accordance with AASB120 Accounting
for Government Grants and Disclosure of Government Assistance. As at 30 June 2020 the Company had
spent US$118,835 of the funds advanced under the PPP on qualifying expenditure and therefore this
portion of the loan has been recognises as granted income. The balance of the amount received under
the PPP (US$111,165) has been recognised as deferred income.
Page 50 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
18. Issued capital
(i)
Share Capital
As at 30 June
2020
US$
2019
US$
268,067,714 fully paid ordinary shares1 (30 June 2019: 92,807,174)
34,767,894
29,582,499
1 This amount excludes 6,036,457 shares (30 June 2019– 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 20181
July 2018 Placement
July 2018 Placement – issue costs
February 2019 Entitlement issue
February 2019 Entitlement offer – issue costs
Balance at 30 June 2019
Options exercised (i)
Equity entitlement offer & shortfall (ii)
Costs of entitlement issues (ii)
Conversion of convertible notes (iii)
Capital raising costs of convertible notes previously capitalized (iii)
Costs of conversion (iii)
Placement to CPx Holdings LLC (iv)
Placement costs (iv)
Balance at 30 June 2020
Number
US$
73,564,879
26,607,205
6,034,483
-
13,207,812
-
2,600,850
(171,656)
566,298
(20,198)
92,807,174
29,582,499
4,000,000
93,243,631
69,713,576
8,333,333
27,656
3,094,916
(277,583)
2,321,114
(202,442)
(8,829)
250,000
(19,437)
268,097,714
34,767,894
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 2020 6,036,457 such shares were excluded (2019: 6,036,457). Total fully paid shares on issue at
30 June 2020 was 98,843,631 (2019: 79,601,336).
(i)
(ii)
4,000,000 options with a strike price of A$0.01 were exercised during November and December 2019
93,243,631 shares were issued during May and June 2020 at a price of A$0.05 per share under a 1 fo1
Entitlement Offer announced 1 April 2020. Costs of the entitlement offer included management and
capital raising fees. Subsequent to year end a further 9,600,000 shares were issued to raise a further
A$480,000 cash.
Page 51 of 67
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Annual Report
For year ended 30 June 2020
(iii)
(iv)
On 13 May 2020 the Convertible Notes, at the request of the Noteholders, and pursuant to their terms of
issue, converted to ordinary shares. Under the terms of the issue of the Notes, the ordinary shares were
issued at A$0.05 per share. The funds raised from the issue of the convertible notes plus the value of
notes issued in lieu of interest were reclassified from Borrowings to Issued Capital. Capital raising costs
of the convertible notes previously capitalised were also transferred to equity (refer note 16).
Under the terms of Subscription Agreement entered into between the Company and CPx Holdings
Limited (CPx), 8,333,333 shares were issued to CPx for US$250,000 during June 2020.
Capital Management
Management controls the capital of the Group to ensure the Company can fund its operations and
continue as a going concern. In order to maintain or adjust the capital structure, the Group may seek to
issue new shares
Options
Information relating to options is set out in note 32.
19. Reserves
Share based payment reserve (a)
Foreign currency translation reserve (b)
Total reserves
(a)
Share based payment reserve
Balance at the start of the period
Options issued / (lapsed)
Closing balance
(b)
Foreign currency translation reserve
Opening balance
Exchange differences on translation of parent operation
Closing balance
2020
US$
2019
US$
4,114,477
3,925,361
152,222
17,379
4,266,699
3,942,740
3,925,361
4,020,832
189,116
(95,471)
4,114,477
3,925,361
17,379
134,843
152,222
126,675
(109,296)
17,379
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 52 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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
Gain on sale of investment
Capitalised interest
Distribution received
Impairment expense
Change in operating assets and liabilities:
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
2020
US$
2019
US$
(3,512,640)
(4,764,888)
12,481
73,694
175,369
38,848
189,116
(254,766)
-
44,927
(100,001)
-
163,644
60,011
-
-
(1,300,000)
891,944
(57,458)
(81,010)
(6,241)
(69,476)
224,263
(668)
32,931
(50,465)
111,165
(220,234)
Net cash used in operating activities
(2,869,046)
(5,391,456)
(ii) Non-cash financing and investing activities
2020
US$
2019
US$
Borrowing costs settled by way of share-based payments
-
159,295
21. Earnings per share
2020
US$
2019
US$
Loss attributable to ordinary equity holders of Change Financial Limited
(3,512,640)
(4,764,888)
Weighted average number of ordinary shares used as a denominator
in calculating basic earnings per share
125,012,150
84,171,251
Weighted average number of ordinary shares and dilutive potential ordinary shares
used as a denominator calculating diluted earnings per share
125,012,150
84,171,251
Page 53 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
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$). As at 30 June
Cash at bank
Current assets
Current liabilities
Net monetary assets / liabilities designated in AUD
2020
US$
1,875,653
17,072
2019
US$
68,381
58,937
(210,331)
(1,359,345)
1,682,394
(1,237,027)
Interest rate risk
The Group’s main interest rate risk arises from cash. 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 $2,966,200 (2019: $1,464,976) subject to variable interest rates of 0.05% (2019:
0.2%). At 30 June 2020, 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.
Page 54 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
Credit Risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a
financial loss to the Group. Credit risk arises from cash and cash equivalents, as well as outstanding
trade and other receivables. The Group deemed its credit risk from cash and cash equivalents to be
minimal as its financial assets are mainly cash held at BankWest which is a subsidiary of Commonwealth
Bank of Australia and US Bank. The maximum exposure to credit risk is the carrying amount net any
provisions for impairment. No financial assets are past due, and none are impaired except as noted in
Note 8.
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 $631,393 (2019: $276,381) which have a maturity of
less than 6 months. The Group had no current borrowings (2019: $1,050,447). The total lease
payments to be made in the next 12 months are US$165,481 (2019: $162,830) and the period later
than 12 months and less than 5 years $183,444 (2019:259,434). The Group has no other financial
liabilities.
24. Subsidiaries
The consolidated financial statements include the assets, liabilities and results of the following
subsidiaries:
Name of Entity
Country of
Incorporation
Equity Type
Holding
Holding
Change Financial LLC
US
Membership units
Change Labs NZ Pty Ltd (dormant)
Australia
Ordinary Shares
25. Accumulated Losses
As at 30 June
2020
%
100
100
2019
%
100
100
2020
US$
2019
US$
Opening balance of accumulated losses
(33,222,910)
(28,458,022)
Opening balance due to the introduction of AAS16
26,530
-
Loss for the period
Closing balance of accumulated losses
(3,512,640)
(4,764,888)
(36,709,020)
(33,222,910)
Page 55 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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
2020
US$
2019
US$
1,892,725
242,624
643,178
1,185,964
2,535,903
1,428,589
210,331
210,331
1,126,260
1,126,260
2,325,572
302,329
34,767,894
29,582,499
4,266,698
3,942,740
(36,709,020)
(33,222,910)
2,325,572
302,329
(3,486,109)
(25,862,816)
(3,486,109)
(25,862,816)
27. Key management personnel disclosures
Directors
The following persons were directors of Change Financial Limited during the financial year:
Non-executive directors
Teresa Clarke (resigned 30 June 2020)
Benjamin Harrison
Harley Dalton
Executive directors
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
Alastair Wilkie – Chief Executive Officer (appointed 25 October 2019)
Clayton Fossett – Chief Operating Officer
Page 56 of 67
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Change Financial Limited
Annual Report
For year ended 30 June 2020
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.
2020
US$
556,816
10,763
10,018
162,405
740,002
2020
US$
59,486
11,542
2019
US$
724,184
33,585
-
(288,293)
469,476
2019
US$
64,529
16,976
Total
71,028
81,505
Page 57 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
29. Related Party Transactions
The following transactions with key management personnel and their associated entities:
A director, Mr H Dalton is a director and controlling shareholder of Altor Capital Pty Limited which
wholly owns Altor Advisory Partners Pty Limited (AAP). The Company engaged AAP to act as lead
manager and arranger for Change’s capital raising during the year. The contract was based on normal
commercial terms and conditions. The Company also engaged AAP to provide accounting and
bookkeeping services. These services were provided on normal commercial terms. Also during the year
Mr Dalton provided management and consultancy services to the Company beyond the scope of his
role as a director. The Company paid AAP for the services of Mr Dalton on normal commercial terms
and this amount is included in the amount paid to Mr Dalton in Note 27.
A director, Mr Benjamin Harrison is CIO of Altor Capital Limited and was the nominated appointee of
Altor in 2018 when Mr Harrison joined the Board. During the year Mr Harrison provided management
and consultancy services to the Company beyond the scope of his role as a director. The Company paid
AAP for the services of Mr Harrison on normal commercial terms and this amount is included in the
amount paid to Mr Harrison in Note 27.
Transactions with Key Management Personnel
Amounts recognised as expense
Accounting and bookkeeping fees
Amounts recognised in equity (cost of funds raised)
Capital raising & management fees
30. Contingent liabilities
The Group has no contingent liabilities.
31. Commitments
2020
US$
2019
US$
10,091
256,184
-
-
The Company is required to pay to certain minimum payments under contracts for services, the amounts of which
are set out in the table below.
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
2020
US$
62,500
1,097,500
775,000
1,935,000
2019
US$
-
-
-
-
Page 58 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
32. Share Based Payments
(a) Employee option Plan
Share options of the parent were granted to senior executives of the Group as part their remuneration package.
There options were granted under their employment contracts for no consideration.
Set out below are summaries of options granted to executives during the year:
2020
Average
exercise price
Per share Option
Number
of options
Average
exercise price
Per share Option
2019
Number
of options
As at 1 July
Granted during the year
Exercised during the year
Expired/forfeited
As at 30 June
Vested and exercisable at
30 June
0.73
0.22
-
0.67
0.22
1,440,000
4,250,000
-
(940,000)
4,750,000
1,250,000
1.22
8,560,000
-
-
1.35
0.81
-
-
(7,120,000)
1,440,000
860,034
In addition to the above the other non-employee related option movements were
• On 20 April 2019. 1,500,000 CCZ Options with an exercise price of A$1 expired;
• On 11 December 2018. 4,000,000 options were issued as part of the convertible note issue, the options
had an exercise price of A$0.01 per share and an expiry of 31 December 2020. These options were
exercised in the current financial year. Refer to note 18 for further details; and
• On 31 December 2019. 1,500,000 options with an exercise price of A$0.40 expired
Share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant Date
10 Jan 2017
1 Jan 2015
1 Jan 2015
18 Jan 2018
28 Oct 2019
28 Oct 2019
28 Oct 2019
28 Oct 2019
5 December 2019
Expiry
Term
(years)
31 Jan 2020
20 Oct 2019
20 Oct 2020
31 Jan 2021
28 Oct 2022
28 Oct 2022
28 Oct 2022
28 Oct 2022
5 Dec 2022
3
4
5
3
3
3
3
3
3
Exercise
Price
A$
0.657
0.490
0.490
0.920
0.001
2020
2019
Number
Number
-
-
740,000
100,000
100,000
100,000
400,000
500,000
500,000
0.200
1,000,000
0.260
1,000,000
0.320
1,000,000
0.200
750,000
-
-
-
-
Weighted average remaining contractual life of options outstanding at
year end (years)
4,750,000
1,440,000
2.1
1.0
Page 59 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
(b) Fair value of options granted
The assessed fair value of options granted during the year was an average of $0.219 per option. The fair value at
grant date is independently determined using using the Black & Scholes method of option pricing taking into account
the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying
shares, the expected dividend yield, the risk free rate for the term of the options.
The model inputs for options granted during the year ended 30 June 2020 included;
(a) options are granted for no consideration;
(b) exercise price of options granted as set out in the table above;
(c) expiry dates as set out in the table above;
(d) share price of $0.22 for shares granted on 28 October 2019, $0.12 for shares granted on 5 December 2019;
(e) expected volatility of 75%;
(f) expected dividend yield of nil; and
(g) risk-free interest rate of 0.6219%.
The expected volatility is based on the historic volatility adjusted for any expected changes to the future volatility
due to publicly available information.
(c) Expenses arising from share-based payment transactions
Share based payments expense (income)
Borrowing cost
Total
33. Post Balance Date Events
2020
US$
2019
US$
189,116
(254,766)
-
189,116
159,295
(95,471)
Share Issue
Subsequent to year end on 7 August 2020 a total of 9,600,000 shares were issued at A$0.05 per share
under the shortfall facility in the Entitlement Offer dated 1 April 2020 raising A$480,000 in cash.
The issue of some of those shares required shareholder approval. In a general meeting held 6 August
2020 the shareholders approved the issue of fully ordinary shares at A$0.05 per share under the shortfall
Entitlement Offer to Key Management Personnel as follows:
Altor Capital Management Pty Limited (related to Harley Dalton) - 3,000,000
Harley Dalton- 1,500,000
Benjamin Harrison – 1,500,000
Page 60 of 67
For personal use only
Change Financial Limited
Annual Report
For year ended 30 June 2020
DIRECTORS DECLARATION
In the opinion of the directors:
(a)
the financial statements and notes set out on pages 29 to 60 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 2020 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.
Benjamin Harrison
Chair
31 August 2020
Page 61 of 67
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 2020, 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 2020 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 (including Independence Standards) “the Code”
that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the Directors of the Company, would be in the same terms if given to the Directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Page 62
For personal use only Key audit matter
How our audit addressed the matter
Going Concern
Refer to Note 1(r) in the Annual Report
At the date of this report the Group remains in
the development and growth phase of
operations that have resulted in operating
losses and operating cash outflows for a
number of years.
The Directors have adopted the going concern
basis of preparation in preparing the Financial
Statements, having prepared detailed cash
flow forecasts for a period of at least 12
months from the date these Financial
Statements were approved.
The Director’s assessment of the Group’s
ability to continue as a going concern was
assessed as a key audit matter as it requires
significant judgement in determining key
assumptions supporting the expected future
cash flows, including but not limited to:
forecast revenue growth;
forecast development expenditure on the
Group’s payments and card issuing
platform;
forecast operating expenses; and
forecast future capital raising;
Implementation of AASB 16: Leases
Refer to Note 1(d) and 12 in the Annual Report
The 30 June 2020 financial year was the first
year of adoption of Australian Accounting
Standard AASB 16: Leases. The Group has
leases over premises, one of which involves a
sub-lease to a third party, on mirrored terms.
The Group elected to apply the modified
retrospective approach. Effective on the date
of transition, US$498,601 Lease Receivables
and US$472,071 Lease Liabilities were
recognised, with an opening accumulated loss
impact of US$26,530.
Given the financial significance to the Group of
its leasing arrangements, the complexity and
judgements involved in the application of
AASB 16, such as the determination of the
Incremental Borrowing Rate (IBR) and the
transition requirements of the standard, this
was assessed as a key audit matter.
Our procedures included, amongst others:
Understanding and evaluating relevant controls over the
Group’s assessment of going concern and compilation
of cash flow forecasts;
Checking to satisfy ourselves that the cash flow forecast
is approved by the Board and that it has been subject to
the appropriate review and approval processes and
controls;
Discussing with those charged with governance their
funding, business and cash flow strategy for the period
at least 12 months from date of signing the financial
report;
Obtaining supporting documentation in relation to future
capital raising options that the Directors are considering;
Understanding the Directors’ assumptions for forecast
cash outflows during the period under review;
Assessing the sensitivity of the cash flow forecast where
commercial revenues and capital raising activities are
delayed or do not occur within expected timeframes;
Understanding and evaluating the ability of the Group to
scale back future expenditure over the next 12 months,
if required; and
Assessing the appropriateness of the disclosure
included in the financial report.
Our procedures included, amongst others:
Understanding and evaluating relevant controls related
to the identification, recognition and measurement of
lease liabilities and right of use assets;
Checking the integrity of the management’s AASB 16
lease calculation model, including the accuracy of
formulas;
Agreeing inputs used in the AASB 16 lease calculation
model such as the lease term, fixed and variable rent
payments, renewal options and lease incentives back to
underlying executed lease agreements;
Assessing the reasonableness of management’s
judgements in relation to the accounting treatment of
lease renewal options under AASB 16;
Assessing the reasonableness of the Incremental
Borrowing Rate used to discount future lease payments
to present value;
Reviewing whether the Group’s new accounting policy
satisfied the requirements of AASB 16 including the
adoption of practical expedients applied by
management for the transitional accounting; and
Reviewing the adequacy of the disclosures in the
financial report to ensure compliance with Australian
Accounting Standards.
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 63
For personal use only Other Information
The Directors are responsible for the other information. The other information comprises the Chairman and
CEO’s Letter, Corporate Directory, Directors’ Report, Corporate Governance Statement 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 2020, 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 and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the Directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
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. 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.
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 64
For personal use only 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, actions taken to eliminate threats or safeguards
applied.
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 17 of the Directors’ Report for the year ended
30 June 2020. In our opinion, the Remuneration Report of Change Financial Limited, for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
PITCHER PARTNERS
DAN COLWELL
Partner
Brisbane, Queensland
31 August 2020
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 65
For personal use only Change Financial Limited
Annual Report
For year ended 30 June 2020
ASX ADDITIONAL DISCLOSURE
Shareholder information at 28 August 2020
34. 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
248,132,673
13,945,099
16,742,017
2,817,708
1,892,391
204,283
283,734,171
Unmarketable Parcels
1,166,904
35. Top 20 Shareholders
Rank
Name
% of Issued
Capital
Number of
Holders
% of Holders
87.45
4.91
5.90
0.99
0.67
0.07
100.00
0.41
318
176
635
348
645
321
2,443
763
13.02
7.20
25.99
14.24
26.40
13.14
100.00
31.23
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
18
18
18
19
20
BART PROPERTIES PTY LTD
CPX HOLDINGS L.LC.
MR ASHLYE SHILKIN
BOND STREET CUSTODIANS LIMITED
BOND STREET CUSTODIANS LIMITED
MR DAVID FREDERICK OAKLEY
CSWSG PTY LTD
MR COLIN MACLEOD + MRS LINDA MACLEOD
ADMIRANDUS PTY LTD
BJT903 PTY LTD
LEMEURICE PTY LTD
RIGGS AND RUMPS PASTORAL PTY LTD
NAREENEN PTY LTD
GERSEKOWSKI SUPER FUND PTY LTD
JMB PEARCE PTY LTD
MR MANFRED DIETER LAGERMAN
MR ALASTAIR PATERSON WILKIE & MRS SANDRA CHRISTINE WILKIE
MR CRAIG GRAEME CHAPMAN
BOND STREET CUSTODIANS LIMITED
ALTOR CAPITAL MANAGEMENT PTY LTD
ADMINIS CUSTODIAL NOMINEES LIMITED
BONNIP PTY LTD
MR DOUGAL MALCOLM HENDERSONMR MANFRED DIETER
LAGERMAN
Top 20 Total
Total Shares on Issue
Number of
Shares
15,382,582
8,333,333
7,445,797
6,670,000
5,950,000
5,593,890
4,800,000
4,797,830
4,395,658
4,370,080
4,283,291
3,810,823
3,672,529
3,200,000
3,187,408
3,183,002
3,115,990
3,000,000
3,000,000
3,000,000
3,000,000
2,926,780
% of Issued
Capital
5.42%
2.94%
2.62%
2.35%
2.10%
1.97%
1.69%
1.69%
1.55%
1.54%
1.51%
1.34%
1.29%
1.13%
1.12%
1.12%
1.10%
1.06%
1.06%
1.06%
1.06%
1.03%
2,495,418
109,614,411
283,734,171
0.88%
38.63
100.00%
Page 66 of 67
For personal use only Change Financial Limited
Annual Report
For year ended 30 June 2020
36. Unquoted Options
Option ex price and expiry
Options @ $0.49 expiry 20-Oct-20
Options @$0.92 expiry 31-Jan-21
Options @$0.001 expiry 28-Oct-22
Options @$0.20 expiry 28-Oct-22
Options @$0.26 expiry 28-Oct-22
Options @$0.32 expiry 28-Oct-22
Options @$0.20 expiry 5-Dec-22
Total
37. Substantial Shareholders
Number of
Number of
Options
Holders
100,000
400,000
500,000
1,000,000
1,000,000
1,000,000
750,000
4,750,000
1
4
1
1
1
1
1
10
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
BART PROPERTIES PTY LTD
CPX HOLDINGS L.L.C
the relevant interest is held
15,382,582
8,333,333
capital
5.42%
2.94%
Page 67 of 67
For personal use only