Communications Systems, Inc. Annual Report 2019

Plain-text annual report

JCurve Solutions Limited Annual Financial Report FOR THE YEAR ENDED 30 JUNE 2019 01 Corporate Information 22 Statement of Changes In Equity 02 Chairman’s Letter 23 Contents to the Notes to the Financial Statements 04 Directors’ Report Including Remuneration Report 24 Notes to the Financial Statements 18 Auditor’s Independence Declaration 49 Directors’ Declaration 19 Statement of Profit or Loss and Other Comprehensive Income 50 Independent Auditor’s Report 20 Statement of Financial Position 54 Shareholder Information 21 Statement of Cash Flows Corporate Information ABN 63 088 257 729 Directors Mr Bruce Hatchman Mr Mark Jobling Mr David Franks Company Secretary Mr David Franks Registered office Level 8, 9 Help Street Chatswood NSW 2067 Ph. (02) 9467 9200 Principal place of business Level 8, 9 Help Street Chatswood NSW 2067 Ph. (02) 9467 9200 Share Register Automic Registry Services Level 5, 126 Phillip St, Sydney NSW 2000 1300 288 664 or +61 2 9698 5414 Auditors BDO East Coast Partnership Level 11, 1 Margaret Street Sydney NSW 2000 Australia Securities Exchange Listings Australian Securities Exchange ASX Code: JCS Website www.jcurvesolutions.com 1 Chapter name hereChairman’s Letter I am pleased to report, that over the past year JCurve Solutions Limited has continued to strengthen its financial position and achieved solid financial results whilst diversifying operations with a view to delivering medium to long term growth in shareholder value. Over the past year we have increased our overall number Spectrum for four years, was appointed as the General of customers, diversified operations geographically into Manager of JCS’ Asian operations. Asia, further developed and then commercialised the Riyo platform, grown the consolidated top line revenue result and improved our financial stability through positive operating and overall cash flows. After building small team in Singapore to expand the operations of the acquired business, in April 2019 JCurve Solutions incorporated JCurve Solutions Philippines Inc (JSP) and has been building a delivery centre of excellence After the acquisition of Riyo and Spectrum in mid to late 2018, which will service our forecast significant ERP growth we reset our three core strategic priorities, which are to: and also assists to lower the cost base of our overall • Rapidly grow our Asia operations; • Grow our Oracle NetSuite ERP practice in Australia; and • Grow our Riyo business at a faster pace. 1. Rapidly grow our Asia operations We have assessed particularly strong overall growth opportunities within the Asian market for our portfolio of solutions which will complement anticipated growth from our Australian operations. The Company assessed that the quickest way to kick start our growth in Asia was through the acquisition of an existing NetSuite partner. In December 2018 the Company was successful in completing the purchase of the business and assets of the Spectrum Partner Group, a NetSuite Two-Star Solution Group operations. In addition to the direct employment of the resources from a third-party service outsourced arrangement, a number of employees have been, and will be, directly recruited into the JCurve Solutions Philippines team. In addition to expanding our Oracle NetSuite solution offering, we are exploring other M&A opportunities in Asia related to the acquisition of Product IP. These opportunities are in line with our overall diversification strategy and the relocation of the JCS CEO, Stephen Canning, to Singapore from the start of August 2019, will provide further impetus to this strategic initiative. 2. Grow our Oracle NetSuite ERP practice in Australia Provider based in Singapore. The purchase of Spectrum’s During the year ended 30 June 2019, the NetSuite ERP business and assets provides JCurve Solutions with a launch pad for further expansion into the growing ERP Asian market. In addition to a small number of customer contracts and committed license and service revenue, Arthur Fernandez who was the founder and Director of division grew by 7% after recognising $9.8 million of revenue, increasing from the $9.2 million recognised in FY2018. The Company has achieved strong growth results from its existing ERP customers by minimising churn and maximising revenue through renewals and upsells. Chairman’s Letter While we didn’t make the level of new business sales to prospective customer which we were forecasting after a to trial agreements a number of which are expected to convert into paying customers in early FY2020. The JCS team number of sales opportunities which were expected to continues to build a solid pipeline of opportunities to build close in FY2019 were won in July 2019, we are forecasting a strong base of customers from which we are forecasting a solid increase in new business sales in FY2020. The significant recurring revenue. We have assessed a number Company continues to see a shift toward the more of overseas opportunities for the Riyo software which we will complex NetSuite solutions resulting in longer sales cycles. be exploring over the next 12 months. The $9.8 million in revenue generated in FY2019 helped the NetSuite ERP Division to generate a statutory profit Financial Commentary before tax of $2.2 million for the year. As at 30 June 2019 Most importantly as we continue to assess several carefully we had over 600 ERP customers across our portfolio selected product IP acquisition opportunities, JCurve of solutions, customers which are spread across both Solutions continues to strengthen its strong balance sheet Australia and New Zealand. and solid operating fundamentals. We continue to build on our status as the #1 Oracle The statutory profit before tax generated by JCurve NetSuite Solution Partner globally by customer count Solutions for the year ending 30 June 2019 was $0.6 million and remained a 5-star NetSuite Solution Partner thereby (2018: $0.9 million). The normalised EBITDA was $0.9 guaranteeing JCS receives the highest level of commissions million down from $1.0 million in FY2018. on NetSuite edition licence sales. 3. Grow our Riyo business at a faster pace In FY2019 the Group was $0.7 million operating cash flow positive while remaining debt free and holding $4.8 million in cash reserves as at 30 June 2019. This financial After purchasing the Riyo Platform in May 2018, the stability ensures we can evaluate multiple acquisition Company has focused on enhancing the solution through targets while continuing to organically grow our existing research and development activities, defining the go to business operations. market plan and building a team to launch and support the solution. The further development of the Riyo platform (which has been expensed in line with the Company’s current accounting policy for R&D), has now broadened the Riyo solution to a much larger addressable customer base from which was launched to our existing customers in 2HY2019. The Riyo business unit provided a small revenue contribution in FY2019 to the Group result, a contribution which is forecast to exponentially increase over the next 2-3 years. The Company signed its first Riyo customer in April 2019 and in June had signed a number of customers Over the past year we have delivered short term shareholder value through an appreciation of our share price which rose from 3.1 cents to 3.4 cents as at 30 June 2019, a 10% increase during FY2019. Once again, I would like to thank our employees and shareholders for their continuing support over the past year. Bruce Hatchman Chairman 3 Directors’ Report Your directors present the annual financial report of the consolidated entity (referred to hereafter as JCurve Solutions or the Group) consisting of JCurve Solutions Limited and the entities it controlled at the end of, or during, the year ended 30 June 2019. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report is as follows: Directors and Company Secretary The names of directors who held office during or since the end of the year and until the date of this report are as follows. Directors were in office for the entire year unless otherwise stated. Bruce Hatchman FCA MAICD JP (Non-Executive Chairman) Experience and expertise Bruce Hatchman was appointed as the Chairman of JCurve Solutions on 27 November 2014. Bruce Hatchman is an experienced and successful finance professional. As the former Chief Executive of Crowe Horwath, Bruce Hatchman has 40 years’ experience in providing audit and assurance services to listed companies and consulting services to large private enterprises. He is a qualified Chartered Accountant and a member of the Australian Institute of Company Directors. Directorships of other listed companies Bruce Hatchman is currently a Non-Executive Director of Consolidated Operations Group Limited. Former directorships of other listed companies None. Special responsibilities Member of the Audit & Risk Management Committee and Chairman of the Remuneration Committee. David Franks B.Ec, CA, F Fin, FGIA, JP. (Non-Executive Director & Company Secretary) Mark Jobling B. Eco, B Laws (Hons) (Non-Executive Director) Experience and expertise Experience and expertise David Franks joined JCurve Solutions on 15 September 2014 as Company Secretary and a Non- Executive Director. He is a Chartered Accountant, Fellow of the Financial Services Institute of Australia, Fellow of the Governance Institute of Australia, Justice of the Peace, Registered Tax Agent and holds a Bachelor of Economics (Finance and Accounting) from Macquarie University. With over 20 years in finance and accounting, initially qualifying with Price Waterhouse in their Business Services and Corporate Finance Divisions, David has been CFO, Company Secretary and/or Director for numerous ASX listed and unlisted public and private companies, in a range of industries covering energy retailing, transport, financial services, mineral exploration, technology, automotive, software development and healthcare. David Franks is currently the Company Secretary for the following public entities: AUB Group Limited, Adcorp Australia Limited, Elk Petroleum Limited, Noxapharm Limited, Nyrada Inc, Consolidated Operations Group Limited, White Energy Company Limited, White Energy Technology Limited and ZIP Co Limited. David is also a Director and Principal of Automic Group Pty Ltd. Directorships of other listed companies None. Former directorships of other listed companies None. Special responsibilities Chairman of the Audit & Risk Management Committee and Member of the Remuneration Committee. Mark Jobling joined the company on 8 April 2015 as a Non-Executive Director. Mark Jobling is a substantial shareholder of the Company and holds a Bachelor of Economics and Bachelor of Laws (Hons) from Monash University. Mark Jobling manages investments in a diverse range of industries including power technology and angel investing in Asian start-up companies and is currently based in Hong Kong. He began his career as a commercial lawyer with Mallesons Stephen Jaques in Australia and went on to hold senior executive roles in multi-billion dollar companies, including Managing Director of South East Asia and Taiwan for CLP Holdings Limited, and CEO of OneEnergy Limited, a CLP/Mitsubishi Corporation joint venture in Asia. Mark Jobling is the Chairman of Tomorrow Entertainment Holdings Pte Ltd. Directorships of other listed companies None. Former directorships of other listed companies None. Special responsibilities Member of the Audit & Risk Management Committee and the Remuneration Committee. 5 Directors’ Report Including Remuneration ReportInterests in the shares and options of the Group and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of JCurve Solutions were: M Jobling B Hatchman D Franks Ordinary Shares Options over Ordinary Shares 51,204,301 3,500,000 4,206,174 58,910,475 - - - - During the year ended 30 June 2019, 1,500,000 performance rights granted to employees under the Equity Incentive Plan expired. 10,000,000 performance rights granted to employees under the Equity Incentive Plan remained as at 30 June 2019. Unissued ordinary shares under option totalling 8,928,571 expired during the financial year. Dividends and shareholder returns No dividends were declared or paid during the financial year ended 30 June 2019. Principal activities The principal activities of JCurve Solutions during the year ended 30 June 2019 were: • the sale of Enterprise Resource Planning (ERP) • the purchase and integration of Spectrum solutions, which included the exclusively licensed and subsequent sale of Enterprise Resource JCurveERP and associated implementation and Planning (ERP) solutions in South East Asia; consulting services as well as NetSuite mid market and enterprise editions in addition to accompanying associated implementation and consulting services; • the sale of proprietary Telecommunications Expense Management Solutions; and • the development and sale of the Riyo platform solution. Operating financial review Financial Results for the Year The Group recognised a profit after tax of $0.3 million for year ended 30 June 2019 (2018 $0.8 million). The ‘Normalised EBITDA’ for the full year ended 30 June 2019 was $0.9 million (2018 $1.0 million), which has been determined as follows: Total comprehensive income for the year Add Back: Non-cash expenses: Depreciation / amortisation Total non-cash expenses Income tax expense Interest income/finance costs 2019 338,114 254,490 254,490 266,273 (6,288) Consolidated ($) 2018 847,267 102,328 102,328 48,105 (17,769) Normalised EBITDA 852,589 979,931 Normalised EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (AAS) and represents the profit under AAS adjusted for specific significant items. The table above summarises key items between the statutory loss after tax and normalised EBITDA. The directors use normalised EBITDA to assess the performance of the Group. Normalised EBITDA has not been subject to any specific The Group has the following risk management controls review procedures by our auditor but has been extracted embedded in the Group’s management and reporting from the accompanying audited financial report. system: The Group’s total revenue for the year ended 30 June 2019 • A comprehensive annual insurance program was $12.6 million (2018: $11.9 million), which includes facilitated by an external broker; revenue from the sale of JCurveERP/NetSuiteERP licenses and accompanying support and implementation revenue in Australia of $9.8 million (2018: $9.2 million), revenue • A monthly risk register which is reviewed by the Executive Management Team and reported to the Board; from the sale of NetSuiteERP licenses and accompanying • Annual Strategic and operational business plans; and support and implementation revenue in Asia following the acquisition of Spectrum $0.4 million (2018: nil), revenue from the sale of Telecommunications Expense Management Solutions $2.3 million (2018: $2.7 million) • Annual budgeting and monthly reporting systems which enable the monitoring of performance against expected targets and the evaluation of trends. and revenue from the sale of MYOB Advanced licenses and The Chief Executive Officer and Chief Financial Officer accompanying support and implementation revenue $0.1 through monthly Board papers, report to the Board as to million (2018: $0.05 million). Total expenses for the full year ended 30 June 2019 were whether all identified material risks are being managed effectively across the Group. $12.2 million (2018: $11.3 million). The largest expense During the year, ongoing monitoring, mitigation and during the year ended 30 June 2019 was amounts paid to employees with $6.1 million being paid or accrued (2018: $6 million). Financial Position as at 30 June 2019 The Group had cash reserves as at 30 June 2019 totaling $4.8 million which increased by $0.3 million from $4.5 million as at 30 June 2018. The $0.3 million of cash flows reporting on material risks was conducted by Executive Management Team, the Audit and Risk Committee and the Board and took place in accordance with the process disclosed above. A copy of the Risk Management Policy can be found on the Group’s website: https://www.jcurvesolutions.com/ wp-content/uploads/2016/12/JCurve-Solutions-Risk- Management-Internal-Compliance-and-Control-Policy. generated for the year was after $0.3 million was paid to acquire Spectrum in December 2018 and $0.1 million pdf paid to acquire an E-Commerce connector which has been capitalised in intangible assets. Having significant cash reserves while remaining debt free ensures that JCurve Solutions is well positioned to explore acquisition opportunities, the exploration of which remains ongoing. The increase in assets from $11.5 million as at 30 June 2018 to $12.3 million as at 30 June 2019, was achieved Significant changes in the state of affairs Significant changes in the state of affairs of JCurve Solutions during the financial year were as follows: • The purchase of Spectrum to grow the Group’s NetSuite operations in Asia. through improved working capital management which Events since the end of the financial year assisted the Group to be $0.3 million cash flow positive during the year as well as the inclusion of capitalised costs following the acquisition of the Spectrum intangible assets. The liabilities balance increased from $6.6 million as at 30 June 2018 to $7.0 million as at 30 June 2019. Risk management The Group recognises the need to pro-actively manage the risks and opportunities associated with both day-to- day operations of the Group and its longer term strategic objectives and has developed a risk management policy. The Board is responsible for the establishment, oversight and approval of the Group’s risk management strategy, internal compliance and controls. The Board is also responsible for defining the “risk appetite” of the Group so that the strategic direction of the Group can be aligned with its risk management policy. No significant matters or circumstances have arisen since 30 June 2019 that have significantly affected, or may significantly affect: • the Group’s operations in future financial years, or • the results of those operations in future financial years, or • the Group’s state of affairs in future financial years. Likely developments and expected results of operations Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the consolidated entity. Therefore, this information has not been presented in this report. 7 Directors’ Report Including Remuneration ReportEnvironmental legislation The Group is not subject to any significant environmental legislation. The Group does not meet either the facility or the corporate group threshold for registration under the National Greenhouse and Energy Reporting Act 2007. The Group continues to improve work practices in its pursuit of reducing paper usage as much as possible and work electronically. Indemnification and insurance of Directors and Officers The Group has agreed to indemnify all the directors and officers for any breach of laws and regulations arising from their role as a director and officer. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. JCurve Solutions has not indemnified or agreed to indemnify an auditor of the Group or any related body corporate against liability incurred as an auditor. Directors’ Meetings The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows: Directors’ Meetings (Eligible to attend) Directors’ Meetings (Attended) Audit & Risk Remuneration Management Committee Attended/ (Eligible) Committee Attended / (Eligible) 4 2 Number of meetings held: Number of meetings attended: B Hatchman D Franks M Jobling 7 7 7 7 7 7 7 4 (4) 4 (4) 4 (4) 2 (2) 2 (2) 2 (2) Retirement, election and continuation in office of Directors It is the Board’s policy to consider the appointment and retirement of Non-Executive Directors on a case-by-case basis. In doing so, the Board must take into account the requirements of the Australian Securities Exchange Listing Rules and the Corporations Act 2001. Clause 13.4 of the JCurve Solutions Constitution allows the Directors to at any time appoint a person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, but so that the total number of Directors does not at any time exceed the maximum number specified by the JCurve Solutions Constitution. Any Director so appointed holds office only until the next following annual general meeting and is then eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation (if any) at that meeting. There have been no such appointments during the year. Clause 13.2 of the JCurve Solutions Constitution requires that no director who is not the Chief Executive Officer may hold office without re-election beyond the third AGM following the meeting at which the director was last elected or re-elected. The current board was re-elected by shareholders at the following prior AGMs: • 2018: Mark Jobling; • 2017: Bruce Hatchman; • 2016: David Franks Therefore, under Clause 13.4 of the Constitution, David Franks is due for election at the Next Annual General Meeting under the noted time period. Directors’ Report Including Remuneration Report Remuneration Report (Audited) The directors are pleased to present JCurve Solution Limited’s (“the Company’s”) remuneration report for the year ended 30 June 2019. The remuneration report is prepared in accordance with section 300A of the Corporations Act 2001 and has been audited as required by section 308(3C) of the Corporations Act 2001. The remuneration report outlines the key aspects of JCurve Solutions remuneration policy, framework and remuneration awarded for JCurve Solutions directors and executives. The Executives for the purpose of this report are Key Management Personnel who are not Non- Executive Directors. • Katrina Doring Chief Operating Officer • Peter Choo Product Strategy Director • Arthur Fernandez General Manager – JCurve Solutions Asia (from 18 December 2018) • Bill Beedie Sales Director (until 4 February 2019) Key Management Personnel are defined as those persons having the authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly (and include the directors of the Company). The Executive Management team are responsible for preparing the Group’s 3 year Strategic The Remuneration Report is structured as follows: Plan and evaluating the Company’s progress against that 1. Directors and other Key Management Personnel Strategic Plan. 2. Remuneration Governance 3. Remuneration Structure 2. Remuneration governance Remuneration philosophy 4. Remuneration of key management personnel The performance of the Company depends upon the 5. Relationship between remuneration and JCurve Solutions performance 6. Voting and comments made at the Company’s 2018 Annual General Meeting 7. Details of share-based compensation 8. Shareholdings of Key Management Personnel 9. Transactions with Directors and Key Management Personnel 1. Directors and other Key Management Personnel Non-Executive Directors • Bruce Hatchman Non-Executive Chairman – Independent • David Franks Non-Executive Director – Independent • Mark Jobling Non-Executive Director – Not Independent Executive Management Team (Executives) • Stephen Canning Chief Executive Officer • James Aulsebrook Chief Financial Officer • Kate Massey Chief Marketing Officer with Sales Director responsibilities from 5 February 2019 quality of the directors and executives employed by JCurve Solutions. The philosophy of the Company in determining remuneration levels is to: • set competitive remuneration packages to attract and retain high calibre employees; • link executive rewards to shareholder value creation; and • establish appropriate performance hurdles for variable executive remuneration. Nomination and Remuneration committee The Nomination and Remuneration Committee is responsible for determining and reviewing compensation arrangements for the directors and the executive management team. The composition of the Nomination and Remuneration Committee during the year ended 30 June 2019, comprised Bruce Hatchman (Chairman), Mark Jobling and David Franks being three members, all non-executive directors, with an independent Chairman and the majority of whom are independent. On this basis, the Nomination and Remuneration Committee is in compliance with the ASX Corporate Governance Principles and Recommendations. Members of the Nomination and Remuneration Committee are appointed, removed and/or replaced by the Board. The Nomination and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration which the directors and executives receive on a periodic basis by reference to relevant employment 9 market conditions with an overall objective of ensuring (i) Base salary and benefits maximum stakeholder benefit from the retention of a high- quality Board and executive team. The Company’s Corporate Governance Statement which can be found on the Company’s website: http://www. jcurvesolutions.com/corporate-governance, provides further information on the role of the Nomination and Remuneration Committee and its composition and structure. A copy of the Nomination and Remuneration Committee’s charter is included on the Company’s website. 3. Remuneration Structure Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash, superannuation and fringe benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group. Each executive’s remuneration is reviewed annually by the Nomination and Remuneration Committee. The process consists of a review of relevant comparative remuneration in the market, internally and, where appropriate, external advice on policies and practices. The Nomination and Remuneration committee has access to external, independent advice if required. In accordance with best practice Corporate Governance, (ii) Short-term incentive the structure of non-executive director and executive remuneration is separate and distinct. Non-executive director remuneration The Board seeks to set aggregate remuneration at a level that provides JCurve Solutions with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders. JCurve Solutions’ constitution adopted at the AGM on 9 November 2010 specifies that the aggregate remuneration of non-executive directors shall be a maximum of $400,000 per year, and can be varied by ordinary resolution of the shareholders in a General Meeting. There have been no changes to the constitution of JCurve Solutions since this date. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. Non-executive directors are paid their director fees in cash, including statutory superannuation contributions. They do not receive any bonus payments nor are they entitled to any payment upon retirement or resignation. The Short-term incentive (STI) scheme is designed to reward the Executive Management team for their contribution to the success of JCurve Solutions in achieving its financial goals, as well as the individual contribution of each employee to business goals, as determined by the Board. For all members of the Executive Management Team except the Sales Director, the FY2019 KPI targets for the Short-term incentive plan were determined by the Board based on a number of Key Result Areas (KRA’s) which the Board believes will affect the performance of JCurve Solutions during the financial year. The KRA’s included a revenue metric, a profitability metric, various sales metrics, leadership metrics while depending on the Executive Management team members position a business diversification metric, marketing or project delivery metric. The metrics are determined with reference to JCurve Solutions strategic goals and objectives. The revenue, profitability, sales, marketing and project delivery metrics are measured based on the audited statutory financial results. The leadership metric is measured from independently collated feedback scores from employees and the Directors. The diversification metric is determined with reference to the number of The remuneration of non-executive directors for the year profitable acquisitions made by JCurve Solutions during ended 30 June 2019 and comparative year is detailed in the year. This short-term incentive scheme takes the form Section 4, Table 1 of the Remuneration report. of a cash bonus payable once the results for the year Executive remuneration The Company’s Executive remuneration structure consists of three components: Fixed components Variable ‘at-risk’ components have been determined. The Short-term incentive plan for the Sales Director is in the form of a commission scheme whereby actual ERP new business sales results are compared against set targets on a monthly basis. The targets are set with reference to the Company’s annual ERP new business (i) Base salary and (ii) Short-term incentives in the budget. The Short-term incentive scheme for the Sales benefits, including superannuation. form of cash bonuses; and Director takes the form of cash which is paid as part of the pay-run the month following the month of the ERP (iii) Long-term incentives, through new business sale. participation in the JCurve Solutions Equity Incentive Plan (EIP). The potential value of the short-term incentive schemes as a proportion of each Executive’s base salary was as follows: Executives S Canning J Aulsebrook K Massey (***) K Doring P Choo A Fernandez B Beedie (**) Directors’ Report Including Remuneration Report FY2019 STI Potential (*) FY2018 STI Potential (*) 32% 28% 29% 29% 29% 26% 28% 33% 29% 30% 30% 24% N/A 28% (*) STI bonus potential as a proportion of the Executive’s base contracted salary excluding superannuation and other benefits. (**) On target earnings. Commission scheme was uncapped. (***) Sales Director responsibilities from 5 February 2019 which included the commission scheme previously provided to the Sales Director on top of the STI as the Chief Marketing Officer. Commission scheme was uncapped. (iii) Long-term incentive The long-term equity incentive plan implemented in FY2017 has been designed to align a portion of Executive Remuneration with long term shareholder value. Equity Incentive Plan (EIP) The JCurve Solutions Equity Incentive Plan (EIP) was approved by shareholders at the Annual General Meeting held on 22 November 2016. On 27 June 2017 performance rights totalling 10,000,000 were issued employees under the EIP. On 9 October 2017 performance rights totalling 1,500,000 were issued to an employee under the EIP. The performance rights under both tranches are subject to a performance condition and a service condition and vest on 31 August 2019. 11,500,000 of the performance rights issued were to Executive team members as follows: Executives S Canning J Aulsebrook K Massey K Doring P Choo B Beedie (*) (*) Issued 9 October 2017 and cancelled 4 February 2019 Performance Rights Issued 4,500,000 1,500,000 1,500,000 1,500,000 1,000,000 1,500,000 11 4. Remuneration of key management personnel Table 1: Key Management Personnel remuneration for the year ended 30 June 2019: Directors Short-term employee benefits Post- Equity Total employment Director’s Bonuses / Other short- Super- Shares Total Performance Fees Commission term benefits annuation (1) $ $ Related % $ Directors $ B Hatchman 2019 86,646 Chairman (non-executive) 2018 87,646 D Franks 2019 60,000 Director (non-executive) 2018 60,000 M Jobling 2019 60,000 Director (non-executive) 2018 60,000 Total Directors Fees 2019 206,646 Total Directors Fees 2018 207,646 (1) Expense recognised under the Employee Share Plan. $ - - - - - - - - $ - - - - - - - - 11,000 - 97,646 10,000 1,791 99,437 5,700 - 65,700 5,700 1,791 67,491 - - - 60,000 - 60,000 16,700 - 223,346 15,700 3,582 226,928 - 2% - 3% - - 0% 2% Table 2: Key Management Personnel remuneration for the year ended 30 June 2019: Executives Short-term employee benefits Long-term Post- Equity Total employment Executives Salary $ Bonuses / Other Long Super- Shares / Performance Commission short-term service annuation Performance Related (10) benefits (8) leave (9) or CPF Rights % $ $ $ S Canning (1) 2019 309,000 35,000 17,985 25,533 Chief Executive Officer 2018 300,000 35,000 25,677 J Aulsebrook (2) 2019 181,000 17,500 (5,005) Chief Financial Officer 2018 175,000 25,000 5,805 1,012 1,248 298 K Massey (3) 2019 171,000 20,104 12,882 9,039 Chief Marketing Officer 2018 166,000 15,000 13,586 14,674 K Doring (4) 2019 171,000 10,000 15,572 Chief Operating Officer 2018 166,000 15,000 10,909 831 156 P Choo (5) 2019 170,000 10,000 12,159 1,402 Product Strategy Director 2018 109,494 2,131 A Fernandez (6) 2019 100,754 2018 - GM JCS Asia B Beedie (7) 2019 138,525 12,867 (3,358) Sales Director 2018 109,128 16,186 11,262 5,480 2,703 - - - 323 - - - - $ 20,531 20,531 18,858 19,000 18,155 17,195 17,195 17,195 17,100 10,551 16,237 - 10,366 11,905 $ 11,363 419,412 11% 12,101 394,321 12% 3,788 217,389 10% 3,788 228,891 13% 3,788 234,968 10% 4,213 230,668 3,788 218,386 3,788 213,048 2,525 213,186 2,525 130,504 - - 119,694 - 8% 6% 9% 6% 4% - - (9,944) 148,456 2% 11,828 160,309 17% Total Executive Rem. 2019 1,241,279 105,471 52,938 38,053 118,442 15,308 1,571,491 8% Total Executive Rem. 2018 1,025,622 108,317 72,719 16,463 96,377 38,243 1,357,741 10% 1. Bonus of $38,750 based on performance related KRA’s under the Short Term Incentive Scheme for FY2019 and will be paid on 30 Short Term Incentive Scheme for FY2019 and will be paid on 30 August 2019. This bonus has not been included in table 2. August 2019. This bonus has not been included in table 2. 3. Bonus of $10,000 based on performance related KRA’s under 2. Bonus of $19,375 based on performance related KRA’s under the the Short Term Incentive Scheme for FY2019 and will be paid on Directors’ Report Including Remuneration Report 30 August 2019. This bonus has not been included in table 2. Incentive Scheme for FY2019 and will be paid on 30 August 2019. Additional Sales Director responsibilities from 5 February 2019. This bonus has not been included in table 2. 4. Bonus of $10,000 based on performance related KRA’s under the 7. became a Key Management Personal (KMP) from 26 October 2017. Short Term Incentive Scheme for FY2019 and will be paid on 30 Information in table 2 for the period whilst a KMP. It excludes August 2019. This bonus has not been included in table 2. salaries, wages and consulting fees earnt up until the date B Beedie 5. became a Key Management Personal (KMP) from 26 October 2017. became a KMP. Resigned 4 February 2019. Information in table 2 for the period whilst a KMP, it excludes 8. other short-term benefits include car parking expenses for S salaries and commissions up until the time P Choo became a KMP. Canning, K Massey, K Doring, P Choo and B Beedie as well as Bonus of $19,375 based on performance related KRA’s under the annual leave accrued for each Executive Team Member as per Short Term Incentive Scheme for FY2019 and will be paid on 30 Corporations Regulation 2M.3.03(1) Item 6. August 2019. This bonus has not been included in table 2. 9. other long-term benefits as per Corporations Regulation 2M.3.03(1) 6. became a Key Management Personal (KMP) from 18 December Item 8. 2018. Information in table 2 for the period whilst a KMP. Bonus of A$2,799 based on performance related KRA’s under the Short Term 10. The bonuses or commissions included in the above table are those which have been paid during the financial year. Table 3: Service Agreements Remuneration and other terms of employment for the Executive Management Team are formalised in service agreements, in the form of a contract of employment. Arrangements relating to remuneration of the Company’s Executive Management Team currently in place are set out below: Executive Title Term of agreement Current base salary excluding Contractual termination superannuation (**) benefits (***) S Canning Chief Executive Officer Commenced 1 August 2019 S$311,000 6 months base salary on a rolling contract J Aulsebrook Chief Financial Officer Commenced 18 April 2016 $186,000 3 months base salary on a rolling contract K Massey Chief Marketing Officer Commenced 1 September $175,000 3 months base salary 2015 on a rolling contract K Doring Chief Operating Officer Commenced 5 July 2016 $175,000 3 months and 1 week on a rolling contract base salary P Choo Product Strategy Director Commenced 26 October $175,000 3 months base salary 2017 on a rolling contract A Fernandez (*) General Manager JCS Asia Commenced 18 December S$185,000 3 months base salary 2018 on a rolling contract (*) Information outlined as at the date after the completion date of the Spectrum acquisition. Became a member of the Key Management Personnel from 18 December 2018. (**) Current base salaries excluding superannuation are quoted for the year commencing 1 July 2019. They are reviewed annually by the Remuneration Committee. The salaries recorded in Table 2 are for the years ending 30 June 2019 and 30 June 2018. (***) As at the date the Remuneration Report is approved. The service agreement contracts outlined above may be terminated in the following circumstances: • Voluntary termination by the Company: the contractual termination benefit outlined in the table above as well as any statutory entitlements accrued will be paid; or • Termination by the Company for cause without notice: no contractual termination benefits are payable. Only statutory entitlements accrued will be paid. 13 5. Relationship between remuneration and JCurve Solutions performance Performance in respect of the current year and the previous two years is detailed in the table below: Total profit/(loss) for the year Normalised EBITDA Share price at year end ($) Increase/(decrease) in share price Dividends paid 2019 $ 338,114 852,589 0.034 10% - 2018 $ 847,267 979,931 0.031 282% - 2017 $ 454,286 801,920 0.011 83% - 2016 $ (2,597,423) 131,517 0.006 (60%) - The remuneration of JCurve Solutions Executives outlined in Table 2 has consisted primarily of salaries and superannuation. Performance related remuneration was 8% of the Key Management Personnel’s remuneration package reflecting the recent performance levels of the Company outlined in the above table. 6. Voting and comments made at the Company’s 2018 Annual General Meeting The JCurve Solutions Remuneration Report resolution was carried by a show of hands, with the results of both the show of hands and proxy position in excess of 75% in favour of the resolution. Of valid proxies received, 100% of proxy votes lodged (lodged as for/against/open excluding all other votes) voted “yes” on the Remuneration Report for the 2018 financial year. Comments raised by shareholders during the course of the Annual General Meeting were responded to by the Directors during the meeting. 7. Details of share-based compensation Table 1: Performance rights issued to members of the Executive Management Team under the JCurve Solutions Equity Incentive Plan on 27 June 2017 Executives S Canning J Aulsebrook K Massey K Doring P Choo Performance Rights Issued 4,500,000 1,500,000 1,500,000 1,500,000 1,000,000 Table 3: Shares issued to Directors under the employee share plan on 7 December 2015 (effecting comparative Remuneration in Table 1) Directors B Hatchman D Franks Shares Issued 1,000,000 1,000,000 These shares were bought back by the Company on the 7th of December 2017 as the shares were out of the money against their attaching non-recourse loans at a share price of 5 cents per share with the Directors electing not to repay their non-recourse loans by the due date. Table 2: Performance rights issued to members of the Executive Management Team under the JCurve Solutions Equity Incentive Plan on 9 October 2017 Executives B Beedie (*) (*) Cancelled 4 February 2019 as the service condition accompanying the performance rights was not met. Performance Rights Issued 1,500,000 Table 4: Shares issued to members of the Executive Management Team under the employee share plan on 11 September 2015 effecting comparative Remuneration in Table 1) Executives (*) S Canning Shares Issued 1,300,000 (*) K Massey was issued 750,000 shares as part of this allotment however was not a Key Management Personal as defined in the Remuneration Report at the time of the shares being issued. These shares were bought back by the Company on the 11th of September 2017 as the shares were out of the money against their attaching non-recourse loans at a share price of 5 cents per share with the Employees electing not to repay their non-recourse loans by the due date. Table 5: Performance rights issued which formed part of remuneration during the year ended 30 June 2019 Value per Value Value of Total value of Value of % performance of total performance performance performance remuneration right granted performance rights lapsed rights granted, rights included consisting of $ rights granted $ exercised and in remuneration shares for $ lapsed for the year the year Executives S Canning J Aulsebrook K Massey K Doring P Choo B Beedie 0.0055 0.0055 0.0055 0.0055 0.0055 24,750 8,250 8,250 8,250 8,250 0.02062 26,005 $ $ 24,750 11,363 8,250 8,250 8,250 5,500 3,788 3,788 3,788 2,525 26,005 (9,944) - - - - - - 3% 2% 2% 2% 1% -7% For further details on the Employee Share Plan, please refer to Note 24. Table 6: Shares issued under the employee share plan which formed part of remuneration during the year ended 30 June 2018 Value per Value Value of Value of Total value Value of % share of total shares shares of shares shares remuneration granted shares exercised lapsed cancelled/ included in consisting of $ granted $ $ bought remuneration shares for Directors B Hatchman 0.00568 D Franks 0.00568 $ 8,183 8,183 Executives S Canning 0.00568 11,367 K Massey (*) 0.00568 4,263 (*) Granted while not a Key Management Personnel member. back for the year the year $ $ - - - - - - - - 8,183 8,183 11,367 4,263 1,791 1,791 738 426 2% 3% 0% 0% 15 Directors’ Report Including Remuneration Report8. Shareholdings of Key Management Personnel Ordinary shares held in JCurve Solutions Limited (number) 30 June 2019 Balance Granted as Bought back under Net Change Balance 01 Jul 18 remuneration employee share plan Other 30 Jun 19 Directors B Hatchman D Franks M Jobling Executives S Canning J Aulsebrook K Massey K Doring P Choo A Fernandez (*) B Beedie Total 3,500,000 4,206,174 51,204,301 3,233,418 - 665,000 1,975,534 455,000 - - 65,239,427 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,500,000 4,206,174 51,204,301 3,233,418 - 665,000 1,975,534 455,000 600,000 600,000 - - 600,000 65,839,427 (*) A Fernadez became an Executive Team member on 18 December 2018. 96,489 shares held before A Fernadez become an Executive Team member. A further 503,511 purchased after A Fernadez became an Executive Team member. 30 June 2018 Balance Granted as Bought back under Net Change Balance 01 Jul 17 remuneration employee share plan Other 30 Jun 18 Directors B Hatchman D Franks M Jobling Executives S Canning J Aulsebrook K Massey K Doring P Choo (*) B Beedie Total 4,500,000 5,206,174 51,204,301 4,533,418 - 1,415,000 1,975,534 455,000 - 69,289,427 - - - - - - - - - - - - - - - - - - - - (1,000,000) 3,500,000 (1,000,000) 4,206,174 - 51,204,301 (1,300,000) 3,233,418 - - (750,000) 665,000 - - - 1,975,534 455,000 - (4,050,000) 65,239,427 (*) Shares were held before P Choo became an Executive Team member on 26 October 2017. All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the company would have adopted if dealing at arm’s length. All equity transactions with key management personnel other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the company would have adopted if dealing at arm’s length. 9. Transactions with Directors and Key Management Personnel The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year. Purchases from Related Parties Automic Company secretarial services (1) Directors Fees (included in Table 1 and including Superannuation) Share registry fees 2019 $ 48,536 65,700 2,635 2018 $ 50,121 65,700 - 116,871 115,821 (1) David Franks was appointed as Company Secretary of JCurve Solutions Limited on 15 September 2014 and was also appointed as a Non- Executive Director on that date. David was the Proprietor of Franks and Associates, a firm that has provided guidance on corporate compliance requirements pursuant to the Company’s constitution, ASX Listing Rules and Corporations Act, assistance in drafting notices of meeting and announcements and Board documentation. Franks and Associates became a member of Automic Group in June 2018. In September 2018, the Automic Group took over the share registry work for the Group. Company secretarial service fees for the year ended 30 June 2019 amounted to $48,536 net of GST excluding out of pocket expenses (2018: $50,121) and were provided on commercial terms. Automic Group invoices JCurve Solutions for David Franks’ Directors fees and superannuation, which has been included in Section 4, Table 1 of the Remuneration Report. The share registry fees were provided on commercial terms. Sales to Related Parties Tomorrow Entertainment Customer purchases 2019 $ 41,335 41,335 2018 $ - - (1) Tomorrow Entertainment Holdings Pte Ltd (Tomorrow Entertainment), a Company which Mark Jobling is the founder and a Director, became a customer of the Group. The Group invoiced Tomorrow Entertainment $41,335 in the year ended 30 June 2019 (2018: NIL). The services sold to Tomorrow Entertainment were at commercial rates and on commercial terms. Sales to and purchases from related parties are made in Non-Audit Services arm’s length transactions both at normal market prices and on normal commercial terms. Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash. End of Remuneration Report. Proceedings on behalf of the company No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Auditor Independence and Non-Audit Services Section 307C of the Corporations Act 2001 requires our auditors, BDO East Coast Partnership, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 18 and forms part of this Directors’ Report for the year ended 30 June 2019. There were no non-audit related activities carried out by the Company’s auditors during the year ended 30 June 2019. Corporate Governance Statement In fulfilling its obligations and responsibilities to its various stakeholders, the Board is a strong advocate of corporate governance. The Board supports a system of corporate governance to ensure that the management of JCurve Solutions is conducted to maximise shareholder wealth in a proper and ethical manner. The Corporate Governance Statement and other corporate governance practices which outline the principal corporate governance procedures of JCurve Solutions can be found on the company’s website at: http://www. jcurvesolutions.com/corporate-governance/. Signed in accordance with a resolution of the directors Bruce Hatchman Chairman Dated at Sydney 26 August 2019. 17 Directors’ Report Including Remuneration ReportTel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY GARETH FEW TO THE DIRECTORS OF JCURVE SOLUTIONS LIMITED As lead auditor of JCurve Solutions Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of JCurve Solutions Limited and the entities it controlled during the period. Gareth Few Partner BDO East Coast Partnership Sydney, 26 August 2019 BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 30 June 2019 Revenue Cost of goods sold Gross profit Other income Employee benefits expense Other employee related expense Communications expense Advertising and marketing Professional fees Occupancy expense Depreciation and amortisation expense Finance income/(expense) Due Diligence costs Other expenses Profit before income tax Income tax expense Profit for the year Other comprehensive income Total comprehensive income for the year Basic earnings per share (cents per share) Diluted earnings per share (cents per share) Notes 3 3 4 4 4 4 5 6 6 2019 12,579,475 (2,230,419) 10,349,056 241,318 (6,102,949) (658,519) (440,913) (204,830) (1,252,995) (508,068) (254,490) (8,082) (33,687) (521,454) 604,387 (266,273) 338,114 - 338,114 0.10 0.10 Consolidated ($) 2018 11,945,625 (2,036,936) 9,908,689 288,370 (5,997,005) (742,224) (356,096) (149,788) (855,199) (458,203) (102,328) 74 (18,681) (622,237) 895,372 (48,105) 847,267 - 847,267 0.26 0.26 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. The classification of some prior period comparatives have been adjusted. Refer to note 23(2) for future details. 19 Statement of Profit or Loss and Other Comprehensive IncomeStatement of Financial Position As at 30 June 2019 Assets Current Assets Cash and cash equivalents Trade and other receivables Other financial assets Current tax asset Other current assets Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Deferred tax asset Total Non-Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Unearned income Current tax liability Provisions Total Current Liabilities Non-Current Liabilities Unearned income Deferred tax liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Share capital Reserves Accumulated losses Total Equity Notes 2019 2018 Consolidated ($) 7 8 10 9 11 12 5 13 14 15 14 5 15 16 17 4,765,339 2,389,384 10,454 - 925,641 8,090,818 53,504 3,402,499 717,393 4,173,396 4,487,536 2,190,485 - 162,937 935,484 7,776,442 86,139 2,892,857 737,252 3,716,248 12,264,214 11,492,690 3,263,849 2,032,347 37,020 331,426 5,664,642 181,738 1,078,069 88,411 1,348,218 7,012,860 5,251,354 2,477,734 2,720,858 - 263,791 5,462,383 - 1,076,287 55,017 1,131,304 6,593,687 4,899,003 17,588,248 1,818,117 17,588,248 1,803,880 (14,155,011) (14,493,125) 5,251,354 4,899,003 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. The classification of some prior period comparatives have been adjusted. Refer to note 23(2) for future details. Statement of Cash Flows Statement of Cash Flows For the Year Ended 30 June 2019 Notes 2019 2018 Consolidated ($) Inflows / (Outflows) Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest (paid)/refunded Income tax received Net cash provided by operating activities 7 Cash flows used in investing activities Payments for property, plant and equipment Purchase of intangible assets Cash paid for the purchase of the Spectrum business and assets Cash paid for the purchase of the Riyo Platform Net cash used in investing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June 7 13,497,100 (12,954,320) 12,964 (456) 152,292 707,580 (17,310) (100,000) (312,467) - (429,777) 277,803 4,487,536 4,765,339 12,890,984 (11,420,434) 17,695 74 165,043 1,653,362 (61,725) - - (600,000) (661,725) 991,637 3,495,899 4,487,536 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 21 Statement of Changes in Equity For the Year Ended 30 June 2019 Share Capital Accumulated Equity Benefits Total Consolidated ($) 17,588,248 (15,340,392) Losses Reserve 1,762,054 - - 4,009,910 847,267 847,267 847,267 847,267 As at 1 July 2017 Total comprehensive income for the year Transactions with owners in their capacity as owners: Issued shares under employee share plan Issued rights under employee incentive scheme - - - - - - - - 4,746 4,746 37,080 41,826 37,080 41,826 Balance at 30 June 2018 17,588,248 (14,493,125) 1,803,880 4,899,003 As at 1 July 2018 Total comprehensive income for the year Transactions with owners in their capacity as owners: Issued rights under employee incentive scheme Exchange differences on translation of foreign operations 17,588,248 (14,493,125) 1,803,880 4,899,003 - - - - - 338,114 338,114 - - 338,114 338,114 - - - 15,307 15,307 (1,070) 14,237 (1,070) 14,237 Balance at 30 June 2019 17,588,248 (14,155,011) 1,818,117 5,251,354 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Contents to the Notes to the Consolidated Financial Statements Contents to the Notes to the Consolidated Financial Statements Note Number Note Title 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Significant changes in the current reporting period The financial statement numbers Segment reporting Revenue and other income Expenses Income tax Earnings per share Cash and cash equivalents Trade and other receivables Other current assets Other financial assets Plant and equipment Intangible assets Trade and other payables Unearned income Provisions Share capital Reserves Risk Critical judgements, estimates and assumptions Financial instruments and risk management Unrecognised items Commitments Contingencies Events occurring after the reporting period Other information Statement of significant accounting policies Share-based payment plans Business Combinations Remuneration of auditors Related party transactions Parent entity financial information Page 24 24 25 26 27 30 30 31 32 32 33 34 36 36 36 37 37 39 39 42 43 43 43 45 46 47 47 48 23 Notes to the Financial Statements Note 1: Significant Changes in the Current Reporting Period The financial position and performance of the group was components of the Group that are reviewed by the chief operating decision maker in order to allocate resources to the segment and assess its performance. particularly affected by the following factors, events and JCurve Solutions sells a portfolio of solutions and derives its transactions during the reporting period: revenues and profits from a variety of sources. 1. the sale of Enterprise Resource Planning (ERP) The Board and Executive Management Team for the year solutions, which included the exclusively licensed ended 30 June 2019, considered the business from a product JCurveERP and associated implementation and perspective and identified three reportable segments: consulting services as well as NetSuite mid market and enterprise editions in addition to accompanying associated implementation and consulting services; • NetSuite ERP - ERP cloud-based Business Management solutions and associated consulting services; and 2. the purchase and integration of Spectrum and subsequent sale of Enterprise Resource Planning (ERP) solutions; 3. continuing investment in the TEMS research and development aimed at maximising the value from the TEMS business; and • MYOB Advanced - ERP cloud-based Business Management solutions and associated consulting services; and • TEMS - The development and marketing of Telecommunications Expense Management Solutions (JTEL and Full Circle Group). 4. Riyo – the development and All other segments – the development business unit and commercialization of the Riyo Platform. group/head office are cost centres and are not reportable A more detailed outline about the Group’s performance are included in the unallocated column in the segment operating segments. The results of these operations and financial position is outlined in the Directors Report information below. operating and financial review on page 6 Note 2: Segment Reporting 1. Accounting policy Following the acquisition of Spectrum, the Group now operates in two geographical segments being Australasia (Australia and New Zealand) along with SE Asia. The Group reports internally on the assets and liabilities of Operating segments are reported in a manner consistent the Group on a consolidated basis. with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors and Executive Management Team of JCurve Solutions. 2. Description of segments AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about the No customers comprise more than 10% of the Group’s total revenue. 3. Segment information provided to the chief operating decision maker The segment information provided to the Board and the Executive Management Team for the reportable segments for the year ended 30 June 2019 (including the comparative period) is as follows: Year ended 30 June 2019 NetSuite TEMS MYOB Riyo JCS Asia All other Total Total revenue Total cost of sales Gross profit Other income Total expenditure excluding ERP Advanced segments 9,814,712 2,292,424 114,415 3,366 354,558 (2,100,699) (2,330) (18,936) (3,750) (104,704) 7,714,013 2,290,094 95,479 (384) 249,854 - - - 12,579,475 (2,230,419) 10,349,056 - - - 135,497 - 105,821 241,318 cost of sales (5,526,590) (1,002,032) (68,377) (642,193) (445,295) (2,301,500) (9,985,987) Total profit/(loss) before tax 2,187,423 1,288,062 27,102 (507,080) (195,441) (2,195,679) 604,387 Notes to the Financial Statements Year ended 30 June 2018 NetSuite ERP TEMS MYOB All other Total Total revenue Total cost of sales Gross profit Other income Advanced segments 9,191,633 2,704,307 49,685 (2,036,936) - - 7,154,697 2,704,307 49,685 - - - 11,945,625 (2,036,936) 9,908,689 - - - 288,370 288,370 Total expenditure excluding cost (5,314,817) (1,138,394) (455,591) (2,392,885) (9,301,687) of sales Total profit/(loss) before tax 1,839,880 1,565,913 (405,906) (2,104,515) 895,372 Note 3: Revenues and Other Income Revenue Enterprise Resource Planning (ERP) solutions – JCERP and NetSuite Enterprise Resource Planning (ERP) solutions - MYOB Advanced Telecommunications expense management Riyo solutions Other Income Research and Development incentive Interest income Sundry Income Consolidated ($) 2019 2018 10,169,270 114,415 2,292,424 3,366 9,191,633 49,685 2,704,307 - 12,579,475 11,945,625 196,967 14,370 29,981 241,318 266,871 17,695 3,804 288,370 1. Accounting policy Revenue recognition The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised goods or services to customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Revenue is recognised by applying a five-step process outlined in AASB 15 which is as follows: Step 1: Identify the contract with a customer; Step 2: Identify the performance obligations in the contract and determine at what point they are satisfied; Step 3: Determine the transaction price; Step 4: Allocate the transaction price to the performance obligations; The Group’s revenue recognition accounting policy is that: • The performance obligation for the implemented ERP software is satisfied when the ERP software has been installed and is operating materially as contractually required. Rather than recognising the contracted revenue evenly over the contract period which ranges from 12 to 60 months in the case of license revenue or evenly over an implementation period for service revenue (generally 2 to 3 months), under the new accounting policy, both license and implementation revenue for the contracted period is recognised at the point in time when the ERP software has been installed and is operating materially as contractually required; • The performance obligation for providing ERP software customers with technical support is satisfied over the contracted period; • The performance obligation for providing Step 5: Recognise revenue as the performance obligations Telecommunication Expense Management solutions are satisfied. is satisfied over the contracted period; and 25 • The performance obligation for the implemented but the software to be installed by a qualified JCurve Riyo software is satisfied when the Riyo Solutions implementation consultant. As such a combined software has been installed and is operating implemented ERP software performance obligation materially as contractually required. is presented. In addition to contracts with customers, the Group receives Technical support which is purchased by ERP software interest income from monies held in its bank accounts, customers to assist with their ongoing use of the ERP Interest income is recognised on an accruals basis based software and is separate from the combined ERP on the interest rate, deposited amount and time which software/implementation performance obligation. lapses before the reporting period end date. The expected future Research and Development incentive, for past qualifying Research and Development expenditure is accrued as other income when it is established that the conditions of the Research and Development incentive have been met and that the expected amount of the incentive can be reliably measured. 2. Significant accounting judgments, estimates and assumptions: Revenue recognition (i) Identification of performance obligations The Group has determined that for new ERP software sales, while licenses and implementation services are quoted as separate line items and have separate list prices they are not distinct performance obligations as the customer is purchasing customisable ERP software which requires not only the licenses to be provisioned (ii) Satisfaction of performance obligations The performance obligation for the implemented ERP software is satisfied at the point in time when the ERP software has been installed and is operating materially as contractually required. It is when the customer has full access to and control of the ERP software. The performance obligation for providing ERP software customers with technical support remains throughout the contract period so is satisfied over the contract period. The performance obligation for providing Telecommunication Expense Management solutions remains throughout the contract period so is satisfied over the contract period. The performance obligation for the implemented Riyo software is satisfied at the point in time when the Riyo software has been installed and is operating materially as contractually required. It is when the customer has full access to and control of the Riyo software. Note 4: Expenses Other employee related expense - superannuation Other employee related expense – excluding superannuation Depreciation of plant and equipment Amortisation of intangibles Operating lease rental expense: minimum lease payments Other Directors’ Fees (includes superannuation) Consultancy Fees Audit Fees Company Secretarial Fees (includes fees paid to non-related parties overseas) 2019 502,547 155,972 658,519 66,244 188,246 254,490 485,611 22,457 508,068 223,346 901,652 72,226 55,771 1,252,995 Consolidated ($) 2018 517,831 224,393 742,224 92,328 10,000 102,328 437,608 20,595 458,203 226,928 505,575 72,576 50,120 855,199 Notes to the Financial Statements 1. Accounting policy (i) Wages, salaries, annual leave and sick leave reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and period Liabilities for wages and salaries, including non-monetary of service. Expected future payments are discounted benefits, annual leave and accumulating sick leave using market yields at the reporting date on national expected to be settled within 12 months of the reporting government bonds with terms to maturity and currencies date are recognised in other payables in respect of that match, as closely as possible, the estimated future employees’ services up to the reporting date. They are cash outflows. 2. Significant accounting judgments, estimates and assumptions: Recognition of subscription costs of sales The recognition of the license cost associated with each JCurveERP software subscription is estimated on a gross margins basis and is amortised over the life of the contract in a manner consistent with the method for recognising the revenue. measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the Note 5: Income Tax Income tax recognised in profit or loss The major components of tax benefit/(expense) are: Current tax benefit (i) Origination and reversal of temporary differences Under/(over) provision from prior years - current tax Total tax benefit/(expense) (i) The prima facie income tax (benefit)/expense on pre-tax accounting profit from continuing operations reconciles to the income tax (benefit)/expense in the financial statements as follows: Accounting profit before tax Income tax expense calculated at 27.5% Tax effect of amounts which are not taxable/(deductible) in calculating taxable income: Permanent differences Temporary differences Adjustments for current tax of prior periods Research and development incentive Differences in overseas tax rates Carried forward tax losses previously not brought to account now recognised Consolidated ($) 2019 2018 (233,987) (21,641) (10,645) (266,273) (103,934) 80,119 (24,290) (48,105) 604,387 (166,207) 895,372 (246,228) (16,653) (23,315) 28,950 (11,018) (70,353) (11,851) 3,801 (25,092) (2,402) - (27,494) (95,322) - 310,300 Reduction in deferred tax liabilities due to a change - 34,929 in the company income tax rate Under/(over) provision in prior years Income tax benefit/(expense) reported in the Statement of Profit or Loss and other Comprehensive Income (10,645) (266,273) (24,290) (48,105) 27 Deferred Taxes (Non-Current) Analysis of deferred tax assets: Deductible temporary differences available to offset against future taxable income Deferred expenditure Accruals and provisions Tax losses available to offset against future taxable income Analysis of deferred tax liabilities: Plant and equipment Deferred license revenue Other Net Deferred Tax Liability 1. Accounting policy (i) Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance date. Consolidated ($) 2019 2018 306,006 372,876 38,511 717,393 4,482 970,286 103,301 269,174 422,046 46,032 737,252 - 990,450 85,837 1,078,069 1,076,287 360,676 339,035 transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against Deferred income tax is provided on all temporary which the temporary difference can be utilised. differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit Deferred income tax liabilities are recognised for all taxable will be available to allow all or part of the deferred income temporary differences except: tax asset to be utilised. • when the deferred income tax liability arises from the Unrecognised deferred income tax assets are reassessed initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry- forward of unused tax credits and unused tax losses can be utilised, except: at each balance date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. • when the deferred income tax asset relating to (ii) Tax Consolidation Legislation the deductible temporary difference arises from JCurve Solutions and its 100% owned Australian resident the initial recognition of an asset or liability in a subsidiaries have implemented the tax consolidation Notes to the Financial Statements legislation. Current and deferred tax amounts are accounted for in each individual entity as if each entity continued to act as a taxpayer on its own. JCurve Solutions Limited recognises its own current and deferred tax amounts and those current tax liabilities, current tax assets and deferred tax assets arising from unused tax credits and unused tax losses which it has assumed from its controlled entities within the tax consolidated Group. 3. Unrecognised deferred tax assets and deferred tax liabilities The balance of carried forward tax losses that have not been recognised in the Financial Statements amount to $490,088 (2018: $476,267 unrecognised). The deductible temporary differences and tax losses do not expire under current legislation. Deferred tax assets totaling $134,774 (2018: $130,973) have not been recognised in respect of these items at this stage because it is not probable that future tax profits will be available against which the Group Assets or Liabilities arising under tax funding agreements can utilise the benefits thereof. with the tax consolidated entities are recognised as amounts payable or receivable from or payable to other entities in the Group. Any difference between the amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) controlled entities in the tax consolidated Group. (iii) Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. The balance of carried forward capital losses that have not been recognised in the Financial Statements amount to $572,640 (2018: $572,640 unrecognised). The deductible temporary differences and tax losses do not expire under current legislation. Deferred tax assets totaling $157,476 (2018: $157,476) have not been recognised in respect of these items at this stage because it is not probable that future capital gains will be available against which the Group can utilise the benefits thereof. There are no unrecognised deferred tax liabilities. 4. Tax Consolidation JCurve Solutions and its 100% owned Australian resident subsidiaries implemented the tax consolidation legislation from 1 January 2014. The accounting policy for the implementation of the tax consolidation legislation is set out in note 5(1)(ii). The entities in the tax consolidated group have entered into a tax sharing agreement on adoption of the tax consolidation legislation which, in the opinion of the directors, limits the joint and several liability of the Cash flows are included in the Statement of Cash Flows on controlled entities in the case of a default by the head a gross basis and the GST component of cash flows arising entity, JCurve Solutions. from investing and financing activities, which is recoverable from, or payable to the taxation authority are classified as operating cash flows. JCurve Solutions and its controlled entities have entered into a tax funding agreement under which the 100% owned Australian resident subsidiaries compensate Commitments and contingencies are disclosed net of JCurve Solutions for all current tax payable assumed and the amount of GST recoverable from, or payable to, the are compensated by JCurve Solutions for any current taxation authority. 2. Significant accounting judgments, estimates and assumptions: Recovery of deferred tax assets Deferred tax assets are recognised for deductible tax receivable and deferred tax assets which relate to unused tax credits or unused tax losses that, under the tax consolidation legislation, are transferred to JCurve Solutions. These amounts are determined by reference to the amounts which are recognised in the financial statements of each entity in the tax consolidated group. temporary differences as management considers that The amounts receivable/ payable under the tax funding it is probable that sufficient future tax profits will be agreement are due on receipt of the funding advice from available to utilise those temporary differences. Significant management judgement is required to determine the JCurve Solutions, which is issued as soon as practicable after the financial year end. JCurve Solutions may also amount of deferred tax assets that can be recognised, require payment of interim funding amounts to assist based upon the likely timing and the level of future with obligations to pay tax instalments. These amounts are taxable profits over future years together with future tax recognised as current intercompany receivables planning strategies. or payables. 29 Note 6: Earnings Per Share Earnings used for calculation of basic and diluted earnings per share Profit from operations - basic earnings per share Profit from operations - diluted earnings per share 2019 $ 338,114 338,114 Consolidated 2018 $ 847,267 847,267 No. No. Weighted average number of shares used for calculation of basic and diluted EPS Weighted average number of shares 327,856,900 329,343,064 Earnings used for calculation of basic and diluted earnings per share Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 1. Accounting policy Cents per share Cents per share 0.10 0.10 0.26 0.26 Basic earning per share is calculated as net profit/loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earning per share is calculated as net profit/loss attributable to members of the parent, adjusted for: • costs of servicing equity (other than dividends) and preference share dividends; • the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and • other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. Note 7: Cash and Cash Equivalents Cash at bank and on hand Consolidated ($) 2019 2018 4,765,339 4,765,339 4,487,536 4,487,536 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. At 30 June 2019, the Group has no committed borrowing facilities. Reconciliation of profit for the year after tax to net cash flows from operating activities Profit for the year Non-cash flows in operating profit: Depreciation and amortisation from continuing operations Impaired receivables Loss on disposal of fixed assets Equity settled share based payment (Increase)/decrease in assets: Trade and other receivables Other current assets Other financial assets Current tax receivable/payable Deferred tax assets Increase/(decrease) in liabilities: Trade and other payables – Current Unearned income Provisions – Current Provisions – Non-current Deferred tax liabilities Notes to the Financial Statements Consolidated ($) 2019 2018 338,114 847,267 254,490 104,846 - 15,308 (198,899) 9,843 (10,454) 199,957 19,860 378,478 (506,773) 67,634 33,394 1,782 102,328 187,180 5,187 41,826 (791,318) (93,461) 19,078 26,396 (122,552) 1,354,943 - 44,619 (10,565) 42,434 Net cash used in operating activities 707,580 1,653,362 1. Accounting policy Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Note 8: Trade and Other Receivables Current: Trade receivables (i) Allowance for doubtful debts (2) Accrued revenue/commissions receivable Consolidated ($) 2019 2018 1,432,258 (71,952) 1,029,078 2,389,384 1,491,841 (114,173) 812,817 2,190,485 (i) the average credit period on sales of goods and rendering of services is 30 days. An allowance has been made for estimated irrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience. Refer to note 19(6) for ageing of receivables. 31 1. Accounting policy Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified. The Group adopted AASB 9 for the first time during the year ended 30 June 2019. The adoption of AASB 9 resulted in credit losses being recognised in the allowance for doubtful debts under an expected credit loss (ECL) model. ECLs are a probability weighted estimates of credit losses which are discounted at the effective interest rate of the financial asset. Credit losses are measured as the present value of all cash shortfalls. The impact from adopting AASB 9 during the year ended 30 June 2019 was an additional expense of $13,378 from assessing the lifetime expected credit losses based on the history of past bad debts written off the Group after considering a provision matrix which grouped debtors into product lines. The Group has not retrospectively adjusted the prior period comparative balances or opening balances on adoption of AASB 9. 2. Allowance for doubtful debts reconciliation At 30 June 2019, trade receivables of the Group with a nominal value of $71,952 (2018: $114,173) were impaired. The allowance for doubtful debts was $71,952 (2018: $114,173). The movement in the allowance for doubtful debts is as follows: At 1 July Provision for impairment recognised during the year Receivables written off during the year as uncollectable Trade receivables provided for but collected Note 9: Other Current Assets Prepayments Term deposit Deferred expenditure Sundry debtors (*) Prior year comparative for prepayments has been adjusted. Reallocation from accrued expenses. Note 10: Other Financial Assets Security Deposits Consolidated ($) 2018 17,893 187,180 (90,900) - 114,173 Consolidated ($) 2018 (*) 443,168 217,665 166,566 108,085 935,484 2019 114,173 104,846 (81,335) (65,730) 71,952 2019 480,484 231,365 115,707 98,085 925,641 Consolidated ($) 2019 2018 10,454 10,454 - - Note 11: Plant and Equipment Plant and equipment, at cost Less accumulated depreciation Net carrying amount Leasehold improvements, at cost Less accumulated depreciation Net carrying amount Make good assets, at cost Less accumulated depreciation Net carrying amount Notes to the Financial Statements 2019 286,589 (240,053) 46,536 2,740 (2,152) 588 16,299 (9,919) 6,380 Consolidated ($) 2018 269,279 (184,304) 84,975 2,740 (1,576) 1,164 - - - Total net carrying amount 53,504 86,139 Reconciliations: Consolidated ($) Plant & Leasehold Make Good Total Equipment Improvements Assets Movements: Net carrying amounts as at 30 June 2017 Disposals Additions Depreciation write-back on disposals Depreciation charges Net carrying amounts as at 30 June 2018 Net carrying amounts as at 30 June 2018 Disposals Additions Depreciation charges Net carrying amounts as at 30 June 2019 1. Accounting policy (i) Cost 121,763 (57,062) 59,985 51,875 (91,586) 84,975 84,975 - 17,310 (55,749) 46,536 166 - 1,740 - (742) 1,164 1,164 - - (576) 588 - - - - - - - - 16,299 (9,919) 6,380 121,929 (57,062) 61,725 51,875 (92,328) 86,139 86,139 - 33,609 (66,244) 53,504 Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. (ii) Depreciation Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. Leasehold improvements are amortised over the period of the lease or the estimated useful life, whichever is the shorter, using the straight-line method. The following estimated useful lives are used in the calculation of depreciation and amortisation: • Plant and equipment: 2 – 14 years • Leasehold improvements: 1 – 6 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. (iii) De-recognition and disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. Note 12: Intangible Assets Licences Riyo Goodwill Customer NetSuite Pistachio Total Platform relationships customer connector (i) contracts (ii) Year ended 30 June 2018 At 1 July 2017, net of 2,302,857 - accumulated amortisation and impairment Additions Amortisation - - 600,000 (10,000) At 30 June 2018, net of 2,302,857 590,000 (i) - - - - - - - - - - - 2,302,857 - - 600,000 (10,000) - 2,892,857 - 2,892,857 - - - - - 2,302,857 590,000 - - - - 244,515 172,197 175,456 100,000 692,168 (120,000) - (34,438) (33,808) - 2,693 1,503 1,524 - - (188,246) 5,720 2,302,857 470,000 247,208 139,262 143,172 100,000 3,402,499 accumulated amortisation and impairment Year ended 30 June 2019 At 1 July 2018, net of accumulated amortisation and impairment Additions Amortisation FX Revaluation At 30 June 2019, net of accumulated amortisation and impairment (i) Purchase of Spectrum The licenses intangible asset reflects the carrying value of the unimpaired amount paid for the purchase of the exclusive reseller agreement with NetSuite for the JCurve ERP edition of the NetSuite software. This Agreement with NetSuite provides JCurve Solutions with the exclusive selling rights for the JCurve ERP edition of the NetSuite business software for an indefinite period and was the basis on which Interfleet Pty Ltd immediately became a five star NetSuite partner on becoming a NetSuite Solution Provider in August 2016. The agreement was the basis from which the Company has built its ERP practice. The NetSuite JCurve ERP reseller agreement provides that in the event of cancellation of the Agreement, the customers of JCurve would be assigned to NetSuite and NetSuite would be required to pay JCurve Solutions a royalty of 30% of the future revenue stream to NetSuite for a 3-year period which along with an increasing level of license commission and service revenue which is generated from the sale of NetSuite editions indicates that it is unlikely that there will be an impairment in future periods. Refer to Note 25 for further information on the acquisition of Spectrum. Notes to the Financial Statements (ii) Pistachio Connector On 8 April 2019, JCurve Business Software Pty Ltd, a 100% owned subsidiary of JCurve Solutions Limited, purchased the JConnect E-Commerce connector from Pistachio Media. The E-Commerce connector links a customers website to the JCurve edition of NetSuite. JCurve Business Software Pty Ltd previously operated under a licensing arrangement with Pistachio Media with both customers managed directly through JCurve Business Software Pty Ltd as well as some customers directly being managed by Pistachio Media. 2. Significant accounting judgments, estimates and assumptions (i) Impairment of intangibles with indefinite useful lives The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are allocated. (ii) Useful life of the Riyo Platform The total cost of the asset acquisition was $100,000 which The Group has determined that the useful life of the Riyo was settled in cash on 27 June 2019. Purchase costs of Platform is 5 years with the useful life to be amortised on a $3,480 were included in professional fees in the Statement straight line basis over the five year period. of Profit or Loss and Other Comprehensive Income for the 3. Impairment testing of intangible assets with indefinite lives (i) Licenses – ERP The licenses intangible asset reflects the carrying value of the ERP relationship with Oracle NetSuite. The recoverable amount of the Australian ERP practice has been determined based on a value in use calculation using cash flow projections covering a 5-year period. The discount rate applied to the value in use calculations was 15%. A long term growth rate of 4% has been assumed as has a terminal value. Based on these value in use calculations, there is no impairment for the year ended 30 June 2019 (2018: nil). The carrying value of the NetSuite License remains $2,302,857. If the discount rate applied was 10% higher the recoverable amount would decrease by $213,399 and if the discount rate applied was 10% lower the recoverable amount would increase by $231,785. If the long term growth rate projection applied was 10% lower than the amount forecast, the recoverable amount would decrease by $280,387 and if the long term growth rate projection applied was 10% higher the recoverable amount would increase by $282,297. year ended 30 June 2019. 1. Accounting policy (i) Intangible assets – Licenses and other intangible assets Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year- end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash- generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis. 35 Note 13: Trade and Other Payables Current: Trade payables (*) Other payables Accrued expenses Deferred consideration Consolidated ($) 2019 2018 (*) 1,527,278 530,376 853,812 352,383 704,432 701,102 1,072,200 - 3,263,849 2,477,734 (*) Prior year comparative for trade payables has been adjusted. Reallocation from prepayments. (**) Trade payables are non-interest bearing and are normally settled on 30-day terms. Information regarding the effective interest rate and credit risk of current payables is set out in Note 19. 1. Accounting policy Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabilities unless payment is not due within 12 months. Note 14: Unearned Income Current: Unearned Income Non Current: Unearned Income 1. Accounting policy Consolidated ($) 2019 2018 2,023,347 2,720,858 181,738 2,205,085 - 2,720,858 Unearned income is carried at amortised cost and represents amounts billed to customers in advance of the revenue being recognised in accordance with the revenue recognition policy outlined in note 3. Unearned income is presented as a current liability unless the performance obligations associated with the revenue will be satisfied in greater than 12 months. Note 15: Provisions Current: Annual leave Long service leave Non-current: Long service leave Make good provision Consolidated ($) 2019 2018 244,957 86,469 331,426 64,486 23,925 88,411 231,120 32,671 263,791 55,017 - 55,017 Notes to the Financial Statements 1. Accounting policy Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Profit or Loss and Other Comprehensive Income net of any reimbursement. Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. The current pre-tax rate used for discounting purposes is 12% (2018: 12.5%). When discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense. Note 16: Share Capital Ordinary shares issued and fully paid (i) Unissued shares (i) Fully paid ordinary shares carry one vote per share and carry the right to dividends. Movement in ordinary shares on issue At 1 July 2017 Share by back and cancellation (a) At 30 June 2018 Share by back and cancellation (a) At 30 June 2019 1. Accounting policy Consolidated ($) 2019 2018 17,382,891 17,382,891 205,357 205,357 17,588,248 17,588,248 No. $ 331,906,900 17,382,891 (4,050,000) - 327,856,900 17,382,891 - - 327,856,900 17,382,891 Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase consideration. 2. Share Option Plan - Acquisition of JCurve Business Software JCurve Solutions Limited issued 35,714,284 options (valued at $1,572,144) as part consideration for the acquisition of JCurve Solutions Pty Ltd by its’ subsidiary JCurve Business Software Pty Ltd in October 2013. Refer to Note 24(ii) for further information. Note 17: Reserves Equity Benefits Reserve Balance at the start of the year Shares cancelled under Employee Share Plan Issued rights under Employee Incentive Scheme Balance at the end of the year Consolidated ($) 2019 2018 1,803,880 1,762,054 - 15,307 4,608 37,218 1,819,187 1,803,880 37 Foreign Currency Translation Reserve Balance at the start of the year Currency translation differences arising during the year Balance at the end of the year 1. Accounting policy Consolidated ($) 2019 2018 - (1,070) (1,070) - - - The Group provides benefits to employees (including senior executives) of the Group in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using the Black- Scholes model, further details of which are given in Note 24(i). In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of JCurve Solutions Limited (market conditions) if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. The Statement of Profit or Loss and Other Comprehensive Income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification. If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share (see Note 6). 2. Significant accounting judgments, estimates and assumptions: Share based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a Black - Scholes model, using the assumptions as detailed in the notes to the financial statements. Notes to the Financial Statements Note 18: Critical Judgements, Estimates and Assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: • Revenue recognition - Identification of performance obligations – refer to note 3; • Revenue recognition – Satisfaction of performance obligations – refer to note 3; • Impairment of intangibles with indefinite useful lives – refer to note 12; • Useful life of the Riyo Platform - refer to note 12; • Share-based payment transactions – refer to note 17; and • Recovery of deferred tax assets – refer to note 5; Note 19: Financial Instruments and Risk Management 1. Capital risk management Capital risk is managed and monitored by liaising with banks and communicating with shareholders. JCurve Solutions considers new government legislation and monitors the market place by canvassing information from stockbrokers and investors. When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management adjust the capital structure as necessary to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. (i) Categories of financial instruments Financial assets Cash and cash equivalents Receivables Other current assets Other financial assets Financial liabilities Payables Consolidated ($) 2019 2018 4,765,339 2,389,384 231,365 10,454 4,487,536 2,190,485 217,665 - 3,263,849 2,477,734 The Group has no derivative instruments in designated hedging relationships. 2. Financial Risk Management Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are outlined above in the relevant note. The Group’s principal financial liabilities are trade payables and unearned income which arise during the course of operations. The Group has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations. The Group’s policy throughout 2019 has remained that no trading in derivatives shall be undertaken. The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, and credit risk. The Board of Directors reviews and agrees on policies for managing each of these risks which are summarised on the following pages. 39 Notes to the Financial Statements 3. Interest Rate Risk The following table sets out the carrying amount, by maturity, of the Group’s financial instruments including those exposed to interest rate risk: Within 1 year 1 to 5 years Total Weighted average effective interest rate Consolidated ($) Year ended 30 June 2019 Financial assets Non interest bearing: Trade and other receivables Other Current Assets Floating rate: Cash Assets Other Current Assets Financial liabilities Payables Year ended 30 June 2018 Financial assets Non interest bearing: Trade and other receivables Other Current Assets Floating rate: Cash Assets Other Current Assets (*) Financial liabilities Payables 2,389,384 694,276 3,083,660 4,765,339 231,365 4,996,704 8,080,364 3,263,849 3,263,849 2,190,485 717,819 2,908,304 4,487,536 217,665 4,705,201 7,613,505 2,477,734 2,477,734 - - - - - - - - - - - - - - - - - - 2,389,384 694,276 3,083,660 4,765,339 231,365 4,996,704 8,080,364 3,263,849 3,263,849 2,190,485 717,819 2,908,304 4,487,536 217,665 4,705,201 7,613,505 2,477,734 2,477,734 % 0.15% 2.04% 0.28% 2.13% For all financial instruments, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily traded on organised markets in standardised forms. Interest on financial instruments classified as floating rate is fixed at intervals of less than one year. The other financial instruments of the Group that are not included in the above tables are non-interest bearing and are therefore not subject to interest rate risk. (*) Prior year comparatives have been adjusted to reallocate $482,087 from interest bearing liabilities to non interest bearing liabilities. 40 Interest rate risk sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rates for both derivative and non- derivative instruments at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s net profit before tax would increase by $24,915 and decrease by $10,188 respectively (2018: increase by $23,525 and decrease by $10,117). This is mainly attributable to the Group’s exposure to interest rates on its variable rate cash deposits. 4. Price Risk – Equity and Commodity The Group’s exposure to commodity and equity securities price risk is minimal. 5. Foreign Currency Risk Following the acquisition of Spectrum and establishment of a Philippines centre of excellence, the Group is now exposed to foreign currency risk from movements in the Australian dollar relative to the Singapore and US Dollar’s and Philippine Peso. Foreign currency risk arises from future transactions and recognizing assets and liabilities denominated in a currency that is not the Group’s functional currency. The Group seeks to limit its exposure to foreign currency risk, by maintaining a bank account denominated in Singapore dollars and is in the process of setting up a Philippines bank account denominated in Philippine Peso so that income received from Asian customers is deposited and held in the overseas currency without the need to transact in multiple currencies. The Group’s exposure to foreign currency risk at the reporting date is as follows (in AUD translated balances): Year ended 30 June 2019 Cash and cash equivalents Trade and other receivables Other Current Assets Total Current Assets Property, plant and equipment Intangible assets Total Non Current Assets Total Assets Trade and other payables Unearned income Provisions - current Total current liabilities Total Liabilities Net Assets 2019 12,605 215,095 120,435 348,135 2,783 529,642 532,425 880,560 438,846 133,657 15,337 587,840 587,840 292,720 2018 - - - - - - - - - - - - - - For the year ending 30 June 2019, if the average exchange rate for AUD:SGD had been 10% lower or higher and all other variables were held constant, the Group’s net profit before tax would decrease by $21,716 and increase by $17,767 respectively (2018: decrease by nil and increase by nil). Notes to the Financial Statements 6. Credit Risk Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note. The Group does not hold any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer in accordance with parameters set by the board. These risk limits are regularly monitored. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. At 30 June 2019, the ageing analysis of trade receivables is as follows: Consolidated Total $ 0-30 days $ 0-30 days CI* $ 31-60 days 31-60 days 61-90 days CI* PDNI* $ $ $ 61-90 days CI* $ +91 days PDNI* $ +91 days CI* $ 2019 2018 1,432,258 1,013,134 1,015 207,913 1,015 73,727 1,015 100,009 34,430 1,491,841 1,050,739 - 62,553 - 201,592 - 62,784 114,173 * PDNI - Past due not impaired CI - Considered impaired The receivables which are past due but not considered impaired was $173,736 (2018: $264,376). The provision for doubtful debts as at 30 June 2019 is $71,952 (2018: $114,173). The provision for doubtful debts includes expected credit losses of $13,378 which were recognised on adoption of AASB 9 (2018: nil). Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. 7. Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Note 20: Commitments 1. Remuneration Commitments There are no commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date. 2. Operating Lease Commitments The Group had the following operating lease commitments at balance date: 42 Within one year After one year but not more than five years 2019 494,226 282,300 776,526 Consolidated ($) 2018 305,954 496,395 802,349 Operating lease commitments are in respect of the Chatswood office, St Kilda office, an office in Singapore, a serviced office in Singapore as well as telephone and printer leases. (i) Accounting policy - Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially recognised at their fair value or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the Statement of Financial Position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised. Finance leased assets are depreciated on a straight-line basis over the estimated useful life of the asset. Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Note 21: Contingencies 1. Contingent Liabilities The Group does not have any contingent liabilities. Note 22: Events Occurring After the Reporting Period No matters or circumstances have arisen since 30 June 2019 that significantly affect, or may significantly affect: • the Group’s operations in future financial years, or • the results of those operations in future financial years, or • the Group’s state of affairs in future financial years. Note 23: Statement of Significant Accounting Policies 1. Basis of Preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). JCurve Solutions Limited is a for-profit entity for the purposes of preparing the financial statements. The accounting policies detailed below have been consistently applied to all years unless otherwise stated. The financial report is for the consolidated entity consisting of JCurve Solutions Limited and its subsidiaries. The financial report has also been prepared on a historical cost basis. The financial report is presented in Australian dollars and all values are rounded to the nearest dollar. Notes to the Financial Statements 2. Changes to presentation The classification of some prior period comparatives have been adjusted to reflect an internal reporting change in the presentation of financial statement line items which the Company believes will assist users with their understanding of the Annual Report. There was no net overall profit or loss effect from the reclassification. 3. New accounting standards and interpretations not yet adopted In the year ended 30 June 2019, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. The Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies. Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June reporting period and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations which are most relevant to the Group are set out below: (i) AASB 16 Leases AASB 16 was issued to replace AASB 117 Leases and a number of interpretations. AASB 16 will provide a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The new standard will have three possible main changes on the Group’s accounting for leases: • Enhanced guidance on identifying whether a contract contains a lease; • A completely new leases accounting model for lessees that require lessees to recognise all leases on balance sheet except for short-term leases and leases of low value assets; and • Enhanced financial statement disclosures. The new standard will result in almost all leases being recognised on the Statement of Financial Position. The current distinction between operating and finance leases will be removed with an asset (the right to use the leased item) and a liability (rental payments) being recognised. Lessor accounting will not significantly change under AASB 16. The Group has adopted the new standard from 1 July 2019 under the modified retrospective approach. On adoption of AASB 16, the Group will be recognizing leased liabilities in relation to leases which had previously been classified as operating leases under AASB 117. The adoption of AASB 16 will also result in the recognition of a right of use asset. AASB 16 will impact the Group’s operating leases which are outlined in Note 20. As at 30 June 2019, the Group had non-cancellable operating lease commitments of $776,526 (2018: $802,349). The Group has assessed that the impact of adopting AASB 16 from 1 July 2019 is the recognition of leased liabilities totalling $727,859 and the recognition of right of use assets totaling $727,859. There are no other standard that are not yet effective and that would be expected to have a material impact on the Group in the current or future periods. 4. Statement of Compliance The financial report was authorised for issue on 26 August 2019. The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). 5. Basis of Consolidation The consolidated financial statements comprise the financial statements of JCurve Solutions Limited and its subsidiaries as at 30 June each year (the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. 44 In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The acquisition of subsidiaries has been accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition. Accordingly, the consolidated financial statements include the results of subsidiaries for the period from their acquisition. Note 24: Share-Based Payment Plans (i) Shares issued under Equity Incentive Plan The equity incentive plan was approved by shareholders at the Annual General Meeting held on 22 November 2016. On 27 June 2017, 10,000,000 performance rights (valued at $27,500) were issued to employees under the plan. These performance rights were revalued to $54,862 following an increase in the JCurve Solutions Limited share price during the year. On 9 October 2017, 1,500,000 performance rights (valued at $30,933) were issued to employees under the plan. Each performance right has a nil exercise price and convert into one fully paid ordinary share in JCurve Solutions Limited upon meeting the vesting conditions. The performance rights vest on 31 August 2019. If the vesting conditions are not met the performance right lapses on 31 August 2019. During the year ended 30 June 2019, 1,500,000 performance rights (valued at $30,933) were cancelled under the plan when the service condition associated with the performance rights were not met. The share-based payment expense is recognised in the Statement of Profit or Loss and Other Comprehensive Income evenly over the vesting period. (ii) Share Option Plan – Acquisition of JCurve Business Software JCurve Solutions Limited issued 35,714,284 options (valued at $1,572,144) as part consideration for the acquisition of JCurve Solutions Pty Ltd by its subsidiary JCurve Business Software Pty Ltd. The contractual life of each option granted is between 3 and 5 years. There are no cash settlement alternatives. The following table illustrates the number (No.) and weighted average exercise prices of and movements in share options issued during the year: 2019 2018 No. Weighted average No. Weighted average exercise price exercise price Outstanding at the beginning of the year 8,928,571 $0.000001 17,857,142 $0.000001 Expired during the year (8,928,571) Granted during the year Outstanding at the end of the year Exercisable at the end of the year - - - - - - (8,928,571) - - - 8,928,571 $0.000001 8,928,571 8,928,571 of options expired during the year. Notes to the Financial Statements Note 25: Business Combinations Acquisition of the Spectrum Partner Group On 17 December 2018, JCurve Solutions Asia Pte Ltd, a 100% owned subsidiary of the Group purchased all of the business and assets of Spectrum Partner Group Pte Ltd (Spectrum), a NetSuite two star partner domiciled in Singapore. The purchase price is to be paid across a completion payment of S$300,000 (paid on the 13/12/2018) and a deferred payment in August 2019 based on the level of income generated by the Singapore business for the year ending 31 March 2019 plus qualifying opportunities for the following three months to 30 June 2019. Based on the latest available forecasts obtained pre-acquisition as part of the due diligence phase, the Group estimated the deferred payment to be S$300,000 (A$311,333). After closing more qualifying opportunities in the April to June 2019 period, than originally forecast, the deferred payment which is due to be paid by 31 August 2019 was S$334,074 (A$351,805). The $40,472 difference between the estimated deferred payment and actual deferred payment has been released to the Statement of Profit or Loss and Other Comprehensive Income and is included in other expenses. Acquisition related costs of $17,252 were included in due diligence costs in the Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2019. The fair values of the identifiable assets acquired as part of the acquisition is as follows: NetSuite customer contracts Customer relationships Sundry debtors Fair value of identifiable net assets Goodwill arising on acquisition Consideration Fair value at Fair value at acquisition date acquisition date (S$) 165,326 168,455 31,460 365,241 234,759 600,000 (A$) 172,197 175,456 32,767 380,420 244,515 624,935 It is expected that the acquisition of the Spectrum will deliver the Group additional synergies through a reduction in the overall cost base of the ERP delivery team as the ERP division grows, while it is expected that the Group will be able to increase sales through the Asian market through the ultiisation of the marketing and finance departments from the Group’s head office. These synergies are recognised through the goodwill balance recognised. In addition the acquisition by JCurve Solutions will see the Group receive NetSuite five-star partner margins on Spectrum customers eligible for commission, where pre-acquisition only two star partner margins were received. This synergy has been recognised through the NetSuite customer contracts balance recognised. Net cash outflow arising on acquisition The cash outflow on acquisition was $312,467 (S$300,000) with a further deferred payment to be paid in August 2019 based on the performance factors outlined above. The acquisition of Spectrum affected the year ended 30 June 2019 consolidated result as follows: Revenue Less: expenses Loss before tax 30 June 2019 $ 354,558 (549,999) (195,441) The Group has not disclosed the revenue or profit or loss as though the acquisition date for business combination occurred at the start of the financial year as such disclosure would not be reliable with the acquired entities financial statements being unaudited. 46 The useful life of the NetSuite customer contracts intangible asset was assessed as 2.5 years, with the intangible asset being amortised from 18 December 2018 evenly over the 2.5 year period. The useful life of the customer relationships intangible asset was assessed as 2.5 years, with the intangible asset being amortised from 18 December 2018 evenly over the 2.5 year period. Note 26: Remuneration of Auditors The auditor of JCurve Solutions Limited is BDO East Coast Partnership. Amounts received or due and receivable by BDO East Coast Partnership for an audit or review of the financial report of the entity and any other entity in the consolidated group Consolidated ($) 2019 2018 72,084 72,084 72,576 72,576 Note 27: Related Party Transactions 1. Subsidiaries The consolidated financial statements include the financial statements of JCurve Solutions Limited and the subsidiaries listed in the following table. Country of Incorporation 2019 2018 % Equity Interest Name JCurve Business Software Pty Ltd Fleet Manager Pty Ltd Phoneware Pty Ltd Interfleet Pty Ltd The Full Circle Group Pty Ltd JCS Tech Solutions Pty Ltd JCurve Solutions Asia Pte Ltd JCurve Mobile Services Pty Ltd JCurve Solutions Philippines Inc Australia Australia Australia Australia Australia Australia Singapore Australia Philippines 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - JCurve Solutions Limited is an Australian entity and the ultimate parent of the Group. JCurve Business Software Pty Ltd, Fleet Manager Pty Ltd, Phoneware Pty Ltd, Interfleet Pty Ltd, The Full Circle Group Pty Ltd, JCurve Mobile Services Pty Ltd and JCS Tech Solutions Asia Pte Ltd are all incorporated in Australia. JCurve Solutions Asia Pte Ltd was incorporated on the 22nd of December 2016 and is domiciled in Singapore. JCurve Solutions Philippines Inc was incorporated on the 23rd of February 2019 and is domiciled in the Philippines. 2. Key Management Personnel Compensation The aggregate compensation made to directors and other key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments Total Compensation 2019 1,606,333 135,142 38,054 15,308 Consolidated ($) 2018 1,414,304 112,077 16,463 41,825 1,794,837 1,584,669 Note 28: Parent Entity Financial Information Financial position Notes to the Financial Statements Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated losses Reserves Total equity Financial Performance Net profit for the year 2019 $ 3,178,881 3,065,070 6,243,951 1,446,792 37,902 1,484,694 2018 $ 2,841,559 2,625,282 5,466,841 1,043,704 62,423 1,106,127 4,759,257 4,360,714 17,588,248 (14,648,179) 1,819,188 4,759,257 Year ended 30 June 2019 $ 383,235 17,588,248 (15,031,414) 1,803,880 4,360,714 Year ended 30 June 2018 $ 661,801 48 Directors’ Declaration In the opinion of the directors: (a) the financial statements and notes set out on pages 19 to 48 are in accordance with the Corporations Act 2001, including: (i) complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the financial year ended on that date; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Note 23 (4) 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 Chief Executive Officer and Chief Financial Officer required by Section 295A of the Corporations Act 2001. This declaration is signed in accordance with a resolution of the Board of Directors. Bruce Hatchman Chairman Dated 26 August 2019 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR'S REPORT To the members of JCurve Solutions Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of JCurve Solutions Limited (the Company) and its subsidiaries (the Group), which comprises the statement of financial position as at 30 June 2019, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. Recognition of license and implementation revenue Key audit matter How the matter was addressed in our audit AASB 15 Contracts with Customers uses Our audit procedures to address the key audit matter included, a five step model to recognise revenue. but were not limited to, the following: A number of judgements and estimates are made in order to determine the point at which performance obligations are met and revenue can be recognised. The disclosure in connection with the recognition of license and implementation revenue can be found in Note 3. Due to the nature of these key estimates and judgements, and given the financial significance of revenue to the users of the financial report, revenue recognition of license and implementation revenue has been determined as a key audit matter. • Performing testing, on a sample basis, of management’s judgement in relation to application of “Go-live” date during the year and subsequent to year end to ensure revenue was recorded in the correct accounting period; • Review the operating effectiveness of internal controls in relation to the judgements associated with the satisfaction of identified performance obligations; • Reviewing a sample of deferred revenue balances at year end to ensure that revenue was appropriately deferred in accordance with the progress of individual projects; • Selecting a sample of projects during the year and agreeing them to customer contracts to ensure that revenue and deferred revenue were correctly calculated in accordance with AASB 15 and the Group’s revenue accounting policies. Acquisition Accounting Key audit matter How the matter was addressed in our audit As disclosed in Note 25 of the financial Our audit procedures to address the key audit matter included, report, JCurve Solutions Limited but were not limited to, the following: acquired the business and assets of the Spectrum Partner Group (an entity incorporated in Singapore). AASB 3 Business Combinations requires a number of judgements to be made in the acquisition accounting The audit of the acquisition is a key audit matter due to the significant judgment and complexity involved in assessing the determination of the fair value of identifiable intangible assets and the final purchase price which included contingent deferred consideration. • Reviewing the acquisition agreement to understand the key terms and conditions, and confirming our understanding of the transaction with management; • Assessing the estimation of the contingent consideration by challenging the key assumptions; • Comparing the assets recognised on acquisition against the historical financial information of the acquired businesses; • Obtaining the calculation of the fair value of net identifiable intangible assets acquired to critically assess the determination of the fair values; • Reviewing the recoverability of the intangible assets recorded as part of the business combination to ensure they remain recoverable in light of performance following acquisition; and • Auditing the disclosures associated with the acquisition to ensure they are complete and accurate and reflect the requirements of AASB 3. Other information The directors are responsible for the other information. The other information comprises the Chairman’s letter, Directors Report (excluding the audited Remuneration Report) and Shareholders Information the year ended 30 June 2019, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and 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 has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of JCurve Solutions Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO East Coast Partnership Gareth Few Partner Sydney, 26 August 2019 Shareholder Information 1. Distribution of shareholder and listed option holder numbers Category 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Ordinary 68 13 46 201 198 530 Units 6,122 37,633 398,567 9,694,673 317,719,905 327,856,900 % of Issued Capital 0.00% 0.01% 0.12% 2.96% 96.91% 100.00% There are 161 shareholders that hold less than a marketable parcel as at 16 August 2019. 2. Substantial shareholders The names of the substantial shareholders listed in the Group’s register as at 30 June 2019 and 16 August 2019 are outlined below, based on the shareholders last lodged Substantial Shareholder notice: Shareholder Gramell Investments Pty Limited Mark Jobling Philip Ewart 3. Voting rights 30 June 2019 16 August 2019 Number of ordinary % held of ordinary Number of ordinary % held of ordinary shares held share capital shares held share capital 83,124,215 51,204,301 27,267,804 25.35% 15.47% 8.30% 83,124,215 51,204,301 31,075,654 25.35% 15.47% 9.48% At members’ meetings, each eligible voter (i.e. eligible member, proxy, attorney or representative of an eligible member) has one vote on a show of hands; and one vote on a poll (except where a share has not been fully paid, that share will only confer that fraction of one vote which has been paid, and if the total number of votes does not constitute a whole number, the fractional part of that total will be disregarded). This is subject to the following: • Where any calls due and payable have not been paid; • Where there is a breach of a restriction agreement; • Where a member and their proxy or attorney are both present at the meeting, or if more than one proxy or attorney is present; • Where a vote on a particular resolution is prohibited by the Corporations Act 2001, Listing Rules, ASIC or order of a Court. 4. Company secretary 6. Register of securities The name of the company secretary is David Franks. The registers of securities are held at the following address: 5. Registered office Automic Registry Services Level 5/126 Phillip St, Sydney NSW 2000 The address of the principal registered office in Australia is: 1300 288 664 or +61 2 9698 5414 Level 8, 9 Help Street Chatswood NSW 2067 547. Top 20 Registered Holders – Ordinary Shares as of 16 August 2019 Name GRAMELL INVESTMENTS PTY LIMITED MR MARK CHRISTOPHER JOBLING DR PHILIP GORDON WILSON EWART & MRS KYLIE EWART MR GREGORY PETER WILSON HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED JACANA GLEN PTY LTD POTENTATE INVESTMENTS PTY LTD SHANMAC PTY LTD ROUND ETERNAL INVESTMENTS PTY LTD P EWART INVESTMENTS PTY LTD 1 2 3 4 5 6 7 8 8 9 10 VERSAILLES HOLDINGS PTY LTD 11 MR DAVID JAMES FRANKS & 12 13 14 15 MR WALTER GEORGE FRANKS MR CHARLES BYRON SMITH BUFF HOLDINGS PTY LTD MR STEPHEN CANNING MR PETER GRAHAM DORAN & MRS BARBARA LINDA DORAN 16 MR TRENT ROSS WATSON & MS GAY MCCARTHY & MS ZANA BRODZELI 17 MR ANDREW JOHN PETTINELLA 17 INVIA CUSTODIAN PTY LIMITED 17 18 19 20 MR SIMON JAMES OGILVIE ATTENBOROUGH SUPERANNUATION MANAGERS PTY LTD MS KATRINA MAREE FIORE GLEN ALPINE PTY LTD TOTAL HELD BY TOP 20 HOLDERS TOTAL HELD BY REMAINING SHAREHOLDERS Number of % of Ordinary Ordinary Shares Shares Held 83,124,215 25.35% 47,899,564 24,849,499 14.61% 7.58% 9,000,000 6,777,180 6,500,000 6,330,943 6,000,000 6,000,000 5,856,470 5,800,000 4,206,174 3,785,600 3,500,000 3,233,418 2,271,973 2.75% 2.07% 1.98% 1.93% 1.83% 1.83% 1.79% 1.77% 1.28% 1.15% 1.07% 0.99% 0.69% 2,121,742 0.65% 2,100,000 2,000,000 2,000,000 2,000,000 1,975,534 1,970,710 239,303,022 88,553,878 0.64% 0.61% 0.61% 0.61% 0.60% 0.60% 72.99% 27.01% 8. Stock exchange listing– ordinary shares (as of 30 June 2019) Quotation has been granted for all the ordinary shares of the Company on the Australian Securities Exchange. 9. Restricted securities As at 30 June 2019 and 16 August 2019 there are no restricted security classes recorded in the Company’s share register. 10. Unquoted securities The unquoted securities of the Company as at 16 August 2019 are: 10,000,000 Performance Rights are outlined below: Number of Performance Rights Exercise Price Expiry Date Number of Holders 10,000,000 $Nil 31 August 2019 5 11. Listing Rule 3.13.1 and 14.3 Further to Listing Rule 3.13.1 and Listing Rule 14.3, the Annual General Meeting of JCurve Solutions is scheduled for 19 November 2019. 56JCurve Solutions Limited ABN 63 088 257 729 Level 8, 9 Help Street Chatswood NSW 2067 P +61 2 9467 9200

Continue reading text version or see original annual report in PDF format above