“
In an increasingly
vulnerable digital world,
we develop technology
that enables everyone
to be cyber-secure.
“
A N N U A L
R E P O R T
2 0 1 8
FirstWave Cloud Technology Limited
ABN 35 144 733 595
All businesses should have access to
enterprise-quality cybersecurity.
“
“
DAVID KIRTON
CEO, FirstWave
This Annual Report is a summary of FirstWave Cloud Technology Limited’s operations, activities and financial performance and
position as at 30 June 2018. In this Annual Report, references to ‘FirstWave’, ‘the company’, ‘we’, ‘us’ and ‘our’ refer to FirstWave Cloud
Technology Limited (ABN 35 144 733 595), unless otherwise stated. References in this Annual Report to a ‘year’ are to the financial year
ended 30 June 2018, unless otherwise stated. All dollar figures are expressed in Australian dollars (AUD) unless otherwise stated.
CONTENTS
01
CHAIRMAN’S LETTER
02
HIGHLIGHTS
03
FROM THE CEO’S DESK
04
BOARD UPDATE TO SHAREHOLDERS
05
DIRECTORS’ REPORT & REMUNERATION REPORT
06
FINANCIAL REPORT
- AUDITOR’S INDEPENDENCE DECLARATION
- FINANCIAL STATEMENTS
- DIRECTORS’ DECLARATION
- INDEPENDENT AUDITOR’S REPORT
07
SHAREHOLDER INFORMATION
08
CORPORATE DIRECTORY
24681128293069707477
Dear Shareholders
2018 has been an important year for FirstWave
Cloud Technology as we reflect on the
completion of the “Enable” phase of our three
phase strategy “Enable”, “Expand” and “Scale”.
This strategy has seen the launch of a global
cybersecurity platform, establish a strategic
presence across global markets and sign
software distribution and reseller agreements
with some of the most prominent companies in
the industry.
Our purpose
With the explosion in popularity of cloud-based
computing and Software as a Service (SAAS),
the risk of malicious cybercrime has increased
exponentially. Reports continuously confirm
cybercrime is one of the primary threats to all
businesses across the globe today. What is
of significant concern is the rapid upswing of
attacks directed at small to medium businesses
(SMBs). These businesses lack preparation and
the protection required against enterprise style
attacks, with nearly 43% of malicious activity
now directed towards SMBs.
FirstWave exists due to a shared belief that all
companies should have access to enterprise-
quality cybersecurity – regardless of the size
of their operation.
All of this presents an addressable market
opportunity for FirstWave of $14 billion by 2021,
which is aligned with the company’s three year
strategy and our aspirations to grow revenue
to 1% of the global cloud cybersecurity market
(~$138 million), as recently re-affirmed by our
Chief Executive Officer, David Kirton.
01
CHAIRMAN’S
LETTER
2
FirstWave Cloud Technology Limited
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Chairman’s Letter
FirstWave has an
addressable market
opportunity of
“
$14 billion by 2021.“
During the year, long-term Board director, Edward
Keating retired. On behalf of the Board, I thank Edward
for his outstanding contribution and the role he has
played with FirstWave moving from its inception, to
becoming a publicly listed company and the evolution
to the company it is today. We wish Edward well in
retirement.
On behalf of the Board, I would like to thank all
shareholders for their continued support as well as the
members of the FirstWave team for their dedication and
efforts in building a performance culture that is driving
innovation and excellence.
Yours faithfully
ALEXANDER KELTON
Non-Executive Chairman
Achievements
We recently signed a software original equipment
manufacturer development and license agreement
with Cisco Systems, Inc. (Cisco) and optimised sales
and logistics operations through agreements with
Ingram Micro and Mind Flow Sdn Bhd in Asia. These
significant accomplishments have enhanced our ability
to offer scalable, rapid and affordable access to the most
technologically advanced, comprehensive and adaptive
cloud-based cybersecurity both domestically and
internationally.
Continued investment in our orchestration platform means
we now provide a multi-channel and multi-cloud approach
to deliver cloud email, web and next generation firewall
services globally. This enables service providers and
partners to bundle an enterprise grade cybersecurity
offering across multiple threat vectors to their end
customers. It also means that enterprise grade email
security is now available for all customers, big or small.
Outlook
In August 2018, we announced the appointment of
David Kirton as Chief Executive Officer. Demonstrating
his commitment to FirstWave, David had been fulfilling
the role on an interim basis since 3 October 2017 and,
after a rigorous selection process, the Board confirmed
that David was the standout candidate to formally lead
the company as CEO.
With direction provided by David, the progress of
FirstWave’s “Enable”, “Expand” and “Scale” phased
approach has yielded exciting results. The “Enable” phase
has been successfully completed and the “Expand” phase
is actively facilitating the international sales pipeline with
initial orders already received.
With $10.1 million of capital raised during the year to
simultaneously expand the scope of global opportunities,
support existing customers and build partnerships
with existing Global Security Vendors, the international
markets make for a promising prospect. Meanwhile, we
anticipate that domestic agreements with local software
distributors and cloud service providers will contribute to
drive revenue growth domestically.
The Board has approved a three year business
plan proposed by management that requires further
investment over the next 24 months of $15 million.
This investment will enable FirstWave to fully realise
the market and economic potential that our expanded
distribution capability provides. It is our intention to
pursue investment from the combination of our existing
shareholder base and new strategic investors.
3
Annual Report 2018 “
enterprise-grade security.“
With security expertise in large organisations
generally inadequate, and often non-existent
in small to medium enterprise, the growth
in cyber attacks has driven demand for
SIMON RYAN
CTO, FirstWave
02
HIGHLIGHTS
4
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY FY 2018
HIGHLIGHTS
FirstWave is poised to drive
international expansion with
new and exciting relationships
and the strongest sales
pipeline ever.
2 MILLION+
mailboxes filtered
21%
REVENUE
GROWTH
Licensing and support
revenue up by
33%
2 NEW OPERATING
ENTITIES OPENED
IN SINGAPORE AND
NORTH AMERICA
Highlights
Distribution agreements with
domestic and international
service providers (Asia)
Signed software OEM
agreement with Cisco
Establishment of a global
24/7 delivery centre in India
The launch and first orders
on the global public cloud
email platform
Annual Report 2018
55
Annual Report 2018 Dear Shareholders
From my initial appointment as interim Chief
Executive Officer of FirstWave in October 2017
through to my recent appointment as CEO in
August 2018, I have witnessed firsthand the
creation and implementation of the “Enable”
phase of the company’s strategic plan.
Through the launch of the current “Expand”
phase, we are poised to drive international
expansion and have forged significant new
relationships that will be pivotal in creating a
strengthened sales pipeline, developing our
brand and building solutions that create value
for both our customers and shareholders.
In an increasingly vulnerable digital world, we
have a clear vision to provide everyone with
access to cloud-based security through the
world’s most adaptive and comprehensive
cloud cybersecurity platform. This vision
permeates through every part of our business
and is demonstrated by the investment of
10 years and more than $10 million in research
and development.
Highlights
In further pursuing our growth aspirations,
domestic and international operations have
been strengthened with the following key
milestones:
• New public cloud security platform that
became operational with first customer
orders commencing during the last quarter
of fiscal 2018.
• Software distribution agreement with
Ingram Micro.
• New reseller agreements with leading
information and communications
technology/cybersecurity solution system
integrators.
03
FROM THE
CEO’S DESK
6
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY • A software original equipment manufacturer (OEM)
development and license agreement with the world’s
leading IT technology company Cisco Systems, Inc.
(Cisco) (signed in July 2018).
Operationally, we achieved the following milestones:
• Opened new operating entities in Singapore and
North America.
• Received a first international customer order in Q4
FY2018.
• Established a global delivery centre in India designed
to provide a 24/7 expansion capability to supply
comprehensive support to customers as we expand
into new geographical regions in different time zones.
All of this has enabled us to showcase our ability to
offer easy, rapid and affordable access to the most
technologically advanced, comprehensive and adaptive
cloud-based cybersecurity solutions around the world.
The global costs
caused by the effects
of cybercrime are
expected to top
$8.3 trillion annually
“
by 2021.“
Financial update
We delivered revenue for the year of $7.8 million
representing growth of 21% compared to last year.
Licensing and support revenue increased by 33% for the
year and professional services revenue was $0.3 million,
representing a ratio of 4.3% to total revenue.
We completed capital placements of $10.1 million
with funds primarily used to support the “Enable” and
“Expand” phases by driving international expansion and
investing in key relationships with existing customers and
strengthening partnerships with Global Security Vendors.
From The CEO’s Desk
The earnings before interest, tax, depreciation and
amortisation (EBITDA) loss was $6.3 million while the
segmental EBITDA loss underlying the Australian segment
improved $0.7 million. With the rapid growth and uptake
of Software as a Service (SAAS) offerings, increase in
EBITDA losses was driven by increased investment of
$3.2 million into FirstWave’s international expansion.
The year ahead
With the successful launch of the public platform – and
first orders received from our international division – we
have never been in a better position to accelerate growth,
entering the new financial year (FY19) with the strongest
sales pipeline in the company’s history.
As we execute the “Expand” phase of our strategy, we
are well placed to leverage the enormous opportunities
on offer in the global cybersecurity market. By supporting
investment in international expansion, continuing to
strengthen relationships with our Global Security Vendor
partners and working closely with our new software
distributors and resellers, we will begin to realise the
promise shareholders have seen in our Australian
developed cloud cybersecurity technology.
We are building good traction in global markets, due in
large part to the achievements of our driven, innovative
and passionate team – a team that provides us with a
genuine source of competitive advantage.
Finally, in line with our long-term aspirations and
commitment to our “Enable”, “Expand”, “Scale” phased
strategy, we will endeavour to continue create value and
identify opportunities that benefit our shareholders well
into the future.
Yours faithfully
DAVID KIRTON
Chief Executive Officer
7
Annual Report 2018 04
BOARD
UPDATE TO
SHAREHOLDERS
8
FirstWave Cloud Technology Limited
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Introduction
FirstWave continued to establish itself as a leader in
both the development and deployment of cybersecurity
technology both in 2018 and into the future with its
accessible, adaptive, affordable and easily implemented
cloud-based security solutions.
Analysts suggest that this market is further poised to
expand, with the global cost caused by the effects of
cybercrime set to reach $8.3 trillion annually by 2021.
This delivers an addressable market opportunity for
FirstWave of $14 billion by 2021.
FirstWave remains uniquely positioned to leverage
the opportunities presented by the growth of the
cybersecurity market. Our capacity to provide advanced
threat solutions, orchestrated and consumable in a
multi-tenanted, multi-cloud Software as a Service (SAAS)
offering that democratises and differentiates enterprise
grade security products into previously untapped
mid-market and small to medium business segments,
has been recognised by two of the world’s leading
security vendors – Palo Alto Networks and Cisco
Systems, Inc. (Cisco).
To enhance capability and market viability, FirstWave
has developed and deployed machine learning and API
technologies that automate, accelerate and optimise
cloud-security delivery, threat detection and security
management. Additionally, FirstWave’s unique cloud
platform orchestration is now available to service
providers and enterprises of any scale in any location.
FY2018 highlights
Throughout FY2018, FirstWave bolstered and enhanced
the domestic platform of operations, enabling positive
progress on the international expansion strategy and,
in doing so, achieved several milestones central to
establishing a strong foothold in international markets
outside of Australia.
Strategic business highlights
• Successfully completed the “Enable” phase of the
strategic plan.
• Transitioned to the “Expand” phase to focus on
expanding our domestic market share and entering
selected international markets.
• Signed a software original equipment manufacturer
development and license agreement (OEM) with
Cisco and commenced pre-sales activity.
• Delivered cloud email security on public cloud
infrastructure in conjunction with Amazon Web
Services (AWS).
• Completed two capital placements, raising $10.1
million and allocating 44.9 million new fully paid
ordinary shares to new and existing institutional
and sophisticated shareholders.
Board Update To Shareholders
Operational highlights
• Effective scaling of technologies and operations
within selected markets with a focus on delivering
shareholder return on investment.
• Signing of agreement and receipt of initial orders
from Mind Flow Sdn Bhd, a leading Malaysian-based
reseller and our first international partner.
Revenue for the year was $7.8 million representing
growth of 21% over last year. Licensing and support
revenue increased by 33% for the year. Professional
Services revenue was $0.3 million, representing a ratio of
4.3% to total revenue.
In FY2019, FirstWave will continue its focus on growth with
a specific attention on international markets. This will be
supported by increased cash outflow of approximately
$5.9 million to support investment, leveraging
relationships with Global Security Vendor partners to
open broader market opportunities and engaging new
software distributors and resellers.
Product development and associated service offerings
FY2018 saw significant progress in the application of
FirstWave’s triple-phase “Enable”, “Expand” and “Scale”
approach. The success of the “Enable” phase is perhaps
best showcased by the launch of FirstWave’s public
global cloud cybersecurity platform and the subsequent
securing of an OEM agreement with Cisco.
This agreement not only strengthens the existing pipeline
to business and government organisations but reinforces
and expands it by enhancing the reach of FirstWave’s
proprietary technology into new markets.
The milestones achieved through FirstWave’s cloud email
and next generation firewall services in conjunction with
AWS have been outstanding and have laid the foundation
for further development of both the relationship and
inherent opportunities moving forward into FY2019.
Domestic market developments
Despite slower than expected growth in the previous
financial year, operating revenue was consistently higher
quarter-on-quarter in FY2018 compared to FY2017.
Recent relationship developments with local software
distributors and cloud service providers are expected to
yield improving results within the domestic market this
year as well as emergence of the international distribution
network as a revenue generating unit.
9
Annual Report 2018 Vendor and partner relationships and opportunities
Global expansion
FY2019 is heralding the “Expand” phase of the corporate
strategy and between strategy and maximising existing
relationships, while fostering new partnerships, will create
an opportunity for FirstWave to firmly establish itself as a
clear thought-leader and expert solutions provider in the
global cloud-based services community.
International market opportunities
It is forecast that FirstWave’s addressable market
opportunity will grow to $14 billion by 2021. This aligns
well with FY2022 aspirations spearheaded by FirstWave’s
Chief Executive Officer, David Kirton, to grow revenue
share to around 1% of the global cloud cybersecurity
market. We will achieve this with a successfully executed
strategy targeting three-year revenue of $50 million –
60% of which is expected to be derived outside of the
Australian market through international business. The
Board anticipates that an investment of approximately
$15 million will be required to achieve the three-year
revenue target.
Given that security expertise in large organisations is
generally inadequate and often non-existent in small to
medium enterprise, the growth in cyber attacks has driven
demand for enterprise-grade security. This provides
FirstWave with the potential to address 75% of the US
market – representing approximately $14 billion.
The markets representing the greatest share, in turn
presenting prime opportunities for additional expansion,
include North America (40%), Asia Pacific (31%) and
Europe, the Middle East and Africa (20%).
In strengthening and deepening collaboration with
leading Global Security Vendors, interest from potential
local and international customers has increased
significantly.
This is primarily due to the commencement of
agreements with:
• Cisco: Leading Global Security Vendor.
•
Ingram Micro: World’s largest wholesale technology
distributor and global leader in IT supply chain and
mobile device lifecycle service.
•
Interactive Australia: Australia’s largest multi-vendor
service provider.
• Mind Flow Sdn Bhd: A recognised Malaysia Status
Company (MSC) and a leading Malaysian-based
reseller.
• Soflogic: A privately held Singapore-managed
service provider.
• Kronicles: Singapore’s leading service provider.
These relationships form a strong foundation for
continued sales growth and brand evolution in
established markets and sectors with considerable
opportunities.
“
FirstWave’s unique
cloud platform
orchestration
is available to
service providers
and enterprises of
any scale in any
location.“
ROGER CARVOSSO
Product and Innovation Director, FirstWave
10
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY 05
DIRECTORS’
REPORT &
REMUNERATION
REPORT
11
Annual Report 2018Directors’ 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 2018.
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 - Non-Executive Chairman
Scott Lidgett
Paul MacRae
Simon Moore
Sam Saba (appointed on 16 October 2017)
Richard Beswick (alternate to Scott Lidgett, resigned on 23 August 2017)
Steven O’Brien (resigned on 3 October 2017)
David Garnier (resigned on 30 November 2017)
Edward Keating (resigned on 13 July 2018)
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 $8,717,386 (30 June 2017: $5,066,543).
Financial review
Profit or loss performance
The consolidated entity’s revenue for the year was $7,817,128, which represents growth of 21% over the prior comparative
period (‘PCP’). Licensing and support revenue increased by 33% for the year. Professional Services revenue was
$333,071, representing 4.3% of total revenue.
Earnings before interest, tax depreciation and amortisation (‘EBITDA’) was a loss of $6,303,341. The segmental EBITDA
loss underlying the Australia segment improved to $330,424 compared with a loss of $1,031,933 against PCP. Strategic
expenditure on the international expansion increased to $2,255,349 from $197,247 in prior year. Corporate Services
expenditure increased to $3,717,568 from $2,224,302 in prior year.
The consolidated entity’s loss after income tax amounted to $8,717,386 (FY2017 loss of $5,066,543), this includes the
impact of derecognition of deferred tax assets following a review of recoverability of these assets. The consolidated
entity expects to incur strategic expenditure that will manifest in after-tax losses for the next 12 months. Therefore, it
was considered prudent, and in accordance with accounting standards requirements to derecognise these assets and
consider recognising them in later years when the certainty of realising taxable profits increases. The net effects of these
are reported under income tax benefit / (expense) in the statement of profit or loss and other comprehensive income.
Statement of financial position
Cash and cash equivalents increased by $4,020,984 to $5,782,873 at 30 June 2018. This is underpinned by two
rounds of capital raising totalling $9,457,823 net of expenses. Of this increase of cash and cash equivalents, $3,531,173
represented cash outflows from operating activities. Cash used in operating activities increased by $1,221,991 (53%) from
FY2017, driven by the consolidated entity’s focus on international expansion. Trade receivables of $1,706,880 at 30 June
2018 have been substantially realised after the year end.
12
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Directors’ Report & Remuneration Report
Investment into innovation has driven the $1,533,639 investment in research and development that has been capitalised
as an intangible asset in the consolidated entity’s balance sheet.
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 several 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 a significant
doubt on the consolidated entity’s ability to continue as a going concern.
Significant changes in the state of affairs
On 20 October 2017, the company completed a capital raise of $4,350,001 (before costs) by issuing 19,772,732
ordinary shares.
On 25 May 2018, the company completed a capital raise of $5,789,994 (before costs) by issuing 25,173,885
ordinary shares.
FY2018 has seen many firsts for the consolidated entity; launch of a new public cloud security platform that became
operational with first customer orders commencing in the fourth quarter of FY2018, opening of new operating entities in
Singapore and North America, received a first international customer order in the fourth quarter of FY2018, addition of
new software distribution and reseller agreements both domestically and internationally, significantly broadening market
reach. The consolidated entity has set up a global delivery centre in India designed to provide 24/7 comprehensive
support to customers, as the consolidated entity expands into new geographical regions in different time zones,
necessitating the capability to provide comprehensive support to customers.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
On 19 July 2018, the consolidated entity announced the signing of a software original equipment manufacturer (OEM)
development and licensing agreement with Cisco Systems, Inc. This is a significant first step that is expected to drive
global growth, accelerating the ‘Expand’ phase of the consolidated entity’s five-year strategic plan.
The consolidated entity has now confirmed the key appointment of Mr David Kirton as Chief Executive Officer at a
meeting of the Board of directors held on 27 August 2018.
No other matter or circumstance has arisen since 30 June 2018 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 FY2019 are to support globalisation and strategically invest into business and
product development. Strong foundations have been laid in FY2018, the consolidated entity will look to build on those
efforts and realise its goals.
The long-term goal of the consolidated entity is focused on delivery of the 5 -year plan to penetrate 1% of a $13.8 billion
global cloud cyber-security market - circa $138 million. The plan now also includes a three-year target revenue of $50
million by FY2021, of which 60% of revenue to be derived outside of Australia.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or
State law.
13
Annual Report 2018 Information on directors
Information on the directors of the company as at 30 June 2018 is set out below:
ALEXANDER KELTON
Non-Executive Chairman
Qualifications: Alexander has a Bachelor of Science degree in Electrical and
Electronic Engineering from The University of Western Scotland.
Experience and expertise: 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, Alexander has also been responsible for start-ups, merger and
acquisition transactions and Initial Public Offering of one of the businesses.
Alexander was appointed the Chief Executive Officer of Superloop Limited
(ASX:SLC) with effect from 1 July 2018.
Other current directorships: Megaport Limited (ASX: MB1)
Former directorships (last three years): Chairman of Mobile Embrace Ltd (ASX:
MBE) (resigned on 30 June 2018)
Special responsibilities: Member of the Audit and Risk Committee and Member
of Remuneration and Nomination Committee
Interests in shares: 1,115,625 | Interests in options: 4,200,000
SCOTT LIDGETT
Non-Executive Director
Qualifications: Scott holds formal qualifications in Engineering.
Experience and expertise: Scott was a co-founder of FirstWave Cloud
Technology Limited. He is also 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
Former directorships (last three years): None
Special responsibilities: Member of Remuneration and Nomination Committee
Interests in shares: 19,654,847 | Interests in options: 1,200,000
14
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Directors’ Report & Remuneration Report
PAUL MACRAE
Non-Executive Director
Qualifications: Paul holds a Master of Business Administration (MBA) from
University of Strathclyde and a Bachelor of Science in Chemistry from The
University of Glasgow.
Experience and expertise: 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
Former directorships (last three years): None
Special responsibilities: Chairman of the Remuneration and Nomination
Committee
Interests in shares: 1,634,888 | Interests in options: 1,200,000
SIMON MOORE
Non-Executive Director
Qualifications: Simon holds a Bachelor of Commerce (Hons) and a Bachelor of
Law (Hons) from The University of Queensland.
Experience and expertise: 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.
Other current directorships: Megaport Limited (ASX: MP1); TPI Enterprises
Limited (ASX: TPE).
Former directorships (last three years): Healthscope Limited (ASX:HSO)
(resigned on 31 December 2015); Qube Holdings Limited (ASX: QUB) (resigned
on 1 September 2016).
Special responsibilities: Chairman of the Audit and Risk Committee
Interests in shares: 2,100,000 | Interests in options: 1,000,000
15
Annual Report 2018 SAM SABA
Non-Executive Director
Qualifications: Sam holds BS and MS Degrees in Civil Engineering from the
University of Louisiana at Lafayette. He completed post-graduate studies
in Business Management from Columbia University and Executive Sales
Management from Wharton Business School, Pennsylvania and Cambridge
University, UK.
Experience and expertise: Sam served as the Head of South East Asia and
Oceania Region at Telefonaktiebolaget LM Ericsson (publ) since 1 July 2014.
He is a highly-regarded, internationally experienced business executive with
expertise leading large multinational Telecommunication/IT companies across
Australia and New Zealand, Southeast Asia and the Middle East. He has spent
23 years with the Ericsson Group and served as the President of Ericsson’s
Southeast Asia and Oceania Region based in Singapore, President Director
of Ericsson Indonesia, Chief Executive Officer of Ericsson Australia and New
Zealand and Telstra Account Director at Ericsson Australia. He is a Former
Senior Advisor, Ericsson South East Asia, Oceania and India.
Other current directorships: None
Former directorships (last three years): None
Special responsibilities: None
Interests in shares: 340,909 | Interests in options: None
EDWARD KEATING
Non-Executive Director
Experience and expertise: 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
Former directorships (last three years): None
Special responsibilities: Member of the Audit and Risk Committee
Interests in shares: 6,591,427 | Interests in options: 1,200,000
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of
all other types of entities, unless otherwise stated.
‘Former directorships (last three years)’ quoted above are directorships held in the last three years for listed entities only
and excludes directorships of all other types of entities, unless otherwise stated.
16
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Directors’ Report & Remuneration Report
Company secretary
Gai Stephens (BEC, LLB, LLM, GAICD, FCA, FTIA, FGIA) was appointed as company secretary on 30 November 2017.
Gai is responsible for all of the legal and compliance issues associated with the consolidated entity. Previously she
held the position of company secretary at Hills Limited for four years from 2012 until 2017 and company secretary and
general counsel at Luxottica (formerly OPSM Group) for 20 years from 1992 until 2012. Gai has extensive knowledge in
intellectual property maintenance, tax structuring, acquisitions and disposals, risk management, company secretarial and
legal matters.
The previous company secretary was Justin Clyne (appointed on 16 February 2016 and resigned on 30 November 2017).
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 2018, and the number of meetings attended by each director were:
Full Board
Remuneration and Nomination
Committee
Audit and Risk Committee
Name
Attended
Held
Attended
Held
Attended
Held
Alexander Kelton -
Non-Executive Chairman
Scott Lidgett
Paul MacRae
Simon Moore
Sam Saba
Richard Beswick
Steven O’Brien
David Garnier
Edward Keating
11
10
11
10
8
1
2
3
10
11
10
11
11
9
1
2
3
11
4
4
4
-
-
-
-
-
-
4
4
4
-
-
-
-
-
-
4
-
-
4
-
-
-
-
4
4
-
-
4
-
-
-
-
4
Held: represents the number of meetings held during the time the director held office or was a member of the
relevant committee.
Remuneration report (audited)
The remuneration report details the key management personnel (‘KMP’) remuneration arrangements for the consolidated
entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the
entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
• Principles used to determine the nature and amount of remuneration
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional disclosures relating to key management personnel
17
Annual Report 2018
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 ensures that executive reward satisfies the following key criteria for good reward
governance practices:
•
•
• performance linkage/alignment of executive compensation; and
•
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.
competitiveness and reasonableness;
acceptability to shareholders;
transparency.
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
rewarding capability and experience;
attracting and retaining high calibre executives.
•
Additionally, the reward framework should seek to enhance executives’ interests by:
•
•
• 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.
reflecting competitive reward for contribution to growth in shareholder wealth; and
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 Non-Executive Chairman’s fees are determined independently to the fees of other non-
executive directors based on comparative roles in the external market. The Non-Executive Chairman is not present at any
discussions relating to the determination of his own remuneration.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The most recent determination was at the Extraordinary General Meeting held on 15 April 2016, where the
shareholders approved a maximum annual aggregate 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;
•
• other remuneration such as superannuation and long service leave.
The combination of these comprises the executive’s total remuneration.
share-based payments; and
18
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Directors’ Report & Remuneration Report
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’) programme 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 (‘KPIs’) being achieved. KPIs relate to qualitative and quantitative leadership
performance and subject to Board discretion.
The Bonuses to KMP were approved by the remuneration committee on 31 July 2018. These payments were made for
each of the awarded KMP achieving Board decided objectives and KPIs for FY2018.
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 2018.
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 2018, the consolidated entity did not engage any remuneration consultants.
Voting and comments made at the Company’s 2017 Annual General Meeting (‘AGM’)
At the 2017 AGM, shareholders voted to approve the adoption of the remuneration report of the company for
the year ended 30 June 2017. 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 - Interim Chief Executive Officer and Chief Financial Officer
• Neil Pollock - Chief Operating Officer (KMP from 1 December 2017)
Changes since the end of the reporting period:
• Edward Keating resigned as director of the company on 13 July 2018.
• David Kirton was appointed as the Chief Executive Officer with effect from 22 August 2018.
19
Annual Report 2018 Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Termination
payment
Cash
salary and
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
options
$
2018
Non-Executive
Directors:
Alexander Kelton***
150,000
Scott Lidgett
Paul MacRae
Simon Moore
Sam Saba*
David Garnier**
Edward Keating
48,000
48,000
58,000
34,000
20,000
48,000
Executive Director:
Steven O’Brien**
24,012
-
-
-
-
-
-
-
-
Other KMP:
Simon Ryan
David Kirton
Neil Pollock*
216,724
260,000
175,000
1,081,736
20,000
25,000
20,000
65,000
-
-
-
-
-
-
-
-
-
-
-
-
-
4,560
-
5,510
-
1,900
4,560
19,238
20,589
24,700
12,192
93,249
Total
$
285,347
52,560
48,000
74,534
34,000
21,900
52,560
$
-
-
-
-
-
-
-
170,000
213,250
-
-
-
-
-
-
-
-
135,347
-
-
11,024
-
-
-
-
4,145
-
-
51,358
14,119
-
-
-
-
312,816
323,819
207,192
4,145
211,848
170,000
1,625,978
* Represents remuneration from the date of appointment as KMP for Sam Saba on 16 October 2017 and Neil Pollock
on 1 December 2017.
** Represents remuneration up to the date of resignation as KMP for David Garnier on 30 November 2017 and
Steven O’Brien on 3 October 2017.
*** Includes $30,000 Board approved consulting services on ordinary commercial terms.
20
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-settled
options
$
2017
Non-Executive
Directors:
Alexander Kelton***
Scott Lidgett
Paul MacRae
Simon Moore
David Garnier
Edward Keating
Executive Director:
153,750
48,000
48,000
19,333
48,000
48,000
Steven O’Brien
270,000
Other KMP:
Simon Ryan
David Kirton*
Murray Scott**
221,724
33,333
180,000
1,070,140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
760
-
1,837
760
760
30,847
21,064
3,167
-
59,195
Total
$
343,120
166,006
165,246
21,170
166,006
166,006
189,370
117,246
117,246
-
117,246
117,246
227,096
527,943
-
-
-
-
-
-
-
4,145
67,369
-
-
-
-
314,302
36,500
180,000
4,145
952,819
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.
*** Includes $22,500 Board approved consulting services on ordinary commercial terms.
21
Annual Report 2018Directors’ Report & Remuneration Report
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Grant date
2018
2017
2018
2017
2018
2017
Fixed remuneration
At risk - STI
At risk - LTI
Non-Executive Directors:
Alexander Kelton
Scott Lidgett
Paul MacRae
Simon Moore
Sam Saba
David Garnier
Edward Keating
Executive Director:
Steven O’Brien
Other KMP:
Simon Ryan
David Kirton
Neil Pollock
Murray Scott
53%
100%
100%
85%
100%
100%
100%
45%
29%
29%
100%
-
29%
29%
100%
57%
-
-
-
-
-
-
-
-
78%
88%
90%
-
79%
100%
-
100%
6%
8%
10%
-
-
-
-
-
-
-
-
-
-
-
-
-
47%
-
-
15%
-
-
-
-
16%
4%
-
-
55%
71%
71%
-
-
71%
71%
43%
21%
-
-
-
Service agreements
The consolidated entity enters into employment agreements with each KMP. With the exception of the Chief Executive
Officer’s (‘CEO’) agreement, the employment agreement with the KMP are continuous i.e. not of a fixed duration, and
includes a minimum four 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.
Details of the CEO’s service agreement is provided below:
Name: David Kirton
Title: CEO
Agreement commenced: 22 August 2018
Term of agreement: Initial three year term with renewal by agreement between the parties
Details: Fixed remuneration of $350,000 per annum plus statutory superannuation contribution. On target STI represents
30% of fixed remuneration. Above target performance is rewarded by an additional STI payment of up to 30% of the fixed
remuneration. LTI of 5,000,000 options, which vest in three equal tranches over the next three years. The exercise price
for each grant will be based upon the volume weighted average share price of the company’s shares in the five days
following the release of the full year results for 30 June 2018. The options are subject to the approval of shareholders
at the next Annual General Meeting. The company may terminate the contract without cause on providing six months’
written notice. David Kirton may terminate the contract by providing three months’ written notice. The employment
agreement contains standard terms and conditions relating to leave entitlements, confidential information and intellectual
property. Restraint period of 12 months applies.
KMP have no entitlement to termination payments in the event of removal for misconduct.
22
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY 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 2018.
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
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
11/05/2022
11/05/2023
11/05/2024
11/05/2023
11/05/2024
11/05/2025
11/05/2022
11/05/2022
11/05/2022
11/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
19/05/2020
19/05/2021
19/05/2021
19/05/2022
28/02/2022
28/02/2023
28/02/2024
31/05/2023
31/05/2024
31/05/2024
31/05/2025
Alexander Kelton: (500,000)
Alexander Kelton: (500,000)
Alexander Kelton: (2,000,000)
Alexander Kelton: (200,000)
Alexander Kelton: (200,000)
Alexander Kelton: (800,000)
David Garnier: (1,200,000)
Edward Keating: (1,200,000)
Scott Lidgett: (1,200,000)
Paul MacRae: (1,200,000)
Steven O’Brien: (960,000)
Steven O’Brien: (960,000)
Steven O’Brien: (1,440,000)
Steven O’Brien: (1,440,000)
Simon Ryan: (150,000)
Simon Ryan: (150,000)
Simon Ryan: (450,000)
Simon Ryan: (750,000)
Simon Moore: (333,400)
Simon Moore: (333,300)
Simon Moore: (333,300)
David Kirton: (100,000)
David Kirton: (100,000)
David Kirton: (300,000)
David Kirton: (500,000)
$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
$0.75
$0.75
$0.75
$0.65
$0.65
$0.76
$0.87
* The share option plan is subject to participants meeting service condition (continuous employment with the
consolidated entity) at the vesting date. There are no performance conditions.
Options granted carry no dividend or voting rights.
$0.110
$0.120
$0.130
$0.090
$0.100
$0.060
$0.110
$0.110
$0.110
$0.110
$0.110
$0.120
$0.090
$0.030
$0.090
$0.110
$0.110
$0.090
$0.010
$0.020
$0.020
$0.020
$0.030
$0.020
$0.020
23
Annual Report 2018Directors’ Report & Remuneration Report
The number of options over ordinary shares granted to and vested in directors and other KMP as part of compensation
are set out below:
Alexander Kelton
David Garnier
Edward Keating
Scott Lidgett
Paul MacRae
Steven O’Brien
Simon Moore
Simon Ryan
David Kirton
Number of
options
during the year
2018
Number of
options granted
during the year
2017
Number
of options vested
during the year
2018
Number
of options vested
during the year
2017
-
-
-
-
-
-
1,000,000
-
1,000,000
-
-
-
-
-
-
-
-
-
500,000
-
-
-
-
-
333,400
600,000
100,000
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
Scott Lidgett
Paul MacRae
Simon Moore
Sam Saba
David Garnier*
Edward Keating
Simon Ryan
Richard Beswick
(alternate to Scott Lidgett)*
Balance at the
start of the
year
Received as
part of
remuneration
Additions
Disposals/other
Balance at the
end of the year
1,115,625
19,654,847
1,634,888
2,100,000
-
1,449,430
6,591,427
4,615,000
9,725,171
46,886,388
-
-
-
-
-
-
-
-
-
-
-
-
-
-
340,909
-
-
-
-
-
-
-
-
-
(1,449,430)
-
-
-
1,115,625
19,654,847
1,634,888
2,100,000
340,909
-
6,591,427
4,615,000
9,725,171
340,909
(1,449,430)
45,777,867
* Disposal/others represents shares held at resignation date.
24
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Options over ordinary shares
Alexander Kelton
Scott Lidgett
Paul MacRae
Simon Moore***
David Garnier*
Edward Keating
Steven O’Brien**
Simon Ryan
David Kirton
Balance at the
start of the year
Granted
Exercised
Expired/ forfeited/
other
Balance at the
end of the year
4,200,000
1,200,000
1,200,000
-
-
-
-
1,000,000
1,200,000
1,200,000
4,800,000
1,500,000
-
-
-
-
-
1,000,000
15,300,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,200,000)
4,200,000
1,200,000
1,200,000
1,000,000
-
-
1,200,000
(4,800,000)
-
-
-
(6,000,000)
1,500,000
1,000,000
11111,300,000
* Disposal/others represents options held at resignation date.
** Disposal/others represents 3,840,000 forfeited during the year and 960,000 options held at resignation date.
*** Excludes subscription agreement to acquire 1,086,957 ordinary shares $0.23 per share to be issued subject to
shareholder approval.
Options over ordinary shares
Alexander Kelton
Scott Lidgett
Paul MacRae
Simon Moore
Edward Keating
Simon Ryan
David Kirton
Vested and
exercisable
Vested and
unexercisable
Balance at the
end of the year
1,000,000
1,200,000
1,200,000
333,400
1,200,000
750,000
100,000
5,783,400
-
-
-
-
-
-
-
-
1,000,000
1,200,000
1,200,000
333,400
1,200,000
750,000
100,000
5,783,400
Loans to key management personnel and their related parties
Outstanding loan to Simon Ryan as at 30 June 2018 amounted to $221,520 (2017: $221,520). Interest is charged on the
outstanding balance at 7.5% per annum. During the year ended 30 June 2018, interest of $16,620 is receivable from
Simon Ryan (2017: $16,630) in respect of this loan.
This concludes the Remuneration Report, which has been audited.
25
Annual Report 2018Directors’ Report & Remuneration Report
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
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
13/04/2018
13/04/2018
13/04/2018
Expiry date
Exercise price
Number under option
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
31/05/2023
31/05/2024
28/02/2022
28/02/2023
28/02/2024
31/05/2024
31/05/2025
12/04/2021
12/04/2021
12/04/2021
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.65
$0.65
$0.75
$0.75
$0.75
$0.76
$0.87
$0.40
$0.50
$0.60
750,000
230,000
500,000
1,500,000
2,500,000
6,260,000
500,000
200,000
2,000,000
200,000
800,000
100,000
100,000
333,400
333,300
333,300
300,000
500,000
1,416,667
316,667
316,666
19,490,000
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 2018 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.
26
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY 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
There were no ordinary shares of FirstWave Cloud Technology Limited issued on the exercise of options during the year.
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
There were no non-audit services provided during the financial year by the auditor.
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.
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
Non-Executive Chairman
30 August 2018
SIMON MOORE
Director
27
Annual Report 2018Directors’ Report & Remuneration Report 06
FINANCIAL
REPORT
28
FirstWave Cloud Technology Limited
FIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Auditor’s Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Firstwave Cloud Technology Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Firstwave
Cloud Technology Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have
been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
C F Farley
Partner – Audit & Assurance
Sydney, 30 August 2018
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
29
Annual Report 2018
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:
•
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.
Level 10, 132 Arthur Street, North Sydney, NSW 2060, Australia
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 August 2018. The
directors have the power to amend and reissue the financial statements.
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Sales revenue
Cost of sales
Gross profit
Other income
Expenses
Sales and marketing
Engineering and development
General and administration
Finance costs
Total expenses
Loss before income tax benefit/(expense)
Income tax benefit/(expense)
Loss after income tax benefit/(expense) for the year attributable to the
owners of FirstWave Cloud Technology Limited
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
FirstWave Cloud Technology Limited
Basic earnings per share
Diluted earnings per share
Consolidated
Note
2018
$
2017
$
4
5
6
7
7,817,128
6,435,660
(3,486,040)
(2,422,997)
4,331,088
673,425
4,012,663
596,620
(3,816,082)
(4,016,111)
(4,746,533)
(19,043)
(2,115,760)
(3,438,515)
(4,601,532)
(32,573)
(12,597,769)
(10,188,380)
(7,593,256)
(1,124,130)
(5,579,097)
512,554
(8,717,386)
(5,066,543)
-
-
(8,717,386)
(5,066,543)
35
35
Cents
(4.45)
(4.45)
Cents
(2.82)
(2.82)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
30
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Financial Statements
Statement of financial position
As at 30 June 2018
Consolidated
Note
2018
$
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
Employee benefits
Other
Borrowings
Total current liabilities
Non-current liabilities
Borrowings
Employee benefits
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
The above statement of financial position should be read in conjunction with the accompanying notes.
5,782,873
2,270,819
1,285,574
9,339,266
599,761
3,121,073
-
614,111
4,334,945
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
13,674,211
11,909,664
2,862,311
661,550
2,132,531
87,139
5,743,531
-
71,866
152,649
1,969,912
2,194,427
7,937,958
5,736,253
2,844,001
530,578
1,250,690
200,237
4,825,506
87,139
49,399
152,649
1,908,398
2,197,585
7,023,091
4,886,573
25,231,669
1,731,056
15,773,846
1,621,813
(21,226,472)
(12,509,086)
5,736,253
4,886,573
31
Annual Report 2018
Consolidated
Balance at 1 July 2016
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
36
Statement of changes in equity
For the year ended 30 June 2018
Note
Issued capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
15,773,846
397,911
(7,442,543)
8,729,214
-
-
-
-
-
-
-
(5,066,543)
(5,066,543)
-
-
(5,066,543)
(5,066,543)
1,223,902
-
1,223,902
Balance at 30 June 2017
15,773,846
1,621,813
(12,509,086)
4,886,573
Consolidated
Balance at 1 July 2017
Note
Issued capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
15,773,846
1,621,813
(12,509,086)
4,886,573
Loss after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Transactions with owners in their capacity
as owners
Contributions of equity, net of transaction costs
Share-based payments
Balance at 30 June 2018
-
-
-
9,457,823
-
-
-
-
-
109,243
(8,717,386)
(8,717,386)
-
-
(8,717,386)
(8,717,386)
-
-
9,457,823
109,243
25,231,669
1,731,056
(21,226,472)
5,736,253
22
36
The above statement of changes in equity should be read in conjunction with the accompanying notes.
32
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Financial Statements
Statement of cash flows
For the year ended 30 June 2018
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
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from release of security deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
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
Consolidated
Note
2018
$
2017
$
10,481,554
8,670,530
(14,664,835)
(11,543,759)
57,904
613,247
(19,043)
104,271
492,349
(32,573)
34
(3,531,173)
(2,309,182)
22
22
(149,060)
(1,556,369)
-
(240,858)
(1,214,073)
46,310
(1,705,429)
(1,408,621)
10,139,995
(682,172)
(200,237)
9,257,586
-
-
(292,723)
(292,723)
4,020,984
1,761,889
(4,010,526)
5,772,415
Cash and cash equivalents at the end of the financial year
8
5,782,873
1,761,889
The above statement of cash flows should be read in conjunction with the accompanying notes.
33
Annual Report 2018
Notes to the financial statements
30 June 2018
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. 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 2018 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’.
34
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
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.
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.
35
Annual Report 2018 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.
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.
36
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
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 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.
37
Annual Report 2018 Leasehold improvements
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:
•
• Furniture and fittings
• Computer equipment
• Computer platform
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
3-5 years
2-3 years
5 years
3 years
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the
assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit
or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of the
asset’s useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership
at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets acquired are initially recognised at cost. Indefinite life intangible assets are not amortised and are
subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost
less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition
of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the
intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the
expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method
or period.
Capitalised development costs
Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-
generated intangible asset arising from development (including those arising from the development phase of an internal
project) are capitalised when it is probable that the project will be a success considering its commercial and technical
feasibility; the consolidated entity is able to use or sell the asset; the consolidated entity has sufficient resources and
intent to complete the internal development; and their costs can be measured reliably.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from
the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated
intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is
incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their
finite useful lives of five to seven years.
38
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Financial Statements
Patents
Significant costs associated with patents are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite useful lives of five to seven years.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount
exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together
to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
Finance costs
Finance costs attributed 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.
39
Annual Report 2018 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.
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.
40
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of FirstWave Cloud Technology
Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during
the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
New Accounting Standards and Interpretations not yet mandatory or
early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018.
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.
41
Annual Report 2018 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, using the transitional modified retrospective
method as detailed in paragraph C3(b) of the standard. The impact assessment of this standard is substantially complete
and based on the work performed to the date of this report, no material impact is expected on the financial statements
of the consolidated entity from the adopting this standard.
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
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.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the IASB and is applicable for annual reporting periods on
or after 1 January 2020. The Australian equivalent is yet to be published. The application of the new definition and
recognition criteria may result in future amendments to several accountings standards. Furthermore, entities who rely
on the conceptual framework in determining their accounting policies for transactions, events or conditions that are not
otherwise dealt with under Australian Accounting Standards may need to revisit such policies. The Group will apply the
IASB revised conceptual framework from 1 July 2020 and is yet to assess its impact.
42
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
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 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.
NOTE 3. OPERATING SEGMENTS
Identification of reportable operating segments
The consolidated entity’s operating segments are based on the internal reports that are reviewed and used by the
Chief Executive Officer and the Board of directors (being the Chief Operating Decision Makers (‘CODM’)) in assessing
performance and in determining the allocation of resources. Prior period information has also been appropriately
rearranged to reflect segmental performance to facilitate comparison.
43
Annual Report 2018 The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information
reported to the CODM is on a monthly basis.
The CODM does not review segment assets and liabilities.
Types of products and services
The consolidated entity is organised into three operating segments as follows:
Australia
International
A geographical segment to identify development and sale of internet security software in the
domestic market.
A geographical segment to identify development and sale of internet security software in the
international market.
Corporate services
A functional segment that manages the provision of research & development, and
administrative support provided to the consolidated entity.
Major customers
During the year ended 30 June 2018, there was one major external customer (2017: one customer) where revenue
exceeded 10% of the consolidated revenue. Total revenue from the customer for the year ended 30 June 2018 amounted
to $7,598,771 (2017: $6,134,627).
Operating segment information
Consolidated - 2018
Revenue
Sales to external customers
Total revenue
EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Other non-cash expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense
Consolidated - 2017
Revenue
Sales to external customers
Total revenue
EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Other non-cash expenses
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
44
Australia
$
International
$
Corporate Services
$
Total
$
7,817,128
7,817,128
-
-
-
-
(330,424)
(2,255,349)
(3,717,568)
7,817,128
7,817,128
(6,303,341)
(1,221,807)
60,178
(19,043)
(109,243)
(7,593,256)
(1,124,130)
(8,717,386)
Australia
$
International
$
Corporate Services
$
Total
$
6,435,660
6,435,660
-
-
-
-
6,435,660
6,435,660
(1,031,933)
(197,247)
(2,224,302)
(3,453,482)
(973,411)
104,271
(32,573)
(1,223,902)
(5,579,097)
512,554
(5,066,543)
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
NOTE 4. REVENUE
Licensing and support revenue
Professional services revenue
Total revenue
NOTE 5. OTHER INCOME
Research and development grant income*
Interest income
Other income
Total other income
Financial Report / Financial Statements
Consolidated
2018
$
7,484,057
333,071
7,817,128
2017
$
5,629,291
806,369
6,435,660
Consolidated
2018
$
611,166
60,178
2,081
673,425
2017
$
492,349
104,271
-
596,620
* There are no unfulfilled conditions or other contingencies attached to the grant. The consolidated entity did not
benefit directly from any other government assistance.
45
Annual Report 2018
NOTE 6. EXPENSES
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
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable
Net foreign exchange variance
Consolidated
2018
$
2017
$
3,486,040
2,422,997
170,418
4,375
80,447
7,950
263,190
936,309
22,308
958,617
1,221,807
108,423
2,059
76,644
7,521
194,647
762,710
16,054
778,764
973,411
19,043
32,573
Net foreign exchange variance (included in cost of sales above)
(3,840)
(91,568)
Rental expense relating to operating leases
Minimum lease payments
Employee benefit expenses
Employee salaries and other benefits
Defined contribution superannuation expense
Share-based payments expenses
Total employee benefit expenses
343,168
306,121
8,182,737
531,156
109,244
8,823,137
7,970,052
426,281
1,223,902
9,620,235
46
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
NOTE 7. INCOME TAX (BENEFIT)/EXPENSE
Financial Report / Financial Statements
Consolidated
Note
2018
$
2017
$
Income tax (benefit)/expense
Deferred tax - origination and reversal of temporary differences
1,124,130
(512,554)
Aggregate income tax (benefit)/expense
1,124,130
(512,554)
Deferred tax included in income tax (benefit)/expense comprises:
Decrease/(increase) in deferred tax assets
13
1,124,130
(512,554)
Numerical reconciliation of income tax (benefit)/expense and tax at the
statutory rate
Loss before income tax benefit/(expense)
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income:
Amortisation of intangibles
Entertainment expenses
Non-deductible research and development incentive expenditure
Development costs
Deferred income
Sundry items
Tax losses not recognised (including reversal of previously recognised
tax losses)
Current year temporary differences not recognised
Income tax (benefit)/expense
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at statutory tax rates
(7,593,256)
(5,579,097)
(2,088,145)
(1,534,252)
257,485
13,566
587,497
(421,751)
(167,394)
51,779
209,626
18,650
498,063
(299,457)
(131,067)
-
(1,766,963)
(1,238,437)
2,861,051
369,353
30,042
356,530
1,124,130
(512,554)
Consolidated
2018
$
9,936,900
2,732,648
2017
$
-
-
The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax
losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test
is passed.
47
Annual Report 2018
NOTE 8. CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank
Cash on deposit
Consolidated
2018
$
5,282,873
500,000
5,782,873
2017
$
761,889
1,000,000
1,761,889
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
2018
$
1,706,880
(22,206)
1,684,674
2017
$
2,198,049
(22,206)
2,175,843
45,248
564,683
319,377
221,520
245,857
221,520
2,270,819
3,207,903
Impairment of receivables
The consolidated entity has recognised a loss of $nil (2017: $22,206) in profit or loss in respect of impairment of
receivables for the year ended 30 June 2018.
The ageing of the impaired receivables provided for above are as follows:
Consolidated
2018
$
-
-
22,206
22,206
2017
$
5,082
7,623
9,501
22,206
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
48
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Closing balance
Financial Report / Financial Statements
Consolidated
2018
$
22,206
-
22,206
2017
$
-
22,206
22,206
Customers with balances past due but without provision for impairment of receivables amount to $60,626 as at 30 June
2018 ($1,280 as at 30 June 2017).
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
NOTE 10. CURRENT ASSETS - OTHER
Prepayments
Security deposits
Other deposits
Consolidated
2018
$
16,288
4,807
39,531
60,626
2017
$
-
-
1,280
1,280
Consolidated
2018
$
1,151,348
133,776
450
2017
$
1,120,753
133,776
450
1,285,574
1,254,979
49
Annual Report 2018
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
Consolidated
2018
$
800,159
(286,669)
513,490
16,592
(16,592)
-
791,259
(707,802)
83,457
237,838
(235,024)
2,814
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
599,761
713,891
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 2016
Additions
Write off of assets
Depreciation expense
Balance at 30 June 2017
Additions
Depreciation expense
Balance at 30 June 2018
Leashold
Improvement
$
Furniture and
fittings
$
Computer
equipment
$
484,011
205,018
-
(108,423)
580,606
103,302
(170,418)
5,331
1,103
-
(2,059)
4,375
-
(4,375)
205,278
33,361
(42,317)
(76,644)
119,678
44,226
(80,447)
Computer
platform
$
15,377
1,376
-
Total
$
709,997
240,858
(42,317)
(7,521)
(194,647)
9,232
1,532
713,891
149,060
(7,950)
(263,190)
513,490
-
83,457
2,814
599,761
Property, plant and equipment secured under finance leases
Refer to note 29 for further information on property, plant and equipment secured under finance leases.
50
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
NOTE 12. NON-CURRENT ASSETS - INTANGIBLES
Capitalised development costs - at cost
Less: Accumulated amortisation
Patents - at cost
Less: Accumulated amortisation
Financial Report / Financial Statements
Consolidated
2018
$
2017
$
10,168,100
(7,105,483)
8,634,461
(6,167,441)
3,062,617
2,467,020
121,888
(63,432)
58,456
3,121,073
97,425
(41,124)
56,301
2,523,321
2,523,321
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 2016
Additions
Amortisation expense
Balance at 30 June 2017
Additions
Amortisation expense
Balance at 30 June 2018
Capitalised
development costs
$
2,042,794
1,186,936
(762,710)
2,467,020
1,531,906
(936,309)
Patents
$
45,218
27,137
(16,054)
56,301
24,463
(22,308)
Total
$
2,088,012
1,214,073
(778,764)
2,523,321
1,556,369
(958,617)
3,062,617
58,456
3,121,073
51
Annual Report 2018
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/(charged) to profit or loss
Closing balance
Consolidated
Note
2018
$
2017
$
328,317
271,168
232,098
26,712
1,415,311
249,788
199,455
16,572
(858,295)
(756,996)
-
1,124,130
7
1,124,130
(1,124,130)
611,576
512,554
-
1,124,130
NOTE 14. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Consolidated
2018
$
1,215,867
1,646,444
2,862,311
2017
$
1,556,934
1,287,067
2,844,001
Refer to note 25 for further information on financial instruments.
NOTE 15. CURRENT LIABILITIES - EMPLOYEE BENEFITS
Consolidated
2018
$
490,423
171,127
661,550
2017
$
377,139
153,439
530,578
Annual leave
Long service leave
52
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
NOTE 16. CURRENT LIABILITIES - OTHER
Deferred research and development income
Income received in advance
NOTE 17. CURRENT LIABILITIES - BORROWINGS
Lease liability
Financial Report / Financial Statements
Consolidated
2018
$
256,633
1,875,898
2,132,531
2017
$
211,047
1,039,643
1,250,690
Consolidated
2018
$
87,139
2017
$
200,237
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 18. NON-CURRENT LIABILITIES - BORROWINGS
Lease liability
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
2018
$
-
2017
$
87,139
Consolidated
2018
$
87,139
2017
$
287,376
53
Annual Report 2018
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:
Total facilities
NAB lease facility
Other lease facility
Corporate credit card facility
Used at the reporting date
NAB lease facility
Other lease facility
Corporate credit card facility
Unused at the reporting date
NAB lease facility
Other lease facility
Corporate credit card facility
Consolidated
2018
$
300,000
-
80,000
380,000
87,139
-
1,804
88,943
212,861
-
78,196
291,057
2017
$
300,000
115,942
50,000
465,942
171,435
115,942
-
287,377
128,565
-
50,000
178,565
NOTE 19. NON-CURRENT LIABILITIES - EMPLOYEE BENEFITS
Consolidated
2018
$
71,866
2017
$
49,399
Long service leave
54
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
NOTE 20. NON-CURRENT LIABILITIES - PROVISIONS
Lease make-good
Lease make-good
Financial Report / Financial Statements
Consolidated
2018
$
2017
$
152,649
152,649
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:
Consolidated - 2018
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
$
152,649
152,649
Consolidated
2018
$
587,359
1,382,553
1,969,912
2017
$
453,804
1,454,594
1,908,398
NOTE 22. EQUITY - ISSUED CAPITAL
Ordinary shares - fully paid
224,733,105
179,786,485
25,231,669
15,773,846
2018 Shares
2017 Shares
Consolidated
2018
$
2017
$
55
Annual Report 2018
Movements in ordinary share capital
Details
Balance at 1 July 2016
Balance at 30 June 2017
Issue of shares 20 October 2017
Issue of shares 25 May 2018
Share issue transaction costs, net of tax
Balance at 30 June 2018
Shares
$
179,786,485
15,773,846
179,786,485
19,772,732
25,173,888
-
15,773,846
4,350,001
5,789,994
(682,172)
224,733,105
25,231,669
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 will raise capital to support its growth strategy and to fund value adding projects that it deems
necessary to maintain and enhance shareholder value. Any funds raised will be utilized in adherence with the governance
principles underlying the consolidated entity’s capital management policy under the authority of the Board.
The capital risk management policy remains unchanged from the 30 June 2017 Annual Report.
56
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY NOTE 23. EQUITY - RESERVES
Share-based payments reserve
Financial Report / Financial Statements
Consolidated
2018
$
2017
$
1,731,056
1,621,813
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 2016
Share-based payment expense
Balance at 30 June 2017
Share-based payment expense
Balance at 30 June 2018
Share-based payments
$
397,911
1,223,902
1,621,813
109,243
1,731,056
NOTE 24. EQUITY - DIVIDENDS
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.
57
Annual Report 2018
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
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 2018 owed the
consolidated entity $1,621,795 (94% of trade receivables) (2017: $2,139,367 (97% of trade receivables)). This balance
was within its terms of trade and no impairment was made as at 30 June 2018. 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:
Consolidated
2018
$
212,861
78,196
291,057
2017
$
128,565
50,000
178,565
NAB lease facility
Corporate credit card facility
58
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest
date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows
disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the
statement of financial position.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing - variable
Lease liability
Total non-derivatives
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing - variable
Lease liability
Total non-derivatives
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining contractual
maturities
$
1,215,867
89,064
1,304,931
-
-
-
-
-
-
-
-
-
1,215,867
89,064
1,304,931
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
Remaining contractual
maturities
$
1,556,934
-
212,503
1,769,437
101,179
101,179
-
-
-
-
-
-
1,556,934
313,682
1,870,616
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:
Audit services - Grant Thornton
Audit or review of the financial statements
Consolidated
2018
$
2017
$
106,526
116,483
59
Annual Report 2018
NOTE 28. CONTINGENT LIABILITIES
The consolidated entity has given bank guarantees as at 30 June 2018 of $133,776 (2017: $133,776) to various landlords.
NOTE 29. COMMITMENTS
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
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
Consolidated
Note
2018
$
2017
$
310,860
584,259
895,119
89,064
-
89,064
(1,925)
292,497
853,116
1,145,613
212,503
101,179
313,682
(26,306)
Net commitment recognised as liabilities
87,139
287,376
Representing:
Lease liability - current
Lease liability - non-current
17
18
87,139
-
87,139
200,237
87,139
287,376
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 $97,043 (2017: $109,304) 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.
60
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Financial Statements
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
Termination benefits
Share-based payments
Consolidated
2018
$
2017
$
1,146,736
1,070,140
93,248
4,145
170,000
211,849
59,195
4,145
-
952,819
1,625,978
2,086,299
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 received from key management personnel
16,620
16,630
Consolidated
2018
$
2017
$
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.
61
Annual Report 2018
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
2018
$
2017
$
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.
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
Parent
2018
$
(632,910)
(632,910)
2017
$
(525,010)
(525,010)
Parent
2018
$
-
2017
$
75,981
21,645,821
12,820,906
-
-
-
-
25,231,669
(3,585,848)
21,645,821
15,773,846
(2,952,940)
12,820,906
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
62
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Financial Statements
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 2018 and 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
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:
•
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
indicator of an impairment of the investment.
NOTE 33. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name
FirstWave Technology Pty Ltd
FirstWave Cloud Technology Inc.
Principal place of business /
Country of incorporation
Australia
The United States of America
FirstWave Cloud Technology (Singapore) Ltd
Singapore
Ownership interest
2018
%
100
100
100
2017
%
100
-
-
63
Annual Report 2018 NOTE 34. CASH FLOW INFORMATION
Reconciliation of loss after income tax to net cash used in operating activities
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
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in deferred tax assets
Decrease in accrued revenue
Decrease/(increase) in prepayments
Increase in trade and other payables
Increase in employee benefits
Increase in other operating liabilities
Net cash used in operating activities
Consolidated
2018
$
2017
$
(8,717,386)
(5,066,543)
1,221,807
-
109,243
937,084
1,124,130
-
678,845
18,310
153,439
943,355
973,411
42,317
1,223,902
(840,302)
(512,554)
291,198
(1,434,324)
943,251
149,340
1,921,122
(3,531,173)
(2,309,182)
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2016
Net cash used in financing activities
Balance at 30 June 2017
Net cash used in financing activities
Balance at 30 June 2018
Lease liability
$
Insurance liability
$
481,389
(194,013)
287,376
(200,237)
87,139
98,710
(98,710)
-
-
-
Total
$
580,099
(292,723)
287,376
(200,237)
87,139
64
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY NOTE 35. EARNINGS PER SHARE
Financial Report / Financial Statements
Consolidated
2018
$
2017
$
Loss after income tax attributable to the owners of FirstWave Cloud Technology Limited
(8,717,386)
(5,066,543)
Weighted average number of ordinary shares used in calculating basic
earnings per share
Number
Number
196,098,013
179,786,485
Weighted average number of ordinary shares used in calculating diluted
196,098,013
179,786,485
earnings per share
Basic earnings per share
Diluted earnings per share
Cents
(4.45)
(4.45)
Cents
(2.82)
(2.82)
Options have been excluded in the weighted average number of shares used to calculate diluted earnings per share as
they were anti-dilutive.
65
Annual Report 2018
NOTE 36. SHARE-BASED PAYMENTS
The consolidated entity has a share option plan to incentivise certain employees and key management personnel. 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.
During the financial year 4,050,000 options were granted (2017: Nil). The share-based payment expense for the year was
$109,243 (2017: $1,223,902).
Set out below are summaries of options granted under the plan:
2018
Grant date
Expiry date
Exercise
price
Balance at the
start of the
year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of the
year
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
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
13/04/2018
13/04/2018
13/04/2018
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
31/05/2023
31/05/2024
28/02/2022
28/02/2023
28/02/2024
31/05/2024
31/05/2025
12/04/2021
12/04/2021
12/04/2021
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.45
$0.65
$0.65
$0.75
$0.75
$0.75
$0.76
$0.87
$0.40
$0.50
$0.60
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
100,000
333,400
333,300
333,300
300,000
500,000
1,416,667
316,667
316,666
21,530,000
4,050,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(250,000)
(750,000)
(1,250,000)
-
(960,000)
(1,440,000)
-
-
-
(1,440,000)
-
-
-
-
-
-
-
-
-
-
750,000
230,000
500,000
1,500,000
2,500,000
6,260,000
500,000
200,000
2,000,000
200,000
800,000
-
100,000
100,000
333,400
333,300
333,300
300,000
500,000
1,416,667
316,667
316,666
(6,090,000)
19,490,000
Weighted average exercise price
$0.32
$0.61
$0.00
$0.37
$0.36
Outstanding options vested and exercisable as at 30 June 2018: 4,203,400 (2017: 7,240,000).
66
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Financial Statements
2017
Grant date
Expiry date
Exercise
price
Balance at the
start of the
year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of the
year
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
18/05/2016
19/05/2020
19/05/2020
19/05/2021
19/05/2021
19/05/2022
11/05/2022
11/05/2023
11/05/2023
11/05/2024
11/05/2024
11/05/2025
11/05/2024
$0.30
$0.35
$0.30
$0.35
$0.40
$0.25
$0.25
$0.35
$0.25
$0.35
$0.35
$0.45
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(50,000)
(40,000)
(50,000)
(150,000)
(250,000)
-
-
-
-
-
-
-
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
(540,000)
21,530,000
Weighted average exercise price
$0.32
$0.00
$0.00
$0.37
$0.32
The weighted average share price during the financial year was $0.29 (2017: $0.40).
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.76 years
(2017: 5.34 years).
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at
the grant date, are as follows:
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
30/11/2017
13/04/2018
13/04/2018
13/04/2018
31/05/2023
31/05/2024
28/02/2022
28/02/2023
28/02/2024
31/05/2024
31/05/2025
21/04/2021
21/04/2021
21/04/2021
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.28
$0.65
$0.65
$0.75
$0.75
$0.75
$0.76
$0.87
$0.40
$0.50
$0.60
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
34.00%
-
-
-
-
-
-
-
-
-
-
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
1.75%
$0.020
$0.030
$0.010
$0.020
$0.020
$0.020
$0.020
$0.036
$0.021
$0.013
67
Annual Report 2018 NOTE 37. EVENTS AFTER THE REPORTING PERIOD
On 19 July 2018, the consolidated entity announced the signing of a software original equipment manufacturer (OEM)
development and licensing agreement with Cisco Systems Inc. This is a significant first step that is expected to drive
global growth, accelerating the ‘Expand’ phase of the consolidated entity’s five-year strategic plan.
The consolidated entity has now confirmed the key appointment of Mr David Kirton as Chief Executive Officer at a
meeting of the Board of directors held on 27 August 2018.
No other matter or circumstance has arisen since 30 June 2018 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.
68
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Financial Report / Directors’ Declaration
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 2018 and of its performance for the financial year ended on that date.
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
Non-Executive Chairman
30 August 2018
SIMON MOORE
Director
69
Annual Report 2018 INDEPENDENT AUDITOR’S REPORT
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Firstwave Cloud Technology Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Firstwave Cloud Technology Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary
of significant accounting policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
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FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Independent auditor’s report
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Going concern (Note 1)
The Group made a loss of $8,717,386 for the year ended 30
June 2018 and has accumulated losses of $21,226,472 as at
30 June 2018. The Group’s use of the going concern basis of
accounting and the associated extent of uncertainty is a key
audit matter due to the high level of judgment required in
evaluating the Group’s assessment of going concern.
The Directors have determined that the use of the going
concern basis of accounting is appropriate in preparing the
financial report. Their assessment of going concern was
based on cash flow projections. The preparation of these
projections incorporated a number of assumptions and
judgments, and the Directors have concluded that the range
of possible outcomes considered in arriving at this judgment
does not give rise to a material uncertainty casting significant
doubt on the Group’s ability to continue as a going concern.
Revenue recognition (Note 4)
Revenue of $7,817,128 has been recognised during the year
ended 30 June 2018, and income received in advance of
$3,258,451 has been included in the statement of financial
position.
This is a key audit matter given the management judgement
involved in applying a revenue recognition policy given the
complexities around accounting for income received in
advance.
How our audit addressed the key audit matter
Our procedures included, amongst others:
Obtaining and reviewing management’s cash flow forecast
to assess whether current cash levels can sustain
operations for a period of at least 12 months from the
proposed date of signing the financial statements;
Agreeing year end cash balances to third party
independent confirmations received to gain comfort around
the opening balances used in the cash flow forecast;
Assessing the Group’s current level of income and
expenditure against management’s forecast for consistency
of relationships and trends to the historical results, and
results since year end; and
Performing sensitivity analysis on the significant inputs and
assumptions made by management in preparing its cash
flow forecast; and
Assessing the adequacy of the related disclosures within
the financial report.
Our procedures included, amongst others:
Assessing the revenue recognition policies for
appropriateness and compliance with AASB 118:
Revenues, as well as reviewing consistency with the prior
period;
Comparing revenue by month and across each revenue
stream to prior periods in order to identify and follow up any
unusual trends;
Testing a sample of revenue transactions for each revenue
stream by tracing through to service agreement to identify
contract terms, and recalculating revenue recognised
during the period to assess for appropriateness;
Assessing whether revenue has been recognised in
accordance with revenue recognition policies;
Testing a sample of transactions near period end to assess
whether the related revenue has been recognised in the
appropriate period;
Reviewing management’s assessment of the impact of
adopting AASB 15: Revenue from Contracts with
Customers; and
Assessing the adequacy of related disclosures in the
financial statements.
71
Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Capitalised product development costs (Note 12)
Capitalised product development costs had a net carrying
value of $3,062,617 at 30 June 2018.
During the year the Group capitalised $1,531,906 of project
development costs. These intangible assets are being
amortised over a 5 – 7 year period, and an amortisation
expense of $936,309 has been included in the statement of
profit or loss and other comprehensive income.
AASB 138: Intangible Assets sets out the specific
requirements to be met in order to capitalise development
costs. Intangible assets should be amortised over their useful
economic lives in accordance with AASB 138.
This area is a key audit matter due to subjectivity and
management judgement applied in the assessment of whether
costs meet the development phase criteria described in AASB
138 and in relation to the estimate of the assets’ useful lives.
Our procedures included, amongst others:
Assessing the Group’s accounting policy in respect of
product development costs for adherence to AASB 138;
Evaluating management’s assessment of each project for
compliance with the recognition criteria set out in AASB
138, including discussing project plans with management
and project leaders to develop an understanding of the
nature and feasibility of key projects at 30 June 2018;
Testing a sample of costs capitalised by tracing to
underlying support such as vendor invoices and payroll
records in order to understand the nature of the item and
whether the expenditure was attributable to the
development of the related asset, and therefore whether
capitalisation was in accordance with the recognition
criteria of AASB 138;
Evaluating the reasonableness of useful lives to be applied
in future reporting periods; and
Assessing the adequacy of related disclosures in the
financial statements.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
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FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
Financial Report / Independent auditor’s report
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 17 to 26 of the Directors’ Report for the year ended 30
June 2018.
In our opinion, the Remuneration Report of Firstwave Cloud Technology Limited, for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
C F Farley
Partner – Audit & Assurance
Sydney, 30 August 2018
73
Annual Report 2018
07 SHAREHOLDER INFORMATION
The following information is provided pursuant to Listing Rule 4.10 and is current as at 13 September 2018.
Distribution of Shareholders
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 over
Rounding
Total
Total Shareholders
Units
1,748
240
162
673
299
3,122
81,359
694,421
1,345,206
27,844,968
194,767,151
224,733,105
Units
%
0.04
0.31
0.6
12.39
86.67
-0.01
100
Unmarketable Parcels
Minimum $500.00 parcel at $0.2350 per unit
Minimum
Parcel Size
2,128
Shareholders
Units
1,838
233,284
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:
Rank
Name
1
2
Mr Greg Maren + Mrs Geraldine Maren
Mr Scott Lidgett + Mrs Katherine Lidgett
Units
16,365,598
16,084,036
Units
%
7.28
7.16
74
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY Top 20 Ordinary Shareholders
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Mr Greg Maren + Mrs Geraldine Maren
Mr Scott Lidgett + Mrs Katherine Lidgett
HSBC Custody Nominees (Australia) Limited - A/C 2
Mr Edward Keating + Mrs Linda Keating
Mr Richard Beswick
Mr Simon Ryan
Willroth Pty Ltd
Mr Scott Lidgett
Willow Wattle Pty Ltd
Eremite Pty Ltd
Quotidian No 2 Pty Ltd
Markets-Alert Pty Limited
Scott McNeilage Pty Limited
Mr David Rothwell
RTEC (NSW) Pty Ltd
Mr Simon Moore
Mr Greg Maren + Mrs Geraldine Maren
Mr James Broomhead
Quotidian No 2 Pty Ltd
Eremite Pty Ltd
Top 20 Shareholders of fully paid ordinary shares (total)
Total remaining Shareholders’ balance
Unquoted Equity Securities
Units
16,365,598
16,084,036
9,502,963
6,438,047
5,561,382
4,615,000
4,107,675
3,570,811
3,444,340
3,348,565
2,452,156
2,443,120
2,293,684
2,217,391
2,115,000
2,100,000
2,036,034
2,000,000
1,810,487
1,805,000
94,311,289
130,421,816
Units
%
7.28
7.16
4.23
2.86
2.47
2.05
1.83
1.59
1.53
1.49
1.09
1.09
1.02
0.99
0.94
0.93
0.91
0.89
0.81
0.8
41.97
58.03
Options over ordinary shares
Number on issue
Number of Holders
24,570,000
44
Unlisted Options
The options on issue as at 11 September 2018 are 20,730,000.
75
Annual Report 2018Directors’ Report & Remuneration Report 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.
b.
c.
Each Shareholder entitled to vote may vote in person or by proxy, attorney or representative.
On a show of hands, every person present who is a Shareholder, or a proxy, attorney or representative of a
Shareholder has one vote.
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 and 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.
76
FirstWave Cloud Technology LimitedFIRSTWAVECLOUD SECURITY TECHNOLOGY
08 CORPORATE DIRECTORY
Directors
Alexander Kelton
Sam Saba
Scott Lidgett
Paul MacRae
Simon Moore
Edward Keating
-
-
-
-
-
-
Company Secretary
Gai Stephens
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (resigned on 13 July 2018)
Registered Office and Principal Place of Business
Level 10, 132 Arthur Street
North Sydney NSW 2060
Australia
Tel: +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
Australia
Stock Exchange Listing
FirstWave Cloud Technology Limited shares are listed on the Australian Securities Exchange (ASX code: FCT).
Website
https://www.firstwavecloud.com
Corporate Governance Statement
The Corporate Governance Statement, which was approved at the same time as the Annual Report, can be found at
https://www.firstwavecloud.com/corporate-governance.html.
FIRSTWA VE
CLOUD SECURITY TECHNOLOGY
A N N U A L
R E P O R T
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