2021 ANNUAL REPORT
DIGITALX LIMITED
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
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DIGITALX LTD | 2021 ANNUAL REPORT | 2
Dear Shareholders,
I am pleased to present this Annual Report to our Shareholders for the year ended 30 June 2021.
The outcome of the 2021 Financial Year is a result of the decisions made by the Board in the previous year, and the commitment to
execution by the Company’s team.
The Company operates at the intersection of finance and technology, to provide shareholders with exposure to both the value uplift
and as such, our aligned businesses of funds management
from the technology and the price appreciation of the new digital asset class
and the utilisation of new technologies to develop and build new age regulatory and compliance products complement one another.
of digital
Backed by strong growth in the digital asset markets and the ongoing wider adoption and acknowledgement of the potential
assets, the Company’s ‘Drawbridge’ suite of regtech products continues to grow both in its utility and by number of users. The goal
with Drawbridge remains the same: to be the standard for governance and compliance products globally. I continue
to believe that
any ASX listed company that has any form of director or employee trading should be using Drawbridge, not only as an immutable
record of those trades, but also to protect all directors and employees from trading in periods where they shouldn't. We will continue
to push this message at every opportunity.
Finally, I would like to acknowledge our team for all their commitment and work this year. Like many businesses, they have faced
challenges as a result of COVID, but they have continued to work to execute the business plan and build wealth for shareholders. As
a team, we all look forward to what the next year can present for DigitalX.
Yours sincerely,
At
Toby Hicks
Non-Executive Chair
DIGITALX LTD | 2021 ANNUAL REPORT | 3
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 2021. Information contained within this report and the financial report is presented in Australian Dollars
($AUD).
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
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.
Status
Independent
Non-Executive
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.
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
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
8,350,792 fully paid ordinary shares; 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 unlisted company EasyPark ANZ, an early adopter in the
“Smart City” opportunities for digital parking.
Interests in securities held as at the date of the report
36,334,372 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; and
2,000,000 unlisted options exercisable at $0.30 each expiring on 10 December 2023.
DIGITALX LTD | 2021 ANNUAL REPORT | 4
Experience
Mr Dooley is an experienced corporate executive and was formerly the Managing Director of
leading international share registry company, Computershare Investor Services Pty Limited for
13 years before retiring in July 2020. During his time at Computershare Mr Dooley also served
as Managing Director of the Computershare Fund Services division, which offered registry
services for unlisted funds.
Mr Dooley holds a Bachelor of Economics from Macquarie University, a Diploma of Applied
Finance and Investment and has completed the Australia Institute of Company Directors’
Company Directors course.
Interests in securities held as at the date of the report
Nil
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.
Mr Greg Dooley
Non-Executive Director
Term of Appointment
Appointed 3 August 2021
Status
Independent
Non-Executive
Current Directorships
None
Previous Directorships of
Listed Entities within past 3
years
None
Mr Leigh Travers
Executive Director
Term of Appointment
Appointed 24 July 2016
Resigned 6 August 2021
Status
Non-Independent
Executive
Current Directorships
None
Previous Directorships of
Listed Entities within past 3
years
None
Company Secretary
Mr Joel Ives is an experienced Chartered Accountant (CAANZ) that provides CFO, accounting, and company secretarial services for
ASX listed and private companies across various industries.
Mr Ives currently acts as Company Secretary to Harvest Technology Ltd (ASX:HTG), Kuniko Limited (ASX:KNI), Green Technology Metals
Limited, and Joint Company Secretary of OliveX Holdings Limited (NSX:OLX).
Mr Ives was appointed on 6 August 2021.
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 and resigned on 6 August 2021.
DIGITALX LTD | 2021 ANNUAL REPORT | 5
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 $AUD8,306,823 (from $AUD50,489,288 to
$58,796,111) primarily as a result of a A$8.8m (before costs) capital raising in March 2021 to sophisticated U.S. investors. The
changes for the year are disclosed in Note F1.
• As a result of the capital raising, digital asset acquisitions by the funds and the year-on-year increase in digital asset prices, the
Group’s cash and digital asset position increased by $AUD32,011,731 (from $AUD10,837,883 to $AUD42,849,614).
•
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
Impact1
Link2
29-Jun-21
DigitalX recognises A$8.33m in revenue for advisory services
21-May-21
Strategic investment into Bitcoin and digital asset market
9-Mar-21
Successful completion of A$8.8 million capital raising
18-Jan-21
Follow-on investment to Bullion Asset Management
Revenue
Contract Asset
Cash
Investments
Cash
Equity
Cash
Investments
24-Nov-20
First RegTech product for publicly traded entities launched
Intangible Assets
Link
Link
Link
Link
Link
1 Refer to the relevant section of the Report for the impact of the change.
2Refer to ASX announcement for full details.
Dividends
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.
Subsequent events
No other matter or circumstance has arisen since 30 June 2021 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.
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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 2021, 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
21 July 2021
3 August 2021
Details of event
On 21 July 2021, the Company announced that Executive Director, Mr Leigh Travers, had tendered his
resignation.
On 3 August 2021, the Company announced that Mr Greg Dooley had been appointed as a Non-
Executive Director of the Company.
Mr Dooley is an experienced corporate executive and was formerly the Managing Director of leading
international share registry company, Computershare Investor Services Pty Limited for 13 years before
retiring in July 2020. During his time at Computershare Mr Dooley also served as Managing Director of
the Computershare Fund Services division, which offered registry services for unlisted funds.
6 August 2021
On 6 August 2021, the Company announced that Ms Shannon Coates had resigned as Company
Secretary and has been replaced by Mr Joel Ives.
26 August 2021
On 26 August 2021, the Company provided a progress update to the market and noted:
- Mr Jonathon Carley had been appointed Acting Chief Operating Officer for the Company; and
-
The Company had recognised a material uplift in the value of its Human Protocol (HMT) holding
to A$18,750,000 following its listing on leading exchanges FTX and Coinlist. The value of the
right at 30 June 2021 was A$8,335,434.
16 September 2021
27 September 2021
On 16 September 2021 the Company announced it had entered into an agreement to acquire leading
online share sales business, Sell My Shares, for upfront cash consideration of $1,640,000 and up to
$250,000 deferred consideration subject to satisfaction of various performance milestones.
Due to the volatile nature and the materiality of the digital assets held, we disclose the value of material
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
Coin Amount
$AUD Price
at 30 June
$AUD Spot Price
at 27 Sept
BTC
HMT
Total
215.95
12,500,000
-
$46,585
$0.665
-
$58,070
$1.29
-
$AUD Balance
$12,540,217
$16,125,000
$28,665,217
DIGITALX LTD | 2021 ANNUAL REPORT | 7
Operating results
The result for the year ended 30 June 2021 was a consolidated profit attributable to members of the Group of $AUD6,756,954
(2020: loss of $AUD6,838,813). Following a transitional year in 2020, DigitalX is pleased to see the systematic approach taken over
the past 18 months begin to deliver early results for shareholders at the end of the financial year.
DigitalX’s corporate strategy is centred on creating solutions at the intersection of finance and technology, to provide shareholders
with exposure to both the value uplift from the technology and the price appreciation of the new digital asset class, utilising its
teams experience in the assessment of new technologies and the investment and development of those technologies.
Highlights
•
•
•
•
•
Increase of liquid assets year on year from A$10.84m to A$42.85m.
Completion of $A8.8m (before costs) capital raising to fund further investments into the digital asset space and to accelerate
future development opportunities.
The growth of the funds management division over the period in terms of both capabilities and funds under management.
Launch of RegTech division led by Drawbridge, a digital governance solution built on the latest blockchain technology with the
potential to integrate with the ASX’s DLT and Chess Replacement application.
Pleasing progress from investments and services undertaken by DigitalX, including Bullion Asset Management, the strategic
investment made in the DigitalX Digital Asset Fund and the Human Protocol Foundation.
• Blockchain innovation activities set to continue headlined by the $60m Digital Finance CRC.
Overview
Throughout the year, DigitalX remained focused on growing three core areas to the company’s operations, which are strategically
aligned to key aspects of the growing blockchain economy in order to deliver returns for shareholders.
DigitalX Funds Management
Growing access to Bitcoin and other digital assets for wholesale investors
Blockchain Product Development
Commercialisation of distributed ledger products such as Drawbridge
DigitalX Corporate Treasury
Investment in blockchain and digital finance projects to generate returns
Digital Asset Funds Management
DigitalX is the investment manager of digital asset investment products for qualified investors to invest in
digital assets through a familiar, secure and regulated structure. The Company operates two professionally
managed wholesale funds, the DigitalX Bitcoin Fund and the DigitalX Digital Asset Fund, a diversified basket
of leading digital assets. The DigitalX Funds solve the technical and risk management challenges of investing in this emerging asset
class for high-net-worth and institutional investors.
The DigitalX Funds provide exposure to a growing, yet volatile asset class and are presented to investors from the perspective of a
long term investment horizon. With volatility over the period continuing, it was pleasing to see both funds under management
increase as well as the division maintaining a high level of investor retention, key indicators that the division is growing sustainably.
The funds under management of the division grew to a peak of $32m over the period with the business posting funds under
management of $22.14m at year end.
DIGITALX LTD | 2021 ANNUAL REPORT | 8
The volatility during the period provided a strategic investment opportunity for DigitalX as the Company doubled its initial
investment into the DigitalX Digital Asset Fund over May and June during the lows for 2021.
Despite this softer period for the digital asset market, the DigitalX Bitcoin Fund and the DigitalX Fund closed the financial year with
impressive 12-month performance (net of fees) of 253.99% and 387.20% respectively.
The strong performance was noted by the Australian Financial Review (AFR)1, which saw DigitalX noted as the manager of the
second-best performing fund per Morningstar. The DigitalX Fund achieved superior returns over the Eureka Crypto Hedge Fund
(ECHF) Index despite having a lower-risk mega-cap, liquid investment strategy. The DigitalX Fund has now seen outperformance
during both bear and bull market periods and has out-performed more traditional asset classes by a significant margin since
inception.
Over the period, the quality of the funds management team was bolstered by the addition of new hires covering funds
management, funds operation and digital asset research. The additional experience and expertise has enabled the strategy to
evolve to a more active investment strategy which aligns with the growing maturity of the marketplace. The strategy enables the
funds management team to deliver greater risk adjusted performance for investors and provide a further key differentiator to
future competitors seeking to introduce passive digital asset investment products. The funds management divisions key assets of
team, wealth management platform listings, CPD education materials and growing brand have set the business up well for future
growth over the 2022 financial year.
Blockchain Product Development
Launch of Drawbridge
During the year the Company launched Drawbridge, its first distributed ledger app for global securities
market exchanges. Drawbridge helps executives of publicly listed companies build trust and improve
reliability in how their organisation is governed, through the use of new technologies that enhance the
standard of systems and processes for achieving good governance outcomes. The vision for Drawbridge is to become the digital
governance standard for publicly listed companies globally.
As a first step in pursuit of this vision, Drawbridge was released to a select set of listed companies through an early adopter
programme focused on growing initial traction in the market. The first version of Drawbridge supports listed companies to transition
away from manual and error prone processes typically used to manage insider trading risks through a Securities Trading Policy, and
overhauls this by providing a digital solution for both company executives and staff. Key to Drawbridge is its use of the Digital Asset
Modelling Language (DAML), which is set to provide future benefits for accessing listed company data through global securities
exchanges. To this end, the Drawbridge application has been one of the first given access to the ASX’s test DLT environment.
Drawbridge Market Traction & Roadmap
Drawbridge’s early marketing strategy has focused on building relationships with key stakeholders within its target market of listed
company governance executives. This has included the sponsorship of industry conferences such as the Governance Institute’s
Governance and Risk Management Forum, email and digital marketing campaigns to over 4,000 identified prospects, and successful
lead generation activities such as the release of a free VWAP calculation service for target customers.
Early market interest in Drawbridge has gained momentum throughout the year, with more listed company employees onboarded
to the Drawbridge app, and a growing pipeline of new customers engaged through product demonstrations and proposals. The
Company has taken an iterative approach to strengthening the product’s strategy and market positioning in response to direct
market feedback from customers. This has seen improvements in the product’s pricing model and refinement of the product
roadmap for additional features and solutions designed to provide greater value to customers and therefore opportunities for
increased revenues.
1 https://www.afr.com/chanticleer/secrets-of-a-top-crypto-fund-20210616-p581kk
DIGITALX LTD | 2021 ANNUAL REPORT | 9
In line with Drawbridge’s strategic roadmap, the Company signed an MoU with leading off-market share sale provider, Sell My
Shares, to assess the delivery of trade execution services so that employees of listed companies may execute trades upon receiving
approval via Drawbridge’s Share Trading Policy app. Additional proposed development areas included a submission to the Australian
Securities Investment Commission (ASIC) in response to their industry regtech challenge.
The Company’s submission seeks to expand Drawbridge by assessing the technical and commercial feasibility of developing a
solution to assist ASIC and listed companies in better monitoring instances of poor market disclosure. The outcome of the
submission process is currently pending.
Digital Finance CRC
During the year the Company became a partner to a successful proposal to the Australian Federal
Government for funding for a Cooperative Research Centre (CRC) to undertake research and
commercialisation activities in the emerging digital asset sector, which saw the award of $60M of
Government funding. The establishment of the CRC is a pleasing sign for the Company as a strong indication of the growth and
maturity of the blockchain and digital asset industry. The vision of the Digital Finance CRC is to be a global leader in the
development and exploitation of the opportunities arising from the universal digitisation of all assets. The CRC is supported by other
partners that include major retail and central banks, global financial markets technology companies, and Australian universities.
Combined, the group is taking a commercially focused, internationally connected approach with world-class researchers
undertaking vital, long-term, collaborative projects. The Company expects to define the exact scope of activities with the CRC and
partners beginning in early 2022.
DigitalX Treasury Holdings & Investments
The DigitalX corporate treasury provides shareholder’s exposure to a variety of digital asset and digital finance projects, which the
Company has used its market expertise and skills in identifying, securing and managing on an ongoing basis in order to generate
value.
As at 30 June 2021, the Group held the following major digital asset and investment related assets:
Investment in Bullion Asset Management (See Note D5);
Investment in DigitalX BTC Fund and DigitalX Fund (See Note D5);
•
•
• Direct holding in Bitcoin and other digital assets (See Note D4);
• Rights to Human Protocol Tokens (See Note C3); and
• Other Digital Assets (See note D4).
Bitcoin and DigitalX Bitcoin Fund Unit
The Company continued its decision to hold its 215.95 Bitcoin and DigitalX Bitcoin Fund units through FY2021. Throughout the year
the Company commenced assessments into methods for realising a yield from its digital asset holdings. The outcome of this
assessment process is ongoing with an objective to identify options which achieve a satisfactory risk and return profile for the
company’s holdings.
DigitalX Digital Asset Fund
As announced to the market on 21 May 2021, the company made a decision to invest a further A$750,000 in its Digital Asset Fund in
response to a downturn in the digital asset market. The Company continues to monitor this position and is pleased with the
subsequent market rebound.
DIGITALX LTD | 2021 ANNUAL REPORT | 10
Bullion Asset Management Services Pte Ltd (BAM)
The equity investment and services provided to Bullion Asset Management Services Pte Ltd (BAM), a bullion and digital asset
business saw pleasing results over the period with the launch of xbullion, a gold bullion backed digital asset. DigitalX provided
technical development resources to enable the launch of xbullion and its foundations for future growth, such as a silver bullion
backed digital asset and digital dollar products. BAM has achieved sales of US$2M and has attracted investments from leading
digital asset investment firms, family offices and a publicly listed gold developer.
The Human Protocol (HMT)
In June of 2021, DigitalX provided an update on a material digital asset position in the Human Protocol Foundation.
The update related to the significant progress of the Human Protocol Foundation as well as the revenue recognition of $8.33m in
relation to advisory services undertaken by DigitalX.
The Human Protocol Foundation completed a US$60m token sale on Coinlist that saw over 50,000 participants during June. The
Human Protocol Foundation is the owner of the digital product hCaptcha, which protects millions of websites globally from bots as
well as provides data labelling services to machine learning companies.
Corporate
Capital Raising
During the period the Company completed a placement to U.S institutional investors to raise A$8,816,684 (before costs). The use of
proceeds from the placement are to accelerate growth in its business, including the ongoing promotion of its Bitcoin and digital asset
investment funds and the rollout of its new RegTech product for publicly traded companies and general working capital purposes.
The Company issued 97,963,164 shares at a price of $0.09. In addition to the new shares, the Company issued 55,839,003 warrants.
48,981,582 warrants have been issued to investors in the Placement, exercisable at $0.10 each and expiring on 9 March 2024. A
further 6,857,421 warrants were issued as part consideration for capital raising services in relation to the Placement, exercisable at
$0.1125 each and expiring on 9 March 2024.
Change of currency
As foreshadowed in the Company’s June 2020 quarterly report, effective from 1 July 2020 the Company changed its functional
currency from US dollars to Australian dollars.
Consistent with this change, the presentation currency also changed to Australian Dollars, which means that financial information in
this Annual Report (including comparatives) are presented in Australian dollars. Refer to Note B2 for additional details.
This decision was made as a result of the focus on Australian markets through the Company’s digital asset funds, consulting activities
and the new product development combined with a reduction in staff in the United States. Furthermore, the Company notes that the
sourcing of reliable pricing in Australian dollars for its cornerstone asset, Bitcoin, has also improved.
COVID-19
The Company made key financial decisions in the prior year to manage its working capital during this uncertain time, which included
the deferral of all Director fees and the reduction in salaries for all senior executives. These temporary measures have now ended as
the Company’s financial performance during this period has been strong and is reflected in the profit for the period and the strong
uplift in the Company’s balance sheet. However, the Company continues to monitor the COVID-19 situation and may make further
adjustments as required.
DIGITALX LTD | 2021 ANNUAL REPORT | 11
Future Developments
With the three areas of Funds Management, Product Development, and Corporate Treasury seeing growth over the 2021 financial
year and the pipeline of opportunities for the Company continuing to develop, the outlook going forward is undoubtedly positive.
The funds management business of DigitalX was a key driver of the growth that saw a cash flow positive fourth quarter. The
business grew funds under management, its capabilities, and the pipeline of new investors, and is well placed to continue growing
its product distribution and investment offering on the back of a strong outlook for the asset class.
A strategic decision was taken a year ago to develop a regtech business which leveraged distributed ledger technologies, DigitalX is
now executing on an ambitious vision for Drawbridge to become the digital governance standard for the world’s publicly listed
companies. During the year, DigitalX saw adoption of the product by publicly listed companies in Australia through its
commercialisation plan and pursued the ongoing development of additional products for Drawbridge to offer into this marketplace.
The inclusion of DigitalX as a DLT solutions provider by the ASX in the FY21 Financial Results Presentation is an example of how the
business has quickly built a brand in a compliance and governance marketplace that requires trust and transparency using enhanced
technologies.
With multiple avenues to provide shareholder value through delivering DigitalX’s blockchain expertise to market, the Company
expects significant blockchain innovation to continue over the financial year.
DIGITALX LTD | 2021 ANNUAL REPORT | 12
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 2021.
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.
KMP
Toby Hicks
Position
Status
Term as KMP
Chairman and Non-Executive Director
Non-Executive KMP
Full Year
Peter Rubinstein
Non-Executive Director
Leigh Travers
Executive Director
Jonathon Carley
Chief Financial Officer
David Beros
Chief Product Officer
REMUNERATION POLICY
For the year ended 30 June 2021 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
Executive KMP
Executive KMP
Executive KMP
Full Year
Full Year
Full Year
Full Year
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 | 2021 ANNUAL REPORT | 13
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 agreed to the deferral of the same amount of his salary as the Non-Executive Directors on the same terms. The
deferrals were in effect from April 2020 to March 2021.
In addition to the above the Company’s senior executives agreed to a reduction in salaries ranging from 10% to 25%. The deferrals
were in effect from April 2020 till October 2020.
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 2021
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 2021.
Performance Metrics
At the 2020 AGM the Board set the following performance metrics for 30 June 2021 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
USD$5,000,000
Milestone
Issued
2018
Met?
Progress made
The Company notes that it has made progress on its strategy around
building a sustainable funds under management business and the
launch of the Company’s regtech product, Drawbridge. In addition to
this the Company recognised A$8.33m in revenue from services
delivered to Human Protocol.
DIGITALX LTD | 2021 ANNUAL REPORT | 14
2018
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
Over the course of the year there was a 200% increase in the share
price from $0.017 to $0.051 as a result of the Company’s progress
on its strategy around building a funds under management business
and the launch of the Company’s regtech product, Drawbridge. In
addition to this the Company’s balance sheet grew by $32m as a
result of a $A8.8 capital raising and an improved digital asset
market.
2018
Consistent with the commentary above.
2019
This hurdle was satisfied during the period as announced to market.
Refer to Note E1 and E2 for the impact.
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 | 2021 ANNUAL REPORT | 15
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 2021 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 increased 43% from $934,692 to $1,334,879
primarily reflective of an increase in vested performance-based remuneration. Total
base remuneration (including other benefits) was up 35% from $574,173 to $774,008
due to an increase in the number of KMP and at-risk remuneration was up 56% from
$360,519 to $560,871 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;
Increase in vested at risk remuneration to $512,027 (91%) in line with satisfaction of
performance right milestones; and
In April 2020 as a response to COVID-19 and capital management, the Board deferred
the cash fees for Non-Executive Directors. The deferral ended 31 March 2021.
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
48,843
9%
At Risk Remuneration
Vested
Unvested
Vested
512,027
91%
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
10,000,000
5,000,000
0
(5,000,000)
(10,000,000)
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
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
0.080
0.070
0.060
0.050
0.040
0.030
0.020
0.010
0.000
0.015
0.010
0.005
0.000
(0.005)
(0.010)
(0.015)
(0.020)
(0.025)
(0.030)
(0.035)
Net profit &
KMP remuneration
Net profit/(loss) before tax
Total reported remuneration
2017
2018
2019
2020
2021
DIGITALX LTD | 2021 ANNUAL REPORT | 16
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.
(Restated)
30 June 2017
$AUD
(Restated)
30 June 2018
$AUD
(Restated)
30 June 2019
$AUD
(Restated)
30 June 2020
$AUD
30 June 2021
$AUD
Revenue & other income from all operations
11,680,716
14,389,647
3,711,552
554,210
9,985,893 ↑
Net profit/(loss) before tax
(5,772,735)
3,770,812
(3,666,683)
(7,108,771)
6,756,954 ↑
Total reported in remuneration report
1,098,167
2,088,661
1,180,152
934,692
1,334,879 ↑
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
1,004,495
697,064
93,672
(0.029)
(0.029)
0.135
0.036
-
1,391,597
0.009
0.007
0.036
0.075
-
607,590
572,562
(0.007)
(0.007)
0.075
0.055
-
574,173
360,519
(0.011)
(0.011)
0.055
0.017
-
774,008 ↑
560,871 ↑
0.010 ↑
0.009 ↑
0.017
-
0.051 ↑
-
DIGITALX LTD | 2021 ANNUAL REPORT | 17
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 $AUD210,633 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
Acting Chief Operating Officer & 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 $AUD200,000 per annum (exclusive of superannuation). During the year Mr Carley also accepted a 25%
reduction due to COVID-19, the reduction ceased in October 2020. Mr Carley is subject to annual salary reviews and his reasonable
expenses will also be paid by the Company.
Mr David Beros
Chief Product Officer
Under an Employment Agreement entered into between Mr Beros and DigitalX, Mr Beros was appointed as Chief Product Officer, in
effect from 1 July 2019. The employment will be ongoing until it is terminated in accordance with Mr Beros’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 Beros’s illness, absence, material breaches or misconduct in which case Mr Beros 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 Beros a payment equal to his salary for the remainder of
the notice period. Mr Beros will be under restraint and non-solicitation clauses for up to 12 months after the termination of his
employment.
Mr Beros’ current salary is $AUD180,000 per annum (exclusive of superannuation). During the year Mr Beros also accepted a 25%
reduction due to COVID-19, the reduction ceased in October 2020. Mr Beros is subject to annual salary reviews and his reasonable
expenses will also be paid by the Company.
DIGITALX LTD | 2021 ANNUAL REPORT | 18
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 2021, 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 which were received on 25 November 2020. The
deferrals ended on 31 March 2021.
Amounts payable to Director controlled entities for services provided by Directors for the year ending 30 June 2021 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 | 2021 ANNUAL REPORT | 19
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 2021
Name
Short-term employee benefits
Post-employment
benefits
Share-based payment
Total
At Risk %
Salary & Fees
$AUD
Director Fees
$AUD
Other Benefits
$AUD
Superannuation
$AUD
Shares
$AUD
Options and
performance rights1
$AUD
$AUD
Non-Executive
Directors
Toby Hicks
Peter Rubinstein
Executive Directors
Leigh Travers
Other KMP
Jonathon Carley
David Beros
Total
-
-
50,0002
50,0004
-
-
4,750
4,750
14,435
19,167
-
-
-
186,2523
45,9465
241,002
77.3%
100,696
45.6%
198,1907
442,209
44.8%
210,4166
193,788
175,385
579,589
-
-
-
100,000
11,119
5,125
30,680
18,410
16,662
63,739
41,9838,9
88,500
130,483
-
-
265,301
15.8%
285,671
31.0%
430,388
1,334,879
42.0%
1 Refer to Sections E & F of the Remuneration Report for additional details.
2 Included in this total is an amount of $37,500 which related to Director’s fees to be paid in shares in
lieu of cash under a deed entered into by the Company and Mr Hicks on 23 April 2020. The fair value of
the 850,792 shares received at the time of issuance was $78,669.
3 100% of the total relates to share-based payment expense for performance rights issued and vested.
4 Included in this total is an amount of $37,500 which related to Director’s fees to be paid in shares in
lieu of cash under a deed entered into by the Company and Mr Rubinstein on 23 April 2020. The fair
value of the 850,792 shares received at the time of issuance was $78,669.
5 100% of the total relates to share-based payment expense for performance rights issued and vested.
6 Included in this total is an amount of $37,500 which related to salary to be paid in shares in lieu of cash
under a deed entered into by the Company and Mr Travers on 23 April 2020. The fair value of the 832,146
shares received at the time of issuance was $75,379.
7 Included in the total is $149,347 relating to the share-based payment expense for performance rights
issued and vested. The remaining amount $48,843 relates to performance rights issued but not vested.
8 Included in the total is a reversal of prior period accrued of $67,029 relating to a performance hurdle
satisfied in a prior period for which shares were not issued until the current period.
9 100% of the total relates to share-based payment expense for shares issued and vested.
DIGITALX LTD | 2021 ANNUAL REPORT | 20
Year ended 30 June 2020 (Restated)
Name
Short-term employee benefits
Post-employment
benefits
Share-based payment
Total
At Risk %
Salary & Fees1
$AUD
Director Fees1
$AUD
Other Benefits2
$AUD
Superannuation3
$AUD
Shares
$AUD
Options and
performance rights11
$AUD
$AUD
Non-Executive
Directors
Toby Hicks8
Peter Rubinstein
Sam Lee7
Stephen Roberts9
Executive Directors
Leigh Travers
Other KMP
Jonathon Carley
Neel Krishnan10
Total
-
-
-
-
216,347
190,414
30,263
437,024
34,901
36,352
-
-
-
-
-
71,253
-
-
-
-
4,494
14,407
-
-
(4,558)
21,737
6,498
4,169
6,109
18,090
1,059
59,787
-
-
-
-
-
-
-
218,666
30,445
-
-
258,061
84.7%
81,204
37.5%
-
-
-
-
111,399
344,925
32.3%
-
-
215,002
35,492
-
-
360,510
934,684
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 $AUD98,899 relating to the share-based payment expense for performance
rights issued but not vested. $AUD12,500 relates to deferred Directors’ fees to be issued in shares.
5 Included in the total is $AUD90,498 relating to the share-based payment expense for performance
rights issued but not vested. $AUD12,500 relates to deferred Directors’ fees to be issued in shares.
6 Included in the total is $AUD17,955 relating to the share-based payment expense for performance
rights issued but not vested. $AUD12,500 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 | 2021 ANNUAL REPORT | 21
SHARE OPTIONS AND PERFORMANCE RIGHTS GRANTED TO KEY MANAGEMENT PERSONNEL
Name
2021
Toby Hicks
Peter Rubinstein
Total
Options
Opening balance
Granted as
compensation
Exercised during the
period
Closing balanceA
2,500,000
4,500,000
7,000,000
-
-
-
-
-
-
2,500,000
4,500,000
17,000,000
1 7,000,000 options are fully vested but remain unexercised at 30 June 2021.
Name
2021
Toby Hicks
Leigh Travers
Peter Rubinstein
Total
Opening balance
Granted as
compensation
Exercised during the
period
Closing balanceA
Performance Rights
7,500,000
18,000,000
3,000,000
28,500,000
-
-
-
-
17,500,000
29,000,000
33,000,000
19,500,000
-
49,000,000
-
9,000,000
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 satisfied, and 7,500,000 rights (100% of the allocation) were vested on 19
February 2021. The fair value at time of exercise was $547,500.
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 satisfied, and 7,500,000 rights (100% of the allocation) were vested on 19
February 2021. The fair value at time of exercise was $657,000.
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 satisfied, and 3,000,000 rights were vested on 19 February 2021. The fair value
at time of exercise was $219,000.
4 9,000,000 rights remain unvested at 30 June 2021 relating to rights issued at the 2018 Annual General Meeting. These rights lapsed subsequent to 30 June 2021.
SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL
Opening Balance
1 July 2020
Granted as
compensation
Conversions &
vesting
25,466,296
5,000,000
-
850,792
832,146
850,792
6,400,000
9,000,000
7,500,000
Directors
Peter Rubinstein
Leigh Travers
Toby Hicks
KMP
David Beros
Net Other
changes1
3,617,284
Closing balance
30 June 2021A
36,334,372
358,974
15,191,120
-
-
8,350,792
1,623,550
(325,000)
1,836,634
Jonathon Carley
25,000
2,136,634
123,550
1,500,000
-
-
Total
30,614,846
6,170,364
22,900,000
3,651,258
63,336,468
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.
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 | 2021 ANNUAL REPORT | 22
RELATED PARTY TRANSACTIONS
Year ended 30 June 2021
•
During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Chairman Toby Hicks is a partner,
$AUD39,613 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 2020
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Chairman Toby Hicks is a partner,
$AUD60,056 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.
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 | 2021 ANNUAL REPORT | 23
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 | 2021 ANNUAL REPORT | 24
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 Hicks
Peter Rubinstein
Leigh Travers
Board Meetings
Number eligible to attend
12
12
12
Number attended
12
12
12
Shares under options and warrants
As at the date of this report, there are 81,107,385 options and warrants to subscribe for unissued ordinary shares in the Company,
comprising:
Date granted
Vesting
Date
Class
Exercise price
Expiry date
Number of shares
under
option/warrant
10 December 2018
10 December 2018
Unlisted Option
$0.22
10 December 2023
2,000,000
10 December 2018
10 December 2018
Unlisted Option
$0.25
10 December 2023
3,000,000
10 December 2018
10 December 2018
Unlisted Option
$0.30
10 December 2023
4,000,000
17 May 2019
17 May 2019
Unlisted Option
$0.0847
17 May 2022
2,768,382
11 July 2019
11 July 2019
Unlisted Option
$0.10
30 June 2024
2,500,000
10 September 2020
-
Unlisted Option
$0.10
9 September 2023
10,000,000
18 December 2020
18 December 2020
Unlisted Option
$0.10
18 December 2024
1,000,000
9 March 2021
9 March 2021
Unlisted Warrant
$0.10
9 March 2024
48,981,582
9 March 2021
9 March 2021
Unlisted Warrant
$0.1125
9 March 2024
6,857,421
The holders of these options do not have the right, by virtue of the option or warrant, to participate in any share issue or interest
issue of the Company or any other body corporate or registered scheme.
Shares issued on exercise of options
During the financial year, and to the date of this report, the Company issued 10,413,580 Ordinary Shares, on exercise of options.
Date
31 August 2020
10 September 2020
21 September 2020
Details
Unlisted
Unlisted
Unlisted
Issue Price A$
Number of Shares
0.0324
0.0324
0.0324
5,251,852
2,561,728
2,600,000
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.
Shares issued on conversion of convertible notes
During the financial year there were no shares issued on conversion of Convertible notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 25
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 $AUD14,743 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 27.
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.
Toby Hicks
Chair
Perth, 28 September 2021
DIGITALX LTD | 2021 ANNUAL REPORT | 26
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 2021 and of its performance for the
period then ended; and
(ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations), the Corporations
Regulations 2001, and other mandatory professional requirements.
(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 2021.
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.
at
Toby Hicks
Chair
Perth, 28
September 2021
DIGITALX LTD | 2021 ANNUAL REPORT | 27
DIGITALX LTD | 2021 ANNUAL REPORT | 28
DIGITALX LTD | 2021 ANNUAL REPORT | 29
DIGITALX LTD | 2021 ANNUAL REPORT | 30
DIGITALX LTD | 2021 ANNUAL REPORT | 31
Revenue from operations
Net gain/(loss) on digital assets
Other Income
Professional and consultancy fees
Corporate expenses
Advertising, media and investor relations
Employee benefit expenses
Share based payments – employee benefits
Depreciation
Realised and unrealised foreign exchange losses
Fair value movement of financial assets
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
D6
C4
Year ended
30 June 2021
$AUD
9,709,745
-
276,148
(687,522)
(75,771)
(271,419)
(Restated)
Year ended
30 June 2020
$AUD
421,882
(3,388,159)
132,328
(647,856)
(62,230)
(90,896)
(1,414,723)
(1,799,302)
(662,936)
(337,477)
129,159
433,670
(100,270)
(716,430)
-
474,780
(216,321)
(247,963)
(202,927)
(167,168)
(55,051)
(761,491)
(23,618)
269,959
6,756,954
(6,838,813)
-
-
Profit/(Loss) for the period attributable to members of DigitalX
6,756,954
(6,838,813)
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 32
e
t
o
N
Year ended
30 June 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
Profit/(Loss) for the period
6,756,954
(6,838,813)
Other comprehensive income for the period
Items that may be reclassified to profit or loss
Fair value increase/(decrease) in digital asset holdings
Exchange differences on translation of operations
Other comprehensive income/(loss) for the period, net of tax
14,930,756
(42,359)
14,888,397
-
(972)
(972)
Total comprehensive income/(loss) for the period
21,645,351
(6,839,784)
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 (cents)
Earnings per share from continuing operations
Total
C5
C5
21,645,351
21,645,351
(6,839,784)
(6,839,784)
0.01
0.01
0.01
0.01
(0.011)
(0.011)
(0.011)
(0.011)
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 33
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Digital assets
Contract 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
Distributions payable to unit holders
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
C2
D5
E1
E2
E3
C3
E2
D6
E2
Year ended
30 June 2021
$AUD
10,369,645
158,825
32,479,969
8,335,434
104,021
51,447,894
(Restated)
Year ended
30 June 2020
$AUD
3,975,690
196,946
6,862,193
-
104,535
(Restated)
1 July 2019
$AUD
7,496,623
240,379
10,336,075
-
146,705
11,139,364
18,219,782
2,471,036
1,496,960
-
148,339
239,283
268,772
-
330,680
424,241
-
752,922
23,618
432,146
-
-
3,127,430
2,251,881
1,208,686
54,575,324
13,391,245
19,428,468
742,515
-
126,169
2,740,471
8,257,054
11,866,209
482,830
22,424
133,412
-
670,909
1,309,575
1,496,050
273,413
-
-
861,140
2,630,603
176,422
176,422
355,990
355,990
-
-
12,042,631
1,665,565
2,630,603
42,532,693
11,725,680
16,797,865
F1
F2
58,796,111
17,970,289
50,489,288
2,227,053
48,899,231
2,011,703
(34,233,707)
(40,990,661)
(34,113,069)
42,532,693
11,725,680
16,797,865
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 34
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Other income
Interest paid
.
(Restated)
Year ended
30 June 2020
$AUD
294,363
(3,515,628)
37,876
-
e
t
o
N
Year ended
30 June 2021
$AUD
1,260,078
(3,289,965)
212,963
-
Net cash provided by/(used in) operating activities
(1,816,924)
(3,183,389)
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
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
(283,522)
(18,374)
(1,071,863)
(5,050,519)
(6,424,278)
9,154,085
6,349,172
(842,963)
(164,933)
14,495,361
-
(15,845)
-
(122,671)
(138,516)
-
156,956
(7,157)
(157,579)
(7,780)
Net increase/(decrease) in cash and cash equivalents
6,254,159
(3,329,686)
Cash and cash equivalents at beginning of period
Foreign exchange movement in cash
3,975,690
139,796
Cash and cash equivalents at end of period
D3
10,369,645
7,496,623
(191,247)
3,975,690
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 35
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
Shares received in lieu of cash
Depreciation
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 items 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 contract asset
(Decrease)/increase in trade payables and accruals
(Decrease)/increase in contract liabilities
(Decrease)/increase in tax payable
e
t
o
N
C2
-
E1
F1 & F2
E2
D6
C2
C2
C3
C3
C4
Year ended
30 June 2021
$AUD
6,756,954
(Restated)
Year ended
30 June 2020
$AUD
(6,838,813)
-
3,388,159
(214,866)
199,636
662,936
(433,670)
47,259
-
185,821
(474,780)
(393,969)
6,335,321
(38,635)
(8,335,434)
237,261
(15,437)
-
-
106,550
216,321
167,168
55,051
23,618
141,413
(269,959)
167,279
(2,843,212)
85,603
-
(174,923)
(250,858)
-
Net cash provided by/(used in) operating activities
(1,816,924)
(3,183,389)
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
• Shares issued in lieu of cash for services performed for Bullion Asset Management – Note D5.
• Shares issued on conversion of options – Note F1.
• Movement in prices of digital assets – Note D4.
• Shares issued to advisors for capital raising and corporate advisory services – Note F2.
Prior Year
• 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.
DIGITALX LTD | 2020 ANNUAL REPORT | 36
Consolidated Group
Balance at 30 June 2020 (Restated)3
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 2021
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 B2 for details of change in accounting policy.
Contributed Equity
$AUD
50,489,288
Reserves1
$AUD
2,227,053
Retained
Earnings/(Losses)
$AUD
Total
$AUD
(40,990,661)
11,725,680
-
-
-
-
6,756,954
6,756,954
14,888,397
-
14,888,397
14,888,397
6,756,954
21,645,351
9,473,215
(1,166,392)
-
-
-
854,839
-
-
-
9,473,215
(1,166,392)
854,839
58,796,111
17,970,289
(34,233,707)
42,532,693
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2020 ANNUAL REPORT | 37
Consolidated Group
Balance at 30 June 2019 (Restated)
Change in accounting policy
Balance at 1 July 2019 (Restated)
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the period (Restated)
Shares issued during the period2
Share issue costs
Share based payment expense
Contributed Equity
$AUD
48,899,231
Reserves1
$AUD
2,011,703
Retained
Earnings/(Losses)
$AUD
Total
$AUD
(34,113,069)
16,797,866
-
-
(38,780)
(38,780)
48,899,231
2,011,703
(34,151,848)
16,759,086
-
-
-
1,600,263
(10,206)
-
(971)
(971)
-
-
-
216,321
(6,838,813)
(6,838,813)
-
(971)
(6,838,813)
(6,839,784)
-
-
-
1,600,263
(10,206)
216,321
Balance at 30 June 2020 (Restated)
50,489,288
2,227,053
(40,990,661)
11,725,680
1 Refer to Note F2 for reconciliation of reserve balances.
2 Refer to Note F1 for details of shares issued during the year.
The above statement should be read in conjunction with the accompanying notes.
DIGITALX LTD | 2021 ANNUAL REPORT | 38
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 H4)
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 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 28.
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 | 2021 ANNUAL REPORT | 39
CORPORATE INFORMATION
Comparative information
its controlled entities
The consolidated historical financial statements of DigitalX
Limited and
the
Consolidated Entity or Group) for the year ended 30 June 2021
were authorised for issue in accordance with a resolution of
the Directors on 28 September 2021.
(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 2021
financial year can be accessed at:
https://DigitalX.com/investor-centre.
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.
Other than the change to policy noted below in Note B2 the
comparative balances for the year ending 30 June 2020 have
been presented consistently.
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 its digital assets.
Presentation and functional currency
The consolidated financial report is presented in Australian
Dollars. Refer to Note B2
in
presentational currency for the year ended 30 June 2021 and
the corresponding comparatives.
for details of change
Functional currency
The individual financial statements of each Group entity are
in the currency of the primary economic
presented
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 Australian dollars (‘$AUD’), which is the
functional currency of the Company and the presentation
currency for the consolidated financial statements.
Due to the nature of these activities for all entities in the Group
the functional currency has been determined to be $AUD.
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.
At the end of each reporting period, monetary
items
denominated in foreign currencies are retranslated at the
rates prevailing at that date.
items carried at
Non-monetary
that are
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
As signalled in its Annual Report for the year ended 30 June
2020, the Group indicated it would report in AUD for all future
reporting periods. The Group has determined $AUD is the
most appropriate currency for the Group’s reporting as the
DIGITALX LTD | 2021 ANNUAL REPORT | 40
predominant currency for revenue generating activities has
been $AUD combined with the material expenditure in AUD
for the financial year combined with digital asset pricing now
primarily in $AUD.
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
B2 - CHANGES TO ACCOUNTING POLICIES
• 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.
As previously disclosed, the Group identified a number of factors which indicated a review of its functional and reporting currency
was appropriate, these included:
•
Significant reduction in expenditure incurred in US dollars following a reduction in the staffing levels in the United States and
associated activities.
• Maturity of the Australian digital asset market and the ability to source reliable pricing for the Company’s cornerstone asset,
Bitcoin, in Australian dollars.
As a result of this review, the Group has changed its functional2 and reporting3 currency from US dollars to Australian dollars in the
current year effective from 1 July 2020.
All other accounting policies are consistent with those adopted in the annual financial report for the year ended 30 June 2020.
The financial information included in the interim financial report for the year ended 30 June 2020 (including comparatives at 1 July
2019), previously reported in US dollars, has been restated to Australian dollars using the procedures outlined below:
i.
ii.
Statement of Profit or Loss and Other Comprehensive Income, Statement of Cash Flows and Statement of Financial Position have
been translated into Australian Dollars using the conversion rate of $1.452644 representing the closing rate at the end of the
period 30 June 2020.
Earnings per share and Net Tangible Asset disclosures have also been restated to Australian dollars to reflect the change in
reporting currency.
2 In accordance with AASB 121: The Effects of Changes in Foreign Exchange Rates, the change in functional currency to Australian Dollars has been
applied prospectively from 1 July 2020, being the effective date of the change.
3 Under AASB 121: The Effects of Changes in Foreign Exchange Rates, a change in reporting currency is considered a voluntary change and
applied retrospectively. The Group have considered this position and have determined that the change in reporting currency has not been a
voluntary change and is necessitated by a change in the Group’s functional currency in order to provide useful and relevant information to the users
of the financial statements. As a result, the translation of prior period balances, as disclosed above, was completed using the same principles of a
change in functional currency being the closing rate prior to the date of the change. This treatment is consistent with guidance publish by a major
international accounting firm. The effect of the difference between the exchange rates used compared to the actual prevailing rates would not have
had a material impact on comparative financial information if the change were applied retrospectively as the difference in the rates is less than 1%.
4 Rate per xe.com
DIGITALX LTD | 2021 ANNUAL REPORT | 41
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 42)
C2 Revenue & Receivables (Page 45)
C3 Expenses, Payables & Other Payables (Page 47)
C4 Income Tax (Page 48)
C5 Earnings Per Share (Page 51)
DIGITALX LTD | 2021 ANNUAL REPORT | 42
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 2021 the Group operated three segments, blockchain consulting and development, asset
management and other. In the previous corresponding period (period ended 30 June 2020) the Group operated three segments,
Blockchain consulting and development, Asset Management and Other.
Segment description
BLOCKCHAIN DEVELOPMENT & CONSULTING (BDC)
The Group develops its own blockchain & regtech products (www.opendrawbridge.io) as well as providing consulting,
technical due diligence, solution design and development to businesses by utilising distributed ledger solutions and best of
blockchain technologies.
ASSET MANAGEMENT (AM)
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 | 2021 ANNUAL REPORT | 43
SEGMENT PERFORMANCE
Segment reporting ($AUD)
Results
Segment revenue
Intersegment revenue
Revenue from external customers
Revenue recognition timing – point in time
Revenue recognition timing – over time
BLOCKCHAIN DEVOPMENT &
CONSULTING
ASSET MANAGEMENT2
OTHER
TOTAL
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
8,655,500
300,837
862,969
41,079
191,276
79,966
9,709,745
421,882
-
8,655,500
-
8,655,500-
-
300,837
203,801
97,036
-
-
-
-
-
862,969
41,079
191,276
79,966
9,709,745
-
-
-
-
-
862,969
41,079
191,276
79,965
9,709,745
-
421,882
203,801
218,080
Segment result
Income tax expense/(benefit)
Segment result after tax
8,137,513
(313,884)
204,417
(840,553)
(1,622,010)
(5,627,703)
6,719,921
(6,782,140)
-
-
-
-
-
-
-
-
8,137,513
(313,884)
204,417
(840,553)
(1,622,010)
(5,627,703)
6,719,921
(6,782,140)
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
6,719,921
(6,782,140)
-
(100,270)
(337,477)
-
-
(23,618)
(55,051)
(247,963)
-
-
474,780
269,959
6,756,954
(6,838,813)
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 Asset Management segment does not include the operating results, segment assets or segment liabilities of the DigitalX Fund as CODM reviews the fund on a fair value basis of the Group’s interest in
the fund.
DIGITALX LTD | 2021 ANNUAL REPORT | 44
SEGMENT POSITION
Segment reporting ($AUD)
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
30 June 2021
(Restated)
30 June 2020
BLOCKCHAIN DEVELOPMENT &
CONSULTING
ASSET MANAGEMENT
OTHER
TOTAL
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
8,706,490
8,706,490
44,000
44,000
955,867
955,867
22,935
22,935
7,700
7,700
74,735
74,735
67,578
67,578
24,310
24,310
44,912,967
13,279,667
54,575,324
13,391,245
44,912,967
13,279,667
54,575,324
13,391,245
11,944,961
1,633,555
12,042,631
1,665,565
11,944,961
1,633,555
12,042,631
1,665,565
DIGITALX LTD | 2021 ANNUAL REPORT | 45
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 | 2021 ANNUAL REPORT | 46
Revenue
Advisory
Consulting
Asset Management Fees
Licensing
Product revenue
Total revenue1
Contract Asset
Contract Asset1
Year ended
30 June 2021
$AUD
8,384,002
269,498
862,969
191,276
2,000
9,709,745
Year ended
30 June 2021
$AUD
8,335,434
(Restated)
Year ended
30 June 2020
$AUD
-
299,648
45,848
76,386
-
421,882
(Restated)
Year ended
30 June 2020
$AUD
-
1 Contract asset relates to amount recognised on completion of revenue recognition obligation for the Human Protocol agreement as announced to the market on 29
June 2021.
Trade and other receivables
Trade receivables (gross) 1,2
Loss allowance
Trade receivables – Net
Other receivables
Deposits
Other
Total trade and other receivables
Other Income
Interest received
Other income
Year ended
30 June 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
82,073
-
82,073
76,751
-
158,825
Year ended
30 June 2021
$AUD
90,242
185,906
276,148
67,106
-
67,106
82,649
47,190
196,946
(Restated)
Year ended
30 June 2020
$AUD
32,272
100,056
132,328
Net fair value gain on digital assets held1
-
(3,388,159)
1 For the prior corresponding period movements in the fair value of digital assets as a result of revaluation were treated in accordance with AASB102 and recognised in
the consolidated statement of profit or loss. For the current period movements in the fair value of digital assets, unless impaired, are recognised in the asset revaluation
reserve in accordance with AASB138
DIGITALX LTD | 2021 ANNUAL REPORT | 47
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
Legal fees
Consulting fees
Tax consulting fees
Audit fees
Total 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.
Year ended
30 June 2021
$AUD
49,510
525,768
31,873
80,371
687,522
(Restated)
Year ended
30 June 2020
$AUD
184,678
327,344
58,087
77,747
647,856
DIGITALX LTD | 2021 ANNUAL REPORT | 48
(C) Other expenses
Regulatory and compliance
Occupancy
Other expenses
Total other expenses
Current liabilities – trade & other payables
Trade payables
Accrued expenses
PAYG withholding payable
Total trade & other payables
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
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.
Year ended
30 June 2021
$AUD
440,849
167,933
107,648
716,430
Year ended
30 June 2021
$AUD
467,049
242,800
32,666
742,515
(Restated)
Year ended
30 June 2020
$AUD
462,924
137,277
161,290
761,491
(Restated)
Year ended
30 June 2020
$AUD
327,784
129,711
25,335
482,830
Year ended
30 June 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
80,371
14,743
95,114
77,747
16,299
94,045
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.
DIGITALX LTD | 2021 ANNUAL REPORT | 49
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 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.
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
in other
current and deferred tax are also recognised
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
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.
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 | 2021 ANNUAL REPORT | 50
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 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
-
-
-
-
-
-
Year ended
30 June 2021
$AUD
6,756,954
-
(Restated)
Year ended
30 June 2020
$AUD
(6,838,813)
-
Profit/(Loss) before tax
6,756,954
(6,838,813)
Tax at the Group’s statutory income tax rate of Australia: 27.5% (2020:
27.5%)
1,858,162
(1,880,673)
Tax effect of amounts which are not deductible or assessable (taxable) in
calculating taxable income:
Non-deductible share-based payment
Profit from equity accounted investments
Fair value adjustment of 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 recognised
Deferred tax assets not recognised - Trusts
171,995
-
(119,259)
(16,346)
26,576
-
(34,313)
185,861
-
Previously unrecognised tax losses now recouped to reduce tax expense
(1,972,675)
Income tax expense/(benefit)
Income tax expense/(benefit) is attributable to:
Profit/(Loss) from continuing operations
Profit/(Loss) from discontinued operations
-
-
-
-
69,801
6,495
-
-
70,393
53,219
(50,610)
1,572,340
158,806
-
-
-
-
-
1 Current year 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 | 2021 ANNUAL REPORT | 51
C. Current tax assets and liabilities
Current tax liability
Income tax payable
Total current tax liability
D. Deferred tax assets and liabilities
-
-
-
-
-
-
As at 30 June 2021 the Group has tax losses available to be applied in the future periods in the United States and Australia estimated
to be $AUD4.62 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 $AUD1.54 million at 30 June 2021.
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 2021. 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
No material future developments.
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 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
0.01
0.01
0.01
0.01
(0.011)
(0.011)
(0.011)
(0.011)
DIGITALX LTD | 2021 ANNUAL REPORT | 52
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
Warrants
Weighted average number of ordinary shares on issue during the period
used in the calculation of diluted EPS
6,756,954
(6,838,813)
-
-
652,503,531
602,105,566
25,268,382
9,000,000
55,839,003
32,848,977
28,500,000
-
742,610,916
665,954,543
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 | 2021 ANNUAL REPORT | 53
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 54)
D2 Financial risk management (Page 54)
D3 Cash and cash equivalents (Page 58)
D4 Digital assets (Page 59)
D5 Investments (Page 61)
D6 Net assets attributable to unit holders (Page 62)
DIGITALX LTD | 2021 ANNUAL REPORT | 54
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 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 | 2021 ANNUAL REPORT | 55
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 | 2021 ANNUAL REPORT | 56
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 2021
$AUD
10,369,645
2,471,036
158,825
12,999,506
742,515
302,589
1,045,104
(Restated)
Year ended
30 June 2020
$AUD
3,975,690
1,496,961
67,106
5,539,757
327,784
489,402
817,186
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 2021, the Group had exposure to foreign currency risk within its recognised assets and liabilities. The cash and cash
equivalents held $USD5,986 (2020: $USD20,349) in bank accounts. The Group has no derivative liabilities in $USD (2020: $nil) and nil
$USD in finance liabilities (2020: $USD nil).
Group sensitivity – Foreign exchange risk
Based upon the financial instruments held as at 30 June 2021, 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 – 2021
Impact on profit or loss – 2020 (Restated)
Interest rate risk management
Fluctuation
+10%
$AUD
(340)
(768,496)
-10%
$AUD
340
768,496
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 | 2021 ANNUAL REPORT | 57
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
%
-
10
-
-
8.8
0.25
10
-
-
8.8
Less than 1
month
Interest
bearing -
variable
$AUD
1 to 3
months
Interest
bearing -
variable
$AUS
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
$AUD
$AUD
$AUD
$AUD
-
-
-
-
-
3,975,690
-
-
-
-
-
249,600
-
-
-
-
-
-
-
-
-
-
10,369,645
-
76,751
82,073
-
(742,515)
(252,337)
-
245,923
-
-
-
-
-
67,106
(327,784)
(549,423)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2021
Cash and cash equivalents
Convertible note
Other receivables
Other payables
Finance liability
2020 (Restated)
Cash and cash equivalents
Convertible note
Other receivables
Other payables
Finance liability
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
2021 no customers had a published credit rating.
Rating
A1
A2
Unrated (with no prior defaults)
Total
A1
A2
Unrated
$AUD
5,638
437,243
9,926,764
10,369,645
DIGITALX LTD | 2021 ANNUAL REPORT | 58
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 2021 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 intangible assets (refer to D4).
Cash at bank
Cash deposits at call1
Total cash and cash equivalents
Year ended
30 June 2021
$AUD
10,369,645
-
10,369,645
(Restated)
Year ended
30 June 2020
$AUD
3,975,690
-
3,975,690
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 | 2021 ANNUAL REPORT | 59
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 2021 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 D2)
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 | 2021 ANNUAL REPORT | 60
(A) Reconciliation of Digital Assets
Bitcoin1,2
Other listed digital assets1,3
Non-listed digital assets4
Total Digital Assets
(B) Reconciliation by Class
Inventory method
Intangible asset method
Financial asset method
Total Digital Assets
Year ended
30 June 2021
$AUD
28,297,002
4,182,967
-
32,479,969
Year ended
30 June 2021
$AUD
-
32,478,065
1,904
32,479,969
1 Digital assets were measured at fair value using at 30 June 2021. Refer to Note H1 for prices at the date of this report.
2 The amount includes $AUD16,268,003 held by the DigitalX BTC Fund and $AUD1,823,409 held by the DigitalX Fund.
3 Includes all tokens that are not bitcoin that are listed on an exchange. The amount includes $AUD3,561,848 held by the DigitalX Fund.
4 Includes all tokens not listed on an exchange.
(C) Movements by Class
Inventory Method
Intangible Asset
Financial Asset
(Restated)
Year ended
30 June 2020
$AUD
5,905,840
759,450
196,902
6,862,193
(Restated)
Year ended
30 June 2020
$AUD
-
6,737,545
124,648
6,862,193
Total
6,862,193
5,050,519
Opening Balance 1 July 2020 (Restated)
Net trading activity1
Revaluation2
Impairment
Closing Balance
-
-
-
-
-
6,737,545
5,050,519
124,648
-
20,690,001
(122,744)
20,567,257
-
-
-
32,478,065
1,904
32,479,969
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 Revaluation is inclusive of fair value movement attributable to the Company (refer Note E2) and the unit holders in the DigitalX Fund and DigitalX BTC Fund.
(C) Digital Assets by Fair Value Hierarchy
Level
Level 1
Level 2
Level 3
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.
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.
$AUD
$32,479,969
-
DIGITALX LTD | 2021 ANNUAL REPORT | 61
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
joint venture is initially recognised
in the consolidated
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 Bullion Asset Management Pte LtdA
Convertible note receivable
Investment in DigitalX FundsB
A.
Investment in BAM
Opening balance (restated)
Additional investment in Bullion Asset Management Pte Ltd1
Additional shares received in lieu of services
Fair value increase
1 As announced to market on 18 January 2021.
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
liabilities over the cost of the
identifiable assets and
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 2021
$AUD
2,221,436
249,600
-
2,471,036
(Restated)
Year ended
30 June 2020
$AUD
1,251,037
245,923
-
1,496,960
Year ended
30 June 2021
$AUD
1,251,036
321,863
214,867
433,670
2,221,436
DIGITALX LTD | 2021 ANNUAL REPORT | 62
B.
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 digital assets., 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 fund has 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 2021.
During the period the Group invested a further A$750,000 in to the DigitalX Fund.
The net asset value (NAV) of the Group’s units in the funds at 30 June 2021 were $AUD 1.37 (2020: $0.50) and $AUD4.45.
respectively.
At 30 June 2021, DigitalX’s holding in the DigitalX BTC fund and DigitalX Fund was 59.64% and 40.72% 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
Profit/(Loss) for the period attributable to non-controlling interests
Other comprehensive income
Impact of foreign exchange
Taxable distributions paid
Taxable distributions payable
Gain/(loss) on change in ownership
Net change in units on issue
Closing Balance
Year ended
30 June 2021
$AUD
670,910
(474,780)
4,244,533
-
(357,460)
(1,410,441)
(427,159)
6,011,451
8,257,054
(Restated)
Year ended
30 June 2020
$AUD
861,140
(269,959)
-
195)
-
-
-
79,924
670,909
DIGITALX LTD | 2021 ANNUAL REPORT | 63
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 64)
E2 Non-current assets – Right of use asset (Page 65)
E3 Non-current assets - Intangible assets (Page 66)
DIGITALX LTD | 2021 ANNUAL REPORT | 64
E1 - PROPERTY, PLANT AND EQUIPMENT
Policy
Property, plant and equipment is stated at historical cost 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 2021
$AUD
528,766
(380,427)
148,339
330,681
17,294
-
(199,636)
148,339
(Restated)
Year ended
30 June 2020
$AUD
511,472
(180,791)
330,680
432,146
10,154
(9,070)
(102,549)
330,680
DIGITALX LTD | 2021 ANNUAL REPORT | 65
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.
Right of use asset
Accumulated amortisation
Net Carrying amount
Reconciliation
Carrying amount at beginning of period
Initial recognition of right of use asset under AASB16
Partial de-recognition of lease – net
Depreciation charge for the period
Net carrying amount at end of period
Carrying amount at beginning of period
Initial recognition of lease liability
Interest expense
Lease payments
Partial de-recognition of lease – net
Foreign exchange effect
Net carrying amount at end of period
Current
Non-Current
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.
30 June 2021
$AUD
598,207
(358,924)
239,283
424,241
-
863
(185,821)
239,283
30 June 2021
$AUD
489,402
-
32,870
(164,138)
(55,545)
-
302,589
126,169
176,421
302,589
(Restated)
30 June 2020
$AUD
697,477
(273,236)
424,241
-
697,477
-
(273,236)
424,241
(Restated)
30 June 2020
$AUD
-
604,489
45,435
(157,579)
-
(2,943)
489,402
133,412
355,990
489,402
DIGITALX LTD | 2021 ANNUAL REPORT | 66
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:
and through the outsourcing of development activities to
external contractors. The total cost capitalised on the project
at 30 June 2021 is $AUD2,928,793.
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;
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
asset can be recognised, development expenditure
is
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.
•
•
•
•
•
•
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 concluded
that all conditions required to recognise an intangible asset
generated from development of an internal project have been
demonstrated.
Capitalisation of development costs
The development activities are part of an internal project, with
costs incurred both by an internal software development team
The Company has evaluated the future economic benefit by
modelling the expected future cash flows to estimate a value
of the asset.
Cost
Accumulated Amortisation
Provision for impairment
Net Carrying amount
30 June 2021
$AUD
3,197,565
-
(2,928,793)
268,772
(Restated)
30 June 2020
$AUD
2,928,793
-
(2,928,793)
-
Additions for the year primarily relate costs capitalised for the development of the Drawbridge regtech product.
The Company has previously raised a $AUD2,928,793 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 | 2021 ANNUAL REPORT | 67
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 68)
F2 Reserves & Non-Controlling Interest (Page 69)
DIGITALX LTD | 2021 ANNUAL REPORT | 68
F1 – CONTRIBUTED EQUITY
(a) Issued and paid-up capital
Fully paid ordinary shares – 739,675,657
(2020: 605,628,549)
(b) Movement in Ordinary Share Capital
Date
Details1
30-Jun-20
Closing Balance (Restated)
1-Sep-20
1-Sep-20
3-Sep-20
Issue of Shares on exercise of options
Issue of shares to employees
Share issue costs
Year ended
30 June 2021
$AUD
(Restated)
Year ended
30 June 2020
$AUD
58,796,111
50,489,288
Issue Price A$
$AUD2
Number of
Shares
605,628,549
5,251,852
1,136,634
0.0324
0.0440
50,489,288
170,160
50,012
(2,582)
83,000
(1,922)
84,240
(1,922)
97,436
(2,465)
10-Sep-20
Issue of Shares on exercise of options
2,561,728
0.0324
11-Sep-20
Share issue costs
21-Sep-20
Issue of Shares on exercise of options
2,600,000
0.0324
22-Sep-20
Share Issue costs
4-Dec-20
7-Dec-20
Issue of shares to directors in lieu of fees
2,029,914
0.0480
Share Issue costs
9-Mar-21
Issue of shares from capital raising
97,963,164
0.0900
8,816,685
9-Mar-21
Share issue costs
9-Mar-21
Share issue costs - Warrants to issued to Corporate Advisor
10-Mar-21
Share issue costs
(791,232)
(336,014)
(20,832)
22-Mar-21
Issue of shares on conversion of performance rights
19,500,000
0.0900
-
23-Mar-21
Share issue costs
21-May-21
Issue of shares to directors in lieu of fees
21-May-21
Issue of shares to employees
24-May-21
Share issue costs
30-Jun-21
Closing Balance
Date
Details1
30-Jun-19
Closing Balance
503,816
2,500,000
0.0480
0.0590
(7,094)
24,183
147,500
(2,329)
739,675,657
58,796,111
Issue Price A$
Number of
Shares
571,525,427
(Restated)
$AUD
48,899,231
1-Jul-19
Issue of Shares on exercise of options
24,691,358
0.0324
809,025
2-Jul-19
Share issue costs
(5,042)
15-Nov-19
Issue of Shares under Bullion Asset Management agreement
9,411,764
0.0850
791,238
18-Nov-19
Share issue costs
30-Jun-20
Closing Balance (Restated)
605,628,549
1 Refer to the corresponding Appendix 3B for full details of each issue.
2 Refer to Note H1 for any issues subsequent to the end of the reporting period
(5,162)
50,489,288
DIGITALX LTD | 2021 ANNUAL REPORT | 69
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.
e
t
o
N
Option premium
and share-based
payment reserve1
Convertible Note
Reserve
Asset
Revaluation
Reserve
Foreign Exchange
Reserve
30 June 2020 (Restated)
Share based payment expense
Conversion of foreign operations
Revaluation of digital assets
2,105,857
1854,839
-
-
91,051
-
-
-
-
-
-
14,930,756
30,144
-
(42,359)
-
30 June 2021
2,960,697
91,051
14,930,756
(12,215)
30 June 2019 (Restated)
Share based payment expense
Conversion of foreign operations
30 June 2020 (Restated)
e
t
o
N
Option premium and
share-based payment
reserve1
Convertible Note
Reserve
Foreign Exchange
Reserve
1,889,536
216,321
-
91,051
-
-
2,105,857
91,051
31,116
-
(972)
30,144
1 Ordinary share issues treated as share-based payments that have no vesting conditions are recognised directly in equity.
2 Included in the balance is an amount of $339,404 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.
DIGITALX LTD | 2021 ANNUAL REPORT | 70
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.
Valuation of options
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:
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
Valuation methodology
Number of options issued
Options issued to Corporate Advisor
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
Valuation methodology
Number of options issued
Warrants issued to Corporate Advisor for Capital Raising
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
Valuation methodology
Number of warrants issued
Tranche 1
109%
0.25%
3
$AUD0.05
$AUD0.04
1 Sep 2020
9 Sep 2023
$0.02
Black-Scholes
10,000,000
Tranche 1
116.95%
0.35%
4
$AUD0.12
$AUD0.09
7 Dec 2020
7 Dec 2024
$AUD0.073
Black-Scholes
1,000,000
Tranche 1
103.65%
0.77%
3
$AUD0.113
$AUD0.085
9 March 2021
8 March 2024
$AUD0.049
Black-Scholes
6,857,421
DIGITALX LTD | 2021 ANNUAL REPORT | 71
Valuation of performance rights
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. There were no performance rights issued during the period,
Options, warrants, and performance rights on issue or owed as at 30 June 2021
Date granted
Vesting
Date
Class
Exercise price
Expiry date
Number of shares
under
option/warrant
10 December 2018
10 December 2018
Unlisted Option
$0.22
10 December 2023
2,000,000
10 December 2018
10 December 2018
Unlisted Option
$0.25
10 December 2023
3,000,000
10 December 2018
10 December 2018
Unlisted Option
$0.30
10 December 2023
4,000,000
17 May 2019
17 May 2019
Unlisted Option
$0.0847
17 May 2022
2,768,382
11 July 2019
11 July 2019
Unlisted Option
$0.10
30 June 2024
2,500,000
10 September 2020
-
Unlisted Option
$0.10
9 September 2023
10,000,000
18 December 2020
18 December 2020
Unlisted Option
$0.10
18 December 2024
1,000,000
9 March 2021
9 March 2021
Unlisted Warrant
$0.10
9 March 2024
48,981,582
9 March 2021
9 March 2021
Unlisted Warrant
$0.1125
9 March 2024
6,857,421
Date performance
rights
Vesting
Date
Class
Expiry date of
options
Number of rights Number of rights
unvested
10 December 2018
-
Unlisted
10 December 2023
9,000,000
9,000,000
DIGITALX LTD | 2021 ANNUAL REPORT | 72
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
2021
% of Shares Held
2020
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 | 2021 ANNUAL REPORT | 73
Name of Controlled Entity
Place of Incorporation
% of Shares Held
2021
% of Shares Held
2020
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 2021
100%
100%
100%
100%
100%
100%
100%
73%
41%
60%
100%
-
-
-
100%
100%
100%
100%
100%
100%
-
73%
46%
93%
100%
100%
100%
100%
There were no changes to the controlled entities during the year ended 30 June 2021 except for those noted below:
• DigitalX New Tech Fund Inc. (de-registered through normal course of business);
• DigitalX (BVI) Limited (de-registered through normal course of business); and
• Digital Asset Administration Cayman Limited (de-registered through normal course of business).
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.
Year ended 30 June 2020
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).
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 B1 for a summary of the
significant accounting policies relating to the Group.
Parent entity financial information
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:
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.
DIGITALX LTD | 2021 ANNUAL REPORT | 74
Financial guarantees
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
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
(a) Summary of financial information
DigitalX Limited for any current tax payable assumed and are
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
legislation. The funding amounts are
tax consolidation
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/(losses)
Reserves
-
-
-
Share based payment
Intangible asset reserve
Convertible note
Total equity
30 June 2021
$AUD
28,307,422
14,256,058
42,563,480
(868,740)
-
(868,740)
110,455,124
(92,501,033)
8,718,842
14,930,755
91,051
41,694,740
(Restated)
30 June 2020
$AUD
7,153,173
5,517,978
12,671,151
(945,471)
-
(945,471)
102,148,300
(98,381,065)
7,867,394
-
91,051
11,725,680
Financial performance
Profit/(loss) for the year and other comprehensive income/(loss)
Total comprehensive income/(loss)
21,801,836
21,801,836
(26,833,034)
(26,833,034)
(b) Guarantees, Commitments and Contingent Liabilities of the parent
The parent entity did not have any contingent liabilities or commitments, as at 30 June 2021 other than those disclosed below
in Note H2.
There were no guarantees entered into by the parent entity other than those disclosed in Note H2.
DIGITALX LTD | 2021 ANNUAL REPORT | 75
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 76)
H2 Commitments and contingents (Page 76)
H3 New Accounting Standards and Interpretations (Page 77)
H4 Post balance date events (Page 80)
DIGITALX LTD | 2021 ANNUAL REPORT | 76
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 2021
$AUD
579,590
100,000
30,680
(Restated)
Year ended
30 June 2020
$AUD
437,024
71,253
6,835
63,739
59,788
130,483
430,388
1,334,879
-
360,519
934,692
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 2021
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Chairman Toby Hicks is a partner,
$AUD39,613 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 2020
• During the year, the Group paid Steinepreis Paganin, a law firm of which Non-Executive Chairman Toby Hicks is a partner,
$AUD60,056 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.
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 2021 (2020: Nil).
DIGITALX LTD | 2021 ANNUAL REPORT | 77
Guarantees entered into by the Group
There were no guarantees entered into by the Group as at 30 June 2021 other than for the lease noted above (2020: Nil).
Contingent Liabilities of the Group
The Group did not have any contingent liabilities as at 30 June 2021 (2020: 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 2021. 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 | 2021 ANNUAL REPORT | 78
New / revised
pronouncement
Superseded
pronouncement
Nature of the change
Effective
date
Likely impact on initial application
None
AASB 2020-8 Amendments to
Accounting
Australian
Standards –
Interest Rate
Benchmark Reform – Phase 2
Requires
for-profit
that
private sector entities
This Standard amends the Standards to help entities to provide
financial statement users with useful information about the effects of
the interest rate benchmark reform on those entities’ financial
statements.
As a result of these amendments, an entity:
a) will not have to derecognise or adjust the carrying amount of
financial instruments for changes required by the reform, but
will instead update the effective interest rate to reflect the
change to the alternative benchmark rate;
b) will not have to discontinue its hedge accounting solely
because it makes changes required by the reform, if the
hedge meets other hedge accounting criteria; and
c) will be required to disclose information about new risks
arising from the reform and how it manages the transition to
alternative benchmark rates.
1 January
2021
When these amendments are first adopted for the year ending
30 June 2022, there will be no material impact on the financial
statements.
2020-3
Annual
AASB
Improvements
IFRS
Standards 2018–2020 and
Other Amendments
to
None
This standard amends:
a)
the application of AASB 1 by a subsidiary that becomes a first-time
adopter after its parent in relation to the measurement of
cumulative translation differences;
b) AASB 3 to update references to the Conceptual Framework for
c)
Financial Reporting;
AASB 9 to clarify when the terms of a new or modified financial
liability are substantially different from the terms of the original
financial liability;
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.
d) AASB 116 to require an entity to recognise the sales proceeds from
selling items produced while preparing property, plant and
equipment for its intended use and the related cost in profit or loss,
instead of deducting the amounts received from the cost of the
asset;
AASB 137 to specify the costs that an entity includes when
assessing whether a contract will be loss-making; and
AASB 141 to align the fair value measurement requirements in
AASB 141 with those in other Australian Accounting Standards.
e)
f)
DIGITALX LTD | 2021 ANNUAL REPORT | 79
None
AASB 2020-1 Amendments to
Australian Accounting
Standards – Classification of
Liabilities as Current or Non-
Current
None
AASB 2021-2 Amendments to
Australian Accounting
Standards – Disclosure of
Accounting Policies and
Definition of Accounting
Estimates
Amends AASB 101 to clarify that liabilities are classified as either
current or non-current, depending on the rights that exist at the end
of the reporting period. Classification is unaffected by the
expectations of the entity or events after the reporting date (for
example, the receipt of a waiver, a breach of covenant, or settlement
of the liability). The mandatory application date of the amendment
has been deferred by 12 months to 1 January 2023 by AASB 2020-6.
This Standard amends:
a) AASB 7, to clarify that information about measurement bases
for financial instruments is expected to be material to an
entity’s financial statements;
b) AASB 101, to require entities to disclose their material
accounting policy information rather than their significant
accounting policies;
c) AASB 108, to clarify how entities should distinguish changes
in accounting policies and changes in accounting estimates;
d) AASB 134, to identify material accounting policy information
as a component of a complete set of financial statements;
and
e) AASB Practice Statement 2, to provide guidance on how to
apply the concept of materiality to accounting policy
disclosures.
1 January
2023
When these amendments are first adopted for the year ending
30 June 2024, 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 2024, there will be no material impact on the financial
statements.
DIGITALX LTD | 2021 ANNUAL REPORT | 80
H4 - EVENTS AFTER THE REPORTING DATE
No other matter or circumstance has arisen since 30 June 2021 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 2021, 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
21 July 2021
3 August 2021
Details of event
On 21 July 2021, the Company announced that Executive Director, Mr Leigh Travers, had tendered his
resignation.
On 3 August 2021, the Company announced that Mr Greg Dooley had been appointed as a Non-
Executive Director of the Company.
Mr Dooley is an experienced corporate executive and was formerly the Managing Director of leading
international share registry company, Computershare Investor Services Pty Limited for 13 years before
retiring in July 2020. During his time at Computershare Mr Dooley also served as Managing Director of
the Computershare Fund Services division, which offered registry services for unlisted funds.
6 August 2021
On 6 August 2021, the Company announced that Ms Shannon Coates had resigned as Company
Secretary and has been replaced by Mr Joel Ives.
26 August 2021
On 26 August 2021, the Company provided a progress update to the market and noted:
- Mr Jonathon Carley had been appointed Acting Chief Operating Officer for the Company
-
The Company had realised a material uplift in the value of its Human Protocol holding to
A$18,750,000 following its listing on leading exchanges FTX and Coinlist. The value of the right
at 30 June 2021 was A$8,335,433.
16 September 2021
27 September 2021
On 16 September 2021 the Company announced it had entered into an agreement to acquire leading
online share sales business, Sell My Shares, for upfront cash consideration of $1,640,000 and up to
$250,000 deferred consideration subject to satisfaction of various performance milestones.
Due to the volatile nature and the materiality of the digital assets held, we disclose the value of material
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 31 August.
Coin Symbol
Coin Amount
$AUD Price
at 30 June
$AUD Spot Price
at 27 Sept
BTC
HMT
Total
215.95
12,500,000
-
$46,585
$0.665
-
$58,070
$1.29
-
$AUD Balance
$12,540,217
$16,125,000
$28,665,217
There were no other reportable subsequent events.
DIGITALX LTD | 2021 ANNUAL REPORT | 81
Directors
Toby Hicks
Non-Executive Chairman
Greg Dooley
Non-Executive Director
Peter Rubinstein
Non-Executive Director
Company Secretary
Joel Ives
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 | 2021 ANNUAL REPORT | 82
The following information is current as at 27 September 2021.
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
210
2,451
1,745
3,723
826
Number of
Shares
44,554
7,249,289
14,030,852
131,996,477
586,354,485
739,675,657
UNMARKETABLE PARCELS
Holdings of less than a marketable parcel of ordinary shares:
Holders: 3,360
Shares: 7,463
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
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 | 2021 ANNUAL REPORT | 83
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 $0.05 each on or before 9 September 2023
Range
Number of
Holders
-
-
-
-
21-2
2
Number of
Holders
-
-
-
-
21-2
2
Number of Options
-
-
-
-
3,000,000
2,000,000
Number of Options
-
-
-
-
4,000,000
4,000,000
Number of Options
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
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.
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
Emboodhu Pty Ltd holds 7,500,000 Performance Rights comprising 100% of this class.
Number of
Holders
-
-
-
-
1
1
Number of Options
-
-
-
-
2,500,000
2,500,000
DIGITALX LTD | 2021 ANNUAL REPORT | 84
Unlisted Options exercisable at $0.10 each on or before 18 December 2024
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Shaw and Partners Limited holds 500,000 options comprising 50% of this class.
2 Pareto Nominees Pty Ltd holds 500,000 options comprising 50% of this class.
WARRANTS
Unlisted warrants exercisable at $0.10 each on or before 9 March 2024
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 Armistice Capital Master Fund Ltd holds 33,725,006 warrants comprising 68.9% of this class.
2 Lind Global Macro Fund LP holds 9,423,243 warrants comprising 19.2 of this class.
3 Iroquois Master Fund Ltd holds 5,833,333 warrants comprising 11.9% of this class.
Unlisted Options exercisable at $0.1125 each on or before 9 March 2024
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total
1 H.C. Wainwright & Co (or its staff and nominees) holds 6,857,421 comprising 100% of this class.
Number of
Holders
-
-
-
-
21-2
2
Number of Options
-
-
-
-
1,000,000
1,000,000
Number of
Holders
-
-
-
-
31-3
3
Number of
Holders
-
-
-
1
3
14
Number of Options
-
-
-
-
46,981,582
46,981,582
Number of Options
-
-
-
68,574
6,788,847
6,857,421
DIGITALX LTD | 2021 ANNUAL REPORT | 85
LISTING OF 20 LARGEST SHAREHOLDERS
The names of the twenty largest registered holders of quoted ordinary shares are:
Name
Number of Shares
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
BNP PARIBAS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
NRB INTERNATIONAL LLC
ATCHO SUPER PTY LTD
IRWIN BIOTECH NOMINEES PTY LTD
MR LEIGH DANIEL TRAVERS
IRWIN BIOTECH NOMINEES P/L
ACL INVESTMENT AUSTRALIA PTY LTD
EMBOODHU PTY LTD
BNP PARIBAS NOMS(NZ) LTD
VALUEADMIN COM PTY LTD
ALTOR CAPITAL MANAGEMENT PTY LTD
MR HING WA CHAN
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMS PTY LTD
MR RICHARD JAMES ANSELL
LEETHAL PTY LTD
YAMI FAMILY PTY LTD
MR DUNCAN JOHN HEAZLEWOOD + MRS JANE LOUISE HEAZLEWOOD
75,219,731
26,532,209
17,231,771
15,223,785
12,000,000
11,196,296
9,532,146
8,626,348
8,397,221
8,194,444
7,961,632
7,200,000
6,800,000
6,555,817
6,040,236
5,700,213
5,239,905
5,000,000
4,253,258
4,070,000
Percentage of
Shares
10.17
3.59
2.33
2.06
1.62
1.51
1.29
1.17
1.14
1.11
1.08
0.97
0.92
0.89
0.82
0.77
0.71
0.68
0.58
0.55
TOTAL
250,975,012
33.93
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 27 September 2021.
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 2021 financial year can be accessed at:
https://digitalx.com/investor-centre
DIGITALX LIMITED
ABN 59 009 575 035
PERTH | SYDNEY | MELBOURNE
WWW.DIGITALX.COM
INFO@DIGITALX.COM