Ann
nual Re
eport 2
016
FirstWav
ve Cloud
Technol
ABN
ogy Limi
35 144 733
ted
3 595
Contents
1. Chairman’s Letter
2. Managing Director’s Review of Operations
3. Directors’ Report & Remuneration Report
4. Auditor’s Independence Declaration
5. Financial Statements
6. Directors’ Declaration
7. Independent Auditor’s Report
8. Corporate Directory
9. Shareholder Information
2
3
5
16
17
52
53
55
56
FirstWave Cloud Technology Limited Annual Report 2016
1
1. Chairman’s Letter
Dear Fellow Shareholders,
I have great pleasure presenting to you the first annual report of FirstWave Cloud Technology Limited (FirstWave or
Company) as a publicly listed company. In May of this year, FirstWave celebrated its listing on the Australian Securities
Exchange (ASX) through the former listed entity, Crestal Petroleum. This represented not only a key milestone in
FirstWave’s history, but a strong endorsement of the Company’s products and the increasingly positive future ahead of us.
2016 was an exciting year for FirstWave in which the Company witnessed significant growth and development culminating
in its successful ASX listing. During the course of the year, the Board and Management delivered a number of highly
strategic achievements, including:
• Completion of the acquisition of FirstWave by Crestal Petroleum and the renaming of the entity to FirstWave
Cloud Technology Limited;
• A strongly oversubscribed capital raising of $8 million in conjunction with the Company’s ASX listing;
•
The appointment of a highly experienced board of directors made up of relevant industry and business
experience matched with corporate governance skills and a perspective of independence;
• Strengthening of the Company’s relationship with Telstra through the execution of a new Product Supply
Agreement (PSA or Agreement) for Telstra Cloud Gateway Protection Advanced;
• Significant upgrading of FirstWave’s Cloud Content Security Gateway (CCSG) in Telstra;
• Post balance date, the execution of a number of new Next Generation Firewall (NGFW) Contracts following the
integration of the Company’s NGFW into Telstra’s platform; and
• A 37% increase in full year revenue to $6.4m with a strong increase in gross margins.
I have touched on just some of the Company’s achievements during the year with a greater level of detail of these
achievements provided in the Managing Director’s Report.
Underpinning the Company’s strong performance in the 2016 financial year strong growth in new contracts across all
product and services, including web, email, cloud security and firewall. It is pleasing to note that FirstWave’s sales pipeline
and tendering activity is now at record levels.
With the pipeline of opportunities for FirstWave growing at a rapid rate, the focus for the 2017 year will be upon execution.
The more the Company can execute in closing these opportunities, increased shareholder value will be created.
Following this theme of growth is the continuing development of key strategic relationships with Telstra, Cisco and Palo
Alto which are only just the beginning. Whilst there is a large domestic market opportunity, the Company is also assessing
ways in which it can undertake significant international expansion and, as previously announced to the market, FirstWave
remains in advanced discussions with a number of telecommunication partners with the ambition to become their cloud
security infrastructure partner in a number of international markets.
Based on these strong achievements in such a relatively short period of time, the management team are to be
commended for their efforts this year. All of us at FirstWave are aiming to ensure that 2017 is another year of strong
growth for your company. The ongoing shift in industry dynamics is expanding with software, applications, storage and
security all moving to the cloud, with the next generation cloud services experiencing exponential growth.
FirstWave will continue to build upon its solid reputation and partnerships and rollout its next generation cloud security
services.
On behalf of the Board, I would like to thank all shareholders for their support, whether it be prior to or during the
Company’s IPO, and to those new shareholders who have joined us since listing. I look forward to an exciting and
productive 2017.
Yours faithfully,
Drew Kelton
Non-Executive Chairman
FirstWave Cloud Technology Limited Annual Report 2016
2
2. Managing Director’s Review of Operations
2016 Highlights
$8m capital raising in conjunction with the Company’s relisting;
The appointment of a new board of directors;
• Completion of the acquisition of FirstWave by Crestal Petroleum;
• Relisting on the ASX;
•
•
• Strengthening of the Company’s relationship with Telstra;
• Significant upgrading of FirstWave’s Cloud Content Security Gateway (CCSG) in Telstra;
• Execution of a number of new Next Generation Firewall (NGFW) Contracts;
•
• A 37% increase in full year revenue to $6.4m;
• Strong increase in gross margins;
• Development of strong partnerships with industry leaders;
•
•
•
Increase in recurring revenue;
Increase in pipeline of new opportunities; and
Increase in Total Contract Value (TCV) execution.
3-year customer contract terms;
Company Overview
FirstWave is an Australian cloud technology company which operates a technology business in the burgeoning cloud
based IT managed security services market.
FirstWave has created an intelligent carrier grade cloud security platform for business and has delivered Software as a
Service (SaaS) solutions since 2004 in a form similar to what is known as the ‘cloud’ today. FirstWave has a long standing
relationship with Telstra and offers a comprehensive cloud security and analytics technology solutions suite that, along
with advanced mail, web and now Next Generation Firewall (NGFW) content controls, delivers a unified, integrated x-
threat vector advanced malware protection technology solution for any business or enterprise moving to or operating in the
cloud.
Since its inception, FirstWave has built a base of more than 300 customers which includes the largest Australian financial
institutions, state and federal government, utilities, ASX listed and private companies across a range of industry sectors.
The 2016 Financial Year
Financial year 2016 marks another year of record growth for FirstWave which is a reflection on the Company’s exposure
to the booming cloud security services sector.
The Company has performed well in all areas with a record year of revenue and increasing gross margins. With increasing
recurring revenue and capital from the Company’s recent public offering in conjunction with its listing, FirstWave has a
strong balance sheet to underpin the rollout and development of its products and services, and for international expansion
opportunities.
FirstWave’s organic growth for the year has been particularly strong with revenue up 37% to $6.4 million (FY2015: $4.7
million) and gross margin growing more than 40% year-on-year, illustrating the high margin nature of FCT’s contract base.
The Company ended the year with cash at bank (after deducting all costs incurred in association with listing upon the
ASX) of just under $6 million which positions the Company well for the year ahead.
The strong progress and development of FirstWave in the 2016 financial year is best reflected through the following
achievements:
A New Product Supply Agreement with Telstra:
Earlier this year, FirstWave entered into a new Product Supply Agreement (PSA) with Telstra. Under the PSA, FirstWave
will deploy, integrate and operate its Cloud Content Security Gateway (CCSG) as the core services platform for Telstra’s
Cloud Gateway Protection Advanced (CGPA) product for enterprise and government customers.
In the initial rollout, multiple FirstWave CCSG platforms will be deployed in Telstra cloud data centres in both Sydney and
Melbourne, supporting latest-generation virtualised Next Generation Fire Wall (NGFW) technologies from market leader
Palo Alto Networks.
The CCSG is FirstWave's own unique services platform offering for Telcos and service providers. It is a fully adaptable
and integrated solution specifically designed to enable Telcos and service providers to sell, deliver, bill and support
advanced CCSG and solutions to downstream customers in a cost-effective, scalable and flexible manner. FirstWave
CCSG is both enterprise and carrier grade and specifically architected for the multi-tenanted requirements of Telcos and
cloud service providers.
A Significant Upgrade of FirstWave’s Platform in Telstra:
In June, the Company announced a significant upgrade to its CCSG, the core services platform for the high-end, complex,
cloud security needs of Telstra’s enterprise and government customers. The licensing of the FirstWave CCSG platform,
represented a major milestone for the Company and helped lead the Company to the Company’s record financial year in
terms of revenue and provides an even more positive outlook for FY2017.
FirstWave Cloud Technology Limited Annual Report 2016
3
FirstWave’s platform upgrade dramatically speeds up and simplifies Telstra’s provisioning of virtualised firewalls for secure
enterprise and government networks. The solution architecture is highly flexible and scalable, and can support customers
at any location. This provides Telstra with another innovative and critical cloud security solution for its 20,000+ enterprise
and government customers who have assigned representation – a huge addressable market for FirstWave.
Of particular note is the fact that FirstWave’s Australian development team has integrated world leading Palo Alto
Networks’ VM-Series next-generation firewalls into the Telstra cloud security gateway infrastructure. Palo Alto Networks’
firewall technology is regarded as world leading, and we are pleased to bring this cutting edge technology to Telstra’s
enterprise customers as part of its cloud-based security offering.
Underpinning FirstWave’s Revenue Base:
The Company’s revenue base continues to grow and was strengthened as announced to the ASX in July 2016 with 15
new NGFW enterprise customers already secured for a total contract value of more than $2.4m across the Health, Non-
For-Profit, Retail, Primary, Government (Local, State & Federal), Fast Food, Professional and Utilities sectors. The
contract terms range from one to three years in length and underpin FirstWave’s growing baseload of recurring revenue
streams. The $2.4 million represents new revenue for the Company and will be booked progressively over FY2017 and
the two years thereafter.
Strengthening Our Partnership with Cisco:
During the year, we also announced further enhancements to our cloud security platform for Telstra enterprise and
government customers with the integration of a new cloud security service provided by its long term partner, Cisco System
Inc. which incorporates Cisco’s Advanced Malware Protection (AMP) cloud-based solution into FirstWave’s Telstra cloud
security gateway infrastructure which is already generating revenue. This relationship further diversifies the Company’s
revenue base.
Financial and Corporate
In May, FirstWave raised a total of $8.0 million (before expenses) through the issue of 40 million new shares at an issue
price of $0.20 per share in conjunction with the Company’s listing on the ASX. The completion of the capital raising
marked a major milestone for FirstWave, providing the funding required to continue the development and rollout of its next
generation cloud security services in Australia, and in the future, international markets which we are closely assessing.
A Strong and Favourable Outlook
The Company has established a solid growth platform for 2017 and beyond. The first licensing of FirstWave’s CCSG to
Telstra occurred in FY2016, and this was a major milestone and revenue driver for the Company. This has further
validated FirstWave’s technology and is a key catalyst for the strong 2017 outlook.
FirstWave is well placed to substantially grow revenue in FY2017 and scale up its operations. In Australia, growth will be
driven from new contracts across all product categories with the key focus on the progressive conversion of the
opportunity pipeline into new revenue generating contracts which is already occurring.
We are continuing negotiations with international telcos which are progressing well, and we have a number of near-term
opportunities to launch our product suite in international markets. This too represents a major growth platform for
FirstWave from FY2017 onwards.
The Company continues to work proactively with our partners – Palo Alto, Cisco and IBM – to enhance our Software as a
Service (SaaS) cloud security offering. Ensuring we have a market-leading platform underpins future revenue growth.
Demand for the NGFW product is exceptionally strong and FirstWave expects tender numbers to keep growing as Telstra
more actively promotes the NGFW offering to its enterprise and government customers. The significant rapid growth in the
NGFW tendering pipeline, and the new recurring revenue generating contracts, reflect the very strong demand for
FirstWave’s cloud security services.
I would also like to advise all shareholders that the Company’s Corporate Governance Statement is available on the
Company’s website at http://www.firstwave.com.au/investors/corporate-governance/
Finally, I would like to join our Chairman in welcoming our new shareholders as well as thanking our long term
shareholders for their continued support during the period prior to the Company’s ASX listing. FirstWave is in excellent
shape and poised for a very bright future.
Yours faithfully,
Steve O’Brien
Managing Director
FirstWave Cloud Technology Limited Annual Report 2016
4
3. Directors’ Report & Remuneration Report
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the 'consolidated entity') consisting of FirstWave Cloud Technology Limited (referred to hereafter as the 'company' or
'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2016.
Directors
The following persons were directors of FirstWave Cloud Technology Limited during the whole of the financial year and up
to the date of this report, unless otherwise stated:
Alexander Kelton - Chairman
Steven O'Brien
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
David Nolan
Richard Willson
Andrew Phillips
Carl Dorsch
Appointed on 8 March 2016
Appointed on 8 March 2016
Appointed on 8 March 2016
Appointed on 8 March 2016
Appointed on 8 March 2016
Appointed on 8 March 2016
Resigned on 5 May 2016
Resigned on 5 May 2016
Resigned on 15 April 2016
Resigned on 3 December 2015
Principal activities
The principal continuing activities of the consolidated entity comprise of development and sale of internet security
software.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $4,654,811 (30 June 2015: profit of
$43,235).
Acquisition of First Wave Technology Pty Ltd
On 5 May 2016, Crestal Petroleum Limited ('Crestal') (now known as FirstWave Cloud Technology Limited) acquired
100% of the share capital of First Wave Technology Pty Ltd ('FirstWave'). The acquisition resulted in FirstWave's original
shareholders holding a majority share in Crestal. The acquisition has been accounted for as a share-based payment and
the principles of reverse acquisition applied. The current year results represents the consolidated entity comprising
FirstWave for the entire year and Crestal from 5 May 2016 to 30 June 2016. The comparative period results reflect
FirstWave results only.
Financial review
Profit or loss performance
The consolidated entity’s revenue for the year ended 30 June 2016 was $6,401,718, representing growth of 37% over the
previous year (30 June 2015: $4,660,828), with a corresponding growth in gross profit of 44%. This was mainly driven by
growth in the cloud based infrastructure services industry. Telstra, being the largest telecommunication services provider
in Australia, and also a key provider of public and private cloud services, is the consolidated entity’s largest trading
partner. Growth in revenue reflects higher demand for the consolidated entity’s ESP© ('Enterprise Specific Protection')
solutions, and the roll out of the Cloud Gateway Protection Advanced (‘CGPA’) which increases the number of available
services on the platform.
The consolidated entity has reported a loss for the year of $4,654,811 after tax. The main contributors to this result were
the recognition of non-cash share-based payment expenses of $1,499,135 as a result of the acquisition accounting and
the listing costs of $1,433,363 (aggregating a total cost of listing of $2,932,498). The consolidated entity has also invested
a significant amount of resources in the expectation of future growth, hiring key senior management and operational
personnel with the overall head count increasing from 22 to 41 during the year.
Statement of financial position
Net assets reflect those of the consolidated entity and include cash proceeds from the equity raising that occurred
contemporaneously with the reverse acquisition. With minimal debt, and given that a large part of the consolidated entity’s
asset base is cash of $5,772,415 and intangible assets predominantly capitalised development costs of $2,040,628 that
embody the consolidated entity's intellectual property, the consolidated entity is well placed to embark upon its growth
FirstWave Cloud Technology Limited Annual Report 2016
5
plans and to fund research and development activity to further build its intellectual property and stay ahead of competition.
Furthermore, trade receivables of $1,545,268 outstanding at 30 June 2016 have been mostly realised subsequent to the
year end.
Significant changes in the state of affairs
On 5 May 2016, the company acquired First Wave Technology Pty Ltd. Refer to 'Review of operations' for further
information on the acquisition.
On 5 May 2016, the company successfully completed a capital raising of $8,000,000 by issuing 40,000,000 ordinary
shares.
On 6 May 2016, the company also changed its name from Crestal Petroleum Limited to FirstWave Cloud Technology
Limited.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Likely developments and expected results of operations
Future growth is expected to be largely driven by the newly commercialised Next Generation Firewall (‘NGFW’) product
offering.
Multiplier effect of new service offerings include:
•
•
•
new services opening up new parts of the Cloud Security Services addressable market;
new platform allows for rapid provisioning of current services and substantially reduces the time to introduce new
accretive services; and
replication of platforms and services in international markets.
A partnership with world leading firewall hardware provider Palo Alto Networks (announced to the market on 22 July
2016), enables the consolidated entity to integrate additional security functionality into Telstra’s offering.
To diversify customer concentration risk, the consolidated entity is pursuing additional telco partnerships in new
international markets.
The above strategies position the consolidated entity well to manage and diversify its business risks, whilst at the same
time addressing the need to stay competitive, in niche markets. In line with its growth expectations, the consolidated entity
has moved to a new office that can accommodate a head count of over 70, so that it is not constrained by office space, in
meeting its delivery expectations.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
FirstWave Cloud Technology Limited Annual Report 2016
6
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Alexander Andrew (Drew) Kelton
Non-Executive Chairman
Drew has a Bachelor of Science degree in Electrical and Electronic Engineering
from the University of Western Scotland.
Drew is a global business leader and professional board director with over 30
years’ experience in the information technology ('IT') and telecommunications
arena, including senior operational roles in the United Kingdom, Europe, India and
Australasia, and most recently in the United States. In addition to executive
leadership roles in global organisations, Drew has also been responsible for start-
ups, merger and acquisition transactions and Initial Public Offering of one of the
businesses.
Other current directorships: Chairman of Mobile Embrace Ltd (ASX: MBE), Director of Megaport Limited (ASX:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
.
MP1) and Director of Enice Holding Company Limited (ASX: ENC).
None
Chairman of the Audit and Risk Committee
1,015,625
4,200,000
Steven O'Brien
Managing Director
Steven has over 20 years’ experience working in international business including
over 15 years working in the Asia Pacific region and has significant experience in
senior sales and marketing roles. Steven has also held positions in consulting and
as company director during his time working in the international technology sector.
None
None
None
4,800,000
David Garnier
Non-Executive Director
David has Bachelor of Commerce from Canberra University and is a qualified CPA.
David previously lived in Beijing, China and has more than 25 years of senior
management experience in a number of sectors, including corporate advisory, IT &
communications, digital media and transport. He has successfully launched and
transacted funding requirements for IT & communications, digital media and
transport companies in the Asia Pacific region. Additionally David has secured
capital funding for expansion whilst previously serving in executive and non-
executive roles with leading private and public companies in Asia Pacific. David is
the founder and Chairman of New Wave Capital, a Hong Kong based Investment
Bank and Corporate Advisory firm. He is a board member of a number of private
companies.
None
None
Member of the Audit and Risk Committee
1,449,430
1,200,000
FirstWave Cloud Technology Limited Annual Report 2016
7
Information on directors
Name:
Title:
Experience and expertise:
Edward Keating
Non-Executive Director
Following a career in information technology (Systems Analyst/IT Management),
Edward became involved with numerous business start-ups including: Logical
Solutions; Software Strategies; Computer Faculties; ChannelWorx and FirstWave
Technology. He has also had exposure to a variety of Cloud-based technologies,
since first engaging with the industry in 2001.
Other current directorships: None
None
Former directorships (last 3
years):
Special responsibilities:
Interests in shares:
Interests in options:
6,638,724
1,200,000
Member of the Audit and Risk Committee
Name:
Title:
Qualifications:
Experience and expertise:
Scott Lidgett
Non-Executive Director
Scott holds formal qualifications in Engineering.
Scott is a co-founder of Lidcam Technology Pty Ltd and Channelworx Pty Ltd. Scott
has been in the IT industry since the mid-1980s. Prior to Lidcam and Channelworx,
Scott worked in corporate sales at Logical Solutions Pty Ltd, the leading reseller of
Apple Computer products at the time. Channelworx, a leading IT distribution
business, was acquired by US listed IT giant, Avnet Inc. in November 2007. In
November 2009, Scott, was involved in the formation of a new IT security business
IPSec Pty Ltd, where he also serves as Chairman.
Other current directorships: None
None
Former directorships (last 3
years):
Interests in shares:
Interests in options:
19,654,847
1,200,000
Name:
Title:
Qualifications:
Experience and expertise:
Paul MacRae
Non-Executive Director
Paul holds a Master of Business Administration (MBA) from University of
Strathclyde and a Bachelor of Science in Chemistry from The University of
Glasgow.
Paul has a successful history of setting up new businesses in the IT industry in
Australia and overseas. Since moving to Australia in 1989 he has been involved
with the IT industry at a senior level. Paul also runs part of the largest listed
Australian Enterprise Software company - TechnologyOne. Paul has a strong
background in IT security, application software, software development, outsourcing,
cloud computing and transactional systems. His roles have included establishing
MessageLabs in Australia, Galileo in New Zealand, setting up and selling a
successful SAP Consultancy and growing business at a leading HRMS software
company.
Other current directorships: None
None
Former directorships (last 3
years):
Interests in shares:
Interests in options:
1,634,888
1,200,000
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
FirstWave Cloud Technology Limited Annual Report 2016
8
Company secretary
Justin Clyne was appointed as company secretary on 16 February 2016. He holds a Masters of Laws in International Law
from the University of New South Wales and is a qualified Chartered Company Secretary. Justin was admitted as Solicitor
of the Supreme Court of New South Wales and the High Court of Australia in 1996 before gaining admission as a Barrister
in 1998. Since 2006, Justin has been a full time company secretary for a number of listed and unlisted companies. Justin
has significant experience and knowledge of the Corporations Act, the ASX Listing Rules and general corporate regulatory
requirements.
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2016, and
the number of meetings attended by each director were:
Full Board
Attended
Held
Audit and Risk Committee
Attended
Held
Alexander Kelton - Chairman
Steven O'Brien*
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
2
2
2
2
2
2
2
2
2
2
2
2
1
1
-
1
-
-
1
1
1
1
-
-
Held: represents the number of meetings held during the time the director held office.
*Steven O'Brien attended the Audit and Risk Committee meeting as an observer.
The above table excludes meetings held by Crestal Petroleum Limited prior to group re-organisation.
Remuneration report (audited)
The remuneration report details the key management personnel ('KMP') remuneration arrangements for the consolidated
entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the
delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for
good reward governance practices:
•
•
•
•
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration
philosophy is to attract, motivate and retain high performance and high quality personnel.
FirstWave Cloud Technology Limited Annual Report 2016
9
The Board has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the consolidated entity.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
•
•
•
having economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and
delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers
of value; and
attracting and retaining high calibre executives.
Additionally, the reward framework should seek to enhance executives' interests by:
•
•
•
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from
independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line
with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on
comparative roles in the external market. The chairman is not present at any discussions relating to the determination of
his own remuneration.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. The most recent determination was at the Extraordinary General Meeting held on 15 April 2016, where the
shareholders approved a maximum annual aggregate remuneration of $400,000.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
•
•
•
•
base pay and non-monetary benefits;
short-term performance incentives;
share-based payments; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board based on individual and business unit performance, the overall performance of the consolidated entity and
comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the
executive.
The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of those
executives responsible for meeting those targets. STI payments are granted to executives based on specific annual
targets and key performance indicators ('KPI's') being achieved. KPI’s relate to qualitative and quantitative leadership
performance and subject to Board discretion.
FirstWave Cloud Technology Limited Annual Report 2016
10
The long-term incentives ('LTI') include long service leave and share-based payments. Shares are awarded to executives
with vesting period of one to four years. The Board reviewed the long-term equity-linked performance incentives
specifically for executives during the year ended 30 June 2016.
Consolidated entity performance and link to remuneration
Remuneration was not linked directly to consolidated entity performance. Any bonuses and LTI granted are at the
discretion of the Board. The share option plan is subject to participants meeting service condition at the vesting date.
There were no performance conditions linked to the share option plan.
Use of remuneration consultants
During the financial year ended 30 June 2016, the consolidated entity did not engage any remuneration consultants.
Details of remuneration
Amounts of remuneration
The KMP of the consolidated entity consisted of the directors of FirstWave Cloud Technology Limited and the following
persons:
• Simon Ryan - Chief Technology Officer
• Murray Scott - Chief Financial Officer
Prior to the acquisition on 5 May 2016, First Wave Technology Pty Ltd was not required to prepare a Remuneration report
in accordance with the Corporations Act 2001. As such, Remuneration report information is presented only for 2016.
The 2016 table below represents KMP remuneration paid by the consolidated entity consisting of First Wave Technology
Pty Ltd for the entire financial year and Crestal Petroleum Limited (now known as FirstWave Cloud Technology Limited)
for the period from 5 May 2016 to 30 June 2016.
Short-term benefit Share-based
payments
Cash bonus
Cash salary
and fees
Non-
monetary
$
120,000
Non-Executive Directors:
Alexander
Kelton*
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Executive Directors:
Steven
O'Brien
Other Key Management Personnel:
Simon Ryan
23,348
41,932
35,674
23,250
270,000
226,724
Murray Scott
TOTAL
236,000
976,928
$
-
-
-
-
-
60,000
5,000
30,000
95,000
$
-
-
-
-
-
-
-
-
Post-employment benefits
Super-
annuation
Long service
leave
$
-
-
2,971
-
-
1,609
$
-
-
-
-
-
Long-term
benefits
Equity-
settled
options
$
Total
$
23,202
143,202
15,954
15,954
15,954
15,954
39,302
60,857
51,628
39,204
28,467
360,076
21,539
39,317
8,122
300,702
-
-
-
266,000
26,119
39,317
123,607
1,260,971
*KMP of the consolidated entity from 8 March 2016. Remuneration includes consulting fees paid during the period 1 July 2015 to 8 March
2016.
FirstWave Cloud Technology Limited Annual Report 2016
11
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Executive Directors:
Steven O'Brien
Other KMP:
Simon Ryan
Murray Scott
Fixed remuneration
2016
At risk-STI
2016
At risk - LTI
2016
84%
59%
74%
69%
59%
-
-
-
-
-
16%
41%
26%
31%
41%
75%
17%
8%
95%
89%
2%
11%
3%
-
Service agreements
The consolidated entity enters into employment agreements with each KMP. The agreements are continuous i.e. not of a
fixed duration, and includes 4 weeks' notice period on the part of the employee and the consolidated entity.
The employment agreements contain substantially the same terms which include usual statutory entitlements, typical
confidentiality and intellectual property provisions intended to protect the consolidated entity’s intellectual property rights
and other proprietary information and non-compete clauses.
Share-based compensation
Issue of shares
There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2016.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other KMP
in this financial year or future reporting years are as follows:
Grant date Particulars*
Expiry date
Exercise price
18/05/2016 Alexander Kelton: 500,000 options
18/05/2016 Alexander Kelton: 500,000 options
18/05/2016 Alexander Kelton: 2,000,000 options
18/05/2016 Alexander Kelton: 200,000 options
18/05/2016 Alexander Kelton: 200,000 options
18/05/2016 Alexander Kelton: 800,000 options
18/05/2016 David Garnier: 1,200,000 options
18/05/2016 Edward Keating: 1,200,000 options
18/05/2016 Scott Lidgett: 1,200,000 options
18/05/2016 Paul MacRae: 1,200,000 options
18/05/2016 Steven O'Brien: 960,000 options
18/05/2016 Steven O'Brien: 960,000 options
18/05/2016 Steven O'Brien: 1,440,000 options
18/05/2016 Steven O'Brien: 1,440,000 options
18/05/2016 Simon Ryan: 150,000 options
18/05/2016 Simon Ryan: 150,000 options
18/05/2016 Simon Ryan: 450,000 options
18/05/2016 Simon Ryan: 750,000 options
*The share option plan is subject to participants meeting service condition at the vesting date. There are no performance conditions.
11/05/2022
11/05/2023
11/05/2024
11/05/2023
11/05/2024
11/05/2025
11/05/2022
11/05/2022
11/05/2022
11/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
19/05/2020
19/05/2021
19/05/2021
19/05/2022
Fair value per option
at grant date
$0.110
$0.120
$0.130
$0.090
$0.100
$0.060
$0.110
$0.110
$0.110
$0.110
$0.110
$0.120
$0.090
$0.030
$0.090
$0.110
$0.110
$0.090
$0.25
$0.25
$0.25
$0.35
$0.35
$0.35
$0.25
$0.25
$0.25
$0.25
$0.25
$0.25
$0.35
$0.45
$0.30
$0.30
$0.35
$0.40
FirstWave Cloud Technology Limited Annual Report 2016
12
Options granted carry no dividend or voting rights.
The number of options over ordinary shares granted to and vested by directors and other KMP as part of compensation
during the year ended 30 June 2016 are set out below:
Number of options granted
during the year
2016
Number of options vested
during the year
2016
Name
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Steven O'Brien
Simon Ryan*
*Options exercised by Simon Ryan during the year ended 30 June 2016 were vested in previous years.
4,200,000
1,200,000
1,200,000
1,200,000
1,200,000
4,800,000
1,500,000
-
-
-
-
-
-
-
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Alexander Kelton
David Garnier*
Edward Keating*
Scott Lidgett*
Paul MacRae*
Simon Ryan
Murray Scott
Balance at the
start of the year
-
1,335,544
6,228,275
14,893,907
1,000,246
-
1,153,745
Received as part
of remuneration
-
-
-
-
-
-
-
Additions
1,015,625
113,886
410,449
4,760,940
634,642
3,692,000
-
Disposals/
other
-
-
-
-
-
-
-
Balance at the
end of the year
1,015,625
1,449,430
6,638,724
19,654,847
1,634,888
3,692,000
1,153,745
35,239,259
TOTAL
*Balance at the start of the year represents shareholding in First Wave Technology Pty Ltd, adjusted for share-split. The shares were
converted into issued capital of FirstWave Cloud Technology Limited as referred in note 23 of the financial statements.
24,611,717
10,627,542
-
-
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Options over
ordinary shares
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Steven O’Brien
Simon Ryan*
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/ other
4,200,000
1,200,000
1,200,000
1,200,000
1,200,000
4,800,000
1,500,000
3,692,000
(3,692,000)
TOTAL
*Balance at the start of the year represents options in First Wave Technology Pty Ltd, adjusted for share-split.
(3,692,000)
15,300,000
3,692,000
Balance at the
end of the year
4,200,000
1,200,000
1,200,000
1,200,000
1,200,000
4,800,000
1,500,000
15,300,000
This concludes the remuneration report, which has been audited.
FirstWave Cloud Technology Limited Annual Report 2016
13
Loans to directors and executives
During the year ended 30 June 2016, the consolidated entity provided an unsecured loan to Simon Ryan for $221,520.
Interest is charged on outstanding balance at 7.5% per annum. During the year ended 30 June 2016, interest of $2,285 is
receivable from Simon Ryan (2015: $Nil) in respect of this loan.
Shares under option
Unissued ordinary shares of FirstWave Cloud Technology Limited under option at the date of this report are as follows:
Grant date
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
TOTAL
Expiry date
19/05/2020
19/05/2020
19/05/2021
19/05/2021
19/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
11/05/2024
11/05/2025
11/05/2024
Exercise price
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.45
Number under option
800,000
270,000
800,000
2,400,000
4,000,000
6,260,000
1,460,000
1,640,000
2,000,000
200,000
800,000
1,440,000
22,070,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
The following ordinary shares of FirstWave Cloud Technology Limited were issued during the year ended 30 June 2016
and up to the date of this report on the exercise of options granted:
Date options granted
30/12/2013
01/11/2011
01/11/2011
TOTAL
Exercise price
$0.06
$0.06
$0.07
Number of shares issued
3,692,000
276,900
461,500
4,430,400
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of
the company against a liability 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.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the
company or any related entity.
FirstWave Cloud Technology Limited Annual Report 2016
14
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.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined in note 28 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 28 to the financial statements do not compromise
the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for
the company, acting as advocate for the company or jointly sharing economic risks and rewards.
Officers of the company who are former partners of Grant Thornton
There are no officers of the company who are former partners of Grant Thornton.
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
immediately after this directors' report.
Auditor
Grant Thornton continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Alexander Kelton
Chairman
___________________________
Steven O'Brien
Managing Director
12 September 2016
FirstWave Cloud Technology Limited Annual Report 2016
15
4. Auditor’s Independence Declaration
FirstWave Cloud Technology Limited Annual Report 2016
16
5. Financial Statements
General information
The financial statements cover FirstWave Cloud Technology Limited (referred to as the 'company' or 'parent') as a
consolidated entity consisting of FirstWave Cloud Technology Limited and the entities it controlled at the end of, or during,
the year (referred to as the 'consolidated entity'). The financial statements are presented in Australian dollars, which is
FirstWave Cloud Technology Limited's functional and presentation currency.
FirstWave Cloud Technology Limited is a listed public company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business is:
Level 10, 132 Arthur Street
North Sydney, NSW 2060
Australia
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 12 September 2016.
The directors have the power to amend and reissue the financial statements.
FirstWave Cloud Technology Limited Annual Report 2016
17
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2016
Note
4
5
6
6
7
Revenue
Sales revenue
Cost of sales
Gross profit
Other income
Expenses
Sales and marketing
Engineering and development
General and administration
Listing expenses
Finance costs
Total expenses
Profit/(loss) before income tax
benefit/(expense)
Income tax benefit/(expense)
Profit/(loss) after income tax
benefit/(expense) for the year
attributable to the owners of FirstWave
Cloud Technology Limited
Other comprehensive income for the
year, net of tax
Total comprehensive income for the
year attributable to the owners of
FirstWave Cloud Technology Limited
Basic earnings per share
Diluted earnings per share
37
37
Refer to note 1 for explanation on comparatives.
Consolidated
2016
$
6,401,718
(1,702,334)
4,699,384
232,949
(2,152,390)
(1,352,675)
(3,545,275)
(2,932,498)
(106,568)
(10,089,406)
Consolidated
2015
$
4,660,828
(1,400,634)
3,260,194
445,376
(578,468)
(818,808)
(2,022,358)
-
(126,259)
(3,545,893)
(5,157,073)
159,677
502,262
(116,442)
(4,654,811)
43,235
-
-
(4,654,811)
43,235
Cents
(3.81)
(3.81)
Cents
0.05
0.05
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
FirstWave Cloud Technology Limited Annual Report 2016
18
Statement of financial position
As at 30 June 2016
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax refund due
Share monies receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax
Prepayments
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Employee benefits
Other
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax
Employee benefits
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Note
Consolidated
2016
$
Consolidated
2015
$
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
5,772,415
2,658,799
-
-
760,024
9,191,238
709,997
2,088,012
611,576
430,492
3,840,077
13,031,315
1,900,750
293,398
370,577
563,884
3,128,609
286,701
-
60,060
152,649
674,082
1,173,492
4,302,101
8,729,214
15,773,846
397,911
(7,442,543)
389,255
1,616,556
145,990
1,500,000
486,368
4,138,169
119,086
1,807,152
-
383,855
2,310,093
6,448,262
1,245,957
142,039
278,093
795,906
2,461,995
894,682
27,676
51,462
-
1,125,952
2,099,772
4,561,767
1,886,495
4,436,261
237,966
(2,787,732)
8,729,214
1,886,495
Refer to note 1 for explanation on comparatives.
The above statement of financial position should be read in conjunction with the accompanying notes
FirstWave Cloud Technology Limited Annual Report 2016
19
Statement of changes in equity
For the year ended 30 June 2016
Consolidated
Issued
capital
$
Reserves
$
Retained earnings
$
Total equity
$
Balance at 1 July 2014
3,071,261
237,966
(2,830,967)
Balance at 30 June 2015
4,436,261
237,966
(2,787,732)
1,886,495
Consolidated
Issued capital
$
Reserves
$
Retained earnings
$
Profit after income tax
expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 23)
-
-
-
1,365,000
-
-
-
-
Balance at 1 July 2015
4,436,261
237,966
Loss after income tax benefit
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 23)
Shares to affect the deemed
acquisition of Crestal
Petroleum Limited (note 23
and note 40)
Share-based payment
expense
-
-
-
-
1,499,135
-
-
-
-
-
-
159,945
43,235
-
478,260
43,235
-
43,235
43,235
-
1,365,000
Total equity
$
1,886,495
(4,654,811)
(2,787,732)
(4,654,811)
-
-
(4,654,811)
(4,654,811)
9,838,450
9,838,450
-
-
1,499,135
159,945
Balance at 30 June 2016
15,773,846
397,911
(7,442,543)
8,729,214
Refer to note 1 for explanation on comparatives.
The above statement of changes in equity should be read in conjunction with the accompanying notes
FirstWave Cloud Technology Limited Annual Report 2016
20
Statement of cash flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees
(inclusive of GST)
Interest received
Other revenue
Interest and other finance costs paid
Income taxes refunded
Net cash (used in)/from operating
activities
Cash flows from investing activities
Payments for property, plant and equipment
Note
Consolidated
2016
$
Consolidated
2015
$
5,494,331
(9,375,418)
17,066
15,883
(126,481)
209,000
35
(3,765,619)
3,213,693
(3,153,711)
16,937
-
(127,159)
209,490
159,250
(43,423)
(530,136)
-
-
Payments for intangibles
Payments for security deposits
Net of cash acquired on reverse acquisition
40
(545,168)
(866,897)
(133,776)
34,312
Net cash used in investing activities
(1,511,529)
(573,559)
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Net cash from/(used in) financing
activities
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning
of the financial year
Cash and cash equivalents at the end of
the financial year
11,048,804
(579,000)
248,215
(57,711)
-
-
-
(205,252)
10,660,308
(205,252)
5,383,160
389,255
(619,561)
1,008,816
8
5,772,415
389,255
Refer to note 1 for explanation on comparatives.
The above statement of cash flows should be read in conjunction with the accompanying notes
FirstWave Cloud Technology Limited Annual Report 2016
21
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption
of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or
position of the consolidated entity.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Adoption of AASB 1 'First time adoption of Australian Accounting Standards'
First Wave Technology Pty Ltd historically prepared ‘Special purpose financial statements’ for the purposes of satisfying
the directors reporting requirements under Corporations Act 2001. As a disclosing entity the consolidated entity is now
required to prepare ‘general purpose financial statements’ compliant with International Financial Reporting Standards
('IFRS') for the first time. In accordance with AASB 1 ‘First time adoption of Australian Accounting Standards’ the
consolidated entity has adopted all relevant IFRS standards with effect from the beginning of the comparative period, 1
July 2014. The adoption of AASB 1 has not resulted in any changes in recognition or measurement of amounts in the
financial statements.
Basis of preparation
On 5 May 2016, FirstWave Cloud Technology Limited (previously known as Crestal Petroleum Limited ('Crestal')) acquired
First Wave Technology Pty Ltd ('the legal subsidiary' or 'FirstWave'). For accounting purposes, the acquisition has been
accounted for as a share-based payment with the principles of reverse acquisition accounting applied. These financial
statements represent a continuation of FirstWave since that entity is deemed the accounting acquirer pursuant to
accounting standards, and therefore the comparative information represents that of FirstWave. The current period financial
statements represent those of the consolidated entity comprising FirstWave for the entire year and the legal parent
(Crestal) from 5 May 2016 to 30 June 2016. These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards
Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements
also comply with International Financial Reporting Standards ('IFRS') as issued by the International Accounting Standards
Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 33.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of FirstWave Cloud
Technology Limited ('company' or 'parent entity') as at 30 June 2016 and the results of all subsidiaries for the year then
ended. FirstWave Cloud Technology Limited and its subsidiaries together are referred to in these financial statements as
the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
FirstWave Cloud Technology Limited Annual Report 2016
22
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
The acquisition of FirstWave by Crestal has been accounted as a share-based payment in accordance with AASB 2
‘Share-based payments’ and the consolidated financial statements represent a continuation of the financial statements of
FirstWave. The comparative information is related to FirstWave operations and not that of Crestal. As a result, the
comparatives will not compare to the consolidated financial results of Crestal Petroleum Limited published in prior financial
reporting periods. Refer to ‘Business Combinations’ accounting policy for further explanation of the accounting for this
transaction.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as an equity transaction, where the difference between the
consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in
equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is FirstWave Cloud Technology Limited's functional
and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Licensing and support revenue
Licensing and support income is recognised as soon as a contracted service is provisioned. Provisioning involves the
setting up of a customer on the consolidated entity's platform, and the rendering of certain professional services to the
customer to facilitate service delivery. As licensing is a subscription based model, license revenue is recognised over the
term of the contract.
Professional services revenue
Fully managed services are recognised on a monthly basis as soon as a service is provisioned, in accordance with
customer contracts. Bespoke professional services are recognised on a milestone basis as per agreed terms and
conditions in customer contracts and at least to the extent of recoverable costs incurred to date.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
FirstWave Cloud Technology Limited Annual Report 2016
23
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Government grants
Government grants are recognised at fair value where there is a reasonable certainty that the grant will be received upon
meeting all grant terms and conditions. Grants that are meant to fund expenditure on research and development are
recognised over the periods when these costs are written off to profit or loss. Grants related to assets are carried forward
as deferred income at fair value and are credited to other income over the expected useful life of the asset over a straight
line basis.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised
within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged
or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating
cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or
there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All
other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
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Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of
the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are
recognised in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the
issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower
concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the
borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the financial
asset; or observable data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Computer equipment
Computer platform
three years
five years
three to five years
two to three years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
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Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the
end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets acquired are initially recognised at cost. Indefinite life intangible assets are not amortised and are
subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less
amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of
intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible
asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern
of consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Capitalised development costs
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 (including those arising from the development phase of an internal
project) are capitalised when it is probable that the project will be a success considering its commercial and technical
feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity has sufficient resources; and
intent to complete the internal development and their costs can be measured reliably. 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. Subsequent to initial
recognition, 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. Capitalised development costs
are amortised on a straight-line basis over the period of their expected benefit, being their finite useful lives of five to seven
years.
Patents
Significant costs associated with patents are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite useful lives of five to seven years.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount.
FirstWave Cloud Technology Limited Annual Report 2016
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Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement
of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a
finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in
shareholders' equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option
is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past
event, it is probable the consolidated entity 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 the reporting date, taking into account the risks and uncertainties surrounding the
obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the
liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date is
measured as the present value of expected future payments to be made in respect of services provided by employees up
to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of
shares, or options over shares, that are provided to employees in exchange for the rendering of services.
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The cost of equity-settled transactions is measured at fair value on grant date. Fair value is determined using either the
Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that entitle the employees to receive payment. The cost of equity-
settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The
cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the
number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or
loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the
control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the
condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any
remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-
settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is
recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on 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; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
Acquisition of First Wave Technology Pty Ltd During the financial year, First Wave Technology Pty Ltd’s original
shareholders obtained a majority share interest in Crestal Petroleum Limited (now known as FirstWave Cloud Technology
Limited) after the acquisition transaction. This transaction did not meet the definition of a business combination in AASB 3
‘Business Combinations’. The transaction has instead been accounted for in the consolidated financial statements in
accordance with AASB 2 ‘Share-based Payment’ and as a continuation of the financial statements of First Wave
Technology Pty Ltd, together with a deemed issue of shares, equivalent to the shares held by the former shareholders of
Crestal Petroleum Limited. The deemed issue of shares is, in effect, a share-based payment transaction where First Wave
Technology Pty Ltd is deemed to have received the net assets of Crestal Petroleum Limited, together with the listing
status of Crestal Petroleum Limited. The overall accounting effect is very similar to that of a reverse acquisition in
accordance with AASB 3 with the following principles having been applied:
•
fair value adjustments arising at acquisition were made to Crestal Petroleum Limited's assets and liabilities and
not to those of First Wave Technology Pty Ltd;
FirstWave Cloud Technology Limited Annual Report 2016
28
•
•
•
•
•
the cost of the acquisition, and amount recognised as issued capital to affect the transaction, is based on the
notional amount of shares that First Wave Technology Pty Ltd would have needed to issue to acquire the same
shareholding percentage in Crestal Petroleum Limited at the acquisition date;
retained earnings and other equity balances in the consolidated financial statements at acquisition date are those
of First Wave Technology Pty Ltd;
a shared-based payment transaction arises whereby First Wave Technology Pty Ltd is deemed to have issued
shares in exchange for the net assets of Crestal Petroleum Limited (together with its listing status). The listing
status does not qualify for recognition as an intangible asset and has therefore been expensed in profit or loss as
a share-based payment listing expense; The equity structure in the consolidated financial statements (the
number of shares and dollar value) represents the continuation of First Wave Technology Pty Ltd, including the
equity instruments issued to effect the acquisition;
the results for the financial year ended 30 June 2016 comprise the consolidated results for the year of First Wave
Technology Pty Ltd together with the results of Crestal Petroleum Limited from 5 May 2016 to 30 June 2016; and
the comparative results represents the consolidated results of First Wave Technology Pty Ltd only.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of FirstWave Cloud Technology
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial
year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the 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 shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2016.
The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument
assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election
on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other
FirstWave Cloud Technology Limited Annual Report 2016
29
comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that
relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler
hedge accounting requirements are intended to more closely align the accounting treatment with the risk management
activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an
allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard
introduces additional new disclosures. The consolidated entity will adopt this standard from 1 July 2018 but the impact of
its adoption is yet to be assessed by the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal
or implied) to be identified, together with the separate performance obligations within the contract; determine the
transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the
separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or
estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is
satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the
performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance
obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For
performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how
much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented
in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the
relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative
disclosure is required to enable users to understand the contracts with customers; the significant judgements made in
applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a
customer. The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is yet to be
assessed by the consolidated entity.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to
exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of
the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to
profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor
accounting, the standard does not substantially change how a lessor accounts for leases. The consolidated entity will
adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the consolidated entity.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
FirstWave Cloud Technology Limited Annual Report 2016
30
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or
Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Capitalised development costs
Distinguishing the research and development phases of a new customised product and determining whether the
recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation,
management monitors whether the recognition requirements continue to be met and whether there are any indicators that
capitalised costs may be impaired.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of
technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives
are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold
will be written off or written down.
Impairment of non-financial assets
The consolidated entity assesses impairment of non-financial assets at each reporting date by evaluating conditions
specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists,
the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use
calculations, which incorporate a number of key estimates and assumptions.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for
anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity operates in one segment being the development and sale of internet security software and located
in Australia. This operating segment is based on the internal reports that are reviewed and used by the Board of Directors
(who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources. The operating segment information is the same information as provided throughout the financial
statements and are therefore not duplicated. The information reported to the CODM is on a monthly basis.
Major customers
During the year ended 30 June 2016 there was one external customer (2015: one customer) where revenue exceeded
10% of the consolidated revenue. Total revenue from the customer for the year ended 30 June 2016 amounted to
$6,076,323 (2015: $4,266,662).
FirstWave Cloud Technology Limited Annual Report 2016
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Note 4. Revenue
Licensing and support revenue
Professional services revenue
Total revenue
Note 5. Other income
Research and development grant income*
Interest income
Consolidated
2016
$
4,652,183
1,749,535
Consolidated
2015
$
3,445,553
1,215,275
6,401,718
4,660,828
Consolidated
2016
$
215,883
17,066
Consolidated
2015
$
428,382
16,994
Other income
232,949
445,376
There are no unfulfilled conditions or other contingencies attached to the grant. The consolidated entity did not benefit
directly from any other Government assistance.
FirstWave Cloud Technology Limited Annual Report 2016
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Note 6. Expenses
Profit/(loss) before income tax includes the
following specific expenses:
Cost of sales
Cost of licenses
Depreciation
Leasehold improvements
Furniture and fittings
Computer equipment
Computer platform
Total depreciation
Amortisation
Capitalised development costs
Patents
Total amortisation
Consolidated
2016
$
Consolidated
2015
$
1,702,334
1,400,634
7,828
1,070
77,425
7,479
93,802
573,502
12,535
586,037
336
1,250
31,268
2,766
35,620
542,525
12,535
555,060
Total depreciation and amortisation
679,839
590,680
Listing expenses include the following:
Share-based payment listing expense (note 40)
Legal and professional expenses
Total listing expenses
Finance costs
Interest and finance charges paid/payable
Net foreign exchange variance
Net foreign exchange variance (included in cost
of sales above)
Rental expense relating to operating lease
Minimum lease payments
Employee benefit expenses
Employee salaries and other benefits
Defined contribution superannuation expense
Share-based payments expenses
Total Employee benefit expenses
1,582,198
1,350,300
2,932,498
-
-
-
106,568
126,259
(116,278)
33,600
170,055
112,484
5,094,541
332,027
159,945
5,586,513
1,842,574
170,298
-
2,012,872
FirstWave Cloud Technology Limited Annual Report 2016
33
Note 7. Income tax (benefit)/expense
Income tax (benefit)/expense
Current tax
Deferred tax - origination and reversal of
temporary differences
Consolidated
2016
$
136,990
(639,252)
Consolidated
2015
$
102,177
14,265
Aggregate income tax (benefit)/expense
(502,262)
116,442
Deferred tax included in income tax
(benefit)/expense comprises:
Increase in deferred tax assets (note 13)
Increase/(decrease) in deferred tax liabilities
(note 19)
Deferred tax - origination and reversal of
temporary differences
Numerical reconciliation of income tax
(benefit)/expense and tax at the statutory rate
Profit/(loss) before income tax benefit/(expense)
Tax at the statutory tax rate of 30%
Tax effect amounts which are not
deductible/(taxable) in calculating taxable
income:
Amortisation of intangibles
Entertainment expenses
Listing expenses
Non-deductible research and development
incentive expenditure
Deductible provisions
Development costs
Deferred income
Sundry items
Current year temporary differences not
recognised
(611,576)
(27,676)
(639,252)
(5,157,073)
(1,547,122)
171,888
11,055
424,822
400,235
-
(257,783)
(64,765)
27,055
(834,615)
332,353
-
14,265
14,265
159,677
47,903
-
-
-
164,328
(23,715)
-
-
(72,074)
116,442
-
Income tax (benefit)/expense
(502,262)
116,442
Note 8. Current assets - cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
2016
$
1,000
5,771,415
Consolidated
2015
$
1,000
388,255
Total cash and cash equivalents
5,772,415
389,255
FirstWave Cloud Technology Limited Annual Report 2016
34
Note 9. Current assets - trade and other receivables
Trade receivables
Accrued revenue
Other receivables
Receivable from key management personnel
Consolidated
2016
$
1,545,268
855,881
36,130
221,520
Consolidated
2015
$
1,226,232
338,685
51,639
-
Total trade and other receivables
2,658,799
1,616,556
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $22,699 as at 30 June
2016 ($14,670 as at 30 June 2015).
The consolidated entity did not consider a credit risk on the aggregate balances after reviewing the credit terms of
customers based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Zero to three months overdue
Three to six months overdue
Over six months overdue
Consolidated
2016
$
-
-
22,699
Consolidated
2015
$
14,496
174
-
Total
22,699
14,670
Note 10. Current assets - other
Prepayments
Security deposits
Other deposits
Total
Consolidated
2016
$
579,488
180,086
450
Consolidated
2015
$
439,608
46,310
450
760,024
486,368
FirstWave Cloud Technology Limited Annual Report 2016
35
Note 11. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Computer platform - at cost
Less: Accumulated depreciation
Total
Consolidated
2016
$
491,839
(7,828)
484,011
15,488
(10,157)
5,331
755,988
(550,710)
205,278
234,930
(219,553)
15,377
709,997
Consolidated
2015
$
13,445
(341)
13,104
14,915
(9,087)
5,828
570,892
(473,285)
97,607
214,621
(212,074)
2,547
119,086
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2014
Additions
Depreciation expense
Balance at 30 June 2015
Additions
Write off of assets
Depreciation expense
Balance at 30 June 2016
Leasehold
improvements
$
13,440
-
(336)
13,104
491,839
(13,104)
(7,828)
484,011
Furniture and
fittings $
5,683
1,395
(1,250)
5,828
573
-
Computer
equipment
$
50,551
78,324
(31,268)
97,607
185,096
-
Computer
platform
$
5,313
-
(2,766)
2,547
20,309
-
Total
$
74,987
79,719
(35,620)
119,086
697,817
(13,104)
(1,070)
(77,425)
(7,479)
(93,802)
5,331
205,278
15,377
709,997
Property, plant and equipment secured under finance leases
Refer to note 30 for further information on property, plant and equipment secured under finance leases.
FirstWave Cloud Technology Limited Annual Report 2016
36
Note 12. Non-current assets - intangibles
Capitalised development costs - at cost
Less: Accumulated amortisation
Patents - at cost
Less: Accumulated amortisation
Consolidated
2016
$
7,447,525
(5,404,731)
2,042,794
70,288
(25,070)
45,218
Consolidated
2015
$
6,588,250
(4,831,229)
1,757,021
62,666
(12,535)
50,131
Total
2,088,012
1,807,152
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2014
Additions
Amortisation expense
Capitalised development costs
1,769,410
530,136
(542,525)
Balance at 30 June 2015
Additions
Amortisation expense
1,757,021
859,275
(573,502)
Patents
52,901
9,765
(12,535)
50,131
7,622
(12,535)
Total
1,822,311
539,901
(555,060)
1,807,152
866,897
(586,037)
Balance at 30 June 2016
2,042,794
45,218
2,088,012
Note 13. Non-current assets - deferred tax
Deferred tax asset comprises temporary
differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Provisions
Deferred income
Property, plant and equipment
Development costs
Deferred tax asset
Movements:
Credited to profit or loss (note 7)
Consolidated
2016
$
Consolidated
2015
$
-
-
-
-
-
611,576
611,576
834,995
252,486
166,755
(16,256)
(626,404)
-
-
FirstWave Cloud Technology Limited Annual Report 2016
37
Note 14. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Interest payable
Other payables
Total
Refer to note 26 for further information on financial instruments.
Note 15. Current liabilities - borrowings
Insurance liability
Lease liability
Total
Consolidated
2016
$
593,984
1,306,766
Consolidated
2015
$
353,811
723,733
19,913
148,500
1,900,750
1,245,957
Consolidated
2016
$
98,710
194,688
Consolidated
2015
$
22,813
119,226
293,398
142,039
Refer to note 18 for further information on assets pledged as security and financing arrangements.
Refer to note 26 for further information on financial instruments.
Note 16. Current liabilities - employee benefits
Annual leave
Long service leave
Total
Note 17. Current liabilities - other
Deferred research and development income
Income received in advance
Consolidated
2016
$
201,933
168,644
Consolidated
2015
$
153,145
124,948
370,577
278,093
Consolidated
2016
$
183,214
380,670
Consolidated
2015
$
215,883
580,023
Total
563,884
795,906
FirstWave Cloud Technology Limited Annual Report 2016
38
Note 18. Non-current liabilities – borrowings
Convertible notes payable
Lease liability
Total
Consolidated
2016
$
-
286,701
Consolidated
2015
$
647,126
247,556
286,701
894,682
Refer to note 26 for further information on financial instruments.
During the year, the consolidated entity settled all outstanding convertible notes by way of the issuance of 8,996,989
ordinary shares in the company.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Lease liability
Consolidated
2016
$
481,389
Consolidated
2015
$
366,782
Assets pledged as security
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial
position, revert to the lessor in the event of default.
National Australia Bank ('NAB') lease facility The consolidated entity has an asset leasing facility for $300,000 with NAB.
The facility is available on a revolving basis with repayment terms ranging from 1 to 3 years from the draw-down date.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
2016
$
Consolidated
2015
$
Total facilities
NAB lease facility
Other lease facility
Corporate credit card facility
Total
Used at the reporting date
NAB lease facility
Other lease facility
Corporate credit card facility
Total
Unused at the reporting date
NAB lease facility
Other lease facility
Corporate credit card facility
Total
300,000
205,525
30,000
535,525
275,864
205,525
13,211
494,600
24,136
-
16,789
40,925
300,000
119,226
30,000
449,226
247,556
119,226
11,590
378,372
52,444
-
18,410
70,854
FirstWave Cloud Technology Limited Annual Report 2016
39
Note 19. Non-current liabilities - deferred tax
Deferred tax liability comprises temporary
differences attributable to:
Amounts recognised in profit or loss:
Capitalised research and development
Employee benefits
Deferred income
Deferred tax liability
Movements:
Opening balance
Charged/(credited) to profit or loss (note 7)
Closing balance
Note 20. Non-current liabilities - employee benefits
Long service leave
Note 21. Non-current liabilities - provisions
Lease make good
Consolidated
2016
$
Consolidated
2015
$
-
-
-
-
27,676
(27,676)
-
Consolidated
2016
$
60,060
Consolidated
2016
$
152,649
526,294
(267,098)
(231,520)
27,676
13,411
14,265
27,676
Consolidated
2015
$
51,462
Consolidated
2015
$
-
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the consolidated
entity at the end of the respective lease terms.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Carrying amount at the start of the year
Additional provisions recognised
Carrying amount at the end of the year
Note 22. Non-current liabilities - other
Deferred research and development income
Income received in advance
Lease make good
Consolidated
2016
$
-
152,649
152,649
Consolidated
2016
$
372,636
301,446
Consolidated
2015
$
555,850
570,102
Total
674,082
1,125,952
FirstWave Cloud Technology Limited Annual Report 2016
40
Note 23. Equity - issued capital
The number of shares and dollar value represents the continuation of First Wave Technology Pty Ltd. Consequent to
reverse acquisition, with effect from 5 May 2016, the shares were converted into issued capital of FirstWave Cloud
Technology Limited.
Ordinary shares - fully paid
Movements in ordinary share capital
Details
Balance
Share split 9.23 shares issued for 1 share held
Issue of shares
Share issue transaction costs, net of tax
Balance
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of shares on capital raising
Issue of shares on exercise of options
Share split 1.25 shares issued for 1 share held
Share issue transaction costs, net of tax
Shares to affect the deemed acquisition of Crestal
Petroleum Limited (note 40)
Consolidated
2016
Shares
179,786,485
2015
Shares
83,030,252
2016
$
15,773,846
2015
$
4,436,261
Date
1 July 2014
27 June 2015
29 June 2015
30 June 2015
31 August 2015
1 October 2015
25 October 2015
3 December 2015
20 December 2015
5 May 2016
5 May 2016
5 May 2016
5 May 2016
5 May 2016
5 May 2016
Shares
7,979,984
65,675,268
9,375,000
-
83,030,252
3,125,000
1,243,750
2,565,625
1,725,000
715,625
8,996,989
3,692,000
40,000,000
738,400
26,458,169
-
7,495,675
$
3,071,261
-
1,500,000
(135,000)
4,436,261
500,000
199,000
410,500
276,000
114,500
647,126
221,520
8,000,000
48,804
-
(579,000)
1,499,135
Balance
30 June 2016
179,786,485
15,773,846
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is
calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
FirstWave Cloud Technology Limited Annual Report 2016
41
The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company's share price at the time of the investment. The consolidated entity is not
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in
order to maximise synergies.
Note 24. Equity - reserves
Share-based payments reserve
Consolidated
2016
$
397,911
Consolidated
2015
$
237,966
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2014
Balance at 30 June 2015
Share-based payment expense
Balance at 30 June 2016
Note 25. Equity - dividends
Share-based
payments
$
237,966
237,966
159,945
397,911
Total
$
237,966
237,966
159,945
397,911
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 26. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The
consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses
different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in
the case of interest rate, foreign exchange and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and
appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
consolidated entity's operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The consolidated entity is not exposed to any
significant foreign currency risk.
Price risk
The consolidated entity is not exposed to any significant price rise.
FirstWave Cloud Technology Limited Annual Report 2016
42
Interest rate risk
The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates
expose the consolidated entity to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair
value interest rate risk. Borrowings comprise of lease liabilities and convertible notes with fixed interest rate. The
consolidated entity’s exposure to interest rate risk is not significant and limited to interest on cash at bank.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information,
confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate
to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the
carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position
and notes to the financial statements. The consolidated entity does not hold any collateral.
The consolidated entity has a credit risk exposure with one major customer, which as at 30 June 2016 owed the
consolidated entity $1,498,515 (97% of trade receivables) (2015: $1,190,559 (97% of trade receivables)). This balance
was within its terms of trade and no impairment was made as at 30 June 2016. There are no guarantees against this
receivable but management closely monitors the receivable balance on a monthly basis and is in regular contact with this
customer to mitigate risk.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
NAB lease facility
Corporate credit card facility
Consolidated
2016
$
24,136
16,789
Consolidated
2015
$
52,444
18,410
Total
40,925
70,854
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as
remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of
financial position.
Consolidated - 2016
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing - fixed rate
Lease liability
Insurance liability
Total non-derivatives
1 year or less
Over 5 years
$
Between 1 and 2 years
Remaining contractual
maturities
$
$
593,984
-
221,193
98,710
913,887
301,567
-
301,567
-
-
-
FirstWave Cloud Technology Limited Annual Report 2016
43
Between 2 and 5 years
$
-
-
-
$
593,984
522,760
98,710
1,215,454
Consolidated - 2015
1 year or less
Over 5 years
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - fixed rate
Convertible notes payable
Lease liability
Insurance liability
$
353,811
148,500
647,126
144,073
22,813
Total non-derivatives
1,316,323
Between 1 and 2 years
Remaining contractual
maturities
$
$
-
-
-
251,901
-
251,901
-
-
-
17,371
-
17,371
Between 2 and 5 years
$
-
-
-
-
-
-
$
353,811
148,500
647,126
413,345
22,813
1,585,595
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 27. Fair value measurement
The carrying amounts of trade and other receivables and trade and other payable are assumed to approximate their fair
values due to their short term nature. The fair value of financial liabilities is estimated by discounting the remaining
contractual maturities at the current market interest rate that is available for similar financial liabilities.
Note 28. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of
the company, and unrelated firms:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Due diligence and investigating accountants'
report in relation to prospects*
Tax advice*
Financial modelling*
Total
Total – Grant Thornton
Audit services - unrelated firms**
Audit or review of the financial statements
Consolidated
2016
$
Consolidated
2015
$
102,000
129,500
3,500
22,500
155,500
257,500
-
-
-
-
-
-
-
13,950
* These services were provided to First Wave Technology Pty Ltd.
**Unrelated firm refers to The Linkara Group Pty Ltd, who were the auditors of First Wave Technology Pty Ltd during
2015.
FirstWave Cloud Technology Limited Annual Report 2016
44
Note 29. Contingent liabilities
The consolidated entity has given bank guarantees as at 30 June 2016 of $180,086 (2015: $46,310) to various landlords.
Note 30. Commitments
Capital commitments
Committed at the reporting date but not recognised as
liabilities, payable:
Property, plant and equipment
Lease commitments - operating
Committed at the reporting date but not recognised as
liabilities, payable:
Within one year
One to five years
Total
Lease commitments - finance
Committed at the reporting date and recognised as liabilities,
payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Representing:
Lease liability - current (note 15)
Lease liability - non-current (note 18)
Total
Consolidated
2016
$
Consolidated
2015
$
304,500
-
244,798
979,192
1,223,990
221,193
301,567
522,760
(41,371)
481,389
194,688
286,701
481,389
127,199
100,843
228,042
144,073
269,272
413,345
(46,563)
366,782
119,226
247,556
366,782
Operating lease commitments relates to lease of office premises under non-cancellable operating leases expiring within
one to five years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the
terms of the leases are renegotiated.
Finance lease commitments includes contracted amounts for various plant and equipment with a written down value of
$220,952 (30 June 2015: $61,573) under finance leases expiring within one to three years. Under the terms of the leases,
the consolidated entity has the option to acquire the leased assets for predetermined residual values on the expiry of the
leases.
FirstWave Cloud Technology Limited Annual Report 2016
45
Note 31. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2016
$
1,071,928
26,119
39,317
123,607
Consolidated
2015
$
204,150
-
-
-
Total
1,260,971
204,150
Note 32. Related party transactions
Parent entity
FirstWave Cloud Technology Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 31 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Other income:
Interest receivable from key management
personnel
Consolidated
2016
$
Consolidated
2015
$
2,285
-
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Current receivables:
Loan to key management personnel*
Consolidated
2016
$
221,520
Consolidated
2015
$
-
*Unsecured loan provided to key management personnel. Interest is charged on outstanding balance at 7.5% per annum.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
FirstWave Cloud Technology Limited Annual Report 2016
46
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Retained earnings
Parent
2016
$
(2,427,930)
(2,427,930)
Parent
2016
$
207,414
6,640,009
-
-
2015
$
(17,947,314)
(17,947,314)
2015
$
297,015
297,015
4,576,839
4,576,839
9,067,939
(2,427,930)
21,862,140
(26,141,964)
Total equity/(deficiency)
6,640,009
(4,279,824)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2016 and 30 June 2015.
Parent entity information Parent entity financial information relates to FirstWave Cloud Technology Limited (formerly
Crestal Petroleum Limited). As detailed in note 1, FirstWave Cloud Technology Limited is 'the legal parent' of the
consolidated entity with effect from 5 May 2016. The information for the periods represents the standalone financial
information of the parent entity. The comparative financial information are not part of the consolidated entity's financial
position or performance for the 30 June 2015.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2016 and 30 June 2015.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2016 and 30 June 2015.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1,
except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
•
•
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be
an indicator of an impairment of the investment.
FirstWave Cloud Technology Limited Annual Report 2016
47
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in
accordance with the accounting policy described in note 1:
Name
Principal place of
business/ Country of
incorporation
First Wave Technology Pty Ltd
Australia
Ownership interest
2016
%
100.00%
2015
%
-
Note 35. Reconciliation of profit/(loss) after income tax to net cash (used in)/from operating activities
Consolidated
2016
$
(4,654,811)
Consolidated
2015
$
43,235
Profit/(loss) after income tax benefit/(expense) for the year
Adjustments for:
Depreciation and amortisation
Write off of property, plant and equipment
Provisions - non-cash
Share-based payments - employees
Share-based payments - non-cash listing expenses
Change in operating assets and liabilities:
Increase in trade and other receivables
Decrease in income tax refund due
Increase in deferred tax assets
Increase in accrued revenue
Decrease/(increase) in prepayments
Increase in trade and other payables
Decrease in deferred tax liabilities
Increase/(decrease) in retirement benefit obligations
Increase/(decrease) in other operating liabilities
679,839
13,104
-
159,945
1,499,135
(779,433)
145,990
-
(611,576)
(186,517)
579,191
(27,676)
101,082
(683,892)
Net cash (used in)/from operating activities
(3,765,619)
Note 36. Non-cash investing and financing activities
Leasehold improvements - lease make good
Shares issued on conversion of convertible notes
Shares issued on non-recourse loan to key management
personnel
Shares issued to effect deemed acquisition of Crestal Petroleum
Limited
Total
Consolidated
2016
$
152,649
647,126
221,520
1,499,135
2,520,430
FirstWave Cloud Technology Limited Annual Report 2016
48
578,328
-
44,882
-
-
(946,400)
-
(17,779)
(156,356)
66,586
159,913
(3,514)
(39,206)
429,561
159,250
Consolidated
2015
$
-
-
-
-
-
Note 37. Earnings per share
Profit/(loss) after income tax attributable to the owners of
FirstWave Cloud Technology Limited
Weighted average number of ordinary shares used in
calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Weighted average number of ordinary shares used in
calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
2016
$
(4,654,811)
Number
122,125,559
-
122,125,559
Cents
(3.81)
(3.81)
Consolidated
2015
$
43,235
Number
92,133,286
2,942,063
95,075,349
Cents
0.05
0.05
The weighted average number of ordinary shares for the comparative period has been adjusted to give effect to capital
reorganisation which occurred during the financial year.
22,070,000 options have not been included in the 2016 weighted average number of shares as they were anti-dilutive (30
June 2015: 13,842,174 options and convertible notes)
Note 38. Share-based payments
The consolidated entity has a share option plan to incentivise certain employees and key management personnel. The
share-based payment expense for the year was $159,945 (2015: $Nil). The share option plan is subject to participants
meeting service condition at the vesting date. The options are issued for nil consideration and are granted in accordance
with performance guidelines established by the Board of Directors.
Set out below are summaries of options granted under the plan:
2016
Grant date
30/12/2013
01/11/2011
01/11/2011
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
Total
Expiry date Exercise
price*
$0.06
$0.06
$0.07
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.45
29/06/2016
01/01/2015
01/01/2015
19/05/2020
19/05/2020
19/05/2021
19/05/2021
19/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
11/05/2024
11/05/2025
11/05/2024
Balance at
the start of
the year
3,692,000
276,900
461,500
-
-
-
-
-
-
-
-
-
-
-
-
4,430,400
Granted
Exercised
Expired/
forfeited/
other
-
-
-
800,000
270,000
800,000
2,400,000
4,000,000
6,260,000
1,460,000
1,640,000
2,000,000
200,000
800,000
1,440,000
22,070,000
(3,692,000)
(276,900)
(461,500)
-
-
-
-
-
-
-
-
-
-
-
-
(4,430,400)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at
the end of
the year
-
-
-
800,000
270,000
800,000
2,400,000
4,000,000
6,260,000
1,460,000
1,640,000
2,000,000
200,000
800,000
1,440,000
22,070,000
Weighted average exercise price
$0.06 $0.32 $0.06 $0.00 $0.32
FirstWave Cloud Technology Limited Annual Report 2016
49
*Exercise price and balance at the start of the year has been adjusted for share-split.
Outstanding options vested and exercisable as at 30 June 2016 Nil (2015: 4,430,400 options)
The weighted average share price during the financial year was $0.26.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 6.29 years.
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date Share price
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
19/05/2020
19/05/2020
19/05/2021
19/05/2021
19/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
11/05/2024
11/05/2025
11/05/2024
at grant
date
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
Exercise
price
Expected
volatility
Dividend
yield
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.45
43.90%
43.90%
43.90%
43.90%
43.90%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
-
-
-
-
-
-
-
-
-
-
-
-
Risk-free
interest
rate
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
Fair value
at grant
date
$0.090
$0.080
$0.110
$0.090
$0.090
$0.110
$0.120
$0.090
$0.130
$0.100
$0.060
$0.030
Note 39. Events after the reporting period
No matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Note 40. Share-based payment - reverse acquisition
As detailed in note 1, on 5 May 2016, FirstWave Cloud Technology Limited (previously known as Crestal Petroleum
Limited ('Crestal')) acquired First Wave Technology Pty Ltd ('the legal subsidiary' or 'FirstWave'). For accounting purposes,
the acquisition has been accounted for as a share-based payment with the principles of reverse acquisition accounting
applied.
The purchase consideration was deemed to be calculated at 7,495,675 shares in FirstWave Cloud Technology Limited
(legal parent) issued to the shareholders of Crestal and is valued at $1,499,135 determined based on the FirstWave Cloud
Technology Limited capital raising issue price of $0.20 per share.
Assets and liabilities acquired:
Cash and cash equivalents
Other receivables
Trade and other payables
Net liabilities acquired
Cash and cash equivalents acquired on reverse acquisition
Consolidated
2016
$
34,312
41,290
(158,665)
(83,063)
$34,312
FirstWave Cloud Technology Limited Annual Report 2016
50
Deemed Crestal Petroleum Limited issued capital:
Historical issued capital balance as at 30 June 2015
Shares issued during the period before acquisition
Less: Reduction of capital on acquisition
Shares issued to affect the deemed acquisition of Crestal
Total Crestal Petroleum Limited issued capital on completion of transaction
Deemed Crestal Petroleum Limited retained earnings:
Historical retained earnings balance as at 30 June 2015
Losses incurred during the period before acquisition
Elimination of Crestal Petroleum Limited pre-acquisition retained
earnings
Issue of shares to effect the reverse acquisition of Crestal
Petroleum Limited
Add: Net liabilities acquired
Share-based payment listing expenses
Consolidated
2016
$
21,862,140
980,000
(22,842,140)
1,499,135
1,499,135
Consolidated
2016
$
(26,141,964)
(3,081,996)
29,223,960
1,499,135
83,063
1,582,198
FirstWave Cloud Technology Limited Annual Report 2016
51
6. Directors’ Declaration
In the directors' opinion:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial
position as at 30 June 2016 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Alexander Kelton
Chairman
___________________________
Steven O'Brien
Managing Director
12 September 2016
FirstWave Cloud Technology Limited Annual Report 2016
52
7. Independent Auditor’s Report
FirstWave Cloud Technology Limited Annual Report 2016
53
FirstWave Cloud Technology Limited Annual Report 2016
54
8. Corporate Directory
Directors
Drew Kelton
Steve O’Brien
David Garnier
Edward (Ted) Keating
Scott Lidgett
Paul MacRae
Company Secretary
Justin Clyne
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Registered Office and Principal Place of Business
Level 10, 132 Arthur Street
NORTH SYDNEY NSW 2060
Telephone: +61 2 9409 7000
Email:
investor@FirstWave.com.au
Website
www.firstwave.com.au
ASX Code
FCT
Auditors
Grant Thornton Australia
Level 17, 383 Kent Street
Sydney NSW 2000
Share Registry
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide SA 5000
Postal address:
Telephone
GPO Box 1903, Adelaide SA 5001
(within Australia): 1300 556 161
(Outside Australia): + 61 3 9415 4000
www.computershare.com
Website:
Principal Bankers
National Australia Bank
FirstWave Cloud Technology Limited Annual Report 2016
55
9. Shareholder Information
The following information is provided pursuant to Listing Rule 4.10 and is current as at as at 23 September 2016.
Distribution of Shareholders
Size of Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Totals
Total
Holders
1,825
162
100
323
218
2,628
Total Shares
98,107
429,887
831,127
14,490,309
163,937,055
179,786,485
% of Ordinary
Shares
0.05
0.24
0.46
8.06
91.18
100.00
Unmarketable Parcels
There are 1,810 shareholders with an unmarketable parcel of shares being a holding of less than 878 shares each for a
combined total of 83,608 shares. This is based on a closing price of $0.57 per share as at 22 September 2016 and
represents 0.046% of the shares on issue.
Substantial Shareholders
Name
MR GREG MAREN + MRS GERALDINE MAREN
MR SCOTT LIDGETT + MRS KATHERINE
LIDGETT
Top 20 Ordinary Shareholders
Name
MR GREG MAREN + MRS GERALDINE MAREN
No. of Ordinary
Shares
16,365,598
% of Ordinary
Shares
9.10
16,084,036
8.95
No. of
Ordinary
Shares
16,365,598
% of
Ordinary
Shares
9.10
MR SCOTT LIDGETT + MRS KATHERINE LIDGETT
MR EDWARD KEATING + MRS LINDA KEATING
MR RICHARD BESWICK
UBS NOMINEES PTY LTD
MR SIMON RYAN
WILLOW WATTLE PTY LTD
MR SCOTT LIDGETT
SCOTT MCNEILAGE PTY LIMITED
IIWITI PTY LIMITED
MR MICHAEL GORDON OXLEY + MRS KATE NORTON OXLEY
6,485,344
5,761,382
4,718,082
4,615,000
3,963,789
3,570,811
2,638,684
2,405,000
2,078,535
MR GREG MAREN + MRS GERALDINE MAREN
MR MARTIN WILLIAM BARNES + MS ALEXIS ANN GEORGE
J P MORGAN NOMINEES AUSTRALIA LIMITED
QUINVILLE PTY LTD
WILLROTH PTY LTD
QUOTIDIAN NO 2 PTY LTD
ROYSTON AND HARRISON PTY LTD
BLUEY DESIGNS PTY LTD
MAZOONGOO PTY LTD
Total Held by Top 20 Ordinary Shareholders
Total Remaining Balance or Ordinary Shareholders
Total Shareholders Balance
2,000,480
2,000,036
1,999,998
1,900,000
1,810,487
1,648,213
1,640,197
1,634,888
85,356,594
94,429,891
179,786,485
8.95
3.61
3.20
2.62
2.57
2.20
1.99
1.47
1.34
1.16
1.13
1.11
1.11
1.11
1.06
1.01
0.92
0.91
0.91
47.48
52.52
100.00
There are no shares subject to voluntary escrow but 56,970,816 shares subject to ASX escrow for various periods as at 23
September 2016.
FirstWave Cloud Technology Limited Annual Report 2016
56
Unlisted Options
The Company has 52 option holders with a total of 22,080,621 options on issue (all unlisted).
Voting Rights
The voting rights attached to each class of equity security are as follows:
Voting Rights are contained within clause 12.11 of the Company’s Constitution lodged with the ASX on 18 May 2016.
Clause 12.11 provides:
a) each Shareholder entitled to vote may vote in person or by proxy, attorney or Representative;
b) on a show of hands, every person present who is a Shareholder, or a proxy, attorney or Representative of a
Shareholder has one vote; and
c) on a poll, every person present who is a Shareholder or a proxy, attorney or Representative of a Shareholder
shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney
or Representative, have one vote for the Share, but in respect of partly paid Shares, shall have such number
of votes being equivalent to the proportion which the amount paid (not credited) is of the total amounts paid
and payable in respect of those Shares (excluding amounts credited).
Option holders have the right to attend a meeting and ask questions but do not have any voting rights until the options
have vested and been converted into ordinary shares.
There is no current on market buy back.
In accordance with ASX Listing Rule 4.10.19, the Company has used its cash (and assets in a form readily convertible
to cash) at the time of reinstatement to quotation (following re-compliance with Chapters 1 & 2 of the ASX Listing
Rules) in a way that is consistent with its business objectives for the period from reinstatement to the date of this
Annual Report.
FirstWave Cloud Technology Limited Annual Report 2016
57
FirstWave Cloud Technology Limited Annual Report 2016