ANNUAL REPORT 2017
FirstWave Cloud Technology Limited
ABN 35 144 733 595
Contents
1. Chairman’s Letter
2. Board’s Update to Shareholders
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
18
19
53
54
58
59
FirstWave Cloud Technology Limited Annual Report 2017
1
1. Chairman’s Letter
Dear Shareholders,
It is with pleasure that I present the FirstWave Cloud Technology 2017 Annual Report. Australia’s largest enterprises trust
FirstWave to secure their networks and data from the threat of cyber-crime.
When I was introduced to FirstWave two years ago, what appealed to me was the burgeoning market opportunity in cyber
security services, the quality of the team and technology of the company. At the time, they were operating from a small
partitioned office. The team was only 25 people. They had developed a number of telco-grade cyber security products
(including email, web and firewall) which they had painstakingly built from the ground up in conjunction with Telstra’s
needs.
We are now two years into this journey, which included listing in May 2016, and the market opportunity is greater and
more relevant today than it was then. Recent high profile global cyber security threats, including “Wannacry” & “Petya”
ransomware, severely impact businesses around the globe reinforcing the business risk and financial impact of a breach.
Understanding and reducing the risk of a cyber security breach is now a key board matter for directors of companies and
government entities.
Looking back over the past twelve months, FirstWave has:
Recruited a formidable development team at the forefront of cyber security,
Successfully commercialised its firewall products with Telstra,
An exit annualised monthly recurring revenue of $9M into FY2018,
Added Fortinet to its managed next generation firewall products,
New products ready for launch in both Telstra and in the public cloud,
New channels being developed in Australia and beyond,
Opened a regional sales (branch) office in Singapore.
Notwithstanding the above, we have to accelerate our execution in FY2018 and open up additional distribution channels in
Australia and internationally. We will also continue to invest in our products and platforms to ensure we remain at the
forefront of technology in the cyber security sphere.
As part of our plan to accelerate growth, the company completed an oversubscribed private placement of $4.4m on 17 Oct
2017. A significant proportion of this capital raise will be used to fund international expansion. Further, and subsequent to
the date of the directors’ report, the company has appointed Sam Saba, a highly regarded internationally experienced
business executive in the telecommunications market, further enriching the board’s international business capabilities.
David Garner has also retired from the board effective at this year’s Annual General meeting. I would like to thank David
for his important contribution to the Board since FirstWave’s inception. I look forward to his continued support as a
shareholder in the Company.
On behalf of the board, I would like to take this opportunity to thank the shareholders for their continued support and the
staff of FirstWave for their dedication during the year. I look forward to the company realising its potential in FY2018.
Yours faithfully,
Drew Kelton
Non-Executive Chairman
20 October 2017
FirstWave Cloud Technology Limited Annual Report 2017
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2. Board’s Update to the Shareholders of FirstWave Cloud Technology Limited
Introduction
FirstWave delivers multi-service, multi-vendor, cloud security solutions for institutions, governments, and small and
medium businesses, through its patented, market-leading content security technology.
FirstWave’s service offering was developed to be easily scaled by taking advantage of its unique patented technology and
the market’s increasing demand for cloud security services.
IHS Markit estimates the global cloud-based managed security services market will grow at a CAGR of 7.5% to $US13.1
billion by 2021; FirstWave’s service offering has the potential to address 75% of this market.
FirstWave is unique in this market because of its ability to deliver a fully-virtualised, fully-orchestrated suite of Mail, Next
Generation Managed Firewall (NGFW) and Web security services via an integrated telecommunications and service
provider platform.
FY 2017 Highlights
During FY17, FirstWave continued to execute against its strategy to develop a world-leading cloud security solution, and
to secure long-term contracts by investing in our product and engineering platform, our team, and our business
development capabilities.
Strategic Business Highlights
Exit annualised recurring revenue (ARR) of $9m
Created new domestic and international distribution channels
Opened a new branch office in Singapore
Increased the number of new contracts across security portfolio
Operational Highlights
Incremental functions and features added to FirstWave’s Cloud Security services portfolio
Built a world class development team
Integrated a new Global Security Vendor
Introduced 24/7 / 365 days-a-year Firewall support
FirstWave’s FY17 revenue was $6.5m which represents an increase of 0.5% compared with the prior comparative period
(PCP). While FirstWave’s overall revenue growth was modest, the shift in revenue, from one-off highly-tailored
implementations to one to three-year contracts, was significant.
This maturity of FirstWave’s revenue is demonstrated in our growth of licensing and support revenue, which increased by
21% over FY17, and by 24% in H2 FY17 when compared with PCPs, whereas professional services revenue decreased
by 53.9% to $0.8m in FY17 compared with the PCP.
FirstWave expects licensing and support revenue to continue to grow during FY18 in line with the annual recurring
revenue (ARR) at the end of FY17, which was approximately $9m. The total multi-year sales value of orders in FY17 was
$7.8m.
Product development, and associated service offerings
FY17 was an important year of investment for FirstWave in both its product development and engineering and service
delivery capability. FirstWave invested approximately $1.2m in product development to enable and sustain future revenue
growth in FY18 and beyond, by expanding the sales channels in both domestic and international markets, targeting
institutions, governments and small to medium businesses.
This investment significantly added to FirstWave’s virtualised cloud content security capabilities and enabled FirstWave to
create its current, strong pipeline of long-term contract opportunities with domestic and international telecommunications
companies.
In FY17, FirstWave attracted a team of world-class talent, who have developed market-leading initiatives and
performance, enriched our intellectual property, and has been able to integrate a new Global Service Vendor - Fortinet,
onto the FirstWave platform. The new product features and functionalities emerging as a result of investment in product
FirstWave Cloud Technology Limited Annual Report 2017
3
development are tremendous sales enablers generating the necessary push demand for FirstWave’s products and
services. Further, by rolling out our products and services on a public cloud infrastructure, such as Amazon Web Services,
we are now able to add to our distribution channel strength, and widen our addressable domestic and international
markets.
Feedback received from the Global Security Vendor community and international telecommunication companies reinforces
our view that FirstWave has developed a unique, market-leading, suite of products and services which resonate with our
customer base.
Domestic market developments
In FY17, FirstWave made solid progress with its primary distribution channel partner, however, it has had to adjust its
expectations as the pace of market deployment has been slower than anticipated.
This slower than expected market deployment has resulted in a two to three quarter delay, against initial revenue
expectations. To address this, FirstWave has created an additional domestic channel in Q4 17, which has been well
received by the market and highlights the strong underlying demand for FirstWave products and services.
FirstWave is already experiencing a strong up-tick in revenue generation year to date, and is confident that it will make up
for the slower Q2 and Q3 in FY17 in FY18.
Vendor and partner relationships, and opportunities
During FY17, FirstWave continued to deepen its collaboration with the world’s leading Global Security Vendors, and could
successfully introduce a FirstWave delivered Cisco Umbrella service and Fortinet products into the FirstWave solutions
portfolio, attracting strong interest from domestic small and medium businesses and potential customers in the Asia
region.
We have been particularly pleased with how collaboratively all parties have worked to ensure cloud readiness, and to
validate that the FirstWave services can in fact be adapted and offered on scale in a multi-cloud environment and,
importantly, at an affordable price.
FirstWave’s product development team, led by Simon Ryan, Chief Technology Officer, has also been actively engaging
with Global Security Vendors’ advisory boards, providing insight on product releases, and advice on navigating the
increasingly complex security challenges facing enterprises and government organisations.
Global Expansion
International market and local presence in Singapore
In FY17, in response to growing interest and recognition of our market-leading products and services, FirstWave opened
its first international branch office in Singapore and appointed a Regional Business Development Manager. This new
proximity to local operators will enable FirstWave to develop closer relationships with prospective customers and deepen
our existing international Global Security Vendor relationships in the Asia-Pacific Region.
International market opportunities
In FY 2017, the domestic business funded international business development. As the international pipeline has
developed, the management team has learned more about the longer-lead times to secure revenue. This has created
unforeseen pressure on Firstwave’s capital structure, driving an increased need for working capital. The company
completed an oversubscribed private placement of $4.4m on 17 Oct 2017. A significant proportion of this capital raise will
be used to fund international expansion, and the resulting additional working capital requirements.
FirstWave Cloud Technology Limited Annual Report 2017
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 2017.
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 (resigned with effect from 3 October 2017)
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Simon Moore (appointed on 1 March 2017)
Richard Beswick (alternate to Scott Lidgett appointed on 8 June 2017)
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 $5,066,543 (30 June 2016: $4,654,811).
Financial review
Profit or loss performance
The consolidated entity’s revenue for the year was $6,435,660, which represents growth of 0.5% over the prior
comparative period (‘PCP’). Licensing and support revenue grew by 21% for the year and by 24% in the second half of
financial year 2017 ('FY17') compared with PCPs. Professional Services revenue was $806,369, representing a ratio of
14.3% to licensing and support revenue.
FY17 revenue was below the consolidated entity's expectations following a 2 to 3 quarter lag in converting identified
market opportunities for Platform as a Service, Next Generation Firewall and Email security services in both domestic and
international markets. The consolidated entity’s opportunity pipeline remains strong and anticipates the growing
momentum in licensing and support revenue to continue in FY18 and beyond.
The consolidated entity’s loss after income tax amounted to $5,066,543 (2016: loss of $4,654,811). This result includes
the full impact of the recognition of non-cash share-based payment expenses of $1,223,902 due to stock options granted
to employees and officers. These are reported in general administration expenses in the statement of profit or loss and
other comprehensive income.
Statement of financial position
Cash and cash equivalents decreased by $4,010,526 to $1,761,889 at 30 June 2017. This is driven by the consolidated
entity’s investment in its cloud based managed security services. Of this decrease, $2,309,182 represented cash outflows
from operating activities. Cash used in operating activities improved $1,456,437 (39%) on the PCP driven by the
consolidated entity’s focus in optimising working capital. The consolidated entity anticipates that optimising working capital
will be an important component of managing its cash position as the business transitions to profitability. Trade receivables
of $2,198,049 at 30 June 2017 have been substantially realised after the year end.
Based on its current commitments, the consolidated entity has sufficient funds to meet its debts as and when they fall due,
and accordingly, the financial report has been prepared on a going concern basis.
The directors determined that the use of the going concern basis of accounting is appropriate in preparing the financial
report. The assessment of going concern is based on cash flow projections. The preparation of these projections
incorporates a number of assumptions and judgements, and the directors have concluded that the range of possible
FirstWave Cloud Technology Limited Annual Report 2017
5
outcomes considered in arriving at this judgement does not give rise to a material uncertainty casting significant doubt on
the consolidated entity’s ability to continue as a going concern.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
On 26 September 2017, the consolidated entity announced the resignation of Steven O'Brien, CEO and Managing
Director, with effect from 3 October 2017.
No other matter or circumstance has arisen since 30 June 2017 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
The consolidated entity’s priorities for FY18 are to invest in product development, to enhance its customer experience and
to secure new annualised recurring revenue contracts in domestic and international markets. Domestic channel expansion
through the launch of new cloud platforms, upon which, the consolidated entity will expand its reseller and direct
distribution offerings is planned for FY2018.
In product development, the consolidated entity will continue investing in technology to enable vendors to enhance their
virtualised offering to ‘telco one touch readiness’. This will deliver a far greater level of automation and efficiency to a
significantly broader market of small and medium businesses who were previously unable to access this offering.
In business development, the consolidated entity will continue investing into international markets to convert its existing
strong pipeline of opportunities into annualised recurring revenue contracts. In addition, the consolidated entity will
continue to scale its existing capabilities for current and new clients.
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 2017
6
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Alexander Kelton
Non-Executive Chairman
Alexander has a Bachelor of Science degree in Electrical and Electronic
Engineering from the University of Western Scotland.
Alexander 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); .Megaport Limited (ASX: MP1)
Former directorships (last 3
years):
Special responsibilities:
Enice (ASX:ENC) (resigned august 2017)
Member of the Audit and Risk Committee and Member of Remuneration and
Nomination Committee
Interests in shares:
Interests in options:
1,215,625
4,200,000
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special Responsibilities:
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:
.
Steven O'Brien
Chief Executive Officer (‘CEO’) and 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
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
Former Chairman and current Member of the Audit and Risk Committee
1,449,430
1,200,000
FirstWave Cloud Technology Limited Annual Report 2017
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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:
6,591,427
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):
Special Responsibilities:
Interests in shares:
Interests in options:
1,200,000
Member of the Remuneration and Nomination Committee
19,654,847
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):
Special Responsibilities:
Interests in shares:
Interests in options:
Chairman of the Remuneration and Nomination Committee
1,634,888
1,200,000
FirstWave Cloud Technology Limited Annual Report 2017
8
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Special Responsibilities:
Interests in shares:
Interests in options:
Simon Moore
Non-Executive Director
Simon holds a Bachelor of Commerce (Hons) and a Bachelor of Law (Hons) from
the University of Queensland.
Simon has extensive board-level experience including in the enterprise cloud
computing and information technology sectors, along with a solid background
spanning private equity, strategic planning, corporate finance, financial modelling,
corporate governance and contract negotiations. Simon is the Senior Partner of
Colinton Capital Partners, an Australian middle market private equity investment
firm. From September 2005 through to December 2016, Simon was a Managing
Director and a Global Partner of The Carlyle Group. Prior to joining The Carlyle
Group in 2005, Simon was a Managing Director and Investment Committee
Member of Investcorp International, Inc., based in New York. Prior to that, Simon
worked in private equity investments and investment banking at J.P. Morgan & Co.
in New York, Hong Kong, and Melbourne
Megaport Limited (ASX: MP1); Coates Hire Limited (ASX: COA); TPI Enterprises
Limited (ASX: TPE)
Healthscope Limited (ASX:HSO) (resigned on 31 December 2015); Qube Holdings
Limited (ASX: QUB) (resigned on 1 September 2016)
Chairman of the Audit and Risk Committee
2,100,000
None
'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.
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') and of each Board committee held during the
year ended 30 June 2017, and the number of meetings attended by each director were:
Full Board
Attended
Held
Remuneration and
Nomination Committee
Attended
Held Attended
Audit and Risk Committee
Alexander Kelton - Chairman
Steven O'Brien*
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Simon Moore
Richard Beswick (alternate to
Scott Lidgett)
11
11
11
11
10
11
4
1
11
11
11
11
11
11
4
1
5
-
-
-
3
5
-
2
5
-
-
-
5
5
-
5
2
-
2
2
-
-
-
-
Held
2
-
2
2
-
-
-
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
FirstWave Cloud Technology Limited Annual Report 2017
9
*Steven O'Brien attended the Audit and Risk Committee meeting as an observer.
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; and
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.
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.
FirstWave Cloud Technology Limited Annual Report 2017
10
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 cash 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. There were no STI payments awarded during the year ended 30 June 2017.
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 2017.
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 2017, the consolidated entity did not engage any remuneration consultants.
Voting and comments made at the company's 2016 Annual General Meeting ('AGM')
At the 2016 AGM, shareholders voted to approve the adoption of the remuneration report of the company for the year
ended 30 June 2016. The company did not receive any specific feedback at the AGM regarding its remuneration
practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of KMP of the consolidated entity are set out in the following tables.
The KMP of the consolidated entity consisted of the directors of FirstWave Cloud Technology Limited and the following
persons:
Simon Ryan - Chief Technology Officer
David Kirton - Chief Financial Officer (appointed on 9 May 2017)
Murray Scott - Chief Financial Officer (ceased to be KMP on 8 May 2017)
FirstWave Cloud Technology Limited Annual Report 2017
11
Changes since the end of the reporting period:
On 26 September 2017, the consolidated entity announced the resignation of Steven O'Brien, CEO and Managing
Director, with effect from 3 October 2017
Short-term benefits
2017
Cash
salary
and fees
Cash
bonus
Non-
monetary
Post-
employme
nt benefits
Super-
annuation
Long-term
benefits
Long
Service
Leave
Share-
based
payments
Equity-
settled
options
Total
$
$
$
$
$
$
$
Non-Executive Directors:
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Simon Moore
153,750
48,000
48,000
48,000
48,000
19,333
Executive Directors:
Steven O'Brien
270,000
Other Key Management Personnel:
Simon Ryan
David Kirton*
Murray Scott**
221,724
33,333
180,000
1,070,140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
760
760
760
-
1,837
-
-
-
-
-
-
189,370
117,246
117,246
117,246
117,246
-
343,120
166,006
166,006
166,006
165,246
21,170
30,847
-
227,096
527,943
21,064
3,167
-
59,195
4,145
-
-
4,145
67,369
-
-
952,819
314,302
36,500
180,000
2,086,299
*Represents remuneration from the date of appointment as KMP for David Kirton on 9 May 2017.
**Represents remuneration up to 8 May 2017 for Murray Scott.
Short-term benefits
2016
Cash
salary
and fees
Cash
bonus
Non-
monetary
Post-
employme
nt benefits
Super-
annuation
Long-term
benefits
Long
Service
Leave
Share-
based
payments
Equity-
settled
options
Total
$
$
$
$
$
$
$
Non-Executive Directors:
Alexander Kelton*
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
120,000
23,348
41,932
35,674
23,250
-
-
-
-
-
Executive Directors:
Steven O'Brien
270,000
60,000
Other Key Management Personnel:
Simon Ryan
Murray Scott**
226,724
236,000
976,928
5,000
30,000
95,000
-
-
-
-
-
-
-
-
-
-
-
2,971
-
-
1,609
-
-
-
-
-
-
23,202
15,954
15,954
15,954
15,954
143,202
39,302
60,857
51,628
39,204
28,467
360,076
21,539
-
26,119
39,317
-
39,317
8,122
-
123,607
300,702
266,000
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 2017
12
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
Simon Moore
Executive Directors:
Steven O'Brien
Other KMP:
Simon Ryan
David Kirton
Murray Scott
Fixed
remuneration
2017
At risk-STI
At risk - LTI
2016
2017
2016
2017
2016
45%
29%
29%
29%
29%
100%
57%
79%
100%
100%
84%
59%
74%
69%
59%
-
75%
95%
-
89%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17%
2%
-
11%
55%
71%
71%
71%
71%
-
43%
21%
-
-
16%
41%
26%
31%
41%
-
8%
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 a minimum 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 2017.
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
Expiry date
Issued to:
(Number of options)*
Exercise price
Fair value per option
at 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
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
11/05/2022
Alexander Kelton: (500,000)
11/05/2023
Alexander Kelton: (500,000)
11/05/2024
Alexander Kelton: (2,000,000)
11/05/2023
Alexander Kelton: (200,000)
11/05/2024
Alexander Kelton: (200,000)
11/05/2025
Alexander Kelton: (800,000)
11/05/2022
David Garnier: (1,200,000)
11/05/2022
Edward Keating: (1,200,000)
11/05/2022
Scott Lidgett: (1,200,000)
11/05/2022
Paul MacRae: (1,200,000)
11/05/2022
Steven O'Brien: (960,000)
11/05/2023
Steven O'Brien: (960,000)
11/05/2023
Steven O'Brien: (1,440,000)
11/05/2024
Steven O'Brien: (1,440,000)
19/05/2020
Simon Ryan: (150,000)
19/05/2021
Simon Ryan: (150,000)
19/05/2021
Simon Ryan: (450,000)
19/05/2022
Simon Ryan: (750,000)
$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
$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
* The share option plan is subject to participants meeting service condition (continuous employment with the company) at the vesting
date. There are no performance conditions.
FirstWave Cloud Technology Limited Annual Report 2017
13
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
2017
Number of options
granted during the
year
2016
Number of options
vested during the
year
2017
Number of
options vested
during the year
2016
Name
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Steven O'Brien
Simon Ryan
-
-
-
-
-
-
-
4,200,000
1,200,000
1,200,000
1,200,000
1,200,000
4,800,000
1,500,000
500,000
1,200,000
1,200,000
1,200,000
1,200,000
960,000
150,000
-
-
-
-
-
-
-
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 Moore*
Simon Ryan
Murray Scott
Richard Beswick
(alternate to Scott
Lidgett)*
Received as part
of remuneration
-
-
-
-
-
-
-
-
Balance at the
start of the year
1,015,625
1,449,430
6,638,724
19,654,847
1,634,888
2,100,000
4,615,000
1,153,745
9,725,171
Additions
100,000
-
-
-
-
-
-
-
Disposals/
other
-
-
(47,297)
-
-
-
-
-
Balance at the
end of the year
1,115,625
1,449,430
6,591,427
19,654,847
1,634,888
2,100,000
4,615,000
1,153,745
9,725,171
47,987,430
TOTAL
* Balance at the start of the year represents shares held on commencement as KMP.
-
100,000
(47,297)
48,040,133
FirstWave Cloud Technology Limited Annual Report 2017
14
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:
Granted*
Exercised
Expired/
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
4,200,000
1,200,000
1,200,000
1,200,000
1,200,000
4,800,000
1,500,000
-
-
-
-
-
-
-
-
forfeited/ other
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
TOTAL
15,300,000
* The above excludes 1,000,000 options to be issued to Simon Moore and David Kirton each, to be granted on approval by the
shareholders at the Annual General Meeting to be held in November 2017.
15,300,000
Options over
ordinary shares
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Steven O’Brien
Simon Ryan*
TOTAL
Vested and
exercisable
500,000
1,200,000
1,200,000
1,200,000
1,200,000
960,000
150,000
6,410,000
Vested and
unexercisable
-
-
-
-
-
-
-
Balance at the end
of the year
500,000
1,200,000
1,200,000
1,200,000
1,200,000
960,000
150,000
6,410,000
Loans to key management personnel and their related parties
During the year ended 30 June 2017, the consolidated entity provided an unsecured loan to Simon Ryan for $221,520
(2016: $221,520). Interest is charged on outstanding balance at 7.5% per annum. During the year ended 30 June 2017,
an interest of $16,630 is receivable from Simon Ryan (2016: $2,285) in respect of this loan.
This concludes the remuneration report, which has been audited.
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
FirstWave Cloud Technology Limited Annual Report 2017
15
Number under option
750,000
230,000
750,000
2,250,000
3,750,000
6,260,000
1,460,000
1,640,000
2,000,000
200,000
800,000
1,440,000
21,530,000
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
There were no ordinary shares of FirstWave Cloud Technology Limited issued on the exercise of options during the year
ended 30 June 2017 and up to the date of this report.
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.
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 27 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 27 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.
FirstWave Cloud Technology Limited Annual Report 2017
16
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
28 September 2017
FirstWave Cloud Technology Limited Annual Report 2017
17
4. Auditor’s Independence Declaration
FirstWave Cloud Technology Limited Annual Report 2017
18
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 28 September 2017.
The directors have the power to amend and reissue the financial statements.
FirstWave Cloud Technology Limited Annual Report 2017
19
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
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
Consolidated
2017
$
6,435,660
(2,422,997)
4,012,663
596,620
(2,115,760)
(3,438,515)
(4,601,532)
-
(32,573)
(10,188,380)
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)
(5,579,097)
(5,157,073)
512,554
502,262
(5,066,543)
(4,654,811)
-
-
(5,066,543)
(4,654,811)
Basic earnings per share
Diluted earnings per share
36
36
Cents
(2.82)
(2.82)
Cents
(3.81)
(3.81)
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 2017
20
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
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
Employee benefits
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
.
Note
Consolidated
2017
$
Consolidated
2016
$
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
1,761,889
3,207,903
1,254,979
6,224,771
713,891
2,523,321
1,124,130
1,323,551
5,684,893
11,909,664
2,844,001
200,237
530,578
1,250,690
4,825,506
87,139
49,399
152,649
1,908,398
2,197,585
7,023,091
4,886,573
15,773,846
1,621,813
(12,509,086)
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)
4,886,573
8,729,214
The above statement of financial position should be read in conjunction with the accompanying notes
.
FirstWave Cloud Technology Limited Annual Report 2017
21
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Issued capital
$
Reserves
$
Retained earnings
$
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 22)
Shares to affect the deemed
acquisition of Crestal
Petroleum Limited (note 22)
Share-based payment
expense
-
-
-
9,838,450
1,499,135
-
-
-
-
-
-
159,945
Total equity
$
1,886,495
(4,654,811)
(2,787,732)
(4,654,811)
-
-
(4,654,811)
(4,654,811)
-
-
-
9,838,450
1,499,135
159,945
Balance at 30 June 2016
15,773,846
397,911
(7,442,543)
8,729,214
Consolidated
Issued capital
$
Reserves
$
Accumulated losses
$
Balance at 1 July 2016
15,773,846
397,911
Total equity
$
8,729,214
(5,066,543)
(7,442,543)
(5,066,543)
-
-
(5,066,543)
(5,066,543)
-
-
-
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:
Share-based payments (note
37)
-
-
-
-
1,223,902
-
1,223,902
Balance at 30 June 2017
15,773,846
1,621,813
(12,509,086)
4,886,573
The above statement of changes in equity should be read in conjunction with the accompanying notes
FirstWave Cloud Technology Limited Annual Report 2017
22
Statement of cash flows
For the year ended 30 June 2017
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
Note
Consolidated
2017
$
Consolidated
2016
$
8,670,530
(11,543,759)
104,271
492,349
(32,573)
-
5,494,331
(9,375,418)
17,066
15,883
(126,481)
209,000
Net cash used in operating activities
34
(2,309,182)
(3,765,619)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for security deposits
Net of cash acquired on reverse acquisition
Proceeds from release of security deposits
(240,858)
(1,214,073)
-
-
46,310
(545,168)
(866,897)
(133,776)
34,312
-
Net cash used in investing activities
(1,408,621)
(1,511,529)
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
-
-
-
(292,723)
11,048,804
(579,000)
248,215
(57,711)
(292,723)
10,660,308
(4,010,526)
5,772,415
5,383,160
389,255
8
1,761,889
5,772,415
The above statement of cash flows should be read in conjunction with the accompanying notes
FirstWave Cloud Technology Limited Annual Report 2017
23
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 or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended 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 or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Going concern
Based on its current commitments, the consolidated entity has sufficient funds to meet its debts as and when they fall due,
and accordingly, the financial report has been prepared on a going concern basis.
The directors determined that the use of the going concern basis of accounting is appropriate in preparing the financial
report. The assessment of going concern is based on cash flow projections. The preparation of these projections
incorporate a number of assumptions and judgements, and the directors have concluded that the range of possible
outcomes considered in arriving at this judgement does not give rise to a material uncertainty casting significant doubt on
the consolidated entity’s ability to continue as a going concern.
Basis of preparation
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 32.
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 2017 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
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
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.
FirstWave Cloud Technology Limited Annual Report 2017
24
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
Recognition of licensing and support revenue, commences upon provisioning of the contracted service. Provisioning
entails the setting up of the customer on the entity's infrastructure, and the rendering of prescribed professional services to
the customer, to enable the provision of the contracted service. As licensing is subscription based, license revenue and
the related support service revenue is recognised over the term of the contract, commencing on the date of service
activation.
Professional services revenue
Fully managed services are recognised on a monthly basis as soon as a service is provisioned, in accordance with
customer contracts. 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
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.
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Prepayments
Prepayments are largely made up of back to back cost of licenses procured from upstream security vendors/channel
partners. These prepayments are charged to profit and loss over a term that is between 12 and 48 months, co-terming
with related license revenue recognised per revenue recognition policy stated above.
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.
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
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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
3 years
5 years
3-5 years
2-3 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
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.
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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 5 to 7 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 5 to 7 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.
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.
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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.
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 high quality 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.
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.
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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.
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.
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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 2017.
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
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 and the adoption
of this standard is not expected to have a material impact on 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 and is currently undertaking a comprehensive
review of the implementation impacts of AASB 15. A determination as to the impact of the accounting standard has not yet
been made as at the date of this report.
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 at 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
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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. Information on the undiscounted amount of the consolidated entities’ operating lease
commitments under AASB 117, the current leasing standard, is disclosed in Note 29. The consolidated entity is
considering the available options for transition. To date, work has focused on the identification of the provisions of the
standard which will most impact the consolidated entity. In the next financial year, work on the detailed review of contracts
and financial reporting impacts will commence.
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
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
FirstWave Cloud Technology Limited Annual Report 2017
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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 include an amount of $1,413,140 relating to carry forward tax losses of the consolidated entity for the
years 2016 and 2017. The consolidated entity has incurred these losses over the last two years following a reverse
acquisition and listing. These losses include one-off listing costs in FY 2016 that will not recur, and ongoing costs
representing investment in platform capacity, sales and marketing and service delivery and engineering flowing through
profit and loss, consistent with business strategy to expand the consolidated entity’s cloud content security ecosystem into
public cloud providers, and international expansion. The consolidated entity has concluded that it is probable these
deferred tax assets will be recoverable against estimated future taxable profits based on business plans approved by the
Board of Directors for FY2018.
The decision to recognise these deferred tax assets considered that existing legislation enables tax losses to be carried
forward indefinitely with no expiry date, and the following:
The consolidated entity’s history of generating taxable profits up until FY 2016, when the consolidated entity
made tax losses due to a listing event causing one-off losses.
Delays in market deployment of distribution channel service offerings, causing costs relating to capacity build in
anticipation of planned sales to flow into profit and loss, with corresponding 2 to 3 quarter delay in expected
sales, resulting in tax losses in FY 2017 and the first 3 quarters of FY2018, before recovering to taxable income
in the 3rd quarter of FY2018.
Market deployment of new service offerings in Q2 FY2018, including a new public cloud deployment increasing
the consolidated entity's market penetration.
The private platform capacity of the consolidated entity’s primary in market channel partner, and their significant
market penetration.
New international opportunities, such as a recent Memorandum of Understanding with an international
telecommunications service provider and a number of international market opportunities, that have progressed
beyond technical deep-dive with the expectation that one of these will commence revenue generation in Q4
FY2018.
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 2017 there was one external customer (2016: one customer) where revenue exceeded
10% of the consolidated revenue. Total revenue from the customer for the year ended 30 June 2017 amounted to
$6,134,627 (2016: $6,076,323).
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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
2017
$
5,629,291
806,369
Consolidated
2016
$
4,652,183
1,749,535
6,435,660
6,401,718
Consolidated
2017
$
492,349
104,271
Consolidated
2016
$
215,883
17,066
Other income
596,620
232,949
*There are no unfulfilled conditions or other contingencies attached to the grant. The consolidated entity did not benefit directly from any
other Government assistance.
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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
2017
$
Consolidated
2016
$
2,422,997
1,702,334
108,423
2,059
76,644
7,521
194,647
762,710
16,054
778,764
7,828
1,070
77,425
7,479
93,802
573,502
12,535
586,037
Total depreciation and amortisation
973,411
679,839
Listing expenses include the following:
Share-based payment listing expense
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
32,573
106,568
(91,568)
(116,278)
306,121
170,055
7,970,052
426,281
1,223,902
9,620,235
5,094,541
332,027
159,945
5,586,513
FirstWave Cloud Technology Limited Annual Report 2017
35
Note 7. Income tax benefit
Income tax benefit
Current tax
Deferred tax - origination and reversal of
temporary differences
Consolidated
2017
$
Consolidated
2016
$
-
(512,554)
136,990
(639,252)
Aggregate income tax benefit
(512,554)
(502,262)
Deferred tax included in income tax benefit
comprises:
Increase in deferred tax assets (note 13)
Decrease in deferred tax liabilities
Deferred tax - origination and reversal of
temporary differences
Numerical reconciliation of income tax benefit
and tax at the statutory rate
Profit/(loss) before income tax benefit/(expense)
Tax at the statutory tax rate of 27.5%
(2016:30%)
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
Development costs
Deferred income
Sundry items
Current year tax losses not recognised
Current year temporary differences not
recognised
Income tax benefit
Note 8. Current assets - cash and cash equivalents
(512,554)
-
(512,554)
(5,579,097)
(1,534,252)
209,626
18,650
-
498,063
(299,457)
(131,067)
-
(1,238,437)
369,353
356,530
(512,554)
(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
(502,262)
Cash on hand
Cash at bank
Cash at deposit
Consolidated
2017
$
-
761,889
1,000,000
Consolidated
2016
$
1,000
5,771,415
-
Total cash and cash equivalents
1,761,889
5,772,415
FirstWave Cloud Technology Limited Annual Report 2017
36
Note 9. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Accrued revenue
Other receivables
Receivable from key management personnel
Consolidated
2017
$
2,198,049
(22,206)
2,175,843
564,683
245,857
221,520
Consolidated
2016
$
1,545,268
-
1,545,268
855,881
36,130
221,520
3,207,903
2,658,799
Impairment of receivables
The consolidated entity has recognised a loss of $22,206 (2016: $nil) in profit or loss in respect of impairment of
receivables for the year ended 30 June 2017.
The ageing of the past due but not impaired receivables are as follows:
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Total
Consolidated
2017
$
5,082
7,623
9,501
22,206
Movements in the provision for impairment of receivables are as follows:
Additional provisions recognised
Consolidated
2017
$
22,206
Consolidated
2016
$
-
-
-
-
Consolidated
2016
$
-
Customers with balances past due but without provision for impairment of receivables amount to $1,280 as at 30 June
2017 ($22,699 as at 30 June 2016).
Over 6 months overdue
Note 10. Current assets - other
Prepayments
Security deposits
Other deposits
Total
Consolidated
2017
$
1,280
Consolidated
2017
$
1,120,753
133,776
450
Consolidated
2016
$
22,699
Consolidated
2016
$
579,488
180,086
450
1,254,979
760,024
FirstWave Cloud Technology Limited Annual Report 2017
37
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
2017
$
696,857
(116,251)
580,606
16,592
(12,217)
4,375
747,033
(627,355)
119,678
236,306
(227,074)
9,232
713,891
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
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 2015
Additions
Write off of assets
Depreciation expense
Balance at 30 June 2016
Additions
Write off of assets
Depreciation expense
Leasehold
improvements
$
Furniture and
fittings $
Computer
equipment
$
Computer
platform
$
13,104
491,839
(13,104)
(7,828)
484,011
205,018
-
(108,423)
5,828
573
-
(1,070)
5,331
1,103
-
(2,059)
97,607
185,096
-
(77,425)
205,278
33,361
(42,317)
(76,644)
2,547
20,309
-
(7,479)
15,377
1,376
-
(7,521)
Total
$
119,086
697,817
(13,104)
(93,802)
709,997
240,858
(42,317)
(194,647)
Balance at 30 June 2017
580,606
4,375
119,678
9,232
713,891
Property, plant and equipment secured under finance leases
Refer to note 29 for further information on property, plant and equipment secured under finance leases.
FirstWave Cloud Technology Limited Annual Report 2017
38
Note 12. Non-current assets - intangibles
Capitalised development costs - at cost
Less: Accumulated amortisation
Patents - at cost
Less: Accumulated amortisation
Consolidated
2017
$
8,634,461
(6,167,441)
2,467,020
97,425
(41,124)
56,301
Consolidated
2016
$
7,447,525
(5,404,731)
2,042,794
70,288
(25,070)
45,218
Total
2,523,321
2,088,012
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 2015
Additions
Amortisation expense
Capitalised development costs
1,757,021
859,275
(573,502)
Balance at 30 June 2016
Additions
Amortisation expense
Balance at 30 June 2017
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:
Opening balance
Credited to profit or loss (note 7)
Closing balance
Patents
50,131
7,622
(12,535)
45,218
27,137
(16,054)
Total
1,807,152
866,897
(586,037)
2,088,012
1,214,073
(778,764)
2,042,794
1,186,936
(762,710)
2,467,020
56,301
2,523,321
Consolidated
2017
$
Consolidated
2016
$
1,415,311
249,788
199,455
16,572
(756,996)
1,124,130
611,576
512,554
1,124,130
834,995
252,486
166,755
(16,256)
(626,404)
611,576
-
611,576
611,576
FirstWave Cloud Technology Limited Annual Report 2017
39
Note 14. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Total
Refer to note 25 for further information on financial instruments.
Note 15. Current liabilities - borrowings
Insurance liability
Lease liability
Total
Consolidated
2017
$
1,556,934
1,287,067
Consolidated
2016
$
593,984
1,306,766
2,844,001
1,900,750
Consolidated
2017
$
-
200,237
Consolidated
2016
$
98,710
194,688
200,237
293,398
Refer to note 18 for further information on assets pledged as security and financing arrangements.
Refer to note 25 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
2017
$
377,139
153,439
Consolidated
2016
$
201,933
168,644
530,578
370,577
Consolidated
2017
$
211,047
1,039,643
Consolidated
2016
$
183,214
380,670
Total
1,250,690
563,884
FirstWave Cloud Technology Limited Annual Report 2017
40
Note 18. Non-current liabilities – borrowings
Lease liability
Consolidated
2017
$
87,139
Consolidated
2016
$
286,701
Refer to note 25 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Lease liability
Consolidated
2017
$
287,376
Consolidated
2016
$
481,389
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
2017
$
Consolidated
2016
$
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
115,942
50,000
465,942
171,435
115,942
-
287,377
128,565
-
50,000
178,565
300,000
205,525
30,000
535,525
275,864
205,525
13,211
494,600
24,136
-
16,789
40,925
FirstWave Cloud Technology Limited Annual Report 2017
41
Note 19. Non-current liabilities - employee benefits
Long service leave
Note 20. Non-current liabilities - provisions
Lease make good
Consolidated
2017
$
49,399
Consolidated
2017
$
152,649
Consolidated
2016
$
60,060
Consolidated
2016
$
152,649
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
Carrying amount at the end of the year
Note 21. Non-current liabilities - other
Deferred research and development income
Income received in advance
Lease make good
Consolidated
2017
$
152,649
152,649
Consolidated
2017
$
453,804
1,454,594
Consolidated
2016
$
372,636
301,446
Total
1,908,398
674,082
FirstWave Cloud Technology Limited Annual Report 2017
42
Note 22. 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
Consolidated
2017
Shares
179,786,485
2016
Shares
179,786,485
2017
$
15,773,846
2016
$
15,773,846
Details
Date
Shares
$
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
1 July 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
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
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
Balance
30 June 2016
179,786,485
15,773,846
30 June 2017
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.
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
FirstWave Cloud Technology Limited Annual Report 2017
43
actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in
order to maximise synergies.
The capital risk management policy remains unchanged from the 30 June 2016 Annual Report.
Note 23. Equity - reserves
Share-based payments reserve
Consolidated
2017
$
1,621,813
Consolidated
2016
$
397,911
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 2015
Share-based payment expense
Balance at 30 June 2016
Share-based payment expense
Balance at 30 June 2017
Note 24. Equity - dividends
Share-based
payments
$
237,966
159,945
397,911
1,223,902
1,621,813
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 25. 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 risk.
Interest rate risk
FirstWave Cloud Technology Limited Annual Report 2017
44
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 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 2017 owed the
consolidated entity $2,139,367 (97% of trade receivables) (2016: $1,498,515 (97% of trade receivables)). This balance
was within its terms of trade and no impairment was made as at 30 June 2017. 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
Total
Consolidated
2017
$
128,565
50,000
Consolidated
2016
$
24,136
16,789
178,565
40,925
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.
FirstWave Cloud Technology Limited Annual Report 2017
45
Consolidated - 2017
1 year or less Between 1 and
2 years
Between 2 and
5 years
Over 5 years
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
$
1,556,934
212,503
1,769,437
$
-
101,179
101,179
$
-
-
$
-
-
Consolidated - 2016
1 year or less Between 1 and
2 years
Between 2 and
5 years
Over 5 years
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing - fixed rate
Lease liability
Insurance liability
Total non-derivatives
$
593,984
221,193
98,710
913,887
$
-
301,567
-
301,567
$
-
-
-
$
-
-
-
Remaining
contractual
maturities
$
1,556,934
313,682
1,870,616
Remaining
contractual
maturities
$
593,984
522,760
98,710
1,215,454
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 26. Fair value measurement
The carrying amounts of trade and other receivables and trade and other payable 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 27. 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:
Consolidated
2017
$
Consolidated
2016
$
116,483
102,000
-
-
-
-
129,500
3,500
22,500
155,500
257,500
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
Advisory services
Total
Total – Grant Thornton
116,483
FirstWave Cloud Technology Limited Annual Report 2017
46
Note 28. Contingent liabilities
The consolidated entity has given bank guarantees as at 30 June 2017 of $133,776 (2016: $180,086) to various landlords.
Note 29. 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
2017
$
Consolidated
2016
$
-
304,500
292,497
853,116
1,145,613
244,798
979,192
1,223,990
212,503
101,179
313,682
(26,306)
287,376
200,237
87,139
287,376
221,193
301,567
522,760
(41,371)
481,389
194,688
286,701
481,389
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
$109,304 (30 June 2016: $220,952) 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 2017
47
Note 30. 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
2017
$
1,070,140
59,195
4,145
952,819
Consolidated
2016
$
1,071,928
26,119
39,317
123,607
Total
2,086,299
1,260,971
Note 31. Related party transactions
Parent entity
FirstWave Cloud Technology Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 33.
Key management personnel
Disclosures relating to key management personnel are set out in note 30 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
2017
$
Consolidated
2016
$
16,630
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
2017
$
Consolidated
2016
$
221,520
221,520
*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 2017
48
Note 32. 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
Accumulated losses
Total equity
Parent
2017
$
(525,010)
(525,010)
Parent
2017
$
75,981
2016
$
(2,427,930)
(2,427,930)
2016
$
207,414
6,114,999
6,640,009
-
-
9,067,939
(2,952,940)
6,114,999
-
-
9,067,939
(2,427,930)
6,640,009
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 2017 and 30 June 2016.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017 and 30 June 2016.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 and 30 June 2016.
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.
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 2017
49
Note 33. 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
2017
%
100%
2016
%
100%
Note 34. Reconciliation of loss after income tax to net cash used in operating activities
Consolidated
2017
$
(5,066,543)
Consolidated
2016
$
(4,654,811)
Profit/(loss) after income tax benefit/(expense) for the year
Adjustments for:
Depreciation and amortisation
Write off of property, plant and equipment
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
Decrease/(increase) in accrued revenue
Increase in prepayments
Increase in trade and other payables
Decrease in deferred tax liabilities
Increase in employee benefits
Increase/(decrease) in other operating liabilities
Net cash used in operating activities
Note 35. Non-cash investing and financing activities
973,411
42,317
1,223,902
-
(840,302)
-
(512,554)
291,198
(1,434,324)
943,251
-
149,340
1,921,122
(2,309,182)
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
2017
$
-
-
-
-
-
FirstWave Cloud Technology Limited Annual Report 2017
50
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)
(3,765,619)
Consolidated
2016
$
152,649
647,126
221,520
1,499,135
2,520,430
Note 36. Earnings per share
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
Weighted average number of ordinary shares used in
calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
2017
$
(5,066,543)
Number
179,786,485
Consolidated
2016
$
(4,654,811)
Number
122,125,559
179,786,485
122,125,559
Cents
(2.82)
(2.82)
Cents
(3.81)
(3.81)
21,530,000 options have been excluded in the weighted average number of shares used to calculate diluted earnings per
share as they were anti-dilutive (2016: 22,070,000).
Note 37. 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 $1,223,902 (2016: $159,945). The share option plan is subject to
participants meeting service condition (continuous employment with the company) at the vesting date. The options are
issued for nil consideration. There are no performance conditions.
Set out below are summaries of options granted under the plan:
2017
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 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
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
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
Granted
Exercised
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Expired/
forfeited/
other
(50,000)
(40,000)
(50,000)
(150,000)
(250,000)
-
-
-
-
-
-
-
(540,000)
Balance at
the end of
the year
750,000
230,000
750,000
2,250,000
3,750,000
6,260,000
1,460,000
1,640,000
2,000,000
200,000
800,000
1,440,000
21,530,000
Weighted average exercise price
$0.32
$0.00
$0.00
$0.36 $0.32
Outstanding options vested and exercisable as at 30 June 2017: 7,240,000 (2016: Nil)
FirstWave Cloud Technology Limited Annual Report 2017
51
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
*Exercise price and balance at the start of the year has been adjusted for share-split.
$0.06 $0.32 $0.06 $0.00 $0.32
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 $0.40 (2016: $0.26).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 5.34 years
(2016: 6.29 years).
Note 38. Events after the reporting period
On 26 September 2017, the consolidated entity announced the resignation of Steven O'Brien, CEO and Managing
Director, with effect from 3 October 2017.
No other matter or circumstance has arisen since 30 June 2017 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.
FirstWave Cloud Technology Limited Annual Report 2017
52
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 2017 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
28 September 2017
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7. Independent Auditor’s Report
FirstWave Cloud Technology Limited Annual Report 2017
54
FirstWave Cloud Technology Limited Annual Report 2017
55
FirstWave Cloud Technology Limited Annual Report 2017
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FirstWave Cloud Technology Limited Annual Report 2017
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8. Corporate Directory
Directors
Alexander Kelton - Non-Executive Chairman
Sam Saba – Non-Executive Director
David Garnier - Non-Executive Director
Edward Keating - Non-Executive Director
Scott Lidgett - Non-Executive Director
Paul MacRae - Non-Executive Director
Simon Moore - Non-Executive Director
Company Secretary
Justin Clyne
Registered Office and Principal Place of Business
Level 10, 132 Arthur Street
NORTH SYDNEY NSW 2060
Telephone: +61 2 9409 7000
Share Registry
Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide, SA 5000
Australia
Tel: 1300 787 272
Auditor
Grant Thornton
Level 17, 383 Kent Street
Sydney NSW 2000
Stock Exchange Listing
FirstWave Cloud Technology Limited shares are listed on the Australian Securities Exchange (ASX code: FCT)
Website
http://www.FirstWave.com.au
Corporate Governance Statement
The Corporate governance statement which will be approved at the same time as the Annual Report can be found at
https://www.FirstWavecloud.com/corporate-governance.html
FirstWave Cloud Technology Limited Annual Report 2017
58
9. Shareholder Information
The following information is provided pursuant to Listing Rule 4.10 and is current as at as at 4 October 2017.
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
1,781
161
96
358
232
2,628
Total Shares
87,440
439,458
811,516
14,720,667
163,727,404
179,786,485
% of Ordinary
Shares
0.05
0.24
0.45
8.19
91.07
100.00
Unmarketable Parcels
There are 1,824 shareholders with an unmarketable parcel of shares being a holding of less than 1,852 shares each for
a combined total of 146,775 shares. This is based on a closing price of $0.27 per share as at 3 October 2017 and
represents 0.081% of the shares on issue.
Substantial Shareholders
The Names of substantial shareholders and the number of shares to which each substantial shareholder and their
associates have a relevant interest, as disclosed in substantial shareholder notices given to the Company is as follows:
Name
Scott Lidgett & Katherine Lidgett
Greg Maren & Geraldine Maren
Richard Ivan Beswick
No. of Ordinary Shares
19,654,847
19,412,340
9,682,205
% of Ordinary Shares
10.93
10.79
5.38
Top 20 Ordinary Shareholders
Name
MR GREG MAREN + MRS GERALDINE MAREN
MR SCOTT LIDGETT + MRS KATHERINE
LIDGETT
MR EDWARD KEATING + MRS LINDA KEATING
MR RICHARD BESWICK
CS THIRD NOMINEES PTY LIMITED
MR SIMON RYAN
WILLOW WATTLE PTY LTD
WILLROTH PTY LTD
MR SCOTT LIDGETT
SCOTT MCNEILAGE PTY LIMITED
IIWITI PTY LTD
MR GREG MAREN + MRS GERALDINE MAREN
QUINVILLE PTY LTD
MR MICHAEL GORDON OXLEY + MRS KATE
NORTON OXLEY
QUOTIDIAN NO 2 PTY LTD
WINTEN DEVELOPMENTS PTY LTD
ROYSTON AND HARRISON PTY LTD
MR MARTIN WILLIAM BARNES + MS ALEXIS ANN
GEORGE
No. of Ordinary Shares
16,365,598
% of Ordinary Shares
9.10
16,084,036
6,438,047
5,761,382
4,905,000
4,615,000
3,963,789
3,640,284
3,570,811
2,293,684
2,135,000
2,036,034
1,984,998
1,878,535
1,810,487
1,700,000
1,648,213
1,582,036
8.95
3.58
3.20
2.73
2.57
2.20
2.02
1.99
1.28
1.19
1.13
1.10
1.04
1.01
0.95
0.92
0.88
FirstWave Cloud Technology Limited Annual Report 2017
59
MR JAMES BROOMHEAD
CESSNOCK MOTORS PTY LTD
Top 20 Shareholders
Balance Outside Top 20
Total Shareholders Balance
1,560,000
1,502,460
85,475,394
94,311,091
179,786,485
0.87
0.84
47.54
52.46
100.00
There are no shares subject to voluntary escrow but 52,262,938 shares subject to ASX escrow.
Unlisted Options
The Company has a total of 20,231,328 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 2017
60
FIRSTWAVE CLOUD TECHNOLOGY
ANNUAL REPORT