CREATING THE FINANCIAL AND
TECHNICAL SOLUTIONS FOR
ACHIEVING GLOBAL CONSENSUS
DIGITALX LTD <> 2020 ANNUAL REPORT
LETTER FROM THE CHAIR
DIRECTORS’ REPORT
OPERATING & FINANCIAL REVIEW
REMUNERATION REPORT
DIRECTORS’ DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
AUDITOR’S REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS & OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASHFLOWS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
BASIS FOR PREPARATION
KEY OPERATING & FINANCIAL RESULTS
CAPITAL & RISK MANAGEMENT
FINANCIAL POSITION
EQUITY
GROUP STRUCTURE
OTHER DISCLOSURES
CORPORATE DIRECTORY
ASX INFORMATION
1
2
6
8
21
22
23
26
28
29
31
33
34
36
48
48
63
67
70
77
78
DIGITALX LTD <> 2020 ANNUAL REPORT
Dear Shareholders,
Although the 2020 Financial Year has been disappointing from a financial perspective, much has happened within the Company to
position it for growth and development in the short term.
During the year, the Company undertook various steps to streamline its business, focussing on its digital asset funds management
business as well as its consulting and product development business. Both business lines have seen growth and achievement over the
year.
The Board acknowledges that the Company’s future remains linked to the understanding and experience it has gained over the past
few years. It is one of the few technology companies listed on the ASX that has been able to navigate the emergence of the digital
asset and Blockchain technologies and remain in a position to benefit as these technologies become more mainstream.
With a small and cohesive team and a clear direction for the development of the Company’s business and assets, the Board looks
forward to the year ahead.
We take this opportunity to thank our shareholders that have been on the journey with the Company and who understand the
potential value lying within the digital asset and Blockchain markets.
Yours sincerely,
Toby Hicks
Non-Executive Chair
DIGITALX LTD <> 2020 ANNUAL REPORT
Your Directors present their report together with the financial report on the consolidated entity (referred to hereafter as the Group
or Consolidated entity) consisting of DigitalX Limited (DigitalX or the Company) and the entities it controlled at the end of, or during,
the year ended 30 June 2020. Information contained within this report and the financial report is presented in United States dollars
($USD).
Directors
The following persons were Directors of DigitalX during the financial year and up to the date of this report, unless stated otherwise:
Mr Toby Hicks
Non-Executive Chairman
Term of Appointment
Appointed 10 July 2019
Status
Non-Independent
Non-Executive
Current Directorships
None
Previous Directorships of
Listed Entities within past 3
years
None
Mr Peter Rubinstein
Non-Executive Director
Term of Appointment
Appointed 15 September
2017
Status
Non-Independent
Non-Executive
Current Directorships
Genetic Technologies Limited
Since 31 January 2018
Previous Directorships of
Listed Entities within past 3
years
None
Experience
Mr Hicks is a Partner of Steinepreis Paganin Lawyers & Consultants with over 18 years'
experience advising companies, both public and private, on matters relating to corporate
governance, capital raisings, and mergers and acquisitions, as well as general commercial and
strategic legal advice. He acts for a number of ASX listed companies.
Mr Hicks holds a Bachelor of Business (Management) and a Bachelor of Laws as well as a
Graduate Diploma in Company Secretarial Practice from the Governance Institute and is a
Chartered Secretary.
Mr Hicks spent 16 years as a Governor at the University of Notre Dame Australia and served for
14 years on the University’s Finance, Audit and Risk Committee and 4 years on the Law School
Advisory Board (Fremantle).
Interests in securities held as at the date of the report
7,500,000 performance rights; and
2,500,000 unlisted options exercisable at $0.10 each expiring on 30 June 2024.
Experience
Mr Peter Rubinstein has over 20 years’ experience in early stage technology commercialisation
through to public listings on the ASX. He is a lawyer by training, having worked at one of the
large national firms prior to moving in house at Montech, the commercial arm of Monash
University.
Mr Rubinstein has had significant exposure to the creation, launch and management of a diverse
range of technology companies including in biotech, digital payments and renewable energy.
Mr Rubinstein is also Chairman of EasyPark ANZ an early adopter in the “Smart City”
opportunities for digital parking.
Interests in securities held as at the date of the report
29,483,580 fully paid ordinary shares;
1,000,000 unlisted options exercisable at $0.22 each expiring on 10 December 2023;
1,500,000 unlisted options exercisable at $0.25 each expiring on 10 December 2023;
2,000,000 unlisted options exercisable at $0.30 each expiring on 10 December 2023; and
3,000,000 performance rights.
DIGITALX LTD <> 2020 ANNUAL REPORT
Mr Leigh Travers
Executive Director
Term of Appointment
Appointed 24 July 2016
Status
Non-independent
Executive
Current Directorships
None
Experience
Mr Leigh Travers has enjoyed a decade of building relationships in financial and technology
markets through his experience with fintech and investment advisory companies. He is a current
Director of Blockchain Australia, the industry body for blockchain businesses in Australia.
Mr Travers previously worked for seven years at Australian wealth management firm Euroz
Securities as an Investment Advisor. His clients included high net worth, institutions and listed
companies as he provided trading advice and assisted with company buybacks and sell downs
and capital raising services.
Mr Travers holds a Bachelor of Commerce and Communications from the University of Western
Australia and has completed a Fintech Certification from the Massachusetts Institute of
Technology and Certificate in Blockchain Strategy from RMIT.
Previous Directorships of
Listed Entities within past 3
years
None
Interests in securities held as at the date of the report
5,000,000 fully paid ordinary shares; and
18,000,000 performance rights.
Experience
Mr Sam Lee is the founder and CEO of Blockchain Global Ltd. Blockchain Global is a Blockchain
technology company with offices in Melbourne, New York, Kobe, Shanghai and Dalian.
Experience
Mr Stephen Roberts is an experienced Chair and non-executive director of a number of listed and
private commercial enterprises across financial services, bio-pharm logistics, agriculture and
waste recycling. Mr Roberts’ most recent executive position was as Regional Chief Executive
Officer and Senior Partner of Mercer Investments, Asia Pacific and prior to that Managing Director
of Russell Investments, Australasia.
Mr Xue Samuel (“Sam”) Lee
Non-Executive Director
Term of Appointment
Appointed 15 September
2017 (Resigned 8 July 2019)
Mr Stephen Roberts
Non-Executive Director
Term of Appointment
Appointed 3 April 2019
Resigned 4 July 2019
Company Secretary
Ms Shannon Coates has over 20 years’ experience in corporate law and compliance. She is currently named company secretary to a
number of public unlisted and listed companies; having provided company secretarial and corporate advisory services to boards across
a variety of industries, including financial services, manufacturing and technology both in Australia and internationally. Ms Coates is
a qualified lawyer, Chartered Secretary and graduate of the AICD’s Company Directors course.
Ms Shannon Coates was appointed Company Secretary of DigitalX on 8 December 2016.
DIGITALX LTD <> 2020 ANNUAL REPORT
Principal activities
During the financial year, the principal activities of the Group consisted of:
• Blockchain consulting & development; and
•
Funds under management.
Refer to the Operating and Financial Review for further information about each of the activities.
Environmental regulation
The Group is not subject to significant environmental regulation in respect of its operations.
Significant changes in the state of affairs
Significant changes in the state of affairs of the Group during the financial year were as follows:
• During the course of the financial year the Group’s contributed equity increased by $USD1,094,598 (from $USD33,662,319 to
$USD34,756,917) as a result of shares issued on conversion of options and investment in Bullion Asset Management. The changes
for the year are disclosed in Note F1.
• As a result of the operating performance combined with the year on year decrease in digital asset prices, the Group’s cash and
digital asset position decreased by $USD4,815,244 (from $USD12,276,062 to $USD7,460,818).
•
In addition to the above, the Group also announced the following significant changes and updates to the market during the
financial year which contributed to the overall performance and position of the Group at the end of the financial year:
Date
Announcement
4/07/2019
Resignation of Director
8/07/2019
Resignation of Director
11/07/2019 Appointment of Non-Executive Chairman
5/09/2019
Company Update
13/11/2019 DigitalX launches Bitcoin Fund
15/11/2019
Issue of shares for transfer of shares in BAM
29/04/2020 Company Update
1 Refer to the relevant section of the Report for the impact of the change.
2Refer to ASX announcement for full details.
Dividends
Impact1
Link2
Directors’ Report
Directors’ Report
Directors’ Report
Announcement
Announcement
Announcement
Investments
Directors’ Fees
Segment Note
Investments
Revenue
Digital Assets
Investments
Equity
Expenditure
Announcement
Announcement
Announcement
Announcement
No dividends have been paid or declared up to the date of this report. The Directors have not recommended the payment of a dividend
in the current financial year.
Any future determination as to the payment of dividends by the Company (and the potential creation of a dividend policy for that
purpose) will be at the discretion of the Directors and will depend on the availability of distributable earnings and operating results
and financial condition of the Company, future capital requirements and general business as well as other factors considered relevant
by the Directors.
No assurance in relation to the payment of dividends or franking credits attaching to dividends can be given by the Company.
DIGITALX LTD <> 2020 ANNUAL REPORT
Subsequent events
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected the Group’s operations, results or state
of affairs, or may do so in future years other than those set out below.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not had a material impact on the business up to 30
June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly
developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
Date of event
Details of event
1 September 2020
The Company issued 5,251,852 at $0.0324 per share on conversion of options.
1 September 2020
Issue of 1,136,634 shares to a member of KMP on satisfaction of performance milestones, in accordance
with the Employment Agreement.
9 September 2020
Issue of 10,000,000 options exercisable at $AUD0.05 subject to performance milestones and expiring 9
September 2023.
10 September 2020
The Company issued 2,561,728 at $0.0324 per share on conversion of options.
21 September 2020
The Company issued 2,600,000 at $0.0324 per share on conversion of options.
27 September 2020
Due to the volatile nature and the materiality of the digital assets held, we disclose the impact of changes
in the value of digital assets held by the Group, excluding the DigitalX Fund and DigitalX BTC Fund and
unlisted digital assets, as at the close date of the 27 September.
Coin Symbol
BTC
$USD Spot Price
at 30 June
$9,137
$USD Spot Price
at 27 Sept
$10,774
$USD Impact
$705,547
DIGITALX LTD <> 2020 ANNUAL REPORT
Operating results
The result for the year ended 30 June 2020 was a consolidated
loss attributable to members of the Group of $USD4,707,851
(2019: loss of $USD2,524,151). Following a disappointing first
half loss of $4,508,111, DigitalX underwent a strategic review
that led to significant cost reductions.
Overview
● Following a transitional year, DigitalX focused on
advancing the digital assets funds management division
and on blockchain technology development.
● DigitalX is focused on these two business lines to provide
shareholders with exposure to the fundamental impact
of blockchains as both a technological and financial
innovation.
● Following a strategic review, operational expenditure
was reduced in FY20 by 41% from $4.9m to $2.9m.
Company formed an internal innovation working group to
research, identify and validate potential product offerings for
leveraging future data improvements and DLT benefits. The
Group has prioritised the development of a regulatory
technology (RegTech) business, which is currently being tested
corporate
with potential
governance, at Australian publicly listed companies with a
view to expand into international markets.
responsible
customers
for
and
insured
DigitalX provided consulting and development services to the
xbullion gold project during the year. xbullion offers digitally
transferable ownership of physical gold bullion that is vaulted,
audited
fundamental
transformation in the way gold bullion can be acquired.
xbullion progressed to achieve several key milestones,
including the successful audit and deployment of smart
contracts developed by DigitalX for the minting, transfer and
redemption of gold ownership recorded through the
Ethereum blockchain.
representing
a
Blockchain Innovation and Development
Digital Asset Funds Management
Throughout the year DigitalX delivered on its strategy to
deepen engagement with enterprise organisations through a
series of blockchain discovery workshops and project
submissions. The purpose of the workshops was to collaborate
with senior executives to assess problems and challenges
within their organisations where blockchain solutions can
provide high business value. Identified applications were
progressed to a prototype design stage, with an objective of
demonstrating the potential impact of these new technologies
for businesses and a roadmap for solution productisation for
DigitalX.
DigitalX was engaged by a large global accounting firm to
deploy a set of smart contracts supporting the development of
a blockchain based accounting and audit system for large joint
venture owned and operated oil and gas assets. A prototype
was developed for demonstration to global customers in the
is currently assessing further
energy
commercialisation opportunities for this product with project
partners.
industry. DigitalX
The market for blockchain technology within the public sector
continued to grow with a number of government programs
established to assist with the advancement of the technology
within Australia. DigitalX was engaged to provide a blockchain
solution design project in the gaming industry, alongside a
large international consulting firm, for a government agency
and continued to submit tender applications during the period
for other public sector entities.
DigitalX continued to closely monitor distributed ledger
technology (DLT) opportunities around the transformational
development of a large critical national financial market
infrastructure replacement project. In response to this, the
DigitalX is the investment manager of digital asset investment
products that provide qualified investors with a secure and
accessible way to gain digital asset exposure. The Company
operates two professionally managed wholesale funds, the
DigitalX Bitcoin Fund and the Digital Asset Fund, a diversified
basket of leading digital assets. The DigitalX digital asset funds
solve the technical and administrative challenges of making an
investment into this emerging asset class.
During the first half of the financial year the division explored
the potential of expanding the division internationally, as well
as expanding the potential investment horizon for the funds.
Subsequently, the Board made the decision to refocus on the
Australian marketplace and on the leading digital assets,
including Bitcoin. The execution of this revised strategy has
seen significant operational savings as well as
the
establishment of the DigitalX Bitcoin Fund.
The DigitalX Bitcoin Fund is available through a traditional
unlisted fund structure to offer qualifying investors, including
family offices and high net worth individuals, a low-cost and
familiar vehicle to gain exposure to this growing asset class.
The DigitalX Bitcoin Fund was seeded with 215 bitcoin from the
Group’s existing holding and was announced to the market in
November 2019.
The performance of the two investment funds over the second
half of the year was pleasing. From inception the DigitalX
Bitcoin Fund returned 58% and the Digital Asset Fund returned
DIGITALX LTD <> 2020 ANNUAL REPORT
60%, significantly better than gold 26%1 and the ASX All Ords -
15%2. The performance was attributable to the trillions of
dollars of monetary and fiscal stimulus that have been injected
in to global markets as well as continued
institutional
acceptance of the asset class. The COVID-19 effect on markets
accelerated these trends, including the movement towards
digital money.
During the period, significant efforts were made to broaden
the education and awareness of the investment funds and
digital assets more generally. The funds management division
delivers fortnightly digital asset education and research, in
collaboration with Delphi Digital to qualified investors and
financial advisors. The DigitalX Bitcoin Fund secured a product
listing on Australia’s number 1 rated wealth management
platform Netwealth Group Limited (ASX:NWL). The challenges
in acquiring Bitcoin from cryptocurrency exchanges, storing
them securely and managing tax and audit complexities have
been the biggest barriers to entry for potential Bitcoin
investors. The DigitalX Bitcoin Fund was specifically built to
solve these pain points for investors and its addition to the
Netwealth platform further serves this purpose.
COVID-19
The Company made key financial decisions to manage its
working capital during this uncertain time, including the
deferral of all Director fees and the reduction in salaries for all
senior executives. Each of the Company’s Non-Executive
Directors agreed to defer their Director fees for up to 12
months and to convert those fees into shares in the Company,
subject to the receipt of all shareholder approvals, expected to
be put to shareholders at the Company’s AGM in November
2020. In addition, the Company’s Executive Director, Mr Leigh
Travers agreed to defer an equivalent amount on the same
terms as the Non-Executive Directors.
Future Developments
With a strong digital asset market as well as a number of new
commercial opportunities DigitalX is pursuing, the outlook for
the Company is positive. Post the end of the financial year, the
Funds Management division has recently appointed a new
fund manager, Mr Matthew Harry, to further capital raising
efforts inside the division. As part of this appointment, the
Company expects to secure additional distribution channels
alongside Netwealth as well as improving the education
around digital assets in the Australian investment market by
providing CPD accredited investor presentations.
DigitalX has been actively investigating opportunities to build
products to complement the major Distributed Ledger
Technology (DLT) projects within Australia and the working
group established to actively identify the highest priority
opportunities has progressed. The Group has prioritised the
development of a regulatory technology business, with
activities now at an advanced stage the Company looks
forward to updating the market on its product development
efforts.
The xbullion project recently went live via a soft launch and
absent any setbacks will be moving to a full launch over the
quarter. The market for tokenised assets continues to
increase, with the Ethereum ecosystem growing from $500m
to over $6B USD of asset value in the last year3.
1
https://www.perthmint.com/investment_invest_in_gold_precious_metal_pr
ices.aspx
2 https://www.asx.com.au/about/historical-market-statistics.htm
3 https://defipulse.com/
DIGITALX LTD <> 2020 ANNUAL REPORT
Message from the Board of Directors
The Directors present this Remuneration Report, which forms part of the Directors’ Report for the financial year ended 30 June 2020.
The Directors note that Director and Executive remuneration continues to be an area that receives stakeholder focus and scrutiny, as
such the Remuneration Report has been structured in an attempt to provide transparency and clarity to readers around the
framework, policies and remuneration of DigitalX Limited’s Directors and its Executives.
The Remuneration Report has been set out under the following main headings:
A. Key Management Personnel
B. Remuneration policy, including the relationship between remuneration policy and Company performance
C.
Key terms of employment contracts
D. Remuneration of Directors and Executives
E.
Share options and performance rights granted to Directors
F.
Shareholdings of Directors
G. Related party transactions
H.
I.
Future remuneration developments
Definitions
The information provided in this Remuneration Report has been audited as required by Section 308(3C) of the Corporations Act 2001.
KEY MANAGEMENT PERSONNEL
The Key Management Personnel (KMP) of the Group consist of the Board and Executives. This is the case due to the size and scale of
the Group’s current operations. All the named persons held their current position for the whole or part of the financial year and since
the end of the financial year unless otherwise stated.
Position
Status
Term as KMP
Chairman and Non-Executive Director
Non-Executive KMP
From 10 July 2019
KMP
Toby Hicks
Peter Rubenstein
Sam Lee
Stephen Roberts
Non-Executive Director
Non-Executive Director
Non-Executive Director
Leigh Travers
Executive Director
Jonathon Carley
Chief Financial Officer
Neel Krishnan
President
REMUNERATION POLICY
For the year ended 30 June 2020 the Board as a whole determined and
reviewed compensation arrangements for the Executive Director and where
applicable the Executive Team. The Board assessed the appropriateness of the
nature and amount of emoluments of such officers on a periodic basis by
reference to relevant employment market conditions with the overall objective
of ensuring maximum shareholder benefit from the retention of a high-quality
team. The objective of the Company’s remuneration framework was to ensure
reward for performance was competitive and appropriate to the results
delivered.
Non-Executive KMP
Non-Executive KMP
Non-Executive KMP
Executive KMP
Executive KMP
Executive KMP
Full Year
To 8 July 2019
To 4 July 2019
Full Year
Full Year
To 5 Sep 2019
The Board aims to ensure that executive
rewards satisfied the following key criteria for
good reward governance practices:
Competitiveness and reasonableness;
Acceptability to shareholders;
Performance linked;
Transparency; and
Capital management.
DIGITALX LTD <> 2020 ANNUAL REPORT
IMPLEMENTATION OF REMUNERATION STRATEGY IN RESPONSE TO COVID-19 REVIEW
As announced on 29 April 2020, Each of the Company’s Non-Executive Directors has agreed to defer their Director fees for up to 12
months and to convert those fees into shares in the Company, subject to the receipt of all shareholder approvals, expected to be put
to shareholders at the Company’s Annual General Meeting (AGM) in November 2020. In addition, the Company’s Executive Director,
Mr Leigh Travers has agreed to the deferral of the same amount of his salary as the Non-Executive Directors on the same terms.
In addition to the above the Company’s senior executives agreed to a reduction in salaries ranging from 10% to 25%.
ELEMENTS OF REMUNERATION
Base pay
Directors and Executives are offered a competitive base salary. Base pay for executives is reviewed annually by the Board to ensure
that individual executive’s pay is competitive with the market and is also reviewed upon promotion or additional responsibilities.
There is no guarantee of base pay increases fixed in any executive or Director contracts.
Commission
There is no entitlement to commissions-based remuneration.
Short term incentives (STI)
Executive Director
To align the remuneration of the Executive Director and the performance of the Company, the Executive Director is issued STI in the
form of performance rights that vest on the achievement of certain performance hurdles. The STI for the year ended 30 June 2020
were approved by shareholders at the Annual General Meeting held on 21 November 2019.
Staff
For the purpose of incentivising and tying the rewarding of the Company’s staff to the performance of the Company, the Board has
determined that it may, at its discretion, issue shares or other similar instruments from time to time as a reward.
Long term incentives (LTI)
There were no LTI issued for the year ended 30 June 2020.
Performance Metrics
At the 2019 AGM the Board set the following performance metrics for 30 June 2020 year for the
Executive Director as part of the issue of 9,000,000 performance rights (STI).
Key
The table below sets out the performance against those metrics and where applicable,
commentary made on the progress towards the performance targets.
Target achieved
Work in progress
Target not met
Metric
Company achieving NPAT of
$5,000,000
Milestone
Issued
2018
Met?
Progress made
As noted in the commentary on results for the period in the Operating
and Financial Review, the results for the year were impacted by;
Year on year fall in the value of the Group’s digital assets;
•
• Restructure of Group business lines;
• Reduction in operating expenses;
•
•
COVID-19; and
Established the DigitalX bitcoin fund.
DIGITALX LTD <> 2020 ANNUAL REPORT
DigitalX has been working hard to continue to leverage its core
competencies, specifically, the commercialisation of blockchain
technologies and
focusing on blockchain consulting and
development and funds management.
is
Despite the final financial result, the Group ended the year well
capitalised and resourced to deliver an
improved year for
shareholders.
As noted above, there was a 33% reduction in the year on year value
of the Group’s carring value of digital asset due to a decline in the
price of digital assets combined with the impact of COVID-19 on
global equities markets.
2018
2018
Consistent with the commentary above.
2019
Consistent with the commentary above.
Company’s Shares closing at
a price equal to or greater
than $0.25 on five
consecutive trading days
over the term of the
Performance Rights
Company’s Shares closing at
a price equal to or greater
than $0.30 on five
consecutive trading days
over the term of the
Performance Rights
Company’s Shares closing at
a price equal to or greater
than $0.09 on fifteen
consecutive trading days
over the term of the
Performance Rights
DIGITALX LTD <> 2020 ANNUAL REPORT
11
RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY
PERFORMANCE
As noted in Sections A & B, the Board seeks to align the interests of the Executive Team
with those of the shareholders when setting future short and long-term benefits. For the
year ended 30 June 2020 the total remuneration is reflective of the remuneration strategy
with adjustments made to reflect the current state of the Group and the change in
performance from the previous year, this is evident from the relationship between:
•
•
Total KMP reported remuneration down 21% from $816,299 to $643,444 reflective of
a decrease in performance-based remuneration primarily in the form of share-based
payments. Total base remuneration (including other benefits) was down 6% from
$422,146 to $395,262 and at risk remuneration was down 37% from $394,153 to
$248,182 in line with the financial performance of the Company;
The overall remuneration trend is also consistent with the share price performance
and earnings per share (EPS) performance as evident in the graphs to the right;
• Decrease in vested at risk remuneration to $79,626 (32%); and
•
In April 2020 as a response to COVID-19 and capital management, the Board deferred
the fees for Non-Executive Directors.
The Company is not yet at stage of its development where it considers benchmark returns
against an ASX peer group (blockchain focussed) relevant based on limited inclusions and
comparable data.
Unvested
168,556
68%
Vested
79,626
32%
FY2020
At Risk Remuneration
Vested
Unvested
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
4,000,000
2,000,000
0
(2,000,000)
(4,000,000)
(6,000,000)
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Share price & total KMP
remuneration trend
At risk
Base
Share price at the EOY
Basic EPS & total KMP
remuneration trend
At risk
Base
Basic earnings per share
0.160
0.140
0.120
0.100
0.080
0.060
0.040
0.020
0.000
0.010
0.005
0.000
(0.005)
(0.010)
(0.015)
(0.020)
(0.025)
Net profit &
KMP remuneration
Net profit/(loss) before tax
Total reported remuneration
2016
2017
2018
2019
2020
DIGITALX LTD <> 2020 ANNUAL REPORT
12
RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY PERFORMANCE – FIVE YEAR DATA TABLE
The table below includes the remuneration and performance data from the preceding five (5) financial years used to analyse the linkage between remuneration and performance in the section
above.
Revenue & other income from all operations
40,403,656
8,041,026
9,905,859
2,555,039
381,519 ↓
Net profit/(loss) before tax
(3,417,305)
(3,973,961)
2,595,834
(2,524,151)
(4,707,851) ↓
30 June 2016
$USD
30 June 2017
$USD
30 June 2018
$USD
30 June 2019
$USD
30 June 2020
$USD
Total reported in remuneration report
Remuneration - Base
Remuneration - At risk
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Share Price at the start of year
Share price at the end of year
Final dividend
955,292
910,725
44,567
(0.019)
(0.019)
0.150
0.140
-
755,980
1,437,838
691,496
64,484
(0.020)
(0.020)
0.140
0.036
-
479,860
957,978
0.006
0.005
0.036
0.075
-
812,419
418,266
394,153
(0.005)
(0.005)
0.075
0.055
-
643,444 ↓
395,262 ↓
248,182 ↓
(0.008) ↓
(0.008) ↓
0.055
-
0.017 ↓
-
DIGITALX LTD <> 2020 ANNUAL REPORT
13
KEY TERMS OF EMPLOYMENT CONTRACTS
Executives
Mr Leigh Travers
Executive Director
Under an Executive Employment Agreement entered into between Mr Travers and DigitalX, Mr Travers is appointed as Executive
Director, in effect from 28 November 2017. The employment will be ongoing until it is terminated in accordance with Mr Travers’
Executive Employment Agreement. The employment may be terminated by either party giving 6 months’ written notice (although
less than 6 months’ notice is required by DigitalX in certain circumstances such as Mr Travers’ illness, absence, material breaches or
misconduct in which case Mr Travers will not be entitled to receive any payment in lieu or compensation as set out below). On
termination of his employment and where DigitalX elects to make payment in lieu of notice, the Company must pay Mr Travers a
payment equal to his salary for the remainder of the notice period. Mr Travers will be under restraint and non-solicitation clauses for
up to 24 months after the termination of his employment.
Mr Travers’ current salary is $USD145,000 per annum (exclusive of superannuation) subject to annual salary reviews and his
reasonable expenses will also be paid by the Company.
On 29 April 2020 the Company announced the Mr Travers had agreed to defer up to $AUD50,000 of his remuneration for up to 12
months in line with the deferral taken by Non-Executive Directors.
Mr Jonathon Carley
Chief Financial Officer
Under an amended Employment Agreement entered into between Mr Carley and DigitalX, Mr Carley was appointed as Chief Financial
Officer, in effect from 1 July 2019. The employment will be ongoing until it is terminated in accordance with Mr Carley’s Employment
Agreement. The employment may be terminated by either party giving 1 months’ written notice (although less than 1 months’ notice
is required by DigitalX in certain circumstances such as Mr Carley’s illness, absence, material breaches or misconduct in which case
Mr Carley will not be entitled to receive any payment in lieu or compensation as set out below). On termination of his employment
and where DigitalX elects to make payment in lieu of notice, the Company must pay Mr Carley a payment equal to his salary for the
remainder of the notice period. Mr Carley will be under restraint and non-solicitation clauses for up to 12 months after the termination
of his employment.
Mr Carley‘s current salary is $AUD150,000 per annum (exclusive of superannuation) after accepting a 25% reduction due to COVID-
19. Mr Carley is subject to annual salary reviews and his reasonable expenses will also be paid by the Company.
Under all of the Employment Agreements above, DigitalX, in its absolute discretion acting reasonably, can assign and transfer the
employment to any of DigitalX’s Related Bodies Corporate.
Non-Executive Directors
Non-Executive Directors remuneration arrangements include compensation in the form of annual Directors’ fees in accordance with
their relevant service agreement. The Non-Executive Directors from time to time may receive incentive compensation in the form of
share-based payments (as approved by Shareholders).
For the year ended 30 June 2020, all Non-Executive Directors received a base fee of $AUD50,000 exclusive of entitlements. On 29
April 2020 the Company announced the Non-Executive Directors agreed to defer their fees for up to 12 months and to convert those
fees into shares in the Company, subject to receipt of all shareholder approvals.
Amounts payable to Director controlled entities for services provided by Directors for the year ending 30 June 2020 is detailed in the
following table of this report. The Group may carry out consulting activities with the Directors on an arm’s length basis in the normal
course of business.
DIGITALX LTD <> 2020 ANNUAL REPORT
REMUNERATION OF DIRECTORS AND EXECUTIVES
The compensation for each Director and executive for the period is contained in the following table:
Year ended 30 June 2020
14
Name
Short-term employee benefits
Post-employment
benefits
Share-based payment
Total
At Risk %
Salary & Fees1
$USD
Director Fees1
$USD
Other Benefits2
$USD
Superannuation3
$USD
Shares
$USD
Options and
performance rights11
$USD
$USD
Non-Executive
Directors
Toby Hicks8
Peter Rubinstein
Sam Lee7
Stephen Roberts9
Executive Directors
Leigh Travers
Other KMP
Jonathon Carley
Neel Krishnan10
Total
-
-
-
-
148,934
131,081
20,833
300,848
24,026
25,025
-
-
-
-
-
49,051
-
-
-
-
3,094
9,918
-
-
(3,138)
14,964
4,473
2,870
4,205
12,453
729
41,158
-
-
-
-
-
-
-
150,5305
20,9656
-
-
177,650
84.7%
55,908
37.5%
-
-
-
-
76,6874
237,447
32.3%
-
-
148,006
24,433
-
-
248,182
643,444
38.6%
1 Amounts paid in Australian Dollars are converted to United States Dollars at time of payment.
2 Other benefits include movements in employee benefits.
3 Superannuation or equivalent (i.e 401k, social security).
4 Included in the total is $USD68,082 relating to the share-based payment expense for performance
rights issued but not vested. $USD8,605 relates to deferred Directors’ fees to be issued in shares.
5 Included in the total is $USD62,299 relating to the share-based payment expense for performance
rights issued but not vested. $USD8,605 relates to deferred Directors’ fees to be issued in shares.
6 Included in the total is $USD12,360 relating to the share-based payment expense for performance
rights issued but not vested. $USD8,605 relates to deferred Directors’ fees to be issued in shares.
7 Sam Lee resigned effective 8 July 2019.
8 Toby Hicks was appointed on 10 July 2019.
9 Stephen Roberts resigned effective 4 July 2019.
10 Mr Krishnan ceased being a KMP on 5 September 2019.
11 Refer to Sections E & F of the Remuneration Report for additional details.
DIGITALX LTD <> 2020 ANNUAL REPORT
15
Year ended 30 June 2019
Name
Short-term employee benefits
Post-employment
benefits
Share-based payment
Total
At Risk %
Salary & Fees1
$USD
Director Fees1
$USD
Other Benefits2
$USD
Superannuation3
$USD
Shares
$USD
Options and
performance rights8
$USD
$USD
Non-Executive
Directors
Peter Rubinstein
Sam Lee5
Toby Hicks6
Stephen Roberts7
Executive Directors
Leigh Travers
Other KMP
Neel Krishnan
Total
-
-
-
-
140,062
125,000
265,062
50,510
35,707
6,087
9,569
-
-
101,003
-
-
-
-
-
-
-
-
-
-
-
-
148,318
148,318
-
-
198,828
74.6%
184,025
80.6%
6,087
9,569
-
-
9,494
13,306
29,3544
192,216
20.2%
25,026
34,520
4,375
17,681
24,483
24,483
43,680
369,670
222,564
31.2%
812,419
49.9%
1 Amounts paid in Australian Dollars are converted to United States Dollars at time of payment.
2 Other benefits include tokens from Initial Coin Offerings (ICOs) distributed to KMP and staff.
3 Superannuation or equivalent (i.e 401k, social security).
4 Included in the total is an amount of $USD29,354 relating to the share-based payment expense for performance rights issued but not vested.
5 Sam Lee resigned effective 8 July 2019.
6 Toby Hicks resigned effective 7 September 2018 and was reappointed on 10 July 2019.
7 Stephen Roberts was appointed effective 3 April 2019 and resigned on 4 July 2019.
8 Refer to Sections E & F of the Remuneration Report for additional details.
DIGITALX LTD <> 2020 ANNUAL REPORT
16
SHARE OPTIONS AND PERFORMANCE RIGHTS GRANTED TO KEY MANAGEMENT PERSONNEL
Name
2020
Toby Hicks
Peter Rubinstein
Sam Lee2
Total
Options
Opening balance
Granted as
compensation
Exercised during the
period
Closing balance3,A
-
2,500,0001
4,500,000
4,500,000
9,000,000
-
-
2,500,000
-
-
(4,500,000)
(4,500,000)
2,500,000
4,500,000
-
7,000,000
1 Mr Hicks was issued with 2,500,000 incentive options on the terms and conditions set out in the notice of annual general meeting for 2019 and approved at the
Company’s AGM on 21 November 2019. The incentive options were vested immediately in accordance with the terms and conditions approved by shareholders.
2 Mr Lee resigned from the Board of DigitalX on the 8th of July 2019.
3 7,000,000 remain unexercised at 30 June 2020. Further details on the valuation can be found in Note F2.
Name
2020
Toby Hicks
Leigh Travers
Peter Rubinstein
Total
Opening balance
Granted as
compensation
Exercised during the
period
Closing balanceA
Performance Rights
-
9,000,000
-
17,500,000
29,000,000
33,000,000
9,000,000
19,500,000
-
-
-
-
7,500,000
18,000,000
3,000,000
28,500,000
1 Mr Hicks was issued with 7,500,000 performance rights on the terms and conditions set out in the 2019 notice of annual general meeting and approved at the
Company’s AGM on 21 November 2019. During the year the performance hurdles were not satisfied and 2,500,000 rights remain unvested at 30 June 2020. Further
valuation details can be found in F2.
2 Leigh Travers was issued with 9,000,000 performance rights on the terms and conditions set out in the notice of 2019 annual general meeting and approved at the
Company’s AGM on 21 November 2019. During the year the performance hurdles were not satisfied and 9,000,000 rights remain unvested at 30 June 2020. Further
valuation details can be found in F2.
3 Mr Rubinstein was issued with 3,000,000 performance rights on the terms and conditions set out in the 2019 notice of annual general meeting and approved at the
Company’s AGM on 21 November 2019. During the year the performance hurdles were not satisfied and 3,000,000 rights remain unvested at 30 June 2020. Further
valuation details can be found in F2.
SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL
Directors
Peter Rubinstein
Leigh Travers
Sam Lee
KMP
Neel Krishnan
Jonathon Carley
Total
Opening Balance
1 July 2019
Granted as
compensation
Conversions &
vesting
23,266,296
4,461,111
10,096,296
6,057,500
25,000
37,823,703
-
-
-
-
-
-
-
-
-
-
-
-
Net Other
changes1
2,200,000
Closing balance
30 June 2020A
25,466,296
538,889
5,000,000
2(10,096,296)
2(6,057,500)
-
-
-
25,000
(7,357,407)
30,466,296
1 Net changes include initial holdings, final holdings and on-market sales as reported to the market per the respective Appendix 3X, 3Y, and 3Z.
1 Net change is final balance at time of ceasing to be a KMP.
A – Only KMP with balances or movements have been included. If a KMP is not shown above then this denotes a nil balance.
DIGITALX LTD <> 2020 ANNUAL REPORT
17
RELATED PARTY TRANSACTIONS
Year ended 30 June 2020
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Chairman Toby Hicks is a partner,
$USD41,343 for legal services rendered on various matters. This amount relates to the period of the financial year that Mr Hicks
was a Director of the Company.
Year ended 30 June 2019
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Director Toby Hicks is a partner, $5,533
for legal services rendered on various matters. This amount relates to the period of the financial year that Mr Hicks was a Director
of the Company. At 30 June 2019, Steinepreis Paganin is not considered a related party as Mr Hicks was not a Director at 30 June
2019.
• During the year, the Group recognised an expense and paid Blockchain Global Ltd, a company of which Messrs Rubinstein and
Lee served as Directors of during the year, of $1,211 for reimbursement of costs. The Company notes that both Mr Rubinstein
and Mr Lee resigned as Directors of Blockchain Global during the year and the Company no longer considers Blockchain Global to
be a related party on that basis. Messrs Rubinstein and Lee were appointed Directors of the Company as nominees of Blockchain
Global Ltd.
• During the year, Mars Capital Australia Pty Ltd, a company controlled by Non-Executive Director Sam Lee, converted 14
convertible notes, with a face value of $AUD10,000 each, convertible at $AUD0.027 each, to 5,185,185 ordinary shares. As part
of the conversion 2,800,000 options exercisable at $AUD0.0324 expiring 18 September 2020 were also issued. During the year,
$AUD5,236 of interest was paid, and recognised as an expense, on the convertible notes held. At 30 June 2019, no amounts were
owed to Mars Capital.
• During the year, Irwin Biotech Nominees Pty Ltd, a company controlled by Non-Executive Chairman Peter Rubinstein, converted
17 convertible notes, with a face value of $AUD10,000 each, convertible at $AUD0.027 each, to 6,796,296 ordinary shares. As
part of the conversion 3,400,000 options exercisable at $AUD0.0324 expiring 18 September 2020 were also issued. During the
year, $AUD6,358 of interest was paid, and recognised as an expense on the convertible notes held. At 30 June 2019, no amounts
were owed to Irwin Biotech.
• During the year, the Group paid Value Admin Pty Ltd, a company controlled by Non-Executive Chairman Peter Rubinstein,
$USD50,509 as part of Non–Executive Director fees.
FUTURE REMUNERATION DEVELOPMENTS
The Directors note at last year’s Annual General Meeting the Remuneration Report passed unanimously on a poll and there were no
comments on the Remuneration Report. There are no future developments planned.
DIGITALX LTD <> 2020 ANNUAL REPORT
18
DEFINITIONS
Key management personnel
Those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise) of that entity.
Remuneration of an officer or employee of a corporation
A benefit given to an officer or employee of a corporation is remuneration if and only if the benefit, were it received by a director of
the corporation, would be remuneration of the director for the purposes of an accounting standard that deals with disclosure in
companies' financial reports of information about directors' remuneration.
Remuneration committee
A committee of the board of directors of the company; and has functions relating to the remuneration of key management personnel
for the company.
Remuneration consultant
A person:
a) Who makes a remuneration recommendation under a contract for services with the company to whose key management
personnel the recommendation relates; and
b) Who is not an officer or employee of the company.
A remuneration recommendation
(a) A recommendation about either or both of the following:
a) For one or more members of the key management personnel for a company;
how much the remuneration should be;
i.
ii. what elements the remuneration should have; or
b) A recommendation or advice about a matter or of a kind prescribed by the regulations.
ASIC may by writing declare that s.9B(1) of the Corporations Act 2001 above does not apply to a specified recommendation or
specified advice but may do so only if ASIC is satisfied that it would be unreasonable in the circumstances for the advice or
recommendation to be a remuneration recommendation. The declaration has effect accordingly. The declaration is not a legislative
instrument.
What is not a remuneration recommendation?
None of the following is a remuneration recommendation (even if it would otherwise be covered by subsection (1)):
a) Advice about the operation of the law (including tax law);
b) Advice about the operation of accounting principles (for example, about how options should be valued);
c) Advice about the operation of actuarial principles and practice;
d) The provision of facts;
e) The provision of information of a general nature relevant to all employees of the company;
f) A recommendation, or advice or information, of a kind prescribed by the regulations.
AGM
Means an annual general meeting of a company that section 250N requires to be held.
END OF AUDITED REMUNERATION REPORT
DIGITALX LTD <> 2020 ANNUAL REPORT
19
Directors’ meetings
Given the size and scale of operations of the Company, the full Board undertook the responsibilities of the Audit and Risk Committee,
Remuneration Committee and Nomination Committee.
The Directors attendances at Board meetings held during the financial year were:
Director
Toby Hicks1
Peter Rubinstein
Leigh Travers
Stephen Roberts2
Sam Lee3
1 Toby Hicks was appointed effective 10 July 2019.
2 Stephen Roberts resigned effective 4 July 2019.
3 Sam Lee resigned effective 8 July 2019.
Shares under option
Board Meetings
Number eligible to attend
13
14
14
1
1
Number attended
13
14
14
1
1
As at the date of this report, there are 24,268,382 options to subscribe for unissued ordinary shares in the Company, comprising:
Date options
granted
Vesting
Date
Option class
Exercise price of
options
Expiry date of
options
Number of shares
under option
10 December 2018
10 December 2018
Unlisted
$0.22
10 December 2023
2,000,000
10 December 2018
10 December 2018
Unlisted
$0.25
10 December 2023
3,000,000
10 December 2018
10 December 2018
Unlisted
$0.30
10 December 2023
4,000,000
17 May 2019
17 May 2019
Unlisted
$0.0847
17 May 2022
2,768,382
11 July 2019
11 July 2019
Unlisted
10 September 2020
-
Unlisted
$0.10
$0.10
30 June 2024
2,500,000
9 September 2023
10,000,000
The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the
Company or any other body corporate or registered scheme.
Shares issued on exercise of options
During the financial year, and to the date of this report, the Company issued 24,691,358 Ordinary Shares, on exercise of options.
Date
1 July 2019
31 August 2020
10 September 2020
Details
Unlisted
Unlisted
Unlisted
Issue Price A$
Number of Shares
0.0324
0.0324
0.0324
24,691,358
5,251,852
2,561,728
Shares under convertible notes
As at the date of this report, there are no convertible notes issued that are convertible to ordinary shares in the Company.
DIGITALX LTD <> 2020 ANNUAL REPORT
20
Shares issued on conversion of convertible notes
During the financial year there were no shares issued on conversion of Convertible notes.
Indemnification of officers and auditors
During the financial period, the Company paid a premium in respect of a contract ensuring the Directors, secretary and officers of the
Company and of any related body corporate against a liability incurred as such a Director, Secretary or Officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the
premium.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the
officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in
connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by
the officers or the improper use of their position or of information to gain advantage for themselves or someone else or to cause
detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs
and those relating to other liabilities.
The Company has executed a Deed of Protection for each of the Directors. The Company has not otherwise, during or since the
financial period, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a
liability incurred as such an officer or auditor.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to 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 part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave
of the Court under section 237 of the Corporations Act 2001.
Non-audit services
Amounts of $AUD16,481 were paid to the auditor for non-audit, tax compliance services provided during the period. No amounts are
payable as at the date of this report. Full details of amounts paid to the auditor, BDO Audit (WA) Pty Ltd, are set out in Note C3.
The Board of Directors has considered the position and are satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the
provision of non-audit services by the auditor, as noted above, did not compromise the auditor independence requirements of the
Corporations Act 2001 none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22.
Auditor
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
The Directors’ Report is signed in accordance with a resolution of the Directors made pursuant to Section 298(2) of the Corporations
Act 2001.
On behalf of the Board of Directors.
Leigh Travers
Executive Director
Perth, 28 September 2020
DIGITALX LTD <> 2020 ANNUAL REPORT
21
In the opinion of the Directors of DigitalX Limited (the ‘Company’):
(a) The financial statements, notes and the additional disclosures of the consolidated entity set out on pages 26 to 76 are in
accordance with the Corporations Act 2001 including:
(i) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the
period then ended; and
(ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001.
(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.
(c) The financial statements and notes thereto are in accordance with International Financial Reporting Standards, as stated in Note
B1 to the financial statements.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance with Section 295A
of the Corporations Act 2001 for the financial period ended 30 June 2020.
Signed in accordance with a resolution of the Directors made pursuant to Section 295(5) of the Corporations Act 2001.
On behalf of the Directors
Leigh Travers
Executive Director
Perth, 28 September 2020
DIGITALX LTD <> 2020 ANNUAL REPORT
22
DIGITALX LTD <> 2020 ANNUAL REPORT
23
DIGITALX LTD <> 2020 ANNUAL REPORT
24
DIGITALX LTD <> 2020 ANNUAL REPORT
25
DIGITALX LTD <> 2020 ANNUAL REPORT
26
Revenue from operations
Net gain/(loss) on digital assets
Other Income
Professional and consultancy fees
Settlement costs
Brokerage costs
Corporate expenses
Advertising, media and investor relations
Employee benefit expenses
Share based payments – employee benefits
Depreciation
Intangible asset impairment
Realised and unrealised foreign exchange losses
Fair value movement of financial assets
Impairment of investments and other assets
Interest expense
Finance costs
Other expenses
Equity accounted share of profit/(loss) from joint venture
(Increase)/decrease in net assets attributable to unit holders
Profit/(Loss) before tax
Income tax benefit/(expense)
e
t
o
N
C2
C2
C2
C3
C3
C3
D5
D6
C4
Year ended
30 June 2020
$USD
Restated
Year ended
30 June 2019
$USD
290,424
(2,332,415)
91,095
(445,985)
-
-
(42,839)
(62,573)
(1,238,643)
(148,916)
(170,698)
-
(139,695)
(115,079)
-
-
(37,897)
(524,211)
(16,259)
185,840
1,013,096
1,511,247
30,696
(464,690)
(526,068)
(69,920)
(188,101)
(266,414)
(1,520,014)
(700,044)
(53,883)
(50,000)
(191,370)
14,450
(69,944)
(70,074)
-
(838,128)
(38,442)
(46,548)
(4,707,851)
(2,524,151)
-
-
Profit/(Loss) for the period attributable to members of DigitalX
(4,707,851)
(2,524,151)
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
27
e
t
o
N
Year ended
30 June 2020
$USD
Restated
Year ended
30 June 2019
$USD
Profit/(Loss) for the period
(4,707,851)
(2,524,151)
Other comprehensive income for the period
Items that may be reclassified to profit or loss
Exchange differences on translation of operations
Other comprehensive income/(loss) for the period, net of tax
(669)
(669)
37,307
37,307
Total comprehensive income/(loss) for the period
(4,708,520)
(2,486,844)
Total comprehensive income/(loss) attributable to:
Members of the parent entity
Profit/(Loss) per share attributable to the ordinary equity holders
of the parent:
Basic earnings/(loss) per share
Earnings per share from continuing operations
Total
Diluted earnings/(loss) per share
Earnings per share from continuing operations
Total
C5
C5
(4,708,520)
(4,708,520)
(2,486,844)
(2,486,844)
(0.008)
(0.008)
(0.008)
(0.008)
(0.005)
(0.005)
(0.005)
(0.005)
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
28
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Digital assets
Other current assets
Total Current Assets
NON-CURRENT ASSETS
Investments
Investments – Equity accounted
Property, plant and equipment
Right of use asset
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Contract liabilities
Lease liabilities
Net assets attributable to unit holders
Total Current Liabilities
NON-CURRENT LIABILITIES
Lease liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings/(losses)
TOTAL EQUITY
e
t
o
N
D3
C2
D4
D5
E1
E2
E3
C3
E2
D6
E2
F1
F2
Year ended
30 June 2020
$USD
2,736,872
135,578
4,723,946
71,962
7,668,358
1,030,510
-
227,641
292,048
-
Restated
Year ended
30 June 2019
$USD
5,160,689
165,477
7,115,373
100,992
12,542,531
518,313
16,259
297,490
-
-
1,550,199
832,062
9,218,557
13,374,593
332,381
15,437
91,841
461,855
901,514
245,064
245,064
1,029,974
188,128
-
592,810
1,218,102
-
-
1,146,578
1,218,102
8,071,979
11,563,681
34,756,917
1,533,107
(28,218,045)
8,071,979
33,662,319
1,384,860
(23,483,498)
11,563,681
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
29
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other income
Interest paid
e
t
o
N
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
202,640
(2,420,165)
26,074
-
1,271,834
(3,512,924)
48,010
(12,168)
Net cash provided by/(used in) operating activities
(2,191,451)
(2,205,248)
Cash flows from investing activities
Payment for intellectual property
Acquisition of property plant and equipment
Payment for investments
Net payment for digital assets in funds
Payment for deposits
Loan to related party
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of equity securities
Net proceeds from issue of units in fund
Payments for share issue costs
Principal elements of lease payments
Net cash (used in)/provided by financing activities
-
(10,908)
-
(84,447)
-
-
(95,355)
-
108,049
(4,927)
(108,478)
(5,356)
-
(347,992)
(506,796)
(495,817)
-
(17,538)
(1,368,143)
3,226,941
97,500
(176,548)
-
3,147,893
Net increase/ (decrease) in cash and cash equivalents
(2,292,162)
(425,498)
Cash and cash equivalents at beginning of period
Foreign exchange movement in cash
Cash and cash equivalents at end of period
D3
5,160,689
(131,655)
2,736,872
5,772,287
(186,100)
5,160,689
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
30
Reconciliation of operating cash flows to net profit
Profit/(loss) after income tax
Non-cash flows in profit/(loss)
Net fair value (gain)/ loss on digital assets
Intangible asset impairment
Depreciation
Non-cash legal settlement
Employee share issue
Fair value adjustment of investments
Finance costs
Equity account share of profit/(loss) from joint venture
Amortisation of right of use asset under AASB16
(Increase)/decrease in net assets attributable to unit holders
Other non-cash (income)/expenses including foreign exchange
Change in assets and liabilities, net the effects of purchase of
subsidiaries
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade payables and accruals
(Decrease)/increase in contract liabilities
(Decrease)/increase in tax payable
e
t
o
N
C2
E3
E1
C3(B)
F1 & F2
E2
D6
C2
C3
C3
C4
Year ended
30 June 2020
$USD
(4,707,851)
Restated
Year ended
30 June 2019
$USD
(2,524,151)
2,332,415
(1,511,247)
-
73,349
-
148,916
115,079
37,897
16,259
97,349
(185,840)
115,155
50,000
53,883
245,233
700,044
69,494
69,906
38,442
-
46,548
222,190
(1,957,272)
(2,539,208)
58,929
(120,417)
(172,691)
-
259,375
(113,542)
188,128
-
Net cash provided by/(used in) operating activities
(2,191,451)
(2,205,248)
Non-cash investing and financing activities
In addition to the above, the Group also had the following non-cash investing and financing activities that impacted on the
Statement of Profit and Loss and Other Comprehensive Income and the Statement of Financial Position.
Current year
In addition to the above, the Group also had the following non-cash investing and financing activities that impacted on the
Statement of Profit and Loss and Other Comprehensive Income and the Statement of Financial Position.
• Shares issued to Bullion Asset Management – Note F1 & Note D5.
• Shares issued on conversion of options – Note F1.
• Movement in prices of digital assets – Note D4.
• Seeding of the bitcoin fund – Note D4.
• Adoption of new accounting standard (AASB 16) – Note E2.
Prior Year
• Shares issued on conversion of convertible note – Note F1; and
• Options issued to advisors for capital raising – Note F2.
DIGITALX LTD <> 2020 ANNUAL REPORT
31
Consolidated Group
Balance at 30 June 2019
Change in accounting policy3
Balance at 1 July 2019
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the period
Shares issued during the period2
Share issue costs
Share based payment expense
Balance at 30 June 2020
1 Refer to Note F2 for reconciliation of reserve balances.
2 Refer to Note F1 for details of shares issued during the year.
3 Refer to Note E2 for details of change in accounting policy.
Contributed Equity
$USD
33,662,319
Reserves1
$USD
1,384,860
Retained
Earnings/(Losses)
$USD
Total
$USD
(23,483,498)
11,563,681
-
-
(26,696)
(26,696)
33,662,319
1,384,860
(23,510,194)
11,536,985
-
-
-
1,101,624
(7,026)
-
(669)
(669)
-
-
148,916
(4,707,851)
(4,707,851)
-
(669)
(4,707,851)
(4,708,520)
-
-
-
1,101,624
(7,026)
148,916
34,756,917
1,533,107
(28,218,045)
8,071,979
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
32
Consolidated Group
Balance at 1 July 2018
Contributed
Equity
$USD
30,431,588
Reserves1
$USD
Retained
Earnings/(Losses)
$USD
Total
$USD
Non-controlling
interest
$USD
Total
$USD
832,033
(20,959,346)
10,304,274
514,600
10,818,874
Correction of accounting treatment (Refer Note B1)
-
-
-
-
(514,600)
(514,600)
Balance restated at 1 July 2018
30,431,588
832,033
(20,959,346)
10,304,274
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the period
Shares issued during the period2
Share issue costs
Share based payment expense
-
-
-
3,224,128
(294,002)
300,605
-
(2,524,151)
(2,524,151)
37,307
-
37,307
37,307
(2,524,151)
(2,486,844)
-
116,081
399,439
-
-
-
3,224,128
(177,921)
700,044
Balance at 30 June 2019
33,662,319
1,384,860
(23,483,498)
11,563,681
-
-
-
-
-
-
-
-
10,304,274
(2,477,603)
19,126
(2,458,476)
3,224,128
(177,921)
700,044
11,563,681
1 Refer to Note F2 for reconciliation of reserve balances.
2 Refer to Note F1 for details of shares issued during the financial year.
The accompanying notes form part of these financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
33
The notes to the financial statements have been set out under the following main headings:
A. Legend
B. Basis for preparation (B1)
C. Key operating & financial results (C1 to C5)
D. Capital & risk management (D1 to D6)
E. Financial position (E1 to E2)
F. Equity (F1 to F2)
G. Group structure (G1 to G3)
H. Other disclosures (H1 to H5)
CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Critical judgements in developing and applying accounting policies
The following are the critical judgements, apart from those involving estimations (see Notes below), that the Directors
have made in the process of applying the Group’s accounting policies and that have the most significant effect on the
amounts recognised in the consolidated financial statements.
• Note C2 – Revenue recognition
• Note D4 – Digital assets
• Note D4 – Fair value of digital assets
• Note G1 – Consolidation of DigitalX Funds
•
COVID19 - Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has
had, or may have, on the consolidated entity based on known information. This consideration extends to the nature
of the services offered, farm-in partners, supply chain, staffing and geographic regions in which the consolidated
entity operates. Other than as addressed in specific notes, there does not currently appear to be either any
significant impact upon the financial statements or any significant uncertainties with respect to events or conditions
which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the
Coronavirus (COVID-19) pandemic.
Key sources of estimation uncertainty
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
• Note C4 – Multijurisdictional taxation of operations
• Note F2 – Valuation of share-based payments
• Note D4 – Valuation of unlisted and low volume trading digital assets
KEY AUDIT MATTER
Item is a key audit matter referenced in the Auditor’s Report on Page 23.
ADDITIONAL COMMENTARY
Additional management commentary on the item has been provided above what is required under legislation or
accounting standards for stakeholders to understand the financial report.
DIGITALX LTD <> 2020 ANNUAL REPORT
34
CORPORATE INFORMATION
its controlled entities
The consolidated historical financial statements of DigitalX
Limited and
the
Consolidated Entity or Group) for the year ended 30 June 2020
were authorised for issue in accordance with a resolution of
the Directors on 28 September 2020.
(collectively,
DigitalX Limited (the Company or the Parent) is a company
limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Securities Exchange. The
Company is a for-profit entity.
The nature of the operations and principal activities of the
Group are described in the Directors’ Report. Information on
the Group’s structure is provided in Note G1. Information on
other related party relationships is provided in Note H1.
The Company’s Corporate Governance Statement for the 2020
financial year can be accessed at:
https://DigitalX.com/corporate-governance/.
B1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The significant accounting policies adopted in the preparation
of the financial report are set out below. These policies have
been applied consistently to all periods presented in the
financial report excepted as described in the notes or in the
Group’s interim financial report. These accounting policies are
consistent with Australian Accounting Standards and with
International Financial Reporting Standards.
Basis of preparation
The financial report is a general-purpose financial report which
has been prepared in accordance with Australian Accounting
Standards (AASBs) and interpretations issued by the Australian
Accounting Standards Board (AASB) and the Corporations Act
2001. All amounts are presented in United States Dollars,
unless otherwise noted.
Compliance with IFRS
The consolidated financial report of the Group also complies
with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).
Historical cost convention
The consolidated financial report has been prepared under the
historical cost convention, except for digital assets that are
measured at fair value at the end of each reporting period, as
explained in the accounting policies below. Cost is based on
the fair value of the consideration given in exchange for assets.
Comparative information
The comparative balances for the year ending 30 June 2019
relating to the Non-controlling interest in the DigitalX fund has
been reclassified from equity to
liabilities as per the
requirements of
the Australian Accounting Standard,
AASB132: Financial Instruments.
The change arises where units of the fund not owned by the
company represent a potential obligation to deliver cash in
preference to the shareholders of the company.
As a result of the change to the comparatives there was:
• No impact on the total capital & reserves attributable the
owners of DigitalX as at 30 June 2019 of $11,563,681.
• No impact on the total loss attributable to the owners of
DigitalX for the year ended 30 June 2019 of $2,524,151.
•
•
•
Increase in net assets attributable to unit holders of
$592,810 and decrease in Non-controlling interest of
$592,810.
Increase in current liabilities of $592,810.
The addition of comparative note and balances in Note
D6.
The effect of the change was not considered to be material
with respect to AASB108: Accounting Policies, Changes in
Accounting Estimates and Errors.
Going concern
At the date of this report the Consolidated Entity’s has a strong
working capital position and its cash flow forecast indicates
that it expects to be able to meet its minimum commitments
and working capital requirements for the twelve-month period
from the date of signing the financial report. The Group also
notes subsequent to the end of the financial year that its
working capital has increased materially due to the increase in
the price of Bitcoin by $705,547 (as disclosed in Note H5) and
the receipt of $AUD336,364 on conversion of options.
Presentation and functional currency
The consolidated financial report is presented in United States
Dollars.
Functional currency
The individual financial statements of each Group entity are
presented
in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each group
entity are expressed in United States dollars (‘$USD’), which is
the functional currency of the Company and the presentation
currency for the consolidated financial statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
35
Due to the nature of these activities for all entities in the Group
the functional currency has been determined to be $USD.
In preparing the financial statements of each individual group
entity, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing at the dates of the transactions.
items
At the end of each reporting period, monetary
denominated in foreign currencies are retranslated at the
rates prevailing at that date.
items carried at
that are
Non-monetary
denominated in foreign currencies are retranslated at the
rates prevailing at the date when the fair value was
determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
fair value
The Group determined $USD is the most appropriate
currency for the Group’s reporting as the predominant
currency for revenue generating activities has been $USD
combined with the material USD expenditure for the financial
year combined with digital asset pricing primarily in $USD.
Following the end of the financial year and considering the
drivers for the Group going forward the Group assessed that it
will report in $AUD for future reporting periods.
Current and non-current classification
The Group presents assets and liabilities in the statement of
financial position based on current/non-current classification.
An asset is current when it is:
• expected to be realised or intended to be sold or consumed
in normal operating cycle;
• held primarily for the purpose of trading;
• expected to be realised within twelve months after the
reporting period; or
• cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months after the reporting period.
• The Group classifies all other assets as non-current.
A liability is current when it is:
•
expected to be settled in normal operating cycle;
•
•
•
•
held primarily for the purpose of trading;
due to be settled within twelve months after the
reporting period; or
there is no unconditional right to defer the settlement of
the liability for at least twelve months after the reporting
period.
The Group classifies all other liabilities as non-current.
DIGITALX LTD <> 2020 ANNUAL REPORT
36
The section below includes information regarding how the Group performed during the financial year including segment analysis
and detailed breakdowns of items in the Statement of Profit or Loss and Other Comprehensive Income.
This section includes the following disclosures:
C1 Segment Information (Page 37)
C2 Revenue & Receivables (Page 40)
C3 Expenses, Payables & Other Payables (Page 42)
C4 Income Tax (Page 43)
C5 Earnings Per Share (Page 46)
DIGITALX LTD <> 2020 ANNUAL REPORT
37
C1 SEGMENT INFORMATION
Segment reporting
AASB 8 requires operating segments to be identified based on internal reports about components of the Group that are regularly
reviewed by the Chief Operating Decision Maker in order to allocate resources to the segment and to assess its performance.
Based on the information used for internal reporting purposes by the Chief Operating Decision Maker (CODM), being the Board, which
makes strategic decisions, at 30 June 2020 the Group operated three segments, Blockchain consulting and development, Asset
Management and Other. In the previous corresponding period (period ended 30 June 2019) the Group had three reportable segments:
Advisory, Funds Under Management, and Technology.
In light of the company update announcement on 5 of September 2019, the segment names and descriptions have been updated to
reflect the current operations. However, there has been no material impact on the comparatives as a result of this.
Segment description
BLOCKCHAIN CONSULTING
The Group provides consulting, technical due diligence, solution design and development to businesses by utilising
distributed ledger solutions and best of blockchain technologies.
ASSET MANAGEMENT
The asset management division was setup in 2018 to give high net worth and institutional investors access to a portfolio
of digital assets. DigitalX operates two funds focussed on digital assets, the DigitalX Fund (www.digitalx.fund) and the
DigitalX BTC Fund.
OTHER
Amounts disclosed in the segment primarily relates to Group-level functions including governance, finance, legal, risk
management, company secretarial and management of the corporate entity.
DIGITALX LTD <> 2020 ANNUAL REPORT
SEGMENT PERFORMANCE
38
Segment reporting ($USD)
BLOCKCHAIN CONSULTING
ASSET MANAGEMENT2
OTHER
TOTAL
30 June 2020
30 June 2019
30 June 2020
30 June 2019
30 June 2020
30 June 2019
30 June 2020
(RESTATED)
30 June 2019
Results
Segment revenue
Intersegment revenue
Revenue from external customers
Revenue recognition timing – point in time
Revenue recognition timing – over time
207,097
914,557
-
207,097
140,297
66,800
-
914,557
732,886
181,671
28,279
-
28,279
-
28,279
26,049
-
26,049
-
26,049
55,048
-
55,048
-
55,048
72,492
290,424
1,013,096
-
72,492
-
72,492
-
290,424
140,297
150,127
-
1,013,096
732,886
280,210
Segment result
Income tax expense/(benefit)
Segment result after tax
(216,078)
(185,351)
(578,638)
(737,676)
(3,874,120)
(1,342,177)
(4,668,857)
(2,265,204)
(216,078)
(185,351)
(578,638)
(737,676)
(3,874,120)
(1,342,177)
(4,668,857)
(2,265,204)
-
-
-
-
-
-
-
Reconciliation to profit/loss after tax
Equity accounted share of profit from joint venture
Interest
Depreciation
Amortisation & impairment
Taxation
(Increase)/decrease in net assets attributable to unit holders
Profit/(loss) after income tax
(4,668,857)
(2,265,204)
(16,259)
(37,897)
(170,698)
-
-
(185,840)
(38,442)
(70,074)
(53,883)
(50,000)
-
46,548
(4,707,851)
(2,524,151)
1Revenue earned from external customers by geography and major customer information is not able to be disclosed as the information is not available to the Group.
2 For the purpose of segment reporting the Funds Under Management segment does not include the operating results, segment assets or segment liabilities of the DigitalX Fund & DigitalX BTC Fund as CODM reviews the fund on a fair value basis
of the Group’s interest in the fund.
DIGITALX LTD <> 2020 ANNUAL REPORT
39
SEGMENT POSITION
Segment reporting ($USD)
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
BLOCKCHAIN CONSULTING
ASSET MANAGEMENT
OTHER
TOTAL
30 June
2020
30,290
30,290
5,301
5,301
30 June
2019
53,377
53,377
30 June
2020
46,521
46,521
30 June
2019
22,477
22,477
30 June
2020
(RESTATED)
30 June
2019
30 June
2020
(RESTATED)
30 June
2019
9,141,746
13,298,739
9,218,557
13,374,593
9,141,746
13,298,739
9,218,557
13,374,593
580
580
16,735
16,735
1,183
1,183
1,124,543
1,809,149
1,146,578
1,810,912
1,124,543
1,809,149
1,148,578
1,810,912
DIGITALX LTD <> 2020 ANNUAL REPORT
40
C2 - REVENUE & RECEIVABLES
Policy - Revenue recognition
Revenue is recognised when the benefit from the service
provided is received by the Customer and to the extent that it
is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured, regardless of when
the payment is being made.
Revenue is measured at the fair value of the consideration
received or receivable; taking into account contractually
defined terms of payment, if any, and excluding taxes or duty.
Revenue is recognised when the specific recognition criteria
described below have been met.
A. Advisory
Revenue from advisory services is recognised as a point in time
obligation when its services have been fully rendered under
contract and the Group no
longer has any continuing
involvement in the sale of digital assets by its customers and
the consideration becomes payables. If the Group is entitled to
consideration on a pro rata basis or for works complete, then
the Group shall recognise revenue over time by reference to
the work completed.
Transaction Price – Digital Assets
Where the contract provides for payment in the customers
digital assets, the digital asset’s fair value is determined:
•
•
by referencing publicly available pricing data from digital
asset exchanges; or
for those digital assets not yet listed on exchanges, by
referencing the results of the sale (i.e. the unit price of a
digital asset can be measured by dividing the dollar
amounts raised in the sale by the number of units issued
in the sale).
The Group measures advisory revenue including the receipt of
digital assets at the fair value of consideration received.
B. Consulting
Revenue from consulting services for a fixed fee or time and
material is recognised when or as the Group transfers control
of the assets to the customer. Revenue is recognised over time
as the work is performed as costs are generally incurred
uniformly as the work progresses and are considered to be
proportionate to the entity’s performance.
C. Funds Management
Revenue from contracts with clients is recognised when there
is a right to invoice the client at an amount that reflects the
consideration to which the Group expects to be entitled in
exchange for those services. This method corresponds directly
with the delivery of performance obligations by the Group to
its clients.
Management fees are based on a percentage of the portfolio
value of the fund and calculated in accordance with the
Investment Management Agreement or Constitution.
rise
fee arrangements give
Performance
to variable
consideration. An estimate of the variable consideration is
recorded when it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will
not occur when the associated uncertainty with the variable
consideration
resolved. The Group’s
entitlement to a performance fee for any given performance
period is dependent on outperforming certain hurdles.
subsequently
is
D. Licensing
Revenue from licensing is recognised over time as the services
provided under licensing contract are provided over time and
the customer simultaneously receives and consumes the
benefit of the service.
E. Contract Asset
When a performance obligation is satisfied by transferring a
promised good or service to the customer before the customer
pays consideration or before payment is due, the Group
presents the contract as a contract asset, unless the Group’s
rights to the amount of consideration are unconditional, in
which case the Group recognises a receivable.
F. Contract Liability
When a customer pays consideration before performance
obligation is satisfied, the Group presents the contract as a
contract liability.
G. Trade and other receivables
The Group makes use of a simplified approach in accounting
for trade and other receivables as well as contract assets and
records the loss allowance at the amount equal to the
expected
In using this practical
losses.
expedient, the Group uses its historical experience, external
indicators and forward-looking information to calculate the
expected credit losses using a provision matrix.
lifetime credit
The Group assess impairment of trade receivables on a
collective basis as they possess credit risk characteristics based
on the days past due. The Group allows 1% for amounts that
are 30 to 60 days past due, 1.5% for amounts that are between
60 and 90 days past due and impair any amounts that are more
than 90 days past due.
H. Interest revenue
Interest income is recognised on a time proportion basis that
takes into account the effective yield on the financial asset.
DIGITALX LTD <> 2020 ANNUAL REPORT
41
Revenue
Advisory
Consulting
Asset Management Fees
Licensing
Total revenue1
Year ended
30 June 2020
$USD
-
206,278
31,562
52,584
290,424
1 Revenue recognised at point in time included in the total for the year ended 30 June 2020 was $140,297 (2019: 691,979).
Liabilities related to contracts with customers
Contract liability for services to be rendered1
Contract liability
1 Contract liability decrease for the period as the services were rendered.
Trade and other receivables
Year ended
30 June 2020
$USD
15,437
15,437
Year ended
30 June 2019
$USD
859,743
126,517
18,293
8,543
1,013,096
Year ended
30 June 2019
$USD
188,128
188,128
Trade receivables (gross)
Loss allowance
Trade receivables – Net
Other receivables
Statutory tax receivable
Loan to a related party
Deposits
Other
Total trade and other receivables
Other Income
Interest received
Other income
Net fair value gain/(loss) on digital assets held1,2
1 Refer to Note D4 for further information on Digital Assets.
Year ended
30 June 2020
$USD
46,196
-
46,196
Year ended
30 June 2019
$USD
57,012
-
57,012
-
-
56,896
32,486
135,578
Year ended
30 June 2020
$USD
22,216
68,879
91,095
Year ended
30 June 2020
$USD
(2,332,415)
13,621
26,099
68,745
-
165,477
Year ended
30 June 2019
$USD
30,696
-
30,696
Year ended
30 June 2019
$USD
1,511,247
2 The primary driver for the loss in the current year was the decrease in the price of bitcoin from $10,817 to $9,137 (16%) and the fall in market price for two unlisted
digital assets on exchange listing.
DIGITALX LTD <> 2020 ANNUAL REPORT
42
C3 - EXPENSES, PAYABLES & OTHER PAYABLES
Policy - Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year
which are unpaid. The amounts are unsecured and are usually
paid within 30 days of recognition.
Trade and other payables are presented as current liabilities
unless payment is not due within 12 months from the
reporting date. They are recognised initially at their fair value
and subsequently measured at amortised cost using the
effective interest method.
Policy - Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount
of the obligation.
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation.
Policy - Employee benefits
Short-term and long-term employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave, long service leave,
(A) Professional and Consultancy fees
and sick leave when it is probable that settlement will be
required and they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee
benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of
settlement.
Liabilities recognised
long-term employee
in respect of
benefits are measured as the present value of the estimated
future cash outflows to be made by the Group in respect of
services provided by employees up to reporting date.
Policy - Goods and services, Value Added Tax, or Sales Tax
Amounts are recognised net of the amount of associated GST
or VAT, except:
• where the GST or VAT incurred on a purchase of goods
and services is not recoverable from the taxation
authority, in which case the GST or VAT is recognised as
part of the cost of acquisition of the asset or part of the
expense item as applicable; and
receivables and payables are stated with the amount of
GST or VAT.
•
The net amount of GST or VAT recoverable from, or payable
to, the taxation authority is included as part of receivables or
payables in the balance sheet.
Cash flows are presented on a gross basis. The GST or VAT
component of cash flows arising from investing or financing
activities which are recoverable from, or payable to, the
taxation authority, are presented as operating cash flows.
Legal fees
Consulting fees
Tax consulting fees
Audit fees
Total professional and consultancy fees
(B) Settlement costs
Settlement costs1
Total other expenses
Year ended
30 June 2020
$USD
127,133
225,344
Year ended
30 June 2019
$USD
177,108
209,280
39,987
28,708
53,521
445,985
49,594
464,690
Year ended
30 June 2020
$USD
-
-
Year ended
30 June 2019
$USD
526,068
526,068
1 The balance relates solely to the finalisation of legal proceedings as announced to the market on 7 May 2019 which is expected to be a non-recurring amount. The
Group also incurred $USD66,830 in legal fees for this matter included in the total legal fees disclosed above in (A) for the year ended 30 June 2019.
DIGITALX LTD <> 2020 ANNUAL REPORT
43
(C) Other expenses
Regulatory and compliance
Occupancy
Other expenses
Total other expenses
Current liabilities – trade & other payables
Trade payables
Accrued expenses
PAYG withholding payable
Share applications
Total trade & other payables
Year ended
30 June 2020
$USD
318,678
94,501
110,918
524,097
Year ended
30 June 2020
$USD
225,647
89,293
17,441
-
332,381
Year ended
30 June 2019
$USD
188,100
167,461
482,567
838,128
Year ended
30 June 2019
$USD
242,723
1397,554
16,086
561,739
1,218,102
1 Included in this is an amount of $AUD150,000 for the second tranche of the legal settlement reference above in Note C3 (B).
Remuneration of Auditors
Remuneration of the auditors of the Company for:
BDO Audit (WA) Pty Ltd
Audit and review of financial reports
Non-audit services – tax compliance
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
53,521
11,220
64,741
49,594
28,708
78,302
C4 INCOME TAX
Policy - Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income or tax loss
based on the applicable income tax rate for each jurisdiction.
Current tax
The tax currently payable is based on taxable profit for the
period. Taxable profit differs from profit before tax as reported
in the consolidated statement of profit or loss and other
comprehensive income because of items of income or expense
that are taxable or deductible in other periods and items that
are never taxable or deductible. The Group’s current tax is
calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences between
the carrying amounts of assets and
in the
consolidated financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary
differences.
liabilities
Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets
and liabilities are not recognised if the temporary difference
arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that
DIGITALX LTD <> 2020 ANNUAL REPORT
44
affects neither the taxable profit nor the accounting profit. In
addition, deferred tax liabilities are not recognised if the
temporary difference arises from the initial recognition of
goodwill.
group using the 'separate taxpayer within group's approach,
by reference to the carrying amounts in the separate financial
reports of each entity and the tax values applying under tax
consolidation.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the
Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary
differences associated with such investments and interests are
only recognised to the extent that it is probable that there will
be sufficient taxable profits against which to utilise the
benefits of the temporary differences and they are expected
to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of
the reporting period. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Group expects, at the end
of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Deferred tax liabilities and assets are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the
current and deferred tax are also recognised
in other
comprehensive income or directly in equity, respectively.
Where current tax or deferred tax arises from the initial
accounting for a business combination, the tax effect is
included in the accounting for the business combination.
Tax consolidation
The Company and its wholly-owned Australian tax resident
entities are part of a tax-consolidated group under Australian
taxation law. The head entity within the tax-consolidated
group is DigitalX Limited. Digital CC Holdings joined the DigitalX
Limited tax consolidation group on 26 May 2014.
Tax expense/income, deferred tax liabilities and deferred tax
assets arising from temporary differences of the members of
the tax-consolidated group are recognised in the separate
financial reports of the members of the tax-consolidated
Any current tax liabilities (or assets) and deferred tax assets
arising from unused tax losses of the wholly-owned entities
are assumed by the head entity in the tax-consolidated group
and are recognised as amounts payable (or receivable) to (or
from) other entities
in
conjunction with any tax funding arrangement amounts. The
head entity recognises deferred tax assets arising from unused
tax losses of the tax-consolidated group to the extent that it is
probable that future taxable profits of the tax-consolidated
group will be available against which the assets can be utilised.
in the tax-consolidated group
Estimates & Judgement – Taxation
Income taxes
The Group operates in a newly emerging industry and the
application of taxation laws in Australia, the United States,
Hong Kong and previously Iceland (the principal countries in
which the Group currently operates) in relation to the Group’s
activities may change from time to time. Changes in the
taxation laws or in assessments or interpretation or decisions
in respect of, but not limited to the following, may have a
significant impact on the Group’s results:
•
•
Jurisdiction in which and rates at which income is taxed;
Jurisdiction in which and rates at which expenses are
deductible;
• The nature of income taxes levied, for example whether
taxes are assessed on the revenue account or on the capital
account;
• Requirements to file tax returns; and
• The availability of credit for taxes paid
in other
jurisdictions, for example through the operation of double
taxation treaties.
In recognition of the limited trading and tax history of the
Group, management do not consider there is sufficient
evidence of probability of the ability to utilise temporary
differences and tax losses and hence no deferred tax asset has
been recognised as at 30 June 2020 in relation to these assets.
The Group will continue to assess the performance and may in
the future recognise some or all of these assets.
The Group has taken the approach to calculate income tax
expense on the basis that all revenue and expenses
attributable to its operations are taxable in Australia and all
revenue and expenses attributable to its trading operations
are taxable in the United States in addition to certain
employee costs
in the United States plus an
appropriate mark-up.
incurred
DIGITALX LTD <> 2020 ANNUAL REPORT
45
A.
Income tax expense
Current tax expense / (benefit)
Deferred tax expense / (benefit)
Total income tax (benefit) in profit or loss
B. Numerical reconciliation of tax expense to prima facie tax payable
Profit/(Loss) before tax from continuing operations
Profit/(Loss) before tax from discontinued operations
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
-
-
-
-
-
-
Year ended
30 June 2020
$USD
(4,707,851)
-
Restated
Year ended
30 June 2019
$USD
(2,524,151)
-
Profit/(Loss) before tax
(4,707,851)
(2,524,151)
Tax at the Group’s statutory income tax rate of Australia: 27.5% (2019:
27.5%)
(1,294,659)
(757,245)
Tax effect of amounts which are not deductible or assessable (taxable) in
calculating taxable income:
Non-deductible share-based payment
Non-deductible settlement fees
Non-deductible impairment losses
Non-deductible finance costs – convertible note
Profit from equity accounted investments
Other
Effect of different tax rates of subsidiaries operating in other jurisdictions
Unrealised gain on foreign exchange
Effect of timing expenses that are not deductible
Deferred tax assets not recognised1
Distribution to trust beneficiaries
Previously unrecognised tax losses now recouped to reduce tax expense
Income tax expense/(benefit)
Income tax expense/(benefit) is attributable to:
Profit/(Loss) from continuing operations
Profit/(Loss) from discontinued operations
48,051
-
-
-
4,471
-
48,459
36,636
(34,840)
1,082,402
109,322
-
-
-
-
-
192,512
67,439
13,750
19,131
(10,571)
265
59,309
(214)
(54,451)
493,393
(23,318)
-
-
-
-
-
1 Amount relates to tax losses incurred in US operations that cannot be applied to profits generated in Australia or entities outside the tax consolidated group.
DIGITALX LTD <> 2020 ANNUAL REPORT
C. Current tax assets and liabilities
Current tax liability
Income tax payable
Total current tax liability
D. Deferred tax assets and liabilities
46
-
-
-
-
-
-
As at 30 June 2020 the Group has tax losses available to be applied in the future periods in the United States and Australia estimated
to be $USD9.7 million and $USD4.7 million respectively. The losses in respect of the Group’s operations in Hong Kong are immaterial.
In addition, the Group has gross capital losses in Australia estimated at $USD1.4 million at 30 June 2020.
The Group reviews the recoverability of tax losses each reporting period by reviewing the continuity of ownership test (COT) or Same
Business Test (SBT) and no adjustments have been made for the year ended 30 June 2020. Other than those noted above and tax
losses there are no other material temporary differences.
E. Other tax information
The tax rate used for the reconciliation above is the corporate tax rate of 27.5% payable by Australian corporate entities on taxable
profits under Australian tax law for entities with gross consolidated turnover of less than $AUD25,000,000.
Franking Account
Amounts recognised directly in equity
Future Developments
-
-
-
-
(i) The Group notes that from the 2019 financial year on, the corporate tax for Hong Kong will use a two-tier regime where profits
will be assessed at 8.25% for the first $HK2,000,000 and 16.5% above $HK2,000,000. The Group’s operations in Hong Kong are
immaterial and the effective of the rate is expected to immaterial.
C5 - EARNINGS PER SHARE (EPS)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit/(loss) after tax attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the period, adjusted for bonus elements in ordinary shares issued or
cancelled during the period.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the after income
tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number
of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
Basic earnings/(loss) per share
From continuing operations
Total
Diluted earnings/(loss) per share
From continuing operations
Total
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
(0.008)
(0.008)
(0.008)
(0.008)
(0.005)
(0.005)
(0.005)
(0.005)
DIGITALX LTD <> 2020 ANNUAL REPORT
47
The earnings/(loss) used in the calculation of basic and diluted loss per share
are as follows:
From continued operations
From discontinued operations
Weighted average number of ordinary shares on issue during the period
used in the calculation of basic EPS
Adjustments for calculation of diluted EPS
Options
Performance rights
Convertible notes
Weighted average number of ordinary shares on issue during the period
used in the calculation of diluted EPS
(4,707,851)
(2,524,151)
-
-
602,105,566
512,099,007
32,848,977
28,500,000
-
60,240,335
9,000,000
-
665,954,543
581,339,342
1 Potential ordinary shares in the form of share options and rights are not considered to be dilutive. As the Group made a loss for the prior period, diluted earnings per
share is the same as basic earnings per share for that period.
DIGITALX LTD <> 2020 ANNUAL REPORT
48
The section below includes information regarding how the Group manages it capital assets including the positions at year end as
well as outlining the risks arising from market, price, liquidity and credit exposures. Finally, the section covers how the Group
manages its equity position and movements during the year.
The section includes the following disclosures:
D1 Capital management (Page 49)
D2 Financial risk management (Page 49)
D3 Cash and cash equivalents (Page 53)
D4 Digital assets (Page 54)
D5 Investments (Page 56)
D6 Net assets attributable to unit holders (Page 57)
DIGITALX LTD <> 2020 ANNUAL REPORT
49
D1 - CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to:
•
Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits
for other stakeholders; and
• Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
D2 – FINANCIAL INSTRUMENTS
AND RISK MANAGEMENT
Policy - Financial Instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when
the Group becomes a party to the contractual provisions of the
financial instrument and are measured initially at fair value
adjusted by transactions costs, except for those carried at fair
value through profit or loss, which are measured initially at fair
value. Subsequent measurement of financial assets and
financial liabilities are described below.
Financial assets are derecognised when the contractual rights
to the cash flows from the financial asset expire, or when the
financial asset and substantially all the risks and rewards are
transferred. A financial liability is derecognised when it is
extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a
significant financing component and are measured at the
transaction price in accordance with AASB 15, all financial
assets are initially measured at fair value adjusted for
transaction costs (where applicable).
finance income or other financial items, except for the
allowance for expected credit loss which is presented within
other expenses.
a) Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets
meet the following conditions (and are not designated as
FVPL):
•
•
they are held within a business model whose objective is
to hold the financial assets and collect its contractual
cash flows;
the contractual terms of the financial assets give rise to
cash flows that are solely payments of principal and
interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost
using the effective interest method. Discounting is omitted
where the effect of discounting is immaterial. The Group’s
cash and cash equivalents, trade and most other receivables
fall into this category of financial instruments as well as
government bonds that were previously classified as held-to-
maturity under AASB 139.
Subsequent measurement of financial assets
b) Financial assets at fair value through profit or loss (FVTPL)
For the purpose of subsequent measurement, financial assets,
other than those designated and effective as hedging
instruments, are classified into the following categories upon
initial recognition:
a)
b)
c)
d)
financial assets at amortised cost;
financial assets at fair value through profit or loss
(FVTPL);
fair value
debt
comprehensive income (FVOCI); and
equity
instruments at
comprehensive income (FVOCI).
instruments at
through other
through other
fair value
Classifications are determined by both:
•
•
The entity’s business model for managing the financial
asset; and
The contractual cash flow characteristics of the financial
assets.
All income and expenses relating to financial assets that are
recognised in profit or loss are presented within finance costs,
Financial assets that are held within a business model other
than “hold to collect” or “hold to collect and sell” are
categorised at fair value through profit and loss. Further,
irrespective of business model, financial assets whose
contractual cash flows are not solely payments of principal and
interest are accounted for at FVPL. All derivative financial
instruments fall into this category, except for those designated
and effective as hedging instruments, for which the hedge
accounting requirements apply.
This is includes digital assets classified as financial assets in
accordance with Note D4.
c) Debt
instruments at
fair value
through other
comprehensive income (Debt FVOCI)
Financial assets with contractual cash flows representing
solely payments of principal and interest and held within a
business model of collecting the contractual cash flows and
selling the assets are accounted for at FVOCI.
Any gains or losses recognised in OCI will be recycled upon
derecognition of the asset.
DIGITALX LTD <> 2020 ANNUAL REPORT
50
d) Equity
instruments at
fair value
comprehensive income (Equity FVOCI)
through other
Financial assets at fair value through other comprehensive
income
Investments in equity instruments that are not held for trading
are eligible for an irrevocable election at inception to be
measured at FVOCI. Under this category, subsequent
movements
in other
comprehensive income and are never reclassified to profit or
loss. Dividend income is taken to profit or loss unless the
dividend clearly represents return of capital.
fair value are
recognised
in
Impairment of financial assets
AASB 9’s impairment model use more forward looking
information to recognize expected credit
losses - the
‘expected credit losses (ECL) model’. The application of the
new impairment model depends on whether there has been a
significant increase in credit risk.
The Group considers a broader range of information when
assessing credit risk and measuring expected credit losses,
including past events, current conditions, reasonable and
supportable forecasts that affect the expected collectability of
the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is
made between:
•
•
instruments
financial
that have not deteriorated
significantly in credit quality since initial recognition or
that have low credit risk (‘Stage 1’); and
financial instruments that have deteriorated significantly
in credit quality since initial recognition and whose credit
risk is not low (‘Stage 2’).
‘Stage 3’ would cover financial assets that have objective
evidence of impairment at the reporting date.
‘12-month expected credit losses’ are recognised for the first
category while ‘lifetime expected credit losses’ are recognised
for the second category.
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit
losses over the
expected life of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting
for trade and other receivables as well as contract assets and
records the loss allowance at the amount equal to the
expected lifetime credit losses.
In using this practical expedient, the Group uses its historical
forward-looking
indicators
experience,
information to calculate the expected credit losses using a
provision matrix.
external
and
The Group assess impairment of trade receivables on a
collective basis as they possess credit risk characteristics based
on the days past due. The Group allows 1% for amounts that
are 30 to 60 days past due, 1.5% for amounts that are between
60 and 90 days past due and impair any amounts that are more
than 90 days past due.
The Group recognises 12 months expected credit losses for
financial assets at FVOCI. As most of these instruments have a
high credit rating, the likelihood of default is deemed small.
However, at each reporting date the Group assesses whether
there has been a significant increase in the credit risk of the
instrument.
In assessing these risks, the Group relies on readily available
information such as the credit ratings issued by the major
credit rating agencies for the respective asset. The Group only
holds simple financial instruments for which specific credit
ratings are usually available. In the unlikely event that there is
no or only little information on factors influencing the ratings
of the asset available, the Group would aggregate similar
instruments into a portfolio to assess on this basis whether
there has been a significant increase in credit risk.
In addition, the Group considers other indicators such as
adverse changes in business, economic or financial conditions
that could affect the borrower’s ability to meet its debt
obligation or unexpected changes in the borrowers operating
results.
Should any of these indicators imply a significant increase in
the instrument’s credit risk, the Group recognises for this
instrument or class of instruments the lifetime expected credit
losses.
Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and
other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and,
where applicable, adjusted for transaction costs unless the
Group designated a financial liability at fair value through
profit or loss. Subsequently, financial liabilities are measured
at amortised cost using the effective interest method except
for derivatives and financial liabilities designated at FVPL,
which are carried subsequently at fair value with gains or
losses recognised in profit or loss (other than derivative
financial instruments that are designated and effective as
hedging instruments).
All interest-related charges and, if applicable, changes in an
instrument’s fair value that are reported in profit or loss are
included within finance costs or finance income.
Risk Management
The Group’s activities expose it to a variety of financial risks
including but not limited to:
•
•
•
•
•
Foreign exchange risk;
Liquidity risk;
Interest rate risk;
Credit risk; and
Digital asset price risk.
DIGITALX LTD <> 2020 ANNUAL REPORT
51
The Group’s and the Company’s overall risk management
program focuses on the unpredictability of financial markets
and seeks to minimize potential adverse effects on the
financial performance of the Group. The Group uses different
methods to measure different types of risks to which it is
exposed. The method used is sensitivity analysis for each of
foreign exchange risk, liquidity risk and interest rate risk.
The capital structure of the Group consists of equity
attributable to equity holders of the Company, comprising
issued capital, reserves and retained earnings.
The Group holds the following financial assets and financial liabilities:
Financial Assets
Cash and cash equivalentsAC
InvestmentsFV
Trade receivablesAC
Financial liabilities
Trade and other payablesAC
Finance LiabilitiesAC
AC – Amortised Cost
FV – Fair value through profit or loss
Foreign exchange risk
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
2,736,872
1,030,511
46,196
3,813,579
225,647
336,905
562,552
5,160,689
195,651
57,012
5,413,352
377,682
659,128
The Group and the parent entity operate internationally, and during the period were exposed to foreign exchange risk arising from
currency exposures, primarily with respect to the USD/AUD dollar rates.
Foreign exchange risks arise from future commercial transactions and recognised assets and liabilities that are denominated in a
currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
Management regularly monitors exposure to foreign exchange risk, but do not have a current hedging policy in place. It is intended
that this policy will be continuously assessed in line with funding requirements for each of the investment opportunities.
As of 30 June 2020, the Group had exposure to foreign currency risk within its recognised assets and liabilities. The cash and cash
equivalents held $AUD3,957,230 (2019: $AUD7,227,463) in bank accounts. The Group has no derivative liabilities in $AUD (2019: $nil)
and $AUD480,882 in finance liabilities (2019: $nil).
Group sensitivity – Foreign exchange risk
Based upon the financial instruments held as at 30 June 2020, had the Australian dollar weakened/strengthened 10% against the US
dollar with all other variables held constant, the following impact on profit and or loss in noted:
Impact on profit of loss – 2020
Impact on profit or loss – 2019
Interest rate risk management
Fluctuation
+10%
$USD
(529,034)
(719,596)
-10%
$USD
529,034
719,596
The Group is exposed to interest rate risk as entities in the Group deposit funds at both short-term fixed and floating rates of interest.
The Group’s exposure to interest rates on financial assets and liabilities is detailed in the liquidity risk management section of this
note.
Interest rate sensitivity
A change in interest rates would not have a material impact on the profit and equity for the current and previous periods of the Group
or the Parent entity.
DIGITALX LTD <> 2020 ANNUAL REPORT
52
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who oversee a liquidity risk management
framework for the management of the Group’s funding and liquidity management requirements.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and ensuring there are appropriate plans
in place to finance these future cash flows.
Weighted
average
effective
interest rate
%
Less than 1
month
Interest
bearing -
variable
$USD
1 to 3
months
Interest
bearing -
variable
$USD
More than 3
months
Interest
bearing
Less than 1
month
Non-interest
bearing
1 to 3 months
Non-interest
bearing
More than 3
months
Non-interest
bearing
$USD
$USD
$USD
$USD
2020
Cash and cash equivalents
Convertible note
Other receivables
Other payables
Finance liability
2019
Cash and cash equivalents
Convertible note
Other receivables
Other payables
0.25
10
-
-
8.8
-
10
-
-
2,736,872
-
-
-
-
5,160,689
-
-
-
-
-
-
-
-
-
-
-
-
-
169,294
-
-
-
-
46,196
(225,647)
(378,224)
-
195,651
-
-
-
-
-
57,012
(242,723)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The liquidity and interest rate risk table above has been drawn up based on the undiscounted cash flow (including both interest and
principal cash flows expected) using contractual maturities of financial assets and the earliest date on which the Group can be required
to pay financial liabilities. Amounts for financial assets include interest earned on those assets except where it is anticipated cash will
occur in a different period.
Credit Risk
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to
customers, including outstanding receivables. Credit risk is managed on a group basis. For banks and financial institutions, the Group
aims to hold deposit with independently rated parties with a rating of ‘A2’ or above based on Moody’s ratings. From time to time the
Group may hold deposits with unrated institutions (i.e. exchanges) after trading in digital assets. The Group’s credit risk exposure is
set out below. Due to the nature of the customers the Group engages with ratings are not commonplace. Credit risk is therefore
factored into the transaction price for services often in the form of bonus tokens or a discount to public token sale rate. At 30 June
2020 no customers had a published credit rating.
Rating
A1
A2
Unrated
Total
A1
A2
Unrated
$USD
3,876
1,562
2,731,434
2,736,872
DIGITALX LTD <> 2020 ANNUAL REPORT
53
Fair value measurement
The Group measures financial instruments and non-financial
assets at fair value at each balance sheet date. Also, fair values
of financial instruments measured at amortised cost are
disclosed. Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
The fair value measurement is based on the presumption that
the transaction to sell the asset or transfer the liability takes
place either:
•
•
In the principal market for the asset or liability, or
In the absence of a principal market, in the most
advantageous market for the asset or liability.
The principal or the most advantageous market must be
accessible to the Group. The fair value of an asset or a liability
is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that
market participants act in their economic best interest. A fair
value measurement of a non-financial asset takes into account
a market participant's ability to generate economic benefits by
using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its
highest and best use.
The Group uses valuation techniques that are appropriate in
the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within
the fair value hierarchy, described as follows, based on the
lowest
is significant to the fair value
level input that
measurement as a whole:
D3 CASH AND CASH EQUIVALENTS
Cash and cash equivalents
•
•
•
Level 1 — Quoted (unadjusted) market prices in active
markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable
Level 3 — Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines
whether transfers have occurred between Levels in the
hierarchy by re-assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as
a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained above.
At 30 June 2020 all assets carried at fair value are deemed to
be level 1 based on observable prices in an active market with
the exception of:
•
•
•
Convertible note receivable – Note D5
Investment in Bullion Asset Management – Note D5
Unlisted Digital Assets – Note D4
Fair value estimation
The Directors consider that the carrying amount of financial
assets and financial liabilities, as recorded in the financial
statements, represent or approximate their respective fair
values.
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, cash held with bitcoin exchanges, other 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, and bank overdrafts. Cash and cash
equivalents do not include the Group’s holdings of digital assets which are classified as inventory (refer to D4).
Cash at bank
Cash deposits at call1
Total cash and cash equivalents
Year ended
30 June 2020
$USD
2,736,872
-
2,736,872
Year ended
30 June 2019
$USD
5,160,614
75
5,160,689
1Cash deposits at call include cash balances on exchanges. The balance originates following a liquidation of digital assets. Refer to Note D2 for information on liquidity
and credit risk.
DIGITALX LTD <> 2020 ANNUAL REPORT
54
D4 - DIGITAL ASSETS
Digital Assets
Digital assets are assets such as Bitcoin and Ethereum, which
use an open-source software-based online system where
transactions are recorded in a public ledger (blockchain) using
its own unit of account. Digital Assets are an emerging
technology and asset class, and as such there are no specific
accounting standards that cover the treatment, rather digital
assets are assessed by applying existing accounting standards
in conjunction with guidance released by the accounting
standard setting bodies such as the IASB.
Management consider it appropriate to group digital assets
into a single balance in the Consolidated Financial Statements
and providing users with a reconciliation by category in the
notes to the Financial Statements.
For the purpose of fair value disclosures, the Group has
determined classes of assets and liabilities on the basis of the
nature, characteristics and risks of the asset or liability and the
level of the fair value hierarchy as explained below.
Digital Assets – Accounted for using inventory methodology
For digital assets that meet the criteria of AASB102: Inventory,
the Group measures digital assets at its fair value less costs to
sell, with any change in fair value less costs to sell being
recognised in profit or loss in the period of the change.
Amounts are derecognised when the Group has transferred
substantially all the risks and rewards of ownership. As a result
of the various blockchain protocols, costs to sell are immaterial
in the current period and no allowance is made for such costs.
Digital assets are derecognised when the Group disposes of
the inventory through its trading activities or when the Group
otherwise loses control and, therefore, access to the economic
benefits associated with ownership of the digital asset.
Digital assets are derecognised when the Group disposes of
the asset or when the Group otherwise loses control and,
therefore, access to the economic benefits associated with
ownership of the digital asset.
Digital Assets – Accounted for using financial asset
methodology
Refer to Note D2 for financial asset accounting policy and
treatment.
Estimates & Judgements
(a) Digital assets
Management note that the topic of digital assets and the
accounting for digital assets continues to be considered by the
(IASB) and
International Accounting Standards Board
continues to monitors new comments and interpretations
released by the Board and other standard setters from around
the world.
In line with this, the Group has considered its position for the
year ending 30 June 2020 and has determined that the Group’s
digital assets fall into 3 categories:
•
•
•
Inventory method (historical method used by the
Group)
Intangible asset method (the method noted by the
IASB in its most recent deliberations)
Financial asset method (used where the digital asset
meets the criteria of a financial asset – See Note D)
Management notes that under the 3 methods noted above,
the treatment continues to be to measure digital assets at fair
value (unless otherwise disclosed and provided certain
conditions are met) under the respective accounting
standards.
Digital Assets – Accounted for using
methodology
intangible asset
(b) Fair value of Digital Assets
The Group consider that any digital asset that does not fall
under the inventory or financial asset methodology and meet
the recognition criteria (identifiable, controllable and capable
of generation future economic benefits) are considered to
intangible assets.
For digital assets that meet the criteria of AASB138: Intangible
Assets, the Group measures digital assets at its fair value less
costs to sell in accordance with the revaluation model
(provided there is an active market), with increase in fair value
being recognised in OCI and credited to a revaluation reserve,
unless it reverses a revaluation deficit of the same asset
previously recognised in profit or loss. A revaluation deficit is
recognised in profit or loss, except to the extent that it offsets
an existing surplus on the same asset recognised in the
revaluation reserve. Digital assets classified as intangible
assets are considered to be indefinite life intangible assets
given their nature.
Digital assets (including bitcoin inventory) is measured at fair
value using the quoted price in United States dollars on from a
number of different sources with the primary being Coin
Market Cap (www.coinmarketcap.com) at closing Coordinated
Universal Time. Management considers this fair value to be a
Level 1 input under the AASB 13 Fair Value Measurement fair
value hierarchy as the price on the quoted price (unadjusted)
in an active market for identical assets.
Management uses a number of exchanges including Binance,
Bitgo, Independent Reserve and others in order to provide the
Group with appropriate size and liquidity to provide reliable
evidence of fair value for the size and volume of transactions
that are reasonably contemplated by the Group.
Unlisted digital assets are fair valued using a combination of
Level 2 and Level 3 techniques. Refer to the table below for the
break-down of fair value levels.
DIGITALX LTD <> 2020 ANNUAL REPORT
55
(A) Reconciliation of Digital Assets
Bitcoin1,2
Other listed digital assets1,3
Non-listed digital assets4
Total Digital Assets
Year ended
30 June 2020
$USD
4,065,591
522,807
135,548
4,723,946
Year ended
30 June 2019
$USD
4,661,772
1,121,074
1,332,527
7,115,373
1 Digital assets were measured at fair value using at 30 June 2020. Refer to Note H5 for prices at the date of this report.
2 The amount includes $USD2,021,713 held by the DigitalX BTC Fund.
3 Includes all tokens that are not bitcoin that are listed on an exchange. The amount includes $USD500,704 held by the DigitalX Fund.
4 Includes all tokens not listed on an exchange. The amount includes $USD79,846 held by the DigitalX Fund.
(B) Reconciliation by Class
Inventory method
Intangible asset method
Financial asset method
Total Digital Assets
(C) Movements by Class
Opening Balance 1 July 2019
Net trading activity1
Transfers – BTC Fund Seed2
Transfers between classes3
Revaluation
Impairment
Closing Balance
Year ended
30 June 2020
$USD
-
4,717,985
5,961
4,723,946
Year ended
30 June 2019
$USD
4,661,772
1,683,601
770,000
7,115,373
Inventory Method
Intangible Asset
Financial Asset
4,661,772
-
(1,728,071)
(1,349,825)
(1,583,876)
1,683,601
(59,012)
1,728,071
1,349,825
770,000
-
-
Total
7,115,373
(59,012)
-
-
15,500
(764,039)
(2,332,415)
-
-
-
4,717,985
-
5,961
-
4,723,946
1 Net trading activity is the net purchase and sale of digital assets and includes monthly rebalance for the DigitalX Fund and DigitalX BTC Fund.
2 During the period the Group announced that it had seeded the DigitalX BTC Fund with 215 of its existing Bitcoin holding. The amount above is the fair value of Bitcoin
at the time of the seeding. Inline with Note D5 and G2, the Group consolidates the assets of the DigitalX Fund and DigitalX BTC Fund.
3 At 30 June 2020, the Group made the determination that due to the nature of the Group’s holding and its reduced trading activity it was considered appropriate to
classify its Bitcoin holding as an intangible asset under AASB138: Intangible Assets using fair value under the revaluation method given there is a highly active market
for Bitcoin. As the Group previously recorded its Bitcoin holding at fair value under AASB102: Inventory there was no gain or loss on reclassification.
(C) Digital Assets by Fair Value Hierarchy
Level
Level 1
Description
Level 1 fair value digital assets are those assets that are actively traded on a digital asset
exchange or decentralised exchange for which there is an active market with sufficient
volume.
$USD
$4,532,697
DIGITALX LTD <> 2020 ANNUAL REPORT
56
Level 2
Level 3
Level 2 fair value digital assets are those assets measured at fair value but the market prices
are not actively quoted and determined using a market matrix approach (AASB13.B7). This is
most common for digital assets where an active trading pair does not existing with a FIAT
currency but may exist for a trading pair such as Ethereum or Bitcoin which can then be
measured using the level 1 input.
Level 3 fair value digital assets are those assets carried at fair value where fair value has been
determined by reference to the entity’s own data and financial data provided by the project
such as comparable projects, financial forecasts and equity transactions.
$55,701
$135,548
D5 – INVESTMENTS
Investments in joint ventures
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net
assets of the joint arrangement.
is the
contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities
require unanimous consent of the parties sharing control.
Joint control
The results and assets and liabilities of joint ventures are
incorporated in these consolidated financial statements using
the equity method of accounting.
Under the equity method, an investment in an associate or a
in the consolidated
joint venture is initially recognised
statement of financial position at cost and adjusted thereafter
to recognise the Group's share of the profit or loss and other
comprehensive income of the associate or joint venture.
When the Group's share of losses of an associate or a joint
venture exceeds the Group's interest in that associate or joint
venture (which includes any long-term interests that, in
substance, form part of the Group's net investment in the
associate or joint venture), the Group discontinues recognising
its share of further losses. Additional losses are recognised
only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate or joint venture.
Investment in Coincast - Equity accounted joint ventureA
Investment in Bullion Asset Management Pte LtdB
Convertible note receivableC
An investment in an associate or a joint venture is accounted
for using the equity method from the date on which the
investee becomes an associate or a joint venture. On
acquisition of the investment in an associate or a joint venture,
any excess of the cost of the investment over the Group's
share of the net fair value of the identifiable assets and
liabilities of the investee is recognised as goodwill, which is
included within the carrying amount of the investment. Any
excess of the Group's share of the net fair value of the
identifiable assets and
liabilities over the cost of the
investment, after reassessment, is recognised immediately in
profit or loss in the period in which the investment is acquired.
The requirements of AASB 9 are applied to determine whether
it is necessary to recognise any impairment loss with respect
to the Group’s investment in an associate or a joint venture.
When necessary, the entire carrying amount of the investment
(including goodwill) is tested for impairment in accordance
with AASB 136 ‘Impairment of Assets’ as a single asset by
comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount.
Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment
loss is recognised in accordance with AASB 136 to the extent
that the recoverable amount of the investment subsequently
increases.
Year ended
30 June 2020
$USD
-
861,216
169,294
1,030,510
Year ended
30 June 2019
$USD
16,259
322,662
195,651
534,572
A. Changes to Joint Ventures
During the period the Group announced that it had terminated the joint ventures with DX Americas LLC, Coincast and Futuredge
Capital. The impact to the Group was immaterial and the investments were written down to nil value.
DIGITALX LTD <> 2020 ANNUAL REPORT
57
B.
Investment in Bullion Asset Management Pte Ltd
On 16 April 2019, the Group announced its equity investment into Bullion Asset Management Pte Ltd (“BAM”), the management
company for xbullion (gold backed stable coin project) for $AUD450,000 and 9,411,764 DigitalX shares at an issue price of $AUD0.085.
The DigitalX shares were issued during the period, as a result the investment in BAM increased by $USD544,690. At 30 June 2020 the
investment was measured at fair value using level 2 inputs, there was no change in fair value as the most recent equity issue (January
2020) was consistent with the previous issue price.
C. Convertible note receivable
The Group holds a convertible note with YPB Systems Ltd (ASX:YPB) based on the terms and conditions in the announcement.
•
•
•
3-year fixed term, repayable only at maturity, non-redeemable;
Conversion at any time to ordinary equity at the lower of A$0.018 or a 50% discount to the price at which YPB shares were
subscribed for pursuant to the most recent capital raising of YPB preceding the date of conversion (not including the present equity
placement), provided that the deemed price is no lower than $0.009
Free attaching unlisted option with an exercise price of $0.025. Option expiry 18 months from the date of conversion of the
convertible note to shares
At year end the Group valued the note at fair value using the fair value of holding the note to maturity. Under this methodology the
fair value (level 2) of the note was deemed to be $USD169,294. The key inputs were:
• Coupon rate – 10%
• Market interest rate – 11.8%
D.
Investment in DigitalX Funds
The Group has provided seed capital to the DigitalX Fund (a unit trust) and DigitalX BTC Fund (a unit trust) for the purpose of investing
in and generating returns on digital assets. As noted in Note C1 the Board reviews the performance of the funds at fair value based
on the reported fund net asset value (NAV) each period. However, as DigitalX also provides fund management services for the fund it
is deemed that the Group meets the definition of control under AASB10: Consolidated Financial Statements and as a result, the
financial position and performance of the DigitalX funds have been included in the Group’s consolidated financial statements.
The Group will continue to assess its position with respect to control of the fund at each reporting period and there has been no
changes to the Group’s assessment for the year ended 30 June 2020.
The net asset value (NAV) of the Group’s units in the funds at 30 June 2020 were $AUD 0.50 (2019: $0.85) and $AUD1.35 respectively.
D6 - NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS
In accordance with AASB: 132 Financial Instruments, certain instruments are classified as equity in the separate financial statements
of a subsidiary or other entity controlled by the Group which represent non-controlling interests in the consolidated financial
statements are classified as liabilities in the consolidated financial statements of the Group to the extent which the non-controlling
interest has a preferential claim to the net assets of the subsidiary over shareholders of the parent. Changes in the net assets are
recognised in the profit or loss except for distributions to unit holders and subscription of units.
Opening Balance
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
592,810
514,600
Profit/(Loss) for the period attributable to non-controlling interests
(185,840)
46,548
Impact of foreign exchange
Net change in units on issue
Closing Balance
(135)
(18,181)
55,020
49,843
461,855
592,810
DIGITALX LTD <> 2020 ANNUAL REPORT
58
The section below includes information regarding the financial position of the Group (excluding non-operating assets & liabilities
covered under Section C and Working Capital covered under Section D).
The section includes the following disclosures:
E1 Property, plant and equipment (Page 59)
E2 Non-current assets – Right of use asset (Page 60)
E2 Non-current assets - Intangible assets (Page 61)
DIGITALX LTD <> 2020 ANNUAL REPORT
59
E1 - PROPERTY, PLANT AND EQUIPMENT
Policy
is stated at historical cost
Plant and equipment
less
includes
accumulated
expenditure that is directly attributable to the acquisition of
the items.
depreciation. Historical
cost
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it
is probable that the future economic benefits associated with
the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period
in which they are incurred.
Plant and equipment are depreciated or amortised on a
reducing balance or straight-line basis at rates based upon
their expected useful lives as follows:
•
•
Computer equipment – 3 years
Leasehold improvements – 5 years
Depreciation is recognised to write off the cost or valuation of
assets (other than freehold land) less their residual values over
their useful lives. The estimated residual value of plant and
equipment has been assessed to be zero. The estimated useful
lives, residual values and depreciation method are reviewed at
the end of each reporting period, with the effect of any change
in estimate accounted for on a prospective basis.
Property Plant & Equipment
Cost
Accumulated depreciation
Net Carrying amount
Reconciliation
Carrying amount at beginning of period
Additions
Disposals
Depreciation charge for the period
Net carrying amount at end of period
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. An impairment loss is
recognised for the amount by which the assets carrying
amount exceeds its recoverable amount. The recoverable
amount is the higher of an assets fair value less costs to sell
and value in use. Gains and losses on disposals are determined
by comparing proceeds with their carrying amount.
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.
The Group as lessor
Amounts due from lessees under finance leases are recognised
as receivables at the amount of the Group’s net investment in
the leases. Finance lease income is allocated to accounting
periods to reflect a constant periodic rate of return on the
Group’s net investment outstanding in respect of the leases.
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Initial
direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
Year ended
30 June 2020
$USD
352,098
(124,457)
227,641
297,490
6,990
(6,244)
(70,595)
227,641
Year ended
30 June 2019
$USD
351,352
(53,862)
297,490
502
351,352
(481)
(53,883)
297,490
DIGITALX LTD <> 2020 ANNUAL REPORT
60
E2 - NON-CURRENT ASSETS – RIGHT OF USE
(A) Change of accounting policy
(B) Adjustments recognised on adoption of AASB16
On 1 July 2019, the Group adopted the new leasing standard,
AASB16: Leases, which replaced the existing standard,
AASB117: Leases.
Under the new standard, leases are no longer classified as
operating leases or finances leases as they had been previously
under AASB 117.
In applying AASB16 from 1 July 2019 the Group has adopted
the new standard retrospectively but has not restated
comparatives for the 2018 or 2019 reporting comparatives, as
permitted under the transitional provisions of the new
standard.
The reclassifications and impact of the new standard are
therefore recognised in the opening statement of financial
position on 1 July 2019.
At the time of the change, the Group only had one lease
classified as an operating lease, being the lease for the
Blockchain Centre entered in to in July 2018 for a term of 5
years, that was required to be recognised:
(C) Lease liability
The lease liabilities were recognised at the present value of
remaining lease payments, discounted using the Group’s
incremental borrowing rate (8.8%) at the time of the adoption.
Operating lease commitments disclosed at 30 June 2019
Adjustment for contracts reassessed as service contracts
Adjustment for discounting using the Group’s incremental borrowing rate
Adjustment for finance liabilities
Liability at 1 July 2019
Current Lease Liability
Non-Current Lease Liability
Liability at 1 July 2019
Interest expense
Lease payments
Foreign exchange effect
Liability at 30 June 2020
Current Lease Liability
Non-Current Lease Liability
(D) Right of use asset
$USD
544,549
(234,663)
(166,972)
273,218
416,132
86,576
329,556
416,132
31,278
(108,478)
(2,027)
336,905
91,841
245,064
The associated right of use asset for property leases were measured on a retrospective basis as if the new rules had always been
applied. There were no onerous lease contracts that would have required adjustment
Opening balance at 30 June 2019
Adjustment for right of use asset
Right of use asset at 1 July 2019
Depreciation of right of use asset
Right of use asset at 30 June 2020
Property Leases
$USD
-
389,397
389,397
(97,349)
292,048
1 The net impact to retained earnings at 1 July 2019 was $26,696.
2 The Group does not currently recognised deferred tax assets, as a result no deferred tax impact has been recognised as a result of the change in the standard.
DIGITALX LTD <> 2020 ANNUAL REPORT
61
(C) Other transition disclosures
•
The Group has applied several practical expedients under the new standard as permitted. The expedients include:
a. Use of single discount rate;
b.
c.
Reliance on previous assessment as to whether lease(s) are onerous; and
Exclusion of indirect costs for the measurement of right of use assets and initial application.
•
Lease payments for property leases includes fixed payments less any incentives, variable payments based on a rate and amounts
expected to be payable under residual value guarantees.
• Right of use assets for property leases include the initial measurement of the lease liability plus initial direct & restoration costs
E3 - NON-CURRENT ASSETS - INTANGIBLE ASSETS
Internally generated intangible assets - Research and
development expenditure
Expenditure on research activities is recognised as an expense
in the period in which it is incurred. An internally generated
intangible asset arising from development (or from the
development phase of an internal project) is recognised if, and
only if, all of the following have been demonstrated:
•
•
The technical feasibility of completing the intangible
asset so that it will be available for use or sale;
The intention to complete the intangible asset and
use or sell it;
The ability to use or sell the intangible asset;
•
• How the intangible asset will generate probable
•
•
future economic benefits;
The availability of adequate technical, financial and
other resources to complete the development and to
use or sell the intangible asset; and
The ability to measure reliably the expenditure
attributable to the
its
development.
intangible asset during
The amount initially recognised for internally generated
intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition
criteria listed above. Where no internally generated intangible
is
asset can be recognised, development expenditure
recognised in profit or loss in the period in which it is incurred.
initial recognition,
Subsequent to
internally generated
intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the
same basis as intangible assets that are acquired separately.
Capitalisation of development costs
The development activities are part of an internal project, with
costs incurred both by an internal software development team
and through the outsourcing of development activities to
external contractors. The total cost capitalised on the project
at 30 June 2020 is $USD2,016,187.
An intangible asset arising from the development phase of an
internal project shall be recognised if, and only if, an entity can
demonstrate all of the following:
•
The technical feasibility of completing the intangible
asset so that it will be available for use or sale;
Its intention to complete the intangible asset and use or
sell it;
Its ability to use or sell the intangible asset;
How the intangible asset will generate probable future
economic benefits. Among other things, the entity can
demonstrate the existence of a market for the output of
the intangible asset or the intangible asset itself or, if it is
to be used internally, the usefulness of the intangible
asset;
The availability of adequate technical, financial and other
resources to complete the development and to use or sell
the intangible asset; and
Its ability
attributable
development.
the expenditure
its
to measure
the
to
intangible asset during
reliably
•
•
•
•
•
The Company has evaluated the criteria required to be
satisfied for an intangible asset arising from the development
phase of an internal project to be recognised and conclude in
respect to AirPocket that all conditions required to recognise
an intangible asset generated from development of an internal
project have been demonstrated.
The Company has evaluated the future economic benefit by
modelling the expected future cash flows to estimate a value
of the asset.
The Company has previously raised a $USD2,016,188
impairment provision against the costs capitalised for its
AirPocket intangible asset as a result of a lack of historical data
with respect to the estimates used in determining the fair
value of AirPocket. The provision is to be reassessed at the
next reporting date with anticipation that more information
will be available to assess the recoverable amount of the asset.
DIGITALX LTD <> 2020 ANNUAL REPORT
62
Intellectual property
Cost
Accumulated amortisation
Provision for Impairment2
Net Carrying amount
Reconciliation
Carrying amount at beginning of period
Additions
Write down of Intangible Assets
Provision of impairment of Intangible Assets
Net carrying amount at end of period1
1 Net of accumulated amortisation and provision for impairment.
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
2,016,188
-
2,016,188
-
(2,016,188)
(2,016,188)
-
-
-
-
-
-
-
49,519
481
(50,000)
-
-
DIGITALX LTD <> 2020 ANNUAL REPORT
63
The section below includes information regarding the Group’s equity structure including movements in contributed equity from
share transactions and movements in reserves.
The section includes the following disclosures:
F1 Contributed Equity (Page 64)
F2 Reserves & Non-Controlling Interest (Page 65)
DIGITALX LTD <> 2020 ANNUAL REPORT
64
F1 – CONTRIBUTED EQUITY
(a) Issued and paid up Capital
Fully paid ordinary shares – 605,628,549
(2019: 571,525,427)
(b) Movement in Ordinary Share Capital
Date
Details1
30-Jun-19
Closing Balance
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
34,759,917
33,662,319
Number of
Shares
571,525,427
Issue Price A$
$USD2
33,662,319
Issue of Shares on exercise of options
24,691,358
0.0324
556,934
15-Nov-19
Issue of Shares under agreement with Bullion Asset ManagementA
9,411,764
0.0850
1-Jul-19
2-Jul-19
Share issue costs
18-Nov-19
Share issue costs
30-Jun-20
Closing Balance
A Refer to Note D5(b) for details.
Date
Details1
30-Jun-18
Closing Balance
5-Jul-18
10-Jul-18
7-Aug-18
8-Aug-18
Vesting of Performance Rights
Share issue costs
Share issue costs
18-Sep-18
Issue of shares on exercise of convertible notes
18-Sep-18
Issue of shares to employees
20-Sep-18
Share issue costs
8-Oct-18
Issue of Shares on exercise of options
10-Oct-18
Share issue costs
13-May-19
Issue of Shares for settlement
14-May-19
Share Issue costs
Issue of Shares on exercise of options
3,086,420
0.0324
Issue Price A$
$USD2
605,628,549
Number of
Shares
486,865,628
1,000,000
-
-
-
-
16,296,295
3,441,000
-
-
0.027
0.12
-
100,000
0.0324
-
1,895,453
-
0.0616
(3,472)
544,690
(3,555)
34,756,916
30,431,588
-
(1,426)
73,757
(1,397)
317,108
300,606
(3,571)
2,341
(1,336)
81,301
(1,368)
(6,960)
887,500
(270,745)
(4,459)
80,714
(1,368)
79,796
(1,372)
15-May-19
Issue of Shares under Share Purchase Plan
36,321,122
0.0677
1,701,610
16-May-19
Share Issue costs
17-May-19
Issue of Shares under top up placement
19,046,519
0.0677
17-May-19
Share Issue costs
21-May-19
Share Issue costs
27-May-19
Issue of Shares for settlement
1,576,568
0.0740
28-May-19
Share Issue costs
18-Jun-19
Issue of Shares for settlement
1,896,422
0.0615
571,525,427
33,662,319
24-Jun-19
Share Issue costs
30-Jun-19
Closing Balance
1 Refer to the corresponding Appendix 3B for full details of each issue.
2 Based on AUD/USD as at the date of transaction.
3 Refer to Note H5 for any issues subsequent to the end of the reporting period.
DIGITALX LTD <> 2020 ANNUAL REPORT
65
Rights Attaching to Shares
The rights attaching to fully paid ordinary shares arise from a combination of the Company’s constitution, statute and general law.
Fully paid ordinary shares carry one vote per share and carry a right to dividend.
Dividends
There are no dividends paid or declared during the period.
F2 – RESERVES
Nature of reserves
Option premium and share-
based payment reserve
Reserve is established to record balances pertaining to share options and performance rights
granted for services provided to the Company by employees and vendors.
Convertible note reserve
Foreign Exchange Reserve
Reserve is established to record amounts required to be recognised in equity for convertible notes
that meet the definition of compound instruments.
Exchange differences arising on translation of the foreign controlled entity are recognised in other
comprehensive income and accumulated in a separate reserve within equity. The cumulative
amount is reclassified to profit or loss when the net investment is disposed of.
30 June 2019
Share based payment expense
Conversion of foreign operations
30 June 2020
30 June 2018
Share based payment expense
Share options issued
Conversion of foreign operations
30 June 2019
e
t
o
N
Option premium and
share-based payment
reserve1
Convertible Note
Reserve
Foreign Exchange
Reserve
1,300,760
148,916
-
1,449,676
62,680
-
-
62,680
21,420
-
(669)
20,751
e
t
o
N
Option premium and
share-based payment
reserve1
Convertible Note
Reserve
Foreign Exchange
Reserve
62,680
(15,887)
785,240
399,439
116,081
-
-
-
-
-
-
37,307
21,420
1,300,760
62,680
1 Ordinary share issues treated as share-based payments that have no vesting conditions are recognised directly in equity.
Share based payments
Employees and consultants of the Group receive remuneration in the form of share-based payments, whereby employees render
services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate
valuation model. That cost is recognised, together with a corresponding increase in other capital reserves in equity, over the period
in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised
for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired
and the Group’s best estimate of the number of equity instruments that will ultimately vest. The statement of profit or loss expense
or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is
recognised in employee benefits expense. No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions, for which vesting is conditional upon a market or non-vesting condition.
These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
DIGITALX LTD <> 2020 ANNUAL REPORT
66
Valuation of options and performance rights
The fair value of the share options and performance rights at grant date are determined using a binomial option pricing method that
takes into account the exercise price, the term of the option, the probability of exercise, the share price at grant date and expected
volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The following tables list the inputs to the model used for valuation of the options:
Options issued to Director (Toby Hicks)
Item
Volatility (%)
Risk-free interest rate (%) – range
Expected life of option (years)
Exercise price per terms & conditions
Underlying security spot price
Valuation date
Expiry date
Valuation per option
Number of options issued
Valuation of performance rights
Tranche 1
119.92%
1.04%
5
$AUD0.10
$AUD0.04
10 July 2019
30 June 2024
$AUD0.046
2,500,000
The fair value of performance rights with market-based conditions at grant date are determined using a Monte-Carlo simulation
method that takes into account the market conditions, the term of the vesting period, the share price at grant date and expected
volatility of the underlying share across a number of simulations.
Item
Market based condition – Share price target over 15 days
Volatility (%)
Expected vesting period (years)
Underlying security spot price
Valuation date
Expiry date
Valuation per right
Number of rights issued
Options and performance rights on issue or owed as at 30 June 2020
Details
Share options
Share options
Performance rights
Performance rights
Number
11,168,382
2,500,000
9,000,000
19,500,000
Tranche 1
$AUD0.09
121.84%
3
$AUD0.04
10 July 2019
9 July 2022
$AUD0.037
7,500,000
Tranche 2
$AUD0.09
117.18%
3
$AUD0.03
21 Nov 2019
12 Dec 2022
$AUD0.021
9,000,000
Issue Date
Nov 18 to May 19
12 Dec 2019
10 Dec 2018
12 Dec 2019
DIGITALX LTD <> 2020 ANNUAL REPORT
67
The section below includes information regarding the Group organisational structure and information related to the parent entity as
required by the Corporations Act 2001.
G1 - PRINCIPLES OF CONSOLIDATION
The consolidated financial report incorporates the assets and
liabilities of all subsidiaries of DigitalX Limited (Company or
Parent Entity) as at period end and the results of all
subsidiaries for the period then ended. DigitalX Limited and its
subsidiaries together are referred to as the Group or the
Consolidated Entity.
The consolidated
incorporate the
financial statements
financial statements of the Company and entities (including
structured entities) controlled by the Company and its
subsidiaries. Control is achieved when the Company:
• Has power over the investee;
•
Is exposed, or has rights, to variable returns from its
involvement with the investee; and
• Has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed
above. The Company considers all relevant facts and
circumstances in assessing whether or not the Company's
voting rights in an investee are sufficient to give it power,
including:
•
•
The size of the Company's holding of voting rights
relative to the size and dispersion of holdings of the
other vote holders;
Potential voting rights held by the Company, other
vote holders or other parties;
• Rights arising from other contractual arrangements;
and
• Any additional facts and circumstances that indicate
that the Company has, or does not have, the current
ability to direct the relevant activities at the time that
decisions need to be made, including voting patterns
at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income
and expenses of a subsidiary acquired or disposed of during
the year are included in the consolidated statement of profit
or loss and other comprehensive income from the date the
Company gains control until the date when the Company
ceases to control the subsidiary.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with the Group's accounting policies. All intragroup
assets and liabilities, equity, income, expenses and cash flows
relating to transactions between members of the Group are
eliminated in full on consolidation.
G2 - CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets,
liabilities and results of the following subsidiaries
in
accordance with the accounting policy described in Note G1.
All controlled entities are included in the consolidated annual
final report. The parent entity does not guarantee to pay the
deficiency of its controlled entities in the event a winding up
of any controlled entity. The period end of the controlled
entities is the same as that of the parent entity, except for the
US companies listed below which use 31 December year end.
Name of Controlled Entity
Place of Incorporation
% of Shares Held
2020
% of Shares Held
2019
Digital CC Management Pty Ltd
Digital CC Trading Pty Ltd
Digital CC IP Pty Ltd
Digital CC Limited
Digital CC IP Limited
Australia
Australia
Australia
Hong Kong
Hong Kong
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
DIGITALX LTD <> 2020 ANNUAL REPORT
68
Name of Controlled Entity
Place of Incorporation
% of Shares Held
2020
% of Shares Held
2019
Digital CC Holdings USA Inc
Digital CC USA LLC
Digital CC USA Services LLC
Digital CC Ventures Pty Ltd
Pass Petroleum Pty Ltd
Airpocket International Pty Ltd
United States
United States
United States
Australia
Australia
Australia
AirPocket LLC
United States
DigitalX Funds Management Pty Ltd
DigitalX Fund Unit Trust
DigitalX Bitcoin Fund Unit Trust
DigitalX Asset Management Pty Ltd
DigitalX New Tech Fund Inc.
Australia
Australia
Australia
Australia
Panama
DigitalX (BVI) Limited
British Virgin Isles
Digital Asset Administration Cayman Limited
British Virgin Isles
Year ended 30 June 2020
100%
100%
100%
100%
100%
100%
-
73%
46%
93%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
73%
43%
-
100%
100%
100%
100%
There were no changes to the controlled entities during the year ended 30 June 2020 except for those noted below:
• AirPocket LLC (de-registered through normal course of business); and
• DigitalX Bitcoin Fund Unit Trust (refer to Note D5 for additional details).
Year ended 30 June 2019
There were no changes to the controlled entities during the year ended 30 June 2019 except for those noted below:
• DigitalX Asset Management Pty Ltd;
• DigitalX (BVI) Limited;
• Digital Asset Administration; and
• DigitalX New Tech Fund Inc.
All of the entities above were incorporated as part of the ongoing development and execution of the Group’s asset management
strategy. The results for the entities above are immaterial for the period.
G3 - PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been
applied in determining the financial information shown below,
are the same as those applied in the consolidated financial
statements. Refer to Summary Note A for a summary of the
significant accounting policies relating to the Group.
Investments in subsidiaries, associates and joint venture
entities
Investments in subsidiaries, associates and joint venture
entities are accounted for at cost in the financial statements
of DigitalX Limited.
Parent entity financial information
Financial guarantees
The financial information for the parent entity, DigitalX
Limited, disclosed below has been prepared on the same basis
as the consolidated financial statements, except as set out
below:
Where the parent entity has provided financial guarantees in
relation to
loans and payables of subsidiaries for no
compensation, the fair values of these guarantees are
DIGITALX LTD <> 2020 ANNUAL REPORT
69
accounted for as contributions and recognised as part of the
cost of the investment.
Tax consolidation legislation
DigitalX Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation.
The head entity, DigitalX Limited, and the controlled entities in
the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if
each entity in the tax consolidated group continues to be a
stand-alone taxpayer in its own right. In addition to its own
current and deferred tax amounts, DigitalX Limited also
recognises the current tax liabilities (or assets) and the
deferred tax assets arising from unused tax losses and unused
tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement
under which the wholly-owned entities fully compensate
DigitalX Limited for any current tax payable assumed and are
(a) Summary of financial information
compensated by DigitalX Limited for any current tax receivable
and deferred tax assets relating to unused tax losses or unused
tax credits that are transferred to DigitalX Limited under the
tax consolidation
legislation. The funding amounts are
determined by reference to the amounts recognised in the
wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding
agreement are due upon receipt of the funding advice from
the head entity, which is issued as soon as practicable after the
end of each financial period. The head entity may also require
payment of interim funding amounts to assist with its
obligations to pay tax instalments.
Assets or liabilities arising under tax funding agreements with
the tax consolidated entities are recognised as current
amounts receivable from or payable to other entities in the
group. Any difference between the amounts assumed and
amounts receivable or payable under the tax funding
agreement are recognised as a contribution to (or distribution
from) wholly-owned tax consolidated entities.
Financial position
Assets
Current assets
Non-Current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Contributed Equity
Retained earnings
Reserves
-
-
Share based payment
Convertible note
Total equity
30 June 2020
$USD
30 June 2019
$USD
4,924,257
3,798,586
8,722,843
(650,864)
-
(650,864)
70,319,074
(53,219,051)
5,415,928
62,680
8,071,979
10,836,041
15,817,255
26,653,296
(606,925)
(745,997)
(1,352,922)
69,224,477
(49,253,794)
5,267,011
62,680
25,300,374
Financial performance
Profit/(loss) for the year and other comprehensive income/(loss)
Total comprehensive income/(loss)
(18,471,909)
(18,471,909)
(1,449,920)
(1,449,920)
(b) Commitments and Contingent Liabilities of the parent
The parent entity did not have any contingent liabilities or commitments, as at 30 June 2020 other than those disclosed below
in Note H2.
(c) Guarantees entered into the parent entity
There were no guarantees entered into by the parent entity other than those disclosed in Note H2.
DIGITALX LTD <> 2020 ANNUAL REPORT
70
The section below includes information regarding other disclosures relevant to users of the financial statement in understanding
other transactions and the impact of future standards or events that may impact the Group.
The section includes the following disclosures:
H1 Related Party Transactions (Page 71)
H2 Commitments and contingents (Page 71)
H3 New Accounting Standards and Interpretations (Page 72)
H4 Changes from Preliminary Report (Page 75)
H5 Post balance date events (Page 76)
DIGITALX LTD <> 2020 ANNUAL REPORT
71
H1 - RELATED PARTY TRANSACTIONS
(a) Subsidiaries
Interests in subsidiaries are set out in Note G2. Balances and transaction between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
(b) Transactions with Key Management Personnel
Short term employee benefits
Salaries and fees
Director fees
Other benefits
Post-Employment Benefits
Superannuation
Share-based payments
Shares granted
Options and performance rights1
Total Remuneration
Year ended
30 June 2020
$USD
Year ended
30 June 2019
$USD
300,848
49,051
4,705
265,062
101,003
34,520
41,158
17,681
-
248,182
643,444
43,680
350,472
812,419
1 Refer to Note F2 for details of the events relating to performance rights and options effecting key management personnel.
(c) Transactions with Director related entities
Year ended 30 June 2020
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Director Toby Hicks is a partner,
$USD41,343 for legal services rendered on various matters. This amount relates to the period of the financial year that Mr Hicks
was a Director of the Company.
Year ended 30 June 2019
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Director Toby Hicks is a partner, $5,533
for legal services rendered on various matters. This amount relates to the period of the financial year that Mr Hicks was a Director
of the Company. At 30 June 2019, Steinepreis Paganin is not considered a related party as Mr Hicks was not a Director at 30 June
2019.
• During the year, the Group recognised an expense and paid Blockchain Global Ltd, a company of which Messrs Rubinstein and
Lee served as Directors of during the year, of $1,211 for reimbursement of costs. The Company notes that both Mr Rubinstein
and Mr Lee resigned as Directors of Blockchain Global during the year and the Company no longer considers Blockchain Global to
be a related party on that basis. Messrs Rubinstein and Lee were appointed Directors of the Company as nominees of Blockchain
Global Ltd.
• During the year, Mars Capital Australia Pty Ltd, a company controlled by Non-Executive Director Sam Lee, converted 14
convertible notes, with a face value of $AUD10,000 each, convertible at $AUD0.027 each, to 5,185,185 ordinary shares. As part
of the conversion 2,800,000 options exercisable at $AUD0.0324 expiring 18 September 2020 were also issued. During the year,
$AUD5,236 of interest was paid, and recognised as an expense, on the convertible notes held. At 30 June 2019, no amounts were
owed to Mars Capital.
• During the year, Irwin Biotech Nominees Pty Ltd, a company controlled by Non-Executive Chairman Peter Rubinstein, converted
17 convertible notes, with a face value of $AUD10,000 each, convertible at $AUD0.027 each, to 6,796,296 ordinary shares. As
part of the conversion 3,400,000 options exercisable at $AUD0.0324 expiring 18 September 2020 were also issued.
DIGITALX LTD <> 2020 ANNUAL REPORT
72
During the year, $AUD6,358 of interest was paid, and recognised as an expense on the convertible notes held. At 30 June 2019,
no amounts were owed to Irwin Biotech.
• During the year, the Group paid Value Admin Pty Ltd, a company controlled by Non-Executive Chairman Peter Rubinstein,
$USD50,509 as part of Non–Executive Director fees.
H2 – COMMITMENTS AND CONTINGENCIES
Commitments of the Group
During the 2018 financial year entered into a 5-year lease for premises at 66 Kings Park Road, West Perth, WA (“The Blockchain
Centre”). At 30 June the amount due within 12 months was $130,974 and the committed between 12 months and 5 years was
$287,514. There were no commitments greater than 5 years.
The Group did not have any commitments (other than those set out in note D2 & D5) and above, as at 30 June 2020 (2019: Nil).
Guarantees entered into by the Group
There were no guarantees entered into by the Group as at 30 June 2020 other than for the lease noted above (2019: Nil).
Contingent Liabilities of the Group
The Group did not have any contingent liabilities as at 30 June 2020 (2019: Nil).
H3 - NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
Standards and Interpretations in issue not yet adopted
The following table lists Australian Accounting Standards and Interpretations that have been recently issued or amended but are not
yet effective and have not been early adopted by the Company for the reporting period ended 30 June 2020. These particular
standards are considered relevant to the entity based on the balances and transactions presented within these financial statements.
Management are in the process of determining the potential impact of the initial application of the Standards and Interpretations.
These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period
beginning on or after the effective date of each pronouncement.
DIGITALX LTD <> 2020 ANNUAL REPORT
73
New / revised
pronouncement
Superseded
pronouncement
Nature of the change
Effective
date
Likely impact on initial application
None
AASB 2014-10 Amendments
to Australian Accounting
Standards – Sale or
Contribution of Assets
between an Investor and its
Associate or Joint Venture
AASB 2018-6 Amendments to
Australian Accounting
Standards – Definition of a
Business
None
The amendments address a current inconsistency between AASB 10
Consolidated Financial Statements and AASB 128 Investments in
Associates and Joint Ventures.
1 January
2022
When these amendments are first adopted for the year ending
30 June 2023, there will be no material impact on the financial
statements.
The amendments clarify that, on a sale or contribution of assets to a
joint venture or associate or on a loss of control when joint control or
significant influence is retained in a transaction involving an associate
or a joint venture, any gain or loss recognised will depend on whether
the assets or subsidiary constitute a business, as defined in AASB 3
Business Combinations. Full gain or loss is recognised when the assets
or subsidiary constitute a business, whereas gain or loss attributable
to other investors’ interests is recognised when the assets or
subsidiary do not constitute a business.
This amendment effectively introduces an exception to the general
requirement in AASB 10 to recognise full gain or loss on the loss of
control over a subsidiary. The exception only applies to the loss of
control over a subsidiary that does not contain a business, if the loss
of control is the result of a transaction involving an associate or a joint
venture that is accounted for using the equity method. Corresponding
amendments have also been made to AASB 128.
*The mandatory effective date of AASB 2014-10 has been deferred to
1 January 2022 by AASB 2017-5.
AASB 2018-6 amends AASB 3 to clarify the definition of a business,
assisting entities to determine whether a transaction should be
accounted for as a business combination or as an asset acquisition.
The amendments:
•
clarify that to be considered a business, an acquired set of
activities and assets must include, at a minimum, an input and a
substantive process that together significantly contribute to the
ability to create outputs;
remove the assessment of whether market participants are
capable of replacing any missing inputs or processes and
continuing to produce outputs;
add guidance and illustrative examples to help entities assess
whether a substantive process has been acquired;
narrow the definitions of a business and of outputs by focusing
on goods and services provided to customers and by removing
the reference to an ability to reduce costs; and
•
•
•
1 January
2020
When these amendments are first adopted for the year ending
30 June 2021, there will be no material impact on the financial
statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
74
AASB 2018-7 Amendments to
Australian Accounting
Standards – Definition of
Material
None
AASB 2019-1 Amendments to
Australian Accounting
Standards – References to
the Conceptual Framework
None
add an optional concentration test that permits a simplified
assessment of whether an acquired set of activities and assets is not a
business.
AASB 2018-7 principally amends AASB 101 and AASB 108. The
amendments refine the definition of material in AASB 101. The
amendments clarify the definition of material and its application by
improving the wording and aligning the definition across the
Australian Accounting Standards and other publications. The
amendment also includes some supporting requirements in AASB 101
in the definition to give it more prominence and clarifies the
explanation accompanying the definition of material.
AASB 2019-1 amends Australian Accounting Standards,
Interpretations and other pronouncements to reflect the issuance of
the revised Conceptual Framework for Financial Reporting (Conceptual
Framework).
The application of Conceptual Framework is limited to
•
For profit entities that have public accountability
Other for-profit entities that voluntarily elect to apply the Conceptual
Framework
1 January
2020
When these amendments are first adopted for the year ending
30 June 2021, there will be no material impact on the financial
statements.
1 January
2020
When these amendments are first adopted for the year ending
30 June 2021, there will be no material impact on the financial
statements.
DIGITALX LTD <> 2020 ANNUAL REPORT
75
H4 – CHANGE FROM PRELIMINARY FINAL REPORT
In the Group's Preliminary Final Report for the year ended 30 June 2020 released on 28 August 2020, the Group classified its non-
controlling interest in the DigitalX Fund and DigitalX BTC Fund as equity on consolidation. Despite being recorded as equity in the
financial statements of the trust, in accordance with AASB 132: Financial Instruments, the non-controlling interests in the fund (which
held 46% of the units on issue as at reporting date) should have been classified as a liability in the consolidated financial statements
of the Group as the unit holders of the trust are only entitled to the net assets of the trust on winding up after all of the other creditors
have been paid, they have priority of claim to the net assets of the DigitalX Fund and DigitalX BTC Fund over the shareholders of the
Company. Hence, under accounting standards the units of the DigitalX Fund and DigitalX BTC Fund not owned by the Company
represent a potential obligation to deliver cash in preference to the shareholders of the Company.
The re-classification had no impact on the loss or equity attributable to the shareholders of DigitalX as disclosed in the Preliminary
Final Report.
The misclassification has been corrected by restating each of the affected financial statement line items for the year ended 30 June
2020:
Statement of Profit or Loss (Extract)
Reported
Year ended
30-Jun-20
$USD
Adjustment
$USD
Final
Year ended
30-Jun-20
$USD
(Increase)/decrease in net assets attributable to unit holders
Profit/(Loss) before tax
-
(4,893,691)
185,840
185,840
185,840
(4,707,851)
Income tax benefit/(expense)
-
-
Profit/(Loss) for the period
Profit/(Loss) attributable to:
Members of the parent entity
Non-controlling interests
Statement of Financial Position (Extract)
CURRENT LIABILITIES
Net assets attributable to unit holders
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Non-controlling interests
TOTAL EQUITY
(4,893,691)
185,840
(4,707,851)
(4,707,851)
(185,840)
(4,893,691)
-
185,840
(4,707,851)
-
185,840
(4,707,851)
-
439,659
684,723
461,855
461,855
461,855
901,514
461,855
1,146,578
8,533,834
(461,855)
8,071,979
461,855
(461,855)
-
8,533,834
(461,855)
8,071,979
DIGITALX LTD <> 2020 ANNUAL REPORT
76
H5 - EVENTS AFTER THE REPORTING DATE
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected the group’s operations, results or state
of affairs, or may do so in future years other than those set out below.
The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has not had a material impact on the business up to 30
June 2020, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly
developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
Date of event
Details of event
1 September 2020
The Company issued 5,251,852 at $0.0324 per share on conversion of options.
1 September 2020
Issue of 1,136,634 shares to a member of KMP on satisfaction of performance milestones, in accordance
with the Employment Agreement.
9 September 2020
Issue of 10,000,000 options exercisable at $AUD0.05 subject to performance milestones and expiring 9
September 2023.
10 September 2020
The Company issued 2,561,728 at $0.0324 per share on conversion of options.
21 September 2020
The Company issued 2,600,000 at $0.0324 per share on conversion of options.
27 September 2020
Due to the volatile nature and the materiality of the digital assets held, we disclose the impact of changes
in the value of digital assets held by the Group, excluding the DigitalX Fund and DigitalX BTC Fund and
unlisted digital assets, as at the close date of the 27 September.
Coin Symbol
BTC
$USD Spot Price
at 30 June
$9,137
$USD Spot Price
at 27 Sept
$10,774
$USD Impact
$705,547
There were no other reportable subsequent events.
DIGITALX LTD <> 2020 ANNUAL REPORT
77
Directors
Toby Hicks
Non-Executive Chairman
Leigh Travers
Executive Director
Peter Rubinstein
Non-Executive Director
Company Secretary
Shannon Coates
ABN
59 009 575 035
Registered Office and Principal Place of Business
Suite 1, Level 2,
66 Kings Park Road
West Perth WA 6005
Tel: +61 (8) 9322 1587
Auditor
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6008
Tel: +61 (8) 6382 4600
www.bdo.com.au
Stock Exchange Listing
DigitalX Limited shares are listed on the Australian Securities Exchange (ASX Code: DCC)
Share Registry
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 6000
GPO Box D182
Perth WA 6840
Telephone: +61 (8) 9323 2000
Facsimile: +61 (8) 9323 2096
Email: perth.services@computershare.com.au
Website www.digitalx.com
DIGITALX LTD <> 2020 ANNUAL REPORT
78
The following information is current as at 24 September 2020.
EXCHANGE LISTING
DigitalX Limited shares are listed on the Australian Securities Exchange. The Company’s ASX code is DCC.
DISTRIBUTION OF SHAREHOLDERS
The number of shareholders, by size of holding, are:
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Number of
Holders
193
2,812
1,348
3,057
694
Number of
Shares
44,188
8,234,881
10,921,220
108,053,528
489,924,946
617,178,763
UNMARKETABLE PARCELS
Holdings of less than a marketable parcel of ordinary shares:
Holders: 4,737
Shares: 13,514
UNQUOTED SECURITIES
For each class of unquoted securities, if a person holds 20% or more of the securities in a class, the name of the holder and number
of securities held is disclosed.
UNLISTED OPTIONS AND CONVERTIBLE NOTES
Unlisted Options exercisable at $0.087 each on or before 17 May 2022.
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
Melshare Nominees Pty Ltd holds 2,768,38200,000 comprising 100% of this class.
Unlisted Options exercisable at $0.22 each on or before 10 December 2023
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Irwin Biotech Nominees Pty Ltd holds 1,000,000 Options comprising 50% of this class.
2 Blockchain Global Ltd holds 1,000,000 Options comprising 50% of this class.
Number of
Holders
-
-
-
-
1
1
Number of
Holders
-
-
-
-
21-2
2
Number of Options
-
-
-
-
2,768,382
2,768,382
Number of Options
-
-
-
-
2,000,000
2,000,000
DIGITALX LTD <> 2020 ANNUAL REPORT
79
Unlisted Options exercisable at $0.25 each on or before 10 December 2023
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Irwin Biotech Nominees Pty Ltd holds 1,500,000 Options comprising 50% of this class.
2 Blockchain Global Ltd holds 1,500,000 Options comprising 50% of this class.
Unlisted Options exercisable at $0.30 each on or before 10 December 2023
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Irwin Biotech Nominees Pty Ltd holds 2,000,000 Options comprising 50% of this class.
2 Blockchain Global Ltd holds 2,000,000 Options comprising 50% of this class.
Unlisted Options exercisable at $0.10 each on or before 30 June 2024
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Emboodhu Pty Ltd holds 7,500,000 Performance Rights comprising 100% of this class.
Unlisted Options exercisable at $0.05 each on or before 9 September 2023
Range
Number of Options
-
-
-
-
3,000,000
2,000,000
Number of Options
-
-
-
-
4,000,000
4,000,000
Number of Options
-
-
-
-
2,500,000
2,500,000
Number of Options
Number of
Holders
-
-
-
-
21-2
2
Number of
Holders
-
-
-
-
21-2
2
Number of
Holders
-
-
-
-
1
1
Number of
Holders
-
-
-
-
11
1
-
1–1,000
-
1,001–5,000
-
5,001–10,000
-
10,001–100,000
10,000,000
100,001 and over
Total
10,000,000
1 Matthew Robert Harry holds 10,000,000 options comprising 100% of this class. Vesting of this class is subject to the funds management division reaching AU$100m
in funds under management.
DIGITALX LTD <> 2020 ANNUAL REPORT
80
Performance rights expiring 11 July 2022
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Emboodhu Pty Ltd holds 7,500,000 Performance Rights comprising 100% of this class.
Performance rights expiring 10 December 2023
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1Irwin Biotech Nominees Pty Ltd holds 3,000,000 Performance Rights comprising 25% of this class.
2 Mr Leigh Daniel Travers holds 9,000,000 Performance Rights comprising 75% of this class.
Performance rights expiring 10 December 2023
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Mr Leigh Daniel Travers holds 9,000,000 Performance Rights comprising 100% of this class.
Number of
Holders
-
-
-
-
1
1
Number of
Holders
-
-
-
-
1-21
1
Number of Rights
-
-
-
-
7,500,000
7,500,000
Number of Rights
-
-
-
-
12,000,000
9,000,000
Number of
Holders
-
-
-
-
1
1
Number of Rights
-
-
-
-
9,000,000
9,000,000
DIGITALX LTD <> 2020 ANNUAL REPORT
81
LISTING OF 20 LARGEST SHAREHOLDERS
The names of the twenty largest registered holders of quoted ordinary shares are:
Name
Number of Shares
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BLOCKCHAIN GLOBAL LIMITED
BNP PARIBAS NOMINEES PTY LTD
NRB INTERNATIONAL LLC
IRWIN BIOTECH NOMINEES PTY LTD
ONE CC PTY LTD
CS FOURTH NOMINEES PTY LIMITED
ACL INVESTMENT AUSTRALIA PTY LTD
MR HING WA CHAN
VALUEADMIN COM PTY LTD
DECENTRALISED CAPITAL PTE LTD
MR COREY PINCHAS SILVER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
IRWIN BIOTECH NOMINEES P/L
MR TE-CHIHTERRY CHEN
MRS LISA JANINE DE MEIO
BELTAPE PTY LTD
MR RICHARD JAMES ANSELL
YMG INTERNATIONAL GROUP PTY LTD
39,194,635
26,400,179
18,940,030
17,099,966
14,973,785
11,196,296
10,500,000
9,881,589
9,697,221
8,475,075
7,200,000
7,161,764
6,530,653
5,551,554
5,470,000
5,144,022
4,042,000
3,960,000
3,889,710
3,703,704
Percentage of
Shares
6.35
4.28
3.07
2.77
2.43
1.81
1.70
1.60
1.57
1.37
1.17
1.16
1.06
0.90
0.89
0.83
0.65
0.64
0.63
0.60
TOTAL
219,012,183
35.49
SUSTANTIAL SHAREHOLDERS (HOLDING NOT LESS THAN 5%)
There were no substantial shareholders holding 5% or more of the voting shares in the Company as at 24 September 2020.
VOTING RIGHTS
All ordinary shares carry one vote per share without restriction. No voting rights are attached to Options.
ON MARKET BUY BACK
There is no current on-market buy-back.
CORPORATE GOVERNANCE STATEMENT
The Company’s Corporate Governance Statement for the 2020 financial year can be accessed at:
https://digitalx.com/corporate-governance/
DIGITALX LIMITED
ABN 59 009 575 035
PERTH | NEW YORK
WWW.DIGITALX.COM
INFO@DIGITALX.COM