Firstwave Cloud Technology Limited Annual Report 2020

← All annual reports

FY2020 Annual Report · Firstwave Cloud Technology Limited

Loading PDF…

2020 ANNUAL REPORT

FirstWave Cloud Technology Limited
ABN 35 144 733 595

Annual Report 2020FIRSTWAVECLOUD TECHNOLOGYABN 35 144 733 595

Annual Report
30 June 2020

Contents
Contents

Democratising Enterprise Grade Cybersecurity-as-a-Service

Chairman’s Letter

Chief Operating Officer’s Report

Directors’ Report and Remuneration Report

Financial Report

Auditor’s Independence Declaration

Financial Statements

Directors’ Declaration

Independent Auditor’s Report

Shareholder Information

Corporate Directory

Annual Report 2020

FirstWave Cloud Technology LimitedFIRSTWAVECLOUD TECHNOLOGYFIRSTWAVECLOUD TECHNOLOGY01

Democratising Enterprise Grade Cybersecurity-
as-a-Service

This is also a hard problem to solve.

To address this problem effectively, any solution must:

a. immediately prevent cyber threats attacking any aspect of their

business;

b. be enterprise grade, easy to implement and use, and affordable;

and

c. evolve to address a continually morphing cyber threat
landscape and vendors developing innovative, new security
products.

The Solution: CCSP – Democratising enterprise
grade cybersecurity-as-a-service

CCSP
the only automated cybersecurity-as-a-service
orchestration and management platform for service providers
that integrates and multi-tenants enterprise-grade email, web,
firewall virtual appliances and endpoint protection services from
global security leaders now, and the only platform that can readily
on-board and integrate innovative, new security technologies as
they become available.

CCSP integrates into the service providers’ operational and billing
systems allowing them to offer their customers a cloud-delivered,
subscription-based, integrated, low cost and expanding range of
cybersecurity services.

We call this unique value proposition ‘democratising* enterprise
grade cybersecurity-as-a-service’.

* to make of or for the people (ref The Free Dictionary by Farlex)

There’s a lot in this. Let’s break it down…

At the heart of FirstWave Cloud Technology Limited is its unique
and proprietary technology, Cloud Content Security Platform
(CCSP). CCSP holds the key to FirstWave Cloud Technology
Limited becoming a highly successful, global business.

This important technology enables our partners to offer their end-
user customers, particularly small to medium businesses, a unique
solution to address ever-increasing cybersecurity risk. This was
true before COVID-19. It is even more urgent now as globally,
workers have physically dispersed to work outside the safety of
their corporate networks thereby exposing their businesses to
even more cybersecurity risk.

The Problem for Service Providers: Increasing
complexity and demand at the same time as
declining profitability

As business and government organisations accelerate their digital
transformation to cloud-based applications and a highly mobile
workforce and customer base, service providers, our partners,
are under pressure to do more to lower cybersecurity risk for
their customers and to reverse the decline in profitability they are
experiencing in their traditional telecommunications services.

These are hard problems to solve.

To address these problems effectively, any solution must:

a. immediately meet the dynamic, complex cybersecurity needs

(risks) of their end customers;

b. be delivered as a service from public or private clouds;

c. be integrated into their existing operational and billing systems;

d. significantly lower their cost to deliver;

e. generate new and sustainable lines of revenue; and

f. over the longer term, deliver increasing functionality that
enhances the services they offer to their customers and leads
to more ‘sticky’ service contracts of increased value.

The Problem for End-users: Reducing the risk of
cyber threats by protecting their expanding digital
perimeter

COVID-19 forced businesses to send their people home or
away from the office to work. Using less secure home or
public rather than private networks led almost immediately
to a dramatic increase in cyber-attacks. Targeted phishing,
malware and ransomware attacks and data breaches, designed
to cripple businesses financially and operationally, all increased
substantially.

The end-user problem is now well-understood globally. If
organisations, particularly small and medium businesses who
have less financial and human capacity than larger organisations,
do not reduce the risk of cyber threats by protecting their rapidly
expanding new perimeter (i.e. from simply the firewall to include
email, web, and end-point devices), eventually they will be
compromised. It will be disruptive, potentially very expensive and
for some, terminal.

2 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYTerm

Automated

Cybersecurity-as-a-service

Service Providers

Orchestration and
Management Platform

Integrates

Virtual Appliance On-
Boarding & Integration

Multi-tenancy

Enterprise Grade

Appliances

Global Security Leaders

Definition

Important for both end-users and service providers. Automation reduces dependence
on manual intervention by limited and expensive technically skilled specialists,
minimizing human error and lowering operating cost.

Cybersecurity delivered as-a-service via public (e.g. Amazon Web Services) or
private (e.g. Telstra) clouds and available as a recurring periodic subscription rather
than requiring large upfront capital expenditure and ongoing maintenance fees.

Telcos, Managed Security Service Providers (MSSP), Global Systems Integrators (GSI)
and resellers for whom CCSP is built to integrate into their core systems for platform
administration, operations, requisitioning, billing and customer support, allowing
quick provisioning at lower cost.

The platform on which FirstCloud Email, Web, Firewall and Endpoint security is
deployed to the end-user, as one solution; and for the service provider, a platform
that can manage all on-boarded products via a ‘single pane of glass’ that transforms
the economics of their operational model.

All work together lowering cost and removing the conflicts of different solutions from
different providers, particularly relevant for small to medium businesses which lack
resources to select and integrate component solutions.

Transforms global security vendor email, web, firewall virtual appliances and endpoint
protection into SaaS and hence able to be deployed, repeatably at low cost under a
recurring subscription model.

Multi-tenancy is analogous to a multi-tenant apartment block. One block comprises
multiple apartments. Each tenant can live independently of other tenants. This is a
critical element of CCSP in that it enables multiple tenants (end-user organisations)
to enjoy the services of a single cybersecurity appliance license (‘apartment block’).
The benefits of this are significant – cost savings and efficiency, while each tenant is
completely separate and independent.

Meeting the sophisticated security requirements of the largest enterprises and
governments around the world.

Normally hardware-based or virtualised security devices purchased by an end-
user for their use only under license for an upfront capex payment and ongoing
maintenance fee. It is these appliances that CCSP on-boards and multi-tenants.

Cisco Systems Inc, Palo Alto Networks, Trend Micro and Fortinet – leading global
providers of enterprise grade cybersecurity appliances for email, web, firewall and
endpoint protection.

Subscription-based

A SaaS/consumption-based pricing & charging model ensuring value for money for
end-users.

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYCCSP will continue to adapt and evolve to be the cybersecurity
platform of choice for service providers. CCSP will enable service
provider partners to profitably and effectively stay abreast of the
inexorable, increasing volume and complexity of cybersecurity
attacks on their customers.

Investment in CCSP will continue in the following areas:

•

Increasing the automation and integration capabilities to enable
service providers to offer higher levels of service at lower costs;

Increasing the sophistication of automated threat detection,
response and remediation; and

Integrating new capabilities from existing and new cybersecurity
vendors.

There is no other technology in the world that does what CCSP
does democratising enterprise grade cybersecurity-as-a-service
at a time when security is at the top of priorities for all businesses,
small and large alike.

CCSP – a unique solution for a unique time.

Accessing end-user customers

To access the end-user customer, FirstWave Cloud Technology
Limited has positioned itself at the centre of a partner ecosystem.

CCSP has been purpose built for service providers globally.
These service providers have their path to the end-user customer
either through their own partners and/or direct – what we call ‘a
leveraged channel model’, i.e. a few large partners per country
‘white label’ FirstWave’s services as their own to their many
smaller partners, who in turn then sell these services to many
more end-user customers. It takes time to build momentum in a
channel model like this, but once momentum is achieved, revenue
can scale rapidly.

There are five elements of the FirstWave partner ecosystem:

1. Technology partners: Our technology partners currently include
Cisco Systems Inc, Palo Alto Networks, Fortinet and Trend
Micro. As mentioned above, they supply the world’s leading
enterprise-grade cybersecurity technology for us to multi-tenant
and integrate onto CCSP and be delivered as a service from
public or private clouds.

2. Level 1 partners: FirstWave’s current Level 1 partners are Telstra,
Cisco Systems Inc, Digital Wholesale Solutions (DWS) UK, NTT
Data UK, SHELT Middle East, and Tata Teleservices India. They
generate revenue principally by selling CCSP through their
partners (FirstWave’s Level 2 partners) to end-user customers
usually as a white-label offering. Level 1 partners sell directly
to end customers as well (e.g. Telstra) but the majority of their
revenue is delivered through their partner network. They
are characterised by being tech-savvy with strong partner
networks and existing technology-related relationships with
their partners which significantly lowers their cost to deliver.

3. Level 2 partners: Current Level 2 partners include Mobifone
(Vietnam), Orient Telecom (Malaysia), Netcom Africa (Nigeria)
and XcellHost Cloud Services (India) and iAmaze Consultants
(India) amongst many others. They generate revenue by selling
CCSP direct to end-user customers either as a white label
offering or using FirstWave’s FirstCloud brand. Level 2 partners
usually have a billing relationship with their end customers
through a suite of existing technology offerings. They sell CCSP
to either increase ‘share of wallet’ from existing customers or
break ground and develop new customers.

4. Billing partners: Level 1 or Level 2 partners who have sold
FirstWave CCSP services, have “on-boarded” end-user
customers, and are generating revenue are categorised
as “billing partners”. As such, they are a sub-set of the total
partner ecosystem that has reached the “revenue” milestone
(milestone 8) on FirstWave’s Path to Revenue.

5. End-user customers: As the name suggests, end-user
customers are consumers of FirstWave CCSP services. Some
of our partners are also end-user customers.

4 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY02

Chairman’s Letter

2020 was profoundly different to any other year for your company.
It centred on a number of key developments which our COO Neil
Pollock will expand on but in summary were:

• Enhancement of the product portfolio with new products from
Cisco Systems Inc (Umbrella Web), Fortinet (Firewall) and Trend
Micro (Endpoint Protection) integrated on the company’s Cloud
Content Security Platform (CCSP) and a new ‘bundle’ for Remote
Worker Cybersecurity taken to market;

• Significant expansion of FirstWave’s channel partner network of
Level 1 and Level 2 partners which is the key to scaling revenue
quickly once momentum is created;

• The first promising signs of momentum

international
annualised recurring revenue (IARR) with the company exiting
June at $448,000 up from $12,000 at the end of the prior year;

• COVID-19 flattened the strong momentum we experienced
in IARR early in the year by slowing our partners’ sales and
marketing activities – but its impact on dispersing workforces,
requiring increased digitisation and exposing organisations
to more cybersecurity risks has made FirstWave’s solution
increasingly relevant for large and small businesses;

• Restructuring the cost base and strengthening the capital base
through two successful capital raises which will see, for the first
time since the listing in 2016, the company’s key executives
now focus almost all their attention for the full year on execution
of the FY21 plan.

Toward the end of the financial year we took action to strengthen
the leadership of the company:

Board appointments:

During the year your company was well served by now retired
Directors Sam Saba and Simon Moore, former CEO, David Kirton
and former CFO, Jason Singh. On behalf of the Board and the
company I sincerely thank them for their contributions. Toward the
end of the financial year we took action to strengthen leadership
of the company at Board level with:

• The appointment of David Acton as a Non-Executive Director of
the company, Chairman of the Remuneration and Nominations
Committee and a member of the Audit and Risk Committee.
David brings first class capital markets and operational
experience and has already proven to be a strong and valuable
contributor;

• Formation of a new Board Committee, the Technology and
Markets Committee (TMC), chaired by Non-Executive Director
and founder, Scott Lidgett. The charter of this committee
is to provide critical analysis, guidance, advice, networking
and introductions to assist FCT realise significant growth in
international recurring revenues;

• Appointment of

Inc, ANZ Chief
former Cisco Systems
Technology Officer, Kevin Bloch, as Advisor to the company
through the TMC. Kevin’s role is to review FirstWave’s current
product and commercialisation strategy and develop, with the
TMC, a program of work that will help the company deliver its
FY21 plan in the short term, and position it for sustained success
in the long term.

Executive appointments:

• Appointment of Neil Pollock, formerly the company’s Chief
Operating Officer, as Chief Executive Officer. Aside from the
three years Neil has been with the company, he brings almost
thirty years’ experience in information and communications
technology, telecommunications, data centre technology and
military technology across Australia, Asia, India, the Middle East
and Europe to the role of CEO; and

• Appointment of Iain Bartram as Chief Financial Officer to take
over from Interim CFO Murray Scott. Iain brings over twenty
years’ experience as a hands-on, strategic CFO with multi-site
and international experience in high growth, listed and unlisted
technology businesses.

Neil now leads an Executive team comprising in addition to Iain:

• Simon Ryan, Chief Technology Officer
• Gai Stephens, Company Secretary and General Counsel
• Roger Carvosso, Head of Strategy
• Sundar Bharadwaj, Head of Sales UK, MEA
• Shekila Ramalingham, Head of Sales APAC, ANZ
• Santosh Agrawal, Head of Customer Operations

Prospects for FY21:

In the June capital raise the company presented a prospective
plan for FY21. The revenue and margin aspects of the plan were
developed from the bottom up i.e. by partner by product by price,
by quantity. The Plan reflects our line of sight through partners to
end-user customers and is the most informed view the company
has ever had of its forward prospects. The Plan projects cash
flow breakeven in December 2022.

We have placed all the expected caveats around this prospective
plan with the major risks being business activity not returning to
pre-COVID-19 levels by 1 October, the take-up we see coming
into FY21 not materializing at the rate we are projecting, and loss
of key Level 1 partners or of key personnel, albeit that these are
more manageable. The company will report progress against the
plan to shareholders each quarter.

The senior managers and Directors have entered a significant
‘partnership’ with shareholders – they have committed to the
plan being realised by both their direct investment in shares
and by sacrificing remuneration to take equity through service
rights under the FirstWave Cloud Technology Limited Rights Plan
approved by shareholders at the July EGM. We trust shareholders
appreciate and value this commitment.

Annual Report 2020 5

FIRSTWAVECLOUD TECHNOLOGY

In Closing

While COVID-19 will continue to shadow your company in the near
term, we believe the macro environment has improved considerably
with security, as I said earlier, now top of mind globally for large
and small enterprises alike. The task before the FirstWave team
remains to accelerate the momentum we are now seeing in our
channel partners in taking our solution to their end customers. On
behalf of the Board I express my appreciation for the way in which
the FirstWave employees have adapted and applied themselves
to the changed operating environment. This has not been without
its challenges, but their ability and willingness to step up to these
has been very pleasing to see.

The Board is also appreciates the funding support that has been
provided by its shareholders since listing, but particularly in FY20.
Shareholders can be confident that my, your Directors’ and the
whole FirstWave team’s focus is on getting the results in FY21 that
will reward you for the patience you have shown over the journey
so far.

Kind regards,

John E Grant
Chairman

6 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY03

Chief Operating Officer’s Report

As the Chairman has remarked, 2020 was an extraordinary year.
On the one hand your company made strong progress in key
areas that underpin growth in international revenues, while on
the other, COVID-19 profoundly impacted the business of our
partners and their customers as sales forces were either stood
down or sent home to work. The impact of COVID-19 is now well
appreciated across the world but it did not prevent your company
from:

• enhancing the product portfolio;

• significantly expanding partner and platform networks to be

present on five continents;

were able to reduce the churn in CWS revenue as we migrated as
many customers as possible to the new service.

Our continued investment in product development in 2020
ensured your company remained at the forefront of the cloud-
based cybersecurity industry and enhanced the attractiveness of
CCSP to existing and potential new partners.

Expanding the Partner and Platform Networks

Our channel partner network is the key to our commercial
success. It is a critical factor in delivering revenue growth. 2020
saw substantial growth in our partner numbers.

• seeing promising momentum in international revenues that, in
part, offset the churn-driven decline in domestic revenue;

There are five elements of the FirstWave partner ecosystem
explained in more detail in the first section of this Annual Report:

•

responding to the onset of the COVID-19 pandemic; and

restructuring the cost and capital base to become more
efficient and responsive.

Enhancing the Product Portfolio

In 2020, we continued to invest in the development of product
to ensure we remain competitive in a highly segmented
cybersecurity market.

In parallel with our platform deployments, we released a number
of key technology offerings on our core Cloud Content Security
Platform (CCSP), including two new firewall options enabling our
partners to offer enterprise grade protection at an affordable price
to their end customers. A firewall works by stopping intruders from
gaining access to critical company data via a business network,
but the technology has always been considered expensive and
out of reach for most small and medium enterprises. Our new
firewall offerings make this level of protection affordable to all
business segments but particularly small to medium businesses.

The Remote Worker Cybersecurity product we brought to
market in response to COVID-19 introduced a new technology
partner, Trend Micro, in the process. This offering demonstrated
the flexibility and capability of both the FirstWave team and our
platform as we delivered a solution into the market in just two
weeks. Our responsiveness included offering this new product
on a freemium basis with a 30, 60 or 90 day “free” period prior to
converting to pay-per-use. Launched in April 2020, by the end of
the financial year we had over 8,000 instances in service and had
achieved a 100% conversion from the free period to payment.
This was a joint effort with, and in support of, our partners and
their customers as many of them were exposed to greater risk of
cyber-attack as they moved to remote working. This is precisely
where endpoint protection (EPP) works best. It secures so-called
“endpoints”, such as laptop or desk top computers, from being
attacked by malicious intruders and phishing attacks when they
are accessing company files and data from outside the protection
of a more robust enterprise network. Our Trend Micro-based
offering is one of the world’s leading enterprise-grade EPP
solutions. It complements our advanced malware protection
offering which we deliver in partnership with Cisco Systems Inc
and enables our partners to protect their customers’ endpoints
as they work-from-home.

We also launched a replacement web security solution into our
Australian market to replace the sun-setted Cisco Systems Inc
Web Security (CWS) appliance. Whilst not exactly like-for-like, we

• Technology partners which supply

leading
enterprise-grade cybersecurity technology for us to integrate
onto the company’s CCSP and deliver as consumable SaaS
security services;

the world’s

• Level 1 partners which generate revenue principally by selling
CCSP through their partners to end-user customers, usually as
a white-label offering;

• Level 2 partners which generate revenue by selling CCSP

direct to end-user customers;

• Billing partners, both Level 1 and Level 2 partners who have
reached the “revenue” milestone (milestone 8) on the Path to
Revenue; and

• End-user customers, the consumers of FirstWave CCSP

services.

In 2020 we:

• grew the number of technology partners from 2 to 4 adding
Fortinet and Trend Micro to our existing partners, Cisco Systems
Inc and Palo Alto Networks;

• added Digital Wholesale Solutions (DWS) as a Level 1 partner
in the UK, and subsequent to the year-end, added Tata
Teleservices as a Level 1 Partner in India;

•

increased the number of Level 2 partners on the path to
revenue from 23 at the start of the year to 130 by the end of
the year (including 75 platinum partners through DWS) giving us
partner presence on five continents; and

• converted 25 more of these partners to billing and exited the
year with 28 billing partners across the globe – up from 3 at
the end of the previous year.

This was supported by the continued rollout of additional
platforms. We entered 2020 with 6 platforms. By the end of the
year, we had 11 platforms deployed across 4 continents. Our
deployments were done in consultation with our partners to
shorten the time to convert opportunities to revenue. CCSP is
now deployed in Australia, India, Europe and North America and
we are servicing the cybersecurity needs of customers across
the world supported by 24x7 operations across two geographies,
Australia and India. These 2020 deployments bring to a close the
first phase of establishing a global technology presence.

Annual Report 2020 7

FIRSTWAVECLOUD TECHNOLOGYRevenue

In 2020, we generated revenue, albeit still small, through our
international partners. Total international revenue grew from
$14,000 to $386,000 and your company became truly global
with customers in North and South America, the United Kingdom
and Europe, the Middle East and Africa, India, Sri Lanka, Malaysia,
Vietnam, New Zealand and Australia.

International annualized recurring revenue (IARR), which is the
international revenue billed in the month of June 2020 multiplied
by 12, grew from $12,000 to $448,000 and, despite the impact of
COVID-19, revenue maintained an upward trajectory in the second
half from $232,000 at January 31.

This result was below our and your expectations but due to
COVID-19, there was nothing we could do to change this outcome.

Domestic revenue through our Level 1 Partner, Telstra, was
impacted by churn associated with the sun-setting of our integrated
web security solution, CWS, by our technology partner, Cisco
Systems Inc, For clarity, a replacement product was intended to
be available prior to sun-setting but this did not materialise from
our technology partner in time for it to be an effective replacement
solution. The solution is now available and being integrated onto
the platform.

However, as a result of the impact of COVID-19 and the churn, total
revenue for 2020 declined 7% year on year.

COVID-19

In the first half of 2020, the company had established solid
momentum across technology and product development, sales
and customer operations. International revenue had started to
grow (as reported above) and cost out initiatives committed at the
Annual General Meeting in October 2019 had started to reduce
monthly cash outflow.

COVID-19 hit in February and impacted businesses across the
world. By the end of February 2020, the momentum which had
been built in the first half stalled. Our partners’ sales activity
ceased as their customers paused, trying to understand the
potential business impact; sales teams were sent home, stood
down or laid off; and partner communication and focus turned
to sustaining business and reviewing strategies. At FirstWave
Cloud Technology Limited, we transitioned our entire workforce
to remote working, shut down our offices and looked at ways to
further reduce the monthly cash out flow.

Almost simultaneously, the world experienced a significant and
sustained increase in cyber-attacks. Very quickly, we saw more
frequent reports of targeted phishing attacks, increased malware
and ransomware attacks and data breaches as workers accessed
company systems and data from remote locations via the web
and outside protected enterprise networks. What we witnessed
commencing in March 2020 was the creation of a new way of
working – a new normal – and it was very clear what we had to do
at FirstWave Cloud Technology Limited.

As a result of the efforts we’d made and thanks to the support
shareholders have given the company over a long time to build
our global partner network, enhance and deploy our technology
and platforms, establish a multi-regional 24x7 customer
operations capability, and deliver our product roadmap, we were
well-prepared to manage the risk and leverage the opportunity
presented by the onset of COVID-19 and the “new normal”:

• The rapid move to remote working created a well-publicised
and documented significant increase in cybersecurity risk for
businesses and thereby expanded our directly addressable
market to $1.88billion. It increased our line of sight over the mid-
term (the two to three-year horizon) by 30% up from $45million
to $60million;

• The efforts made to build our partner eco-system saw us ready
to support them when their end-user customers asked for
increased protection while working from home;

• We designed, developed and commercialised a Remote
Worker Cybersecurity product bundle comprising email security
upgrades, web security and endpoint security from inception to
global release in under two weeks;

• We had 11 platforms deployed in key markets to meet sovereign

data laws.

We were in the right place, at the right time with the right technology
and I believe this is why, with our partner’s confidence, we were
able to maintain a positive trajectory in international revenue
growth, albeit below expectations.

In macro terms, the landscape for your company has improved as
security is now top of mind for large and small enterprises alike
even though we see continuing near term uncertainty in restoration
of business activity from COVID-19. Our FY21 plan assumes activity
levels will return to pre-COVID levels by 1 October 2020.

Restructuring the cost and capital base

At the AGM in October 2019, the company committed to reduce
expenditure for the balance of the year. A plan was put in place to
deliver $1.3million in cost savings over the remainder of the year
(which equates to a reduction of $2million per annum) to ensure
the company could fund operations through to the end of the
financial year.

The initiatives we implemented and our focus on cost control and
expense management ensured we achieved this target.

However, with the onset of the COVID-19 pandemic with its impact
on business performance as detailed above, a more significant
challenge emerged – sustaining operations beyond July 2020 in
a capital constrained environment.

This was addressed by the June capital raise of $14.9million in
which shareholders showed solid support for FirstWave Cloud
Technology Limited and for which I thank them.

8 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY
Looking Forward

In Closing

Our partners are telling us they are seeing strengthening macro
demand for cybersecurity-as-a-service. They are also telling us
they are seeing continued COVID-19 inspired restraint but that
there is a determination to get back to business. Your management
team is doing all it can to leverage these indications as we focus
on only two things in 2021: revenue and cashflow.

There are a number of projects across our geographies currently
underway which reinforce the feedback from our partners. While
our 2021 plan hinges on business returning to pre-COVID-19
levels of activity by October 2020, in 2021, it also sees us:

•

invest more in pre-sales and sales resources to speed up the
path from contract to revenue;

• continue to invest in product development to expand our

addressable market and leverage the value of CCSP;

• continue to focus on expense management; and

• streamline, automate and expand our 24x7 operations
capabilities to continue to make our partner and end-user
customer experience a differentiator in the market, and to
support faster order to revenue turn on.

Overall, FY20 was a disappointing year given the momentum
we’d built in the first half.

The COVID-19 pandemic flattened our revenue growth trajectory
from February 2020. Through all this, there was a silver lining
provided by your continued support through additional funding;
the increased global awareness of cybersecurity; the launch and
take-up of the remote worker cybersecurity offering in record
time; feedback from partners about a determination to get back
to business; and our customer operations teams continued focus
on partners and end-user customer experience while transitioning
to remote working.

Your management team and I are confident we have the
technology, the partners and the people to succeed. We are
united and aligned to deliver on revenue and cashflow in the
year ahead. We want 2021 to be a year of celebrating success
for everyone.

Kind regards,

Neil M Pollock
Chief Operating Officer

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY04

Directors’ 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’, ‘FCT’ or ‘parent
entity’) and the entities it controlled at the end of year 30 June
2020.

Directors
The following persons were directors of the company during the
whole of the financial year and up to the date of this report, unless
otherwise stated:

John Grant
Chairman (appointed on 1 July 2019)

Scott Lidgett
Paul MacRae
David Acton (appointed on 15 June 2020)
Simon Moore (resigned on 30 August 2019)
Sam Saba (resigned on 20 December 2019)

Principal activities
The principal continuing activities of the consolidated entity
comprises 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 $13,777,481 (30 June 2019: $11,007,337).

Profit or loss performance

The consolidated entity’s revenue for the year was $8,252,880,
which represents a decline of 6.6% over the prior comparative
period (‘PCP’). Licensing and support revenue declined by 12.7% for
the year and represents 90% of total revenue. Professional services
revenue was $806,051 increasing 168% on PCP, representing 10%
of total revenue.

The consolidated entity’s loss after income tax amounted to
$13,777,481 (30 June 2019: loss of $11,007,337). This result includes
the full impact of the recognition of non-cash share-based
payment expenses of $2,134,044 (30 June 2019: $1,009,962)
due to stock options and share rights granted to employees and
officers. The share-based payments expenses includes $512,467
toward share rights issued in lieu of cash salary.

Statement of financial position

Cash and cash equivalents increased by $7,220,170 to $15,281,338
at 30 June 2020 (30 June 2019: $8,061,168). This is supported by
two capital raises throughout the year and a share purchase plan,
totalling $19,990,848 (net of expenses). Of this increase to cash
and cash equivalents, $8,700,779 represented cash outflows
from operating activities (30 June 2019: $6,345,820). Cash
used in operating activities increased by $2,354,959, up 37%
from 30 June 2019 mainly attributed to the consolidated entity’s
investment to drive international expansion. Trade receivables of
$450,055 at 30 June 2020 (30 June 2019: $572,697) have been
substantially realised after the year end.

10 Annual Report 2020

Product and development costs of $3,670,991 have been
capitalised during the year as an intangible asset in the
consolidated entity’s statement of financial position. The
investment has increased 69% PCP from $2,167,980 in FY19.

Significant changes in the state of affairs
During the financial year, the company completed capital raises
totalling $21,615,359 (before costs) by issuing 366,819,387
ordinary shares. Refer to note 21 for further details.

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
The Coronavirus (COVID-19) pandemic is ongoing and impacted
performance of the consolidated entity’s international operations
in the second half by flattening the trajectory in revenue
growth experienced through the first half. The consolidated
entity has provided a prospective forward plan to investors
and shareholders which assumes business activity levels will
be restored to pre COVID-19 levels in all geographies by the
beginning of the second quarter of FY21. This may well not be the
case as the situation is unpredictable and as a consequence, so
is the economic environment, the response that may come from
our partners and end customers, and any impact this may have
on our FY21 plan.

No other matter or circumstance has arisen since 30 June 2020
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 FY21 are:

•

increasing investment in sales and marketing to expand the
partner channel, to increase billing partners to 40 from 26 and
improve conversion of opportunity to revenue;

incentivising the consolidated entity’s and partners’ sales teams,
streamlining and automating engagement with the consolidated
entity’s partners;

investing in the product roadmap to add additional security
appliances onto the Cloud Content Security Platform (‘CCSP’)
and to add advanced detection and response capability to all
offerings; and

• scaling platform infrastructure and customer operations to

ensure 24/7 delivery for customers across the globe.

Environmental regulation
The consolidated entity is not subject to any significant
environmental regulation under Australian Commonwealth or
State law.

FIRSTWAVECLOUD TECHNOLOGYInformation on directors
Information on the directors of the company as at 30 June 2020
is set out below:

John Grant
Executive Chairman

Qualifications
John has a degree in Engineering with Honours

Experience and expertise
John has an extensive career spanning technology, engineering
and construction and sports administration. He has held leadership
positions including Managing Director and CEO of ASX listed
technology company, Data#3 Limited, and inaugural Chair of the
Australian Rugby League Commission. He is currently a Non-
Executive Director of UniQuest Pty Ltd and Stadiums Queensland.
He has also chaired or been a member of various industry and
government advisory groups and industry associations.

Other current directorships
None

Former directorships (last 3 years)
None

Special responsibilities
Member of the Remuneration and Nomination Committee and
member of the Audit, Risk and Compliance Committee

Interests in shares
3,995,400 ordinary shares

Interests in options
4,200,000 Options and 6,766,638 Service rights

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 and Managing Director

Other current directorships
None

Former directorships (last 3 years)
None

Special responsibilities
Chairman of Remuneration and Nomination Committee and
member of the Audit, Risk and Compliance Committee

Interests in shares
21,296,712 ordinary shares

Interests in options
1,200,000 Options and 2,040,740 Restricted rights

Paul MacRae
Non-Executive Director

Qualifications
Paul is a Graduate of the Australian Institute of Company Directors
and holds Business qualifications and a Bachelor of Science in
Chemistry.

Experience and expertise
Paul has a successful history of setting up and running businesses
in the IT industry in Australia and overseas. Paul’s background
includes having run divisions of TechnologyOne Limited. 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 & NZ (which was acquired by Symantec to establish
their cloud business). He set up the Global reservation system
Galileo in New Zealand. He was involved in selling his successful
SAP Consultancy and has been instrumental in growing business
at several leading software companies.

Other current directorships
None

Former directorships (last 3 years)
None

Special responsibilities
Chairman of the Audit, Risk and Compliance Committee and
member of the Remuneration and Nomination Committee

Interests in shares
3,682,084

Interests in options
1,200,000 Options and 2,040,740 Restricted rights

David Acton
Non-Executive Director

Qualifications
David holds a Bachelor of Business in Accounting and Finance

Experience and expertise
David has been a senior advisor at Rothschild Australia with a
focus on equity capital markets since 2017. Prior to 2017, David
spent 25 years at global investment banks with roles in equity
research, distribution and capital markets. Between 2000 and
2016, he worked at Goldman Sachs in New York, Singapore and
Sydney as an equity specialist advising institutional investors.
From 2006 to 2016, David was a partner at Goldman Sachs
JBWere and a Managing Director at Goldman Sachs where he
held board and risk committee roles.

Other current directorships
None

Former directorships (last 3 years)
None

Interests in shares
None

Interests in options
960,000 Restricted rights

‘Other current directorships’ quoted above are current directorships
for listed entities only and excludes directorships of all other types
of entities, unless otherwise stated.

‘Former directorships
(last 3 years)’ quoted above are
directorships held in the last 3 years for listed entities only
and excludes directorships of all other types of entities, unless
otherwise stated.

Annual Report 2020 11

FIRSTWAVECLOUD TECHNOLOGY

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 4 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.

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 2020, and the number of meetings attended by each director were:

Name

John Grant

Scott Lidgett

Paul MacRae

David Acton

Simon Moore

Sam Saba

Full Board

Remuneration and
Nomination Committee

Audit, Risk and Compliance
Committee

Attended

Held

Attended

Held

Attended

Held

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

Principles used to determine the nature
and amount of remuneration
A major contributor to the performance of the consolidated entity
is the quality of its directors and executives, and the Board is
responsible for determining and reviewing their remuneration
arrangements.

The consolidated entity’s remuneration framework aims to attract,
motivate, reward and retain high performing and high quality
personnel, and consists of a level of fixed remuneration that is
market competitive and appropriate in recognition of the role and
the candidate’s experience, and a level of variable remuneration
that aligns with sustained increase in shareholder value and
rewards performance for results delivered.

12 Annual Report 2020

The Board of Directors is also cognisant of remuneration being
within reasonable shareholder expectations and to best practice
levels of transparency.

Non-executive directors’ remuneration

Fees and payments to non-executive directors (‘NEDs’) 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’ remuneration and payments are appropriate and in line
with the market.

The maximum amount of fees that can be paid to NEDs is capped
by a pool approved by shareholders. At a General Meeting, held
on 15 April 2016, shareholders approved the current fee pool of
$400,000 per annum which is recorded on an accrual basis. The
fee pool and the base directors’ fees did not change in FY2020.
Grants of options approved by shareholders do not count towards
this limit.

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 framework has four components:

• base pay and non-monetary benefits;

• short-term performance incentives (STI);

•

long term incentives (LTI) in the form of share performance
rights; and

• other remuneration such as superannuation and long service

leave.

FIRSTWAVECLOUD TECHNOLOGYUse of remuneration consultants

During the financial year ended 30 June 2020, the consolidated
entity, through the Remuneration and Nomination Committee,
engaged Godfrey Remuneration Group (GRG), remuneration
consultants, to review its existing remuneration policies and
provide recommendations on how to improve its remuneration
structure. This resulted in the introduction of a share rights
plan which was subsequently approved by shareholders at the
Extraordinary General Meeting held on 29 July 2020. GRG was
paid $68,995 for these services.

An agreed set of protocols was put in place to ensure that the
remuneration recommendations would be free from undue
influence from key management personnel. These protocols
include requiring that the consultant not communicate with
affected key management personnel without a member of the
Nomination and Remuneration Committee being present, and
that the consultant not provide any information relating to the
outcome of the engagement with the affected key management
personnel. The Board is also required to make inquiries of the
consultant’s processes at the conclusion of the engagement to
ensure that they are satisfied that any recommendations made
have been free from undue influence. The Board is satisfied that
these protocols were followed and as such there was no undue
influence.

Voting and comments made at the company’s 2019
Annual General Meeting (‘AGM’)

At the 2019 AGM, shareholders voted to approve the adoption of
the remuneration report of the company for the year ended 30
June 2019. The company did not receive any specific feedback
at the AGM regarding its remuneration practices.

The combination of these comprises the executive’s total
remuneration.

Fixed remuneration, consisting of base salary, superannuation
and non-monetary benefits, is reviewed annually by the Board
based on individual and business unit performance, the overall
performance of the consolidated entity and comparable market
remuneration.

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 program is designed to align the
targets of the business units with the targets of those executives
responsible for meeting those business unit targets. STI payments
are granted to executives based on specific annual targets and
key performance indicators (KPI’s) being achieved. KPI’s relate
to qualitative and quantitative leadership performance and are
subject to Board discretion. No STI was paid to KMP and other
executives for the year ended 30 June 2020.

The long-term incentives are in the form of share performance
rights and 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 2020.

is determined

The chairman’s remuneration
independently
to the remuneration of the non-executive directors based on
comparative roles in the external market. The chairman is not
present at any discussions relating to the determination of his
own remuneration.

Grant of share rights in lieu of reduced FY20 cash
remuneration for executives

The consolidated entity has provided a one-off grant of share
rights as compensation for the reduction in cash remuneration for
KMP. The number of rights to be granted has been calculated by
dividing the cash remuneration forgone by $0.045 for directors
and other KMP whose share rights were granted on 1 June, 2020
and $0.10 (5 day VWAP) for directors and other KMP whose share
rights were granted after 1 June, 2020. The share rights were
formally granted at the Extraordinary General Meeting (‘EGM’)
held on 29 July 2020. Each share right has been valued at the
share price of 10.5 cents on grant date. Refer to ‘share-based
compensation’ section below for further details.

Consolidated entity performance and link to
remuneration

STIs were linked directly to performance with any payment
requiring revenue to be achieved above target. This target was
not achieved and consequently, none were paid. Any STIs and
LTIs granted are at the discretion of the Board. The current share
option plan is subject to participants meeting service conditions
at the vesting date. There were no performance conditions linked
to the share option plan.

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYDetails of remuneration

The KMP of the consolidated entity consisted of the directors of FirstWave Cloud Technology Limited and the following persons:

• David Kirton - Chief Executive Officer (resigned on 28 February 2020)

• Simon Ryan - Chief Technology Officer

• Neil Pollock - Chief Operating Officer

• Jason Singh - Chief Financial Officer (resigned on 28 February 2020)

Changes since the end of the reporting period:

Neil Pollock was appointed as Chief Executive Officer with effect from 31 July 2020.

Iain Bartram was appointed as Chief Financial Officer with effect from 17 August 2020.

Details of the remuneration of KMP of the consolidated entity are set out in the following tables:

Short-term benefits

Termination
benefits

Post-
employment
benefits

Long-term
benefits

Share-based payments

Cash salary
and fees

Other

Super-
annuation

Long
service
leave

Cash
settled

Equity-settled
options/
rights

Total

22,500

24,167

14,500

26,400

184,499

217,030

288,833

386,035

163,056

1,327,020

5,352

1,378

21,003

38,840

20,260

21,003

9,251

31,548

81,528

21,003

120,368

121,547

9,251

78,944

106,796

78,944

103,111

100,800

15,878

31,545

57,945

571,469

776,971

276,130

134,216

453,303

156,300

573,883

265,587

1,152,218 2,730,404

2020

Non-Executive
Directors:

Scott Lidgett

Paul MacRae

David Acton*

Simon Moore**

Sam Saba**

Executive Director:

John Grant*
(Chairman)

Other Key
Management
Personnel:

David Kirton***

Simon Ryan

Neil Pollock

Jason Singh***

* Represents remuneration from the date of appointment as KMP for John Grant on 1 July 2019 and David Acton on 15 June 2020.
** Represents remuneration up to the date of resignation as KMP for Simon Moore on 31 August 2019 and Sam Saba on
20 December 2019.
*** Represents remuneration up to the date of resignation as KMP for David Kirton and Jason Singh on 28 February 2020.

14 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYShort-term benefits

Post-
employment
benefits

Long-term
benefits

Super-
annuation

Long service
leave

2019

Non-Executive
Directors:

Sam Saba

Scott Lidgett

Paul MacRae

Simon Moore

Alexander Kelton

Edward Keating

Other Key
Management
Personnel:

David Kirton

Simon Ryan

Neil Pollock

Jason Singh*

Cash salary
and fees

Other

96,000

48,000

58,000

30,250

2,190

333,846

270,846

312,601

53,260

1,252,993

4,560

5,510

25,000

23,474

21,778

4,524

Share-based payments

Cash
settled

Equity-settled
options/
rights

Total

42,293

138,293

3,037

52,560

48,000

66,547

30,250

2,190

44,138

217,263

620,247

16,767

30,000

20,600

361,687

40,000

169,173

543,552

4,400

25,189

87,373

84,846

16,767

118,538

477,555

1,950,699

* Jason Singh was appointed Chief Financial Officer on 11 April 2019.

The proportion of remuneration linked to performance and the fixed proportion are as follows:

Name

2020

2019

2020

2019

2020

2019

Fixed remuneration

STI

LTI

Non-Executive Directors:

Scott Lidgett

Paul MacRae

David Acton

Simon Moore

Sam Saba

Alexander Kelton

Edward Keating

Executive Director:

26%

23%

100%

46%

100%

95%

69%

100%

John Grant (Chairman)

26%

Other Key Management Personnel:

David Kirton

Simon Ryan

Neil Pollock

Jason Singh

100%

70%

73%

100%

58%

86%

62%

66%

74%

77%

100%

54%

74%

30%

27%

31%

35%

31%

29%

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYService agreements
The consolidated entity enters into employment agreements
with each KMP. The employment agreements with the KMP are
continuous (i.e. not of a fixed duration) and includes a minimum 4
weeks’ notice on the part of the employee and the consolidated
entity. The employment agreements contain substantially the
same terms which include the 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.
Key management personnel have no entitlement to termination
payments in the event of removal for misconduct.

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 2020.

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:

Name

John Grant

Number
of options
granted

Grant date

Vesting date
and exercisable
date

Expiry date

Exercise price

Fair value per
option at grant
date

1,400,000

20/11/2019

01/07/2020

01/07/2023

1,400,000

20/11/2019

01/07/2021

01/07/2024

1,400,000

20/11/2019

01/07/2022

01/07/2025

$0.304

$0.425

$0.547

$0.084

$0.087

$0.093

Options granted carry no dividend or voting rights.

Grant of share rights in lieu of reduced FY20 cash
remuneration:

Pursuant to the Rights Plan the consolidated entity granted two
types of share rights:

• Service rights to the Executive Chairman and Senior Executives;

and

• Restricted rights to Non-Executive Directors.

Service rights

Directors and other KMPs sacrificed a portion of their salaries and
fees for service rights and restricted rights. These rights vest on
a quarterly basis at the end of each financial year quarter. The
service rights are subject to service conditions and there are no
performance conditions. The exercise price on the service rights
is $nil as these rights have been granted in lieu of salary sacrifice
of the directors or other KMPs normal remuneration.

Restricted rights

Restricted rights to NEDs vest on grant date and are not forfeited
on resignation. The sale of the rights is restricted whether or not
any Non-Executive Directors continues as a director until the
expiration of three years from the date of grant.

As the service rights and restricted rights were acquired by
Executives and Directors agreeing to forgo their salaries and fees
the maximum allowable life of 15 years was adopted. The share
rights issued during the year will not expire until June 2035.

The number of share rights approved subsequent to the financial year to each director and other KMP is set out below:

Share rights over ordinary shares

Number of rights granted

John Grant

Scott Lidgett

Paul MacRae

David Acton

Simon Ryan

Neil Pollock

16 Annual Report 2020

6,766,638

2,040,740

960,000

4,278,681

1,903,296

17,990,095

FIRSTWAVECLOUD TECHNOLOGYAdditional 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 KMP of the
consolidated entity, including their personally related parties, is
set out below:

Ordinary shares

John Grant

Sam Saba

Scott Lidgett

Paul MacRae

Simon Moore

David Kirton

Simon Ryan

Neil Pollock

Balance at the
start of the year

Received as part
of remuneration

Purchased
during the year

Disposals/
other*

Balance at the
end of the year

876,623

19,011,990

2,045,602

4,358,386

142,857

4,615,000

31,050,458

3,995,400

(876,623)

2,284,722

1,636,482

21,296,712

3,682,084

(4,358,386)

(142,857)

1,000,000

340,162

5,615,000

340,162

9,256,766

(5,377,866)

34,929,358

* Disposal/others represents shares held at resignation date.

Option holding

Options over ordinary shares

John Grant

Sam Saba

Scott Lidgett

Paul MacRae

David Acton

Simon Moore

David Kirton

Simon Ryan

Neil Pollock

Jason Singh

Balance at the
start of the year

Granted

Lapsed

Other*

Balance at the
end of the year

4,200,000

1,000,000

1,200,000

1,000,000

5,998,000

1,500,000

4,000,000

1,750,000

(666,667)

(333,333)

(1,000,000)

(4,332,000)

(1,666,000)

(150,000)

(500,000)

(1,250,000)

1,200,000

1,350,000

4,000,000

17,648,000

4,200,000

(5,648,667)

(4,249,333)

11,950,000

* Others represents options held on resignation date.

No options were exercised during the year ended 30 June 2020.

Share rights over ordinary shares:

outstanding balance at 4.5% per annum. During the year ended
30 June 2020, interest of $9,972 was received from Simon Ryan
(2019: $13,296) in respect of this loan.

As detailed in the ‘share-based compensation’ section above,
17,990,095 share rights have been granted to KMP subsequent
to the financial year end.

This concludes the remuneration report, which
has been audited.

Loans to key management personnel and their
related parties

An outstanding loan to Simon Ryan as at 30 June 2020 amounted
to $221,520 (2019: $221,520). Interest is charged on the

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYShares under option
There were 65,535,999 unissued ordinary shares of FirstWave
Cloud Technology Limited under option including 30,000,000
options valued at $1,830,000 granted to sub-underwriters in
lieu of share-issue transaction costs towards capital raising
undertaken during the year ended 30 June 2020 and 34,606,769
unissued ordinary shares under share rights outstanding at the
date of this report. The options are exercisable at a weighted
average exercise price of $0.23 per option. Share rights have no
exercise price as they have been issued in lieu of cash salary.

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 2020 and up to the date of this report.

Indemnity and insurance of officers
The company has indemnified the directors and executives of
the company for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except
where there is a lack of good faith.

During the financial year, the company paid a premium in respect
of a contract to insure the directors and executives of the company
against a liability to the extent permitted by the Corporations Act
2001. The contract of insurance prohibits disclosure of the nature
of the liability and the amount of the premium.

Indemnity and insurance of auditor
The company has not, during or since the end of the financial year,
indemnified or agreed to indemnify the auditor of the company or
any related entity against a liability incurred by the auditor.

During the financial year, the company has not paid a premium in
respect of a contract to insure the auditor of the company or any
related entity.

auditor’s independence requirements of the Corporations Act
2001 for the following reasons:

• all non-audit services have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of
the auditor; and

• none of the services undermine the general principles relating
to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants (including Independence
Standards) issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor’s
own work, acting in a management or decision-making capacity
for the company, acting as advocate for the company or jointly
sharing economic risks and rewards.

Officers of the company who are former
partners of Grant Thornton

There are no officers of the company who are former partners of
Grant Thornton.

Auditor’s independence declaration
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out
immediately after this directors’ report.

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,

John E Grant
Chairman

Proceedings on behalf of the company
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the
company is a party for the purpose of taking responsibility on
behalf of the company for all or part of those proceedings.

Paul MacRae
Director

31 August 2020
Sydney

Non-audit services
Details of the amounts paid or payable to the auditor for non-
audit services provided during the financial year by the auditor
are outlined in note 26 to the financial statements.

The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the
general standard of independence for auditors imposed by the
Corporations Act 2001.

The directors are of the opinion that the services as disclosed in
note 26 to the financial statements do not compromise the external

18 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY05

Financial Report

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.

A description of the nature of the consolidated entity’s operations
and its principal activities are included in the directors’ report,
which is not part of the financial statements.

The financial statements were authorised for issue, in accordance
with a resolution of directors, on 31 August 2020. The directors
have the power to amend and reissue the financial statements.

FirstWave Cloud Technology Limited is a listed public company
limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:

Level 10, 132 Arthur Street
North Sydney, NSW 2060
Australia

Annual Report 2020 19

FIRSTWAVECLOUD TECHNOLOGY

20 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYFIRSTWAVECLOUD TECHNOLOGY 11 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘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. www.grantthornton.com.au 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 2020, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b 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, 31 August 2020 Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020

Consolidated

Note

2020 $

2019 $

Revenue

Sales revenue

Cost of sales

Gross profit

Other income

Interest revenue calculated using the effective interest method

Expenses

Sales and marketing

Engineering and development

General and administration

Finance costs

Total expenses

Loss before income tax expense

Income tax expense

Loss after income tax expense for the year attributable to the owners of
FirstWave Cloud Technology Limited

Other comprehensive income

Items that may be reclassified subsequently to profit or loss

Foreign currency translation

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

8,252,880 .

8,831,731 .

(3,770,999)

(3,847,376)

4,481,881

4,984,355.

1,172,565

799,899.

48,761.

56,165 .

(6,034,408)

(6,867,873)

(7,153,789)

(4,079,335)

(6,167,121)

(5,856,945)

(125,370)

(43,603)

(19,480,688)

(16,847,756)

(13,777,481)

(11,007,337)

(13,777,481)

(11,007,337)

(1,819)

(4,526)

(13,779,300)

(11,011,863)

Cents

(4.24)

Cents

(4.46)

The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

Annual Report 2020 21

FIRSTWAVECLOUD TECHNOLOGYStatement of financial position
As at 30 June 2020

Consolidated

Note

2020
$

2019
$

15,281,338.

8,061,168.

776,062.

452,652.

1,029,353.

-...

1,265,875.

1,293,821.

17,775,927.

10,384,342.

228,928.

382,165.

427,494.

-...

6,667,519.

4,568,979.

192,016.

563,987.

7,470,628.

5,560,460.

25,246,555.

15,944,802.

3,068,781.
3,046,578.
976,409.
-...
464,271.
429,264.

2,596,317.

3,553,775.

832,858.

4,478.

-...

240,759.

7,985,303.

7,228,187.

592,812.

116,172.

152,649.

1,044,667.

691,817.

95,728.

152,649.

767,061.

1,906,300.

1,707,255.

9,891,603.

8,935,442.

15,354,952.

7,009,360.

54,667,525.

36,506,677.

6,386,579.

2,736,492.

(45,699,152)

(32,233,809)

15,354,952.

7,009,360.

Assets

Current assets

Cash and cash equivalents

Trade and other receivables

Contract assets

Other

Total current assets

Non-current assets

Property, plant and equipment

Right-of-use assets

Intangibles

Other

Total non-current assets

Total assets

Liabilities

Current liabilities

Trade and other payables

Contract liabilities

Employee benefits

Borrowings

Lease liabilities

Other

Total current liabilities

Non-current liabilities

Contract liabilities

Employee benefits

Provisions

Other

Total non-current liabilities

Total liabilities

Net assets

Equity

Issued capital

Reserves

Accumulated losses

Total equity

The above statement of financial position should be read in conjunction with the accompanying notes.

22 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYStatement of changes in equity
For the year ended 30 June 2020

Consolidated

Balance at 1 July 2018

Issued capital
$

Reserves
$

Accumulated
losses
$

Total equity
$

25,231,669

1,731,056.

(21,226,472)

5,736,253.

Loss after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

-....

(11,007,337)

(4,526)

-...

(4,526)

(11,007,337)

(11,011,863)

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs (note 21)

11,275,008

-...

Share-based payments (note 35)

Balance at 30 June 2019

Consolidated

Balance at 1 July 2019

1,009,962.

-...

11,275,008.

1,009,962.

36,506,677

2,736,492.

(32,233,809)

7,009,360.

Issued capital
$

Reserves
$

Accumulated
losses
$

Total equity
$

36,506,677

2,736,492.

(32,233,809)

7,009,360.

Loss after income tax expense for the year

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

(13,777,481)

(1,819)

-...

(1,819)

(13,777,481)

(13,779,300)

Transactions with owners in their capacity as owners:

Contributions of equity, net of transaction costs (note 21)

18,160,848

Share-based payments (note 35)

Transfer to retained earnings

Fair value of options issued to sub-underwriters

2,134,044.

-...

-..

18,160,848.

2,134,044.

(312,138)

312,138.

-...

1,830,000.

-...

1,830,000.

Balance at 30 June 2020

54,667,525

6,386,579.

(45,699,152)

15,354,952.

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Annual Report 2020 23

FIRSTWAVECLOUD TECHNOLOGYStatement of cash flows
For the year ended 30 June 2020

Cash flows from operating activities

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Interest received

Other income

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

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issue of shares

Share issue transaction costs

Repayment of lease liabilities

Net cash from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Consolidated

Note

2020
$

2019
$

8,334,102.

12,040,951.

(18,130,837)

(19,335,535)

48,761.

56,165.

1,172,565.

961,646.

(125,370)

(69,047)

(8,700,779)

(6,345,820)

(42,047)

(66,821)

(3,708,299)

(2,501,411)

(3,750,346)

(2,568,232)

21,615,359.

11,822,000.

(1,624,511)

(546,992)

(319,553)

(82,661)

19,671,295.

11,192,347.

7,220,170.

2,278,295.

8,061,168.

5,782,873.

Cash and cash equivalents at the end of the financial year

.........8

15,281,338.

8,061,168.

The above statement of cash flows should be read in conjunction with the accompanying notes.

24 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYNotes to the financial statements
30 June 2020

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.

Any new or amended Accounting Standards or Interpretations
that are not yet mandatory have not been early adopted.

The following Accounting Standards and Interpretations adopted
during the year are most relevant to the consolidated entity:

Interpretation 23 Uncertainty over Income Tax

The consolidated entity has adopted Interpretation 23 from 1 July
2019. The interpretation clarifies how to apply the recognition
and measurement requirements of AASB 112 ‘Income Taxes’
in circumstances where uncertain tax treatments exists. The
interpretation requires: the consolidated entity to determine
whether each uncertain tax treatment should be treated separately
or together, based on which approach better predicts the
resolution of the uncertainty; the consolidated entity to consider
whether it is probable that a taxation authority will accept an
uncertain tax treatment; and if the consolidated entity concludes
that it is not probable that the taxation authority will accept an
uncertain tax treatment, it shall reflect the effect of uncertainty
in determining the related taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits or tax rates, measuring
the tax uncertainty based on either the most likely amount or the
expected value. In making the assessment it is assumed that a
taxation authority will examine amounts it has a right to examine
and have full knowledge of all related information when making
those examinations. Interpretation 23 was adopted using the
modified retrospective approach and as such comparatives
have not been restated. There was no impact of adoption on the
opening accumulated losses as at 1 July 2019.

AASB 16 Leases

The consolidated entity has adopted AASB 16 from 1 July
2019. The standard replaces AASB 117 ‘Leases’ and for lessees
eliminates the classifications of operating leases and finance
leases. Except for short-term leases and leases of low-value
assets, right-of-use assets and corresponding lease liabilities
are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a
depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease
liabilities (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 improve as the operating expense
is now replaced by interest expense and depreciation in profit
or loss. For classification within the statement of cash flows,
the interest portion is disclosed in operating activities and the
principal portion of the lease payments are separately disclosed
in financing activities. For lessor accounting, the standard does
not substantially change how a lessor accounts for leases.

Impact of adoption

AASB 16 was adopted using the modified retrospective approach
and as such the comparatives have not been restated. The impact
of adoption on opening accumulated losses as at 1 July 2019 was
as follows:

Operating lease commitments as at 1
July 2019 (AASB 117)

Operating lease commitments discount
based on the weighted average
incremental borrowing rate of 5%
(AASB 16)

Pre-existing unearned rent abatement
as at 1 July 2019 (AASB 117)

Right-of-use assets (AASB 16)

Lease liabilities - current (AASB 16)

1 July
2019
$

1,020,612.

(48,323)

(192,943)

779,346.

(512,660)

Lease liabilities - non-current (AASB 16)

(459,629)

De-recognition of unearned rent
abatement as at 1 July 2019

Impact on opening accumulated losses
as at 1 July 2019

192,943.

-....

When adopting AASB 16 from 1 July 2019, the group has applied
the following practical expedients:

• applying a single discount rate to the portfolio of leases with

reasonably similar characteristics;

• accounting for leases with a remaining lease term of 12 months

as at 1 July 2019 as short-term leases;

• excluding any initial direct costs from the measurement of right-

of-use assets;

• using hindsight in determining the lease term when the contract

contains options to extend or terminate the lease; and

• not apply AASB 16 to contracts that were not previously

identified as containing a lease.

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYGoing 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 31.

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 2020 and the
results of all subsidiaries for the year then ended. FirstWave Cloud
Technology Limited and its subsidiaries together are referred to
in these financial statements as the ‘consolidated entity’.

Subsidiaries are all those entities over which the consolidated
entity has control. The consolidated entity controls an entity when
the consolidated entity is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on
transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been

26 Annual Report 2020

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 the entity’s
functional currency 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.

Foreign operations

The assets and liabilities of foreign operations are translated into
Australian dollars using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated
into Australian dollars using the average exchange rates, which
approximate the rates at the dates of the transactions, for the
period. All resulting foreign exchange differences are recognised
in other comprehensive income through the foreign currency
reserve in equity.

The foreign currency reserve is recognised in profit or loss when
the foreign operation or net investment is disposed of.

Revenue recognition

The consolidated entity recognises revenue as follows:

Revenue from contracts with customers

Revenue is recognised at an amount that reflects the consideration
to which the consolidated entity is expected to be entitled in
exchange for transferring goods or services to a customer.
For each contract with a customer, the consolidated entity:
identifies the contract with a customer; identifies the performance
obligations in the contract; determines the transaction price
which takes into account estimates of variable consideration and
the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative

FIRSTWAVECLOUD TECHNOLOGYstand-alone selling price of each distinct good or service to be
delivered; and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer to the
customer of the goods or services promised.

Variable consideration within the transaction price, if any, reflects
concessions provided to the customer such as discounts, rebates
and refunds, any potential bonuses receivable from the customer
and any other contingent events. Such estimates are determined
using either the ‘expected value’ or ‘most likely amount’ method.
The measurement of variable consideration is subject to a
constraining principle whereby revenue will only be recognised
to the extent that it is highly probable that a significant reversal
in the amount of cumulative revenue recognised will not occur.
The measurement constraint continues until the uncertainty
associated with the variable consideration is subsequently
resolved. Amounts received that are subject to the constraining
principle are recognised as a refund liability.

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

Professional services are recognised on a milestone basis as per
agreed terms and conditions in customer contracts and at least to
the extent of recoverable costs incurred to date.

Interest

Interest revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.

Government grants

Government grants are recognised at fair value where there
is a reasonable certainty that the grant will be received upon
meeting all grant terms and conditions. Grants that are meant to
fund expenditure on research and development are recognised
over the periods when these costs are written off to profit or loss.
Grants related to assets are carried forward as deferred income
at fair value and are credited to other income over the expected
useful life of the asset on 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 and the timing of the reversal can be
controlled and it is probable that the temporary difference will
not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.

The carrying amount of recognised and unrecognised deferred
tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer
probable that future taxable profits will be available for the carrying
amount to be recovered. Previously unrecognised deferred tax
assets are recognised to the extent that it is probable that there
are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is
a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax
liabilities; and they relate to the same taxable authority on either
the same taxable entity or different taxable entities which intend
to settle simultaneously.

Current and non-current classification

Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.

An asset is classified as current when: it is either expected to be
realised or intended to be sold or consumed in the consolidated
entity’s normal operating cycle; it is held primarily for the purpose
of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other assets are
classified as non-current.

A liability is classified as current when: it is either expected to
be settled in the consolidated entity’s normal operating cycle;
it is held primarily for the purpose of trading; it is due to be
settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at
least 12 months after the reporting period. All other liabilities are
classified as non-current.

Deferred tax assets and liabilities are always classified as non-
current.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held
at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY
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 allowance for expected credit losses.
Trade receivables are generally due for settlement within 30 days.

The consolidated entity has applied the simplified approach to
measuring expected credit losses, which uses a lifetime expected
loss allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost, less any
allowance for expected credit losses.

Contract assets

Contract assets are recognised when the consolidated entity
has transferred goods or services to the customer but where the
consolidated entity is yet to establish an unconditional right to
consideration. Contract assets are treated as financial assets for
impairment purposes.

Other financial assets

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.
Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification
is determined based on both the business model within which
such assets are held and the contractual cash flow characteristics
of the financial asset unless, an accounting mismatch is being
avoided.

Financial assets are derecognised when the rights to receive
cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and
rewards of ownership. When there is no reasonable expectation
of recovering part or all of a financial asset, its carrying value is
written off.

Financial assets at amortised cost

A financial asset is measured at amortised cost only if both of the
following conditions are met: (i) it is held within a business model
whose objective is to hold assets in order to collect contractual
cash flows; and (ii) the contractual terms of the financial asset
represent contractual cash flows that are solely payments of
principal and interest.

Property, plant and equipment

Plant and equipment is stated at historical cost less accumulated
depreciation and impairment. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.

Depreciation is calculated on a straight line basis to write off the
net cost of each item of property, plant and equipment over their
expected useful lives as follows:

Leasehold improvements
Computer equipment
Computer platform

3 years
3-5 years
2-3 years

The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.

Leasehold improvements are depreciated over the unexpired
period of the lease or the estimated useful life of the assets,
whichever is shorter.

28 Annual Report 2020

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.

Right-of-use assets

A right-of-use asset is recognised at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable,
any lease payments made at or before the commencement
date net of any lease incentives received, any initial direct costs
incurred, and, except where included in the cost of inventories,
an estimate of costs expected to be incurred for dismantling and
removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over
the unexpired period of the lease or the estimated useful life of
the asset, whichever is the shorter. Where the consolidated entity
expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life.
Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.

The consolidated entity has elected not to recognise a right-of-
use asset and corresponding lease liability for short-term leases
with terms of 12 months or less and leases of low-value assets.
Lease payments on these assets are expensed to profit or loss
as incurred.

Intangible assets

Intangible assets acquired are initially recognised at cost. 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.

for

initially

The amount
internally-generated
recognised
intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria
listed above. Where no internally-generated intangible asset can
be recognised, development expenditure is recognised in profit
or loss in the period in which it is incurred. Subsequent to initial
recognition, internally-generated intangible assets are reported at
cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets that are acquired
separately.

Capitalised development costs are amortised on a straight-line
basis over the period of their expected benefit, being their finite
useful lives of 5 years.

FIRSTWAVECLOUD TECHNOLOGY

Patents

Significant costs associated with patents are deferred and
amortised on a straight-line basis over the period of their expected
benefit, being their finite useful lives of 5 years.

Information systems

Significant costs associated with information systems are deferred
and amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 5 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.

Contract liabilities

Contract liabilities represent the consolidated entity’s obligation
to transfer goods or services to a customer and are recognised
when a customer pays consideration, or when the consolidated
entity recognises a receivable to reflect its unconditional right to
consideration (whichever is earlier) before the consolidated entity
has transferred the goods or services to the customer.

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.

Lease liabilities

A lease liability is recognised at the commencement date of
a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the
lease, discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the consolidated entity’s
incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected
to be paid under residual value guarantees, exercise price of a
purchase option when the exercise of the option is reasonably
certain to occur, and any anticipated termination penalties.

Lease liabilities are measured at amortised cost using the effective
interest method. The carrying amounts are remeasured if there is

a change in the following: future lease payments arising from a
change in an index or a rate used; residual guarantee; lease term;
certainty of a purchase option and termination penalties. When
a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying
amount of the right-of-use asset is fully written down.

Finance costs

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. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of
service. Expected future payments are discounted using market
yields at the reporting date on high-quality corporate bonds with
terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.

Defined contribution superannuation expense

Contributions to defined contribution superannuation plans are
expensed in the period in which they are incurred.

Share-based payments

Equity-settled share-based compensation benefits are provided
to employees.

Equity-settled transactions are awards of shares, or options over
shares, that are provided to employees in exchange for the
rendering of services.

The cost of equity-settled transactions is measured at fair value
on grant date. Fair value is determined using either the Binomial
or Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact of dilution,
the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free
interest rate for the term of the option, together with non-vesting

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYconditions that do not determine whether the consolidated
entity receives the services that entitle the employees to receive
payment.

Earnings per share

Basic earnings per share

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.

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 2020. 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.

Conceptual Framework for Financial Reporting (Conceptual
Framework)

The revised Conceptual Framework is applicable to annual
reporting periods beginning on or after 1 January 2020 and early
adoption is permitted. The Conceptual Framework contains new
definition and recognition criteria as well as new guidance on
measurement that affects several Accounting Standards. Where
the consolidated entity has relied on the existing framework in
determining its accounting policies for transactions, events or
conditions that are not otherwise dealt with under the Australian
Accounting Standards, the consolidated entity may need to
review such policies under the revised framework. At this time,
the application of the Conceptual Framework is not expected
to have a material impact on the consolidated entity’s financial
statements.

30 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYEstimation 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 the 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.

Lease term

The lease term is a significant component in the measurement
of both the right-of-use asset and lease liability. Judgement is
exercised in determining whether there is reasonable certainty
that an option to extend the lease or purchase the underlying
asset will be exercised, or an option to terminate the lease will
not be exercised, when ascertaining the periods to be included
in the lease term. In determining the lease term, all facts and
circumstances that create an economical incentive to exercise
an extension option, or not to exercise a termination option,
are considered at the lease commencement date. Factors
considered may include the importance of the asset to the
consolidated entity’s operations; comparison of terms and
conditions to prevailing market rates; incurrence of significant
penalties; existence of significant leasehold improvements; and
the costs and disruption to replace the asset. The consolidated
entity reassesses whether it is reasonably certain to exercise an
extension option, or not exercise a termination option, if there is a
significant event or significant change in circumstances.

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 various other 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.

Coronavirus (COVID-19) pandemic

Judgement has been exercised in considering the impacts that
the Coronavirus (COVID-19) pandemic has had, or may have,
on the consolidated entity based on known information. This
consideration extends to the nature of the products and services
offered, customers, supply chain, staffing and geographic regions
in which the consolidated entity operates. The potential impact
has been detailed in specific notes elsewhere in the report.

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. Refer to note 35 for information regarding
key assumptions.

Allowance for expected credit losses

The allowance for expected credit losses assessment requires a
degree of estimation and judgement. It is based on the lifetime
expected credit loss, grouped based on days overdue, and makes
assumptions to allocate an overall expected credit loss rate for
each group. These assumptions include recent sales experience,
the Coronavirus
the
historical collection rates,
(COVID-19) pandemic and forward-looking information that is
available. The allowance for expected credit losses, as disclosed
in note 9, is calculated based on the information available at the
time of preparation. The actual credit losses in future years may
be higher or lower.

impact of

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.

Annual Report 2020 31

FIRSTWAVECLOUD TECHNOLOGYNote 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.

reviews segment

revenue and consolidated
The CODM
adjusted EBITDA (earnings before interest, tax, depreciation
and amortisation, excluding non-cash share-based payments
expenses). 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 two operating segments
as follows:

Australia

A geographical segment to identify development and sale of
internet security software in the domestic market.

International

A geographical segment to identify development and sale of
internet security software in the international market.

Major customers

During the year ended 30 June 2020, there was one major external
customer (2019: one customer) where revenue exceeded 96% of
the consolidated revenue. Total revenue from the customer for
the year ended 30 June 2020 amounted to $7,725,225 (2019:
$8,612,612).

Operating segment information

Consolidated - 2020

Revenue

Sales to external customers

Interest revenue

Total revenue

Adjusted 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 - 2019

Revenue

Sales to external customers

Interest revenue

Total revenue

Adjusted 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

32 Annual Report 2020

Australia $

International $

Total $

7,866,679

386,201

8,252,880.

48,761

48,761.

7,915,440

386,201

8,301,641.

(9,320,735)

(2,246,093)

48,761.

(125,370)

(2,134,044)

(13,777,481)

-...

(13,777,481)

Australia $

International $

Total $

8,817,796

13,935

8,831,731.

56,165

56,165.

8,873,961

13,935

8,887,896.

(8,717,344)

(1,292,593)

56,165.

(43,603)

(1,009,962)

(11,007,337)

-...

(11,007,337)

FIRSTWAVECLOUD TECHNOLOGY

Note 4. Revenue from contracts with customers

Licensing and support revenue

Professional services revenue

Total revenue

Disaggregation of revenue

The disaggregation of revenue from contracts with customers is as follows:

Timing of revenue recognition

Licensing: over time

Support: over time

Professional services: point in time

Revenue from external customers by geographic regions is set out in note 3.

Note 5. Other income

Research and development grant income*

Other income**

Other income

Consolidated

2020 $

2019 $

7,446,829

8,531,088

806,051

300,643

8,252,880

8,831,731

Consolidated

2020 $

2019 $

3,915,238

5,029,544

3,531,591

3,501,544

806,051

300,643

8,252,880

8,831,731

Consolidated

2020 $

2019 $

789,920

730,761

382,645

69,138

1,172,565

799,899

There are no unfulfilled conditions or other contingencies attached to the grant. The consolidated entity did not benefit directly from
any other government assistance.
Includes Australian Government grant of $142,446 towards cash flow boost and other COVID-19 incentives and $9,641 Singapore
Government job support grant.

Annual Report 2020 33

FIRSTWAVECLOUD TECHNOLOGY Consolidated

2020 $

2019 $

3,770,999

3,847,376

129,503

167,224

49,817

70,065

2,778

1,799

454,236

636,334

239,088

1,577,645

1,027,332

32,114

26,173

1,609,759

1,053,505

2,246,093

1,292,593

43,603

125,370

43,603

120,259

275,198

448,684

12,192,213

10,878,728

961,967

654,047

2,134,044

1,009,962

15,288,224

12,542,737

Note 6. Expenses

Loss before income tax includes the following specific expenses:

Cost of sales

Cost of licenses

Depreciation

Leasehold improvements

Computer equipment

Computer platform

Right-of-use assets

Total depreciation

Amortisation

Capitalised development costs

Patents

Total amortisation

Total depreciation and amortisation

Finance costs

Interest and finance charges paid/payable on borrowings

Interest and finance charges paid/payable on lease liabilities

Finance costs expensed

Net foreign exchange variance

Leases

Minimum lease payments

Employee benefit expenses

Employee salaries and other benefits

Defined contribution superannuation expense

Share-based payments expenses*

Total Employee benefit expenses

* Includes salary sacrifice of $512,467 (2019: $nil).

34 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYNote 7. Income tax expense

Numerical reconciliation of income tax expense and tax at the statutory rate

Loss before income tax 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

Consolidated

2020 $

2019 $

(13,777,481)

(11,007,337)

(3,788,807)

(3,027,018)

415,901.

282,516.

3,059.

13,567.

1,629,390.

832,768.

(988,050)

(640,464)

(217,228)

(200,959)

(2,945,735)

(2,739,590)

Tax losses not recognised (including reversal of previously recognised tax losses)

2,590,202.

2,328,158.

Current year temporary differences not recognised

Income tax expense

Tax losses not recognised

Unused tax losses for which no deferred tax asset has been recognised

Potential tax benefit at statutory tax rates

355,533.

411,432.

-...

Consolidated

2020 $

2019 $

8,165,966.

8,599,145.

2,245,641.

2,364,765.

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.

Note 8. Cash and cash equivalents

Cash at bank

Consolidated

2020 $

2019 $

15,281,338.

8,061,168.

Annual Report 2020 35

FIRSTWAVECLOUD TECHNOLOGYNote 9. Trade and other receivables

Trade receivables

Less: Allowance for expected credit losses

Other receivables

Receivable from key management personnel

GST receivable

Consolidated

2020 $

2019 $

450,055.

572,697.

(95,934)

(49,808)

354,121.

522,889.

59,290.

11,179.

221,520.

141,131.

273,765.

776,062.

1,029,353.

Allowance for expected credit losses

The consolidated entity has recognised a loss of $46,126 (2019: $49,808) in profit or loss in respect of impairment of receivables for the
year ended 30 June 2020.

The ageing of the receivables and allowance for expected credit losses provided for above are as follows:

Expected credit loss rate

Carrying amount

Allowance for expected
credit losses

Consolidated

Not overdue

2020
%

2019
%

2020
$

2019
$

2020
$

255,987

471,360

0 to 3 months overdue

3.000%

3.960%

69,387

3 to 6 months overdue

15.000%

26,914

6 to 12 months overdue

30.000%

11,360

Over 12 months overdue

100.000%

55,112

18,283

18,735

25,779

38,540

2019
$

-...

724.

2,810.

7,734.

2,082.

4,037.

3,408.

55,112.

38,540.

Special provision

100.000%

31,295

31,295.

-...

450,055

572,697

95,934.

49,808.

The consolidated entity has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment
or being unable to pay, due to the Coronavirus (COVID-19) pandemic. As a result, the calculation of expected credit losses has been
revised as at 30 June 2020.

Movements in the allowance for expected credit losses are as follows:

Opening balance

Additional provisions recognised

Receivables written off during the year as uncollectable

Closing balance

Consolidated

2020 $

2019 $

49,808.

22,206.

46,126.

49,808.

-...

(22,206)

95,934.

49,808.

36 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYNote 10. Property, plant and equipment

Leasehold improvements - at cost

Less: Accumulated depreciation

Computer equipment - at cost

Less: Accumulated depreciation

Computer platform - at cost

Less: Accumulated depreciation

Consolidated

2020 $

2019 $

647,510.

800,159.

(489,262)

(453,893)

158,248.

346,266.

470,579.

429,850.

(404,234)

(354,417)

66,345.

75,433 .

243,936.

242,618 .

(239,601)

(236,823)

4,335.

5,795 .

228,928.

427,494..

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 2018

Additions

Depreciation expense

Balance at 30 June 2019

Additions

Transfer to right-of-use assets

Depreciation expense

Leasehold
improvements
$

513,490.

-....

Computer
equipment
$

83,457.

62,041.

Computer
platform
$

Total
$

2,814.

599,761..

4,780.

66,821..

(167,224)

(70,065)

(1,799)

(239,088)

346,266.

-....

(58,515)

75,433.

40,729.

-....

5,795..

427,494.

1,318.

42,047.

-...

(58,515)

(129,503)

(49,817)

(2,778)

(182,098)

Balance at 30 June 2020

158,248.

66,345.

4,335.

228,928.

Note 11. Right-of-use assets

Non-current assets

Right-of-use assets

Less: Accumulated depreciation

Consolidated

2020 $

2019 $

836,401.

(454,236)

382,165.

-....

The consolidated entity has leased office premises under operating leases expiring in one year, with in certain instances options to
extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

Annual Report 2020 37

FIRSTWAVECLOUD TECHNOLOGYReconciliations

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 2018

Balance at 30 June 2019

Adoption of AASB 16 on 1 July 2019 (refer note 1)

Transfer from property, plant and equipment

Exchange differences

Depreciation expense

Balance at 30 June 2020

Note 12. Intangibles

Capitalised development costs - at cost

Less: Accumulated amortisation

Patents - at cost

Less: Accumulated amortisation

Information systems (under development) - at cost

Office premises $

-...

779,346.

58,515.

(1,460)

(454,236)

382,165.

Consolidated

2020 $

2019 $

16,231,139.

12,336,080.

(9,710,459)

(8,132,815)

6,520,680.

4,203,265.

178,558.

141,250.

(121,719)

(89,605)

56,839.

51,645.

90,000.

314,069.

6,667,519.

4,568,979.

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 2018

Additions

Amortisation expense

Balance at 30 June 2019

Additions

Transfers in/(out)

Amortisation expense

Capitalised
development
$

3,062,617.

2,167,980.

Information
systems (under
development)
$

Total
$

-....

3,121,073.

314,069.

2,501,411.

Patents
$

58,456.

19,362.

(1,027,332)

(26,173)

-....

(1,053,505)

4,203,265.

3,670,991.

224,069.

51,645.

37,308.

314,069.

4,568,979.

-....

3,708,299.

-...

(224,069)

-...

(1,577,645)

(32,114)

-....

(1,609,759)

Balance at 30 June 2020

6,520,680.

56,839.

90,000.

6,667,519.

38 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYNote 13. Other

Current assets

Prepayments

Security deposits

Non-current assets

Prepayments

Note 14. Trade and other payables

Current liabilities

Trade payables

Accrued expenses

Note 15. Contract liabilities

Current liabilities

Contract liabilities

Non-current liabilities

Contract liabilities

Reconciliations

Consolidated

2020 $

2019 $

1,132,099.

1,160,045.

133,776.

1,265,875.

1,293,821.

192,016.

563,987.

1,457,891.

1,857,808.

Consolidated

2020 $

2019 $

643,798.

765,109.

2,424,983.

1,831,208.

3,068,781.

2,596,317.

Consolidated

2020 $

2019 $

3,046,578.

3,553,775.

592,812.

691,817.

3,639,390.

4,245,592.

Reconciliation of the contract liabilities (current and non-current) during the current financial year are set out below:

Opening balance

Recognised on adoption of AASB 15 on 1 July 2018

Payments received in advance

Transfer to revenue - included in the opening balance

Transfer to revenue - other balances

Closing balance

Consolidated

2020 $

2019 $

4,245,492.

-...

3,258,451.

6,079,420.

5,311,684.

(3,315,365)

(1,875,898)

(3,370,157)

(2,448,645)

3,639,390.

4,245,592.

Annual Report 2020 39

FIRSTWAVECLOUD TECHNOLOGYNote 16. Employee benefits

Current liabilities

Annual leave

Long service leave

Non-current liabilities

Long service leave

Note 17. Borrowings

Current liabilities

Lease liability

Refer to note 24 for further information on financial instruments.

Total secured liabilities

The total secured liabilities are as follows:

Lease liability

Assets pledged as security

Consolidated

2020 $

2019 $

773,492

652,812

202,917

180,046

976,409

832,858

116,172

95,728

1,092,581

928,586

Consolidated

2020 $

2019 $

4,478

Consolidated

2020 $

2019 $

4,478

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.

40 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYFinancing arrangements

Unrestricted access was available at the reporting date to the following lines of credit:

Total facilities

NAB lease facility

Corporate credit card facility

Used at the reporting date

NAB lease facility

Corporate credit card facility

Unused at the reporting date

NAB lease facility

Corporate credit card facility

Note 18. Provisions

Non-current liabilities

Lease make-good

Consolidated

2020 $

2019 $

300,000

70,000

370,000

4,478

300,000

295,522

70,000

370,000

365,522

Consolidated

2020 $

2019 $

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.

Note 19. Lease liabilities

Current liabilities

Lease liability

Refer to note 24 for further information on financial instruments.

Note 20. Other

Current liabilities

Deferred research and development income

Non-current liabilities

Deferred research and development income

Consolidated

2020 $

2019 $

464,271

Consolidated

2020 $

2019 $

429,264

240,759

1,044,667

767,061

1,473,931

1,007,820

Annual Report 2020 41

FIRSTWAVECLOUD TECHNOLOGY
Note 21. Issued capital

Ordinary shares - fully paid

647,625,092

280,805,705

54,667,525

36,506,677.

Consolidated

2020
Shares

2019
Shares

2020
$

2019
$

Movements in ordinary share capital

Details

Balance

Issue of shares

Share issue transaction costs, net of tax

Balance

Issue of shares

Date

1 July 2018

224,733,105

25,231,669.

21 November 2018

1,086,957

250,000.

6 December 2018

24,314,285

3,404,000.

7 March 2019

2 April 2019

30 April 2019

3,000,000

420,000.

23,214,286

6,500,000.

4,457,072

1,248,000.

(546,992)

30 June 2019

280,805,705

36,506,677.

28 October 2019

34,683,567

6,589,878.

4 November 2019

547,357

104,000.

29 May 2020

78,759,156

3,544,162.

52,475,956

2,361,418.

16 June 2020

200,353,351

9,015,901.

Share issue transaction costs, net of tax

Options issued to sub-underwriters in lieu of transaction costs

(1,624,511)

(1,830,000)

Balance

30 June 2020

647,625,092

54,667,525.

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 are
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 2019 Annual Report.

42 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY
Note 22. Reserves

Foreign currency reserve

Share-based payments reserve

Consolidated

2020 $

2019 $

(6,345)

(4,526)

6,392,924.

2,741,018.

6,386,579.

2,736,492.

Foreign currency reserve

Share-based payments reserve

The reserve is used to recognise exchange differences arising
from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise
gains and losses on hedges of the net investments in foreign
operations.

Movements in reserves

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 each class of reserve during the current and previous financial year are set out below:

Consolidated

Balance at 1 July 2018

Foreign currency translation

Share-based payment expense

Balance at 30 June 2019

Foreign currency translation

Share-based payment expense

Transfer to retained earnings

Fair value of options issued to sub-underwriters

Foreign currency
reserve
$

Share-based
payments
$

Total
$

-....

1,731,056.

(4,526)

-...

(4,526)

-....

1,009,962.

(4,526)

(1,819)

-....

2,741,018.

2,736,492.

-...

(1,819)

2,134,044.

(312,138)

1,830,000.

Balance at 30 June 2020

(6,345)

6,392,924.

6,386,579.

Note 23. Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.

Annual Report 2020 43

FIRSTWAVECLOUD TECHNOLOGY
Note 24. 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 and foreign exchange risk and ageing analysis for credit risk.

Risk management is carried out by senior finance executives
(‘finance’) under policies approved by the Board of Directors
(‘the Board’). These policies include identification and analysis
of the risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits. Finance identifies, evaluates
and hedges financial risks within the consolidated entity’s
operating units. Finance reports to the Board on a monthly basis.

Market risk

Foreign currency risk

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 cash
at bank and borrowings. Bank balance and borrowings issued
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.

An official increase/decrease in interest rates of 50 (2019:50)
basis points would have an favourable/adverse effect on loss
before tax of $76,407 (2019: $40,305) per annum. The percentage
change is based on the expected volatility of interest rates using
market data and analysts’ forecasts.

Credit risk

Credit risk refers to the risk that a counterparty will default on
its contractual obligations resulting in financial loss to the

Financing arrangements

Unused borrowing facilities at the reporting date:

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 adopted a lifetime expected
loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed
rates of credit loss provisioning. These provisions are considered
representative across all customers of the consolidated entity
based on recent sales experience, historical collection rates and
forward-looking information that is available. As disclosed in note
9, due to the Coronavirus (COVID-19) pandemic, the calculation
of expected credit losses has been revised as at 30 June 2020.

The consolidated entity has a credit risk exposure with one major
customer, which as at 30 June 2020 owed the consolidated
entity $187,592 (43% of trade receivables) (2019: $432,573 (76%
of trade receivables)). Despite the impact that the Coronavirus
(COVID-19) pandemic has had on this major Australian retailer,
this balance was within its terms of trade and no impairment was
made as at 30 June 2020. This balance was within its terms of
trade and no impairment was made as at 30 June 2020. 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.

Generally, trade receivables are written off when there is no
reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active
enforcement activity and a failure to make contractual payments
for a period greater than 1 year.

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.

Consolidated

2020 $

300,000

70,000

2019 $

295,522

70,000

370,000

365,522

NAB lease facility

Corporate credit card facility

44 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYRemaining 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 - 2020

Non-derivatives

Non-interest bearing

1 year
or less
$

Between
1 and 2 years
$

Between
2 and 5 years
$

Over
5 years
$

Trade payables

643,798

Interest-bearing - fixed rate

Lease liability

5.00%

537,319

Total non-derivatives

1,181,117

Consolidated - 2019

Non-derivatives

Non-interest bearing

1 year
or less
$

Between
1 and 2 years
$

Between
2 and 5 years
$

Over
5 years
$

Remaining
contractual
maturities
$

643,798

537,319

1,181,117

Remaining
contractual
maturities
$

Trade payables

765,109

Interest-bearing - fixed rate

Lease liability

5.00%

Total non-derivatives

4,498

769,607

765,109

4,498

769,607

The cash flows in the maturity analysis above are not expected to occur significantly earlier that contractually disclosed above.

Note 25. 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.

Annual Report 2020 45

FIRSTWAVECLOUD TECHNOLOGYNote 26. 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

Other services - Grant Thornton

Taxation services

Consolidated

2020 $

2019 $

115,000

118,000

12,730

19,260

127,730

137,260

Note 27. Contingent liabilities

The consolidated entity has given bank guarantees as at 30 June 2020 of $133,776 (2019: $133,776) to various landlords.

Note 28. 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

Total commitment

Less: Future finance charges

Net commitment recognised as liabilities

Consolidated

2020 $

2019 $

436,584.

366,566.

803,150.

4,498.

(20)

4,478.

At 30 June 2020, lease commitments are disclosed as $nil due to the adoption of AASB 16 ‘Leases’ with effect from 1 July 2019 as
detailed in note 1.

Note 29. 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

46 Annual Report 2020

Consolidated

2020 $

2019 $

1,327,020

1,371,531.

121,547

9,251

120,368

84,846.

16,767.

-....

1,152,218

477,555.

2,730,404

1,950,699.

FIRSTWAVECLOUD TECHNOLOGYNote 30. Related party transactions

Parent entity

FirstWave Cloud Technology Limited is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 32.

Key management personnel

Disclosures relating to key management personnel are set out in note 29 and the remuneration report included in the directors’ report.

Transactions with related parties

The following transactions occurred with related parties:

Sale of goods and services:

Sale of services to a director related entity of Simon Moore

1,020.

4,079.

Other income:

Interest received from key management personnel

Payment for goods and services:

9,972.

13,296.

Payment for services from a director related entity of Scott Lidgett

-...

11,550.

Consolidated

2020 $

2019 $

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

2020 $

2019 $

221,520.

* Unsecured loan provided to key management personnel. Interest is charged on outstanding balance at 4.5% (2019: 4.5%) per annum.

Terms and conditions

All transactions were made on normal commercial terms and conditions and at market rates.

Note 31. Parent entity information

Set out below is the supplementary information about the parent entity.

Statement of profit or loss and other comprehensive income

Loss after income tax

Total comprehensive income

Parent

2020 $

2019 $

(1,761,228)

(505,103)

(1,761,228)

(505,103)

Annual Report 2020 47

FIRSTWAVECLOUD TECHNOLOGY
Statement of financial position

Total current assets

Total assets

Total current liabilities

Total liabilities

Equity

Issued capital

Share-based payments reserve

Accumulated losses

Total equity

Parent

2020 $

2019 $

-...

50,645,346.

32,415,726.

-...

54,667,525.

36,506,677.

1,830,000.

-...

(5,852,179)

(4,090,951)

50,645,346.

32,415,726.

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 2020 and 30 June 2019.

Contingent liabilities

The parent entity had no contingent liabilities as at 30 June 2020
and 30 June 2019.

Capital commitments - Property, plant and equipment

The parent entity had no capital commitments for property, plant
and equipment as at 30 June 2020 and 30 June 2019.

Significant accounting policies

The accounting policies of the parent entity are consistent with
those of the consolidated entity, as disclosed in note 1, except for
the following:

•

Investments in subsidiaries are accounted for at cost, less any
impairment, in the parent entity.

• Dividends received from subsidiaries are recognised as other
income by the parent entity and its receipt may be an indicator
of an impairment of the investment.

Note 32. 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 Global Pty Ltd

Principal place of business /
Country of incorporation

Australia

FirstWave Cloud Technology Inc.

The United States of America

FirstWave Cloud Technology (Singapore) Ltd

Singapore

Ownership interest

2020
%

100%

2019
%

100%

48 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY

Note 33. Cash flow information

Reconciliation of loss after income tax to net cash used in operating activities

Loss after income tax expense for the year

Adjustments for:

Depreciation and amortisation

Share-based payments - employees

Change in operating assets and liabilities:

Decrease/(increase) in trade and other receivables

Increase in contract assets

Decrease in prepayments

Decrease in other operating assets

Increase/(decrease) in trade and other payables

Increase/(decrease) in contract liabilities

Increase in employee benefits

Increase/(decrease) in other operating liabilities

Net cash used in operating activities

Non-cash investing and financing activities

Consolidated

2020 $

2019 $

(13,777,481)

(11,007,337)

2,246,093.

1,292,593.

2,134,044.

1,009,962.

(20,474)

1,068,559.

(452,652)

- .

399,917.

41,427.

273,765.

450.

472,105.

(259,360)

(606,202)

4,245,592.

163,995.

195,170.

466,111.

(2,932,876)

(8,700,779)

(6,345,820)

Consolidated

2020 $

2019 $

Fair value of options issued to sub underwriters due to share issue transaction cost

1,830,000.

-...

Changes in liabilities arising from financing activities

Consolidated

Balance at 1 July 2018

Net cash used in financing activities

Balance at 30 June 2019

Adoption of AASB 16 on 1 July 2019

Net cash used in financing activities

Balance at 30 June 2020

Lease liability
$

87,139.

(82,661)

4,478.

779,346.

(319,553)

464,271.

Annual Report 2020 49

FIRSTWAVECLOUD TECHNOLOGYNote 34. Earnings per share

Loss after income tax attributable to the owners of FirstWave Cloud Technology Limited

(13,777,481)

(11,007,337)

Consolidated

2020 $

2019 $

Weighted average number of ordinary shares used in calculating basic earnings per share

324,615,175. 246,617,998.

Weighted average number of ordinary shares used in calculating diluted earnings per share

324,615,175. 246,617,998.

Number

Basic earnings per share

Diluted earnings per share

Cents

(4.24)

Cents

(4.46)

Options have been excluded in the weighted average number of shares used to calculate diluted earnings per share as they
were anti-dilutive.

Note 35. Share-based payments

Movements in share awards during the year

The following table illustrates the number of awards and weighted
average exercise prices (‘WAEP’) of, and movements in, share
awards during the current and previous year:

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 consolidated entity) at the
vesting date. The options are issued for nil consideration. There
are no performance conditions.

During the financial year 4,950,000 options and 34,606,769 share
rights were granted (2019: 22,698,000 options). The share-based
payment expense for the year was $2,134,044 (2019: $1,009,962).

In addition, 30,000,000 options valued at $1,830,000 were
granted to sub-underwriters in lieu of share-issue transaction
costs toward capital raising undertaken during the year ended
30 June 2020.

Movement in share options including share rights

Balance at the beginning of the year

Options granted during the year

Share rights granted during the year

Options granted to sub-underwriters

Forfeited during the year

Exercised during the year

Expired during the year

Number
30 June 2020

Number
30 June 2019

WAEP
30 June 2020

WAEP
30 June 2019

38,951,333

19,520,000

4,950,000

22,698,000

34,606,769

30,000,000

(8,365,334)

(3,266,667)

$0.400

$0.430

$0.000

$0.050

$0.490

$0.000

$0.360

$0.420

$0.000

$0.300

$0.000

Balance at the end of the year

100,142,768

38,951,333

50 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY
22,452,664 options and 11,628,094 share rights were vested and
exercisable as at 30 June 2020 (2019: 15,186,700 options)

The weighted average share price of the company during the
financial year was $0.14 (2019: $0.25). The weighted average
remaining contractual life of options outstanding at the end of the
financial year was 3.57 years (2019: 4.77 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

20/11/2019

01/07/2023

20/11/2019

01/07/2024

20/11/2019

01/07/2025

12/12/2019

01/07/2023

12/12/2019

01/07/2024

12/12/2019

01/07/2025

Share price
at grant date

Exercise
price

Expected
volatility

Dividend
yield

Risk-free
interest rate

Fair value
at grant date

$0.150

$0.304

103.000%

$0.425

103.000%

$0.547

103.000%

$0.304

103.000%

$0.425

103.000%

$0.547

103.000%

1.750%

$0.084

$0.087

$0.093

$0.084

$0.087

$0.093

Share right plan 2020 (‘Rights Plan’)

As noted above, the consolidated entity introduced a new share
rights plan. The share rights were issued to directors and senior
executives subject to shareholder approval of the Rights Plan
and specific approval of the rights to be granted to directors.
Shareholders approved the Rights Plan at an Extraordinary
General Meeting held on 29 July 2020.

Pursuant to the Rights Plan the consolidated entity granted two
types of share rights:

• Service rights to the Executive Chairman and Senior Executives;

and

• Restricted rights to Non-Executive Directors.

Executives and directors salary sacrificed their salaries and fees
for service rights and restricted rights. In respect of the service
rights – these rights vest on a quarterly basis at the end of each
financial year quarter. The service rights are subject to service
condition and there are no performance conditions. The exercise
price on the service rights are $ Nil as these rights have been
granted in lieu of cash salary.

Restricted Rights to Non-Executive Directors: Restricted Rights
vest on grant and are not forfeited on resignation. The sale of
the rights is restricted whether or not the Non-Executive Directors
continue as a director until the expiration of three years from the
date of grant.

As the Service Rights and Restricted Rights were acquired by
Executives and Directors agreeing to forgo their salaries and fees
the maximum allowable life of 15 years was adopted. The share
rights issued during the year will not expire until June 2035.

Share right valuation: The share rights were formally granted at
the Extraordinary General Meeting (‘EGM’) held on 29 July 2020.
Each share right has been valued at the share price on grant date
of 10.5 cents.

Sub-underwriter options:

As part of capital raising in May 2020, 30 million options valued at
$1,830,000 were granted to sub-underwriters. The options were
formally approved at the company EGM held on 29 July 2020.
The valuation model inputs used to determine the fair value at the
grant date is 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

29/07/2020

29/07/2021

$0.105

$0.05

82.00%

1.75%

$0.061

Note 36. Events after the reporting
period

The Coronavirus (COVID-19) pandemic is ongoing and impacted
performance of the consolidated entity’s international operations
in the second half by flattening the trajectory in revenue
growth experienced through the first half. The consolidated
entity has provided a prospective forward plan to investors
and shareholders which assumes business activity levels will

be restored to pre COVID-19 levels in all geographies by the
beginning of the second quarter of FY21. This may well not be the
case as the situation is unpredictable and as a consequence, so
is the economic environment, the response that may come from
our partners and end customers, and any impact this may have
on our FY21 plan.

Annual Report 2020 51

FIRSTWAVECLOUD TECHNOLOGY
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
2020 and of its performance for the financial year ended on
that date; and

there are reasonable grounds to believe that the company will
be able to pay its debts as and when they become due and
payable.

The directors have been given the declarations required by
section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of directors made pursuant
to section 295(5)(a) of the Corporations Act 2001.

On behalf of the directors,

John E Grant
Chairman

Paul MacRae
Director

31 August 2020
Sydney

52 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGYIndependent Auditor’s Report

Annual Report 2020 53

47 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘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. www.grantthornton.com.au 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 2020, 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 2020 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. FIRSTWAVECLOUD TECHNOLOGYKey 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)

How our audit addressed the key audit matter

The Group made a loss of $13,777,481 and had net cash
used in operating activities of $8,700,779 for the year ended
30 June 2020, and had accumulated losses of $45,699,152 as
at 30 June 2020. Proceeds from the issue of shares totalled
$21,615,359 during the year, and the Group had a cash
balance of $15,281,338 as at 30 June 2020.
Given the level of losses, 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
provides support over the Group’s ability to continue as a
going concern.

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 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;

 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.

Revenue recognition (Note 4)

Revenue of $8,252,880 has been recognised during the year
ended 30 June 2020, and contract assets of $452,652 and
contract liabilities of $3,046,578 have been included in the
statement of financial position.
This is a key audit matter given the management judgement
involved in applying the revenue recognition policy and the
complexities around accounting for income received in
advance.

Capitalised product development costs (Note 12)

Capitalised product development costs had a net carrying
value of $6,520,680 at 30 June 2020.
During the year the Group capitalised $3,670,991 of project
development costs. These intangible assets are being
amortised over a 5 year period, and an amortisation expense
of $1,577,645 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.

54 Annual Report 2020

Our procedures included, amongst others:

 Assessing the revenue recognition policies for

appropriateness and compliance with AASB 15: Revenue
from Contracts with Customers;

 Comparing revenue by month and across each revenue

stream to prior periods in order to identify and follow up on
unusual trends;

 Testing a sample of revenue transactions for each revenue
stream by tracing through to service agreement to identify
contract terms, and evaluating revenue recognition for
compliance with AASB 15;

 Testing a sample of transactions near period end to assess
whether the related revenue has been recognised in the
appropriate period; and

 Assessing the adequacy of related disclosures in the

financial statements.

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 nature
and feasibility of key projects at 30 June 2020;
 Testing a sample of costs capitalised by tracing to

underlying support such as vendor invoices and payroll

FIRSTWAVECLOUD TECHNOLOGY

Key audit matter

How our audit addressed the key audit matter

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.

Share-based Payments (Note 35)

In the current year the Group granted share based payments
in the form of Performance Rights, Services Rights and
Restricted Rights to Directors in lieu of Directors’ fees and to
employees in lieu of salary. The rights vest subject to the
achievement of certain vesting conditions. An expense of
$1,266,783 has been included in the statement of profit or loss
and other comprehensive income.
Due to the complex and judgmental estimates used in
determining the valuation of the share based payments and
vesting expense, we considered the Group’s calculation of the
share based payment expense to be a key audit matter.

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;

 Assessing the company's review of impairment indicators in

accordance with AASB 136: Impairment of Assets;

 Evaluating the reasonableness of useful lives to be applied

in future reporting periods; and

 Assessing the adequacy of related disclosures in the

financial statements.

Our procedures included, amongst others:

 Agreeing the issue of rights to the related agreements;
 Verifying the grant date of the rights, the fair value of the
rights, and evaluating and challenging management’s
judgements regarding vesting conditions; 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 2020, 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.

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.

Annual Report 2020 55

FIRSTWAVECLOUD TECHNOLOGY

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.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 4 to 9 of the Directors’ report for the year ended 30 June
2020.

In our opinion, the Remuneration Report of Firstwave Cloud Technology Limited, for the year ended 30 June 2020
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, 31 August 2020

56 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY

Shareholder Information for 2020 Annual Report

As at 10 September 2020

Distribution of Shareholders

Range of Units As Of 10/09/2020 Composition : FP

Range

1 - 1,000

1,001 - 5,000

5,001 - 10,000

10,001 - 100,000

100,001 Over

Rounding

Total

Total holders

1,640

240

245

1,018

746

3,889

Units

68,615

730,700

1,943,229

45,484,391

599,991,419

648,218,354

% Units

0.01

0.11

0.30

7.02

92.56

0.00

100.00

Unmarketable Parcels

Minimum Parcel Size

Holders

Units

Minimum $ 500.00 parcel at $ 0.1250 per unit

4,000

1,815

499,776

Substantial Shareholders

Rank

Name

Units

% of Units

PERENNIAL VALUE MANAGEMENT LIMITED

51,927,430

8.02

Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY

Shareholder Information for 2020 Annual Report

Top Shareholders

FIRSTWAVE CLOUD TECHNOLOGY LIMITED FULLY PAID ORDINARY SHARES (Total)

Top Holders (Grouped) As Of 10/09/2020 Composition : FP

Rank Name

1 NATIONAL NOMINEES LIMITED

2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2

4 MR SCOTT LIDGETT + MRS KATHERINE LIDGETT

5 MR GREG MAREN + MRS GERALDINE MAREN

6 CS THIRD NOMINEES PTY LIMITED

7 PATAGORANG PTY LTD

8 MR DAVID ROTHWELL

9 BNP PARIBAS NOMS PTY LTD

10 EREMITE PTY LTD

11 WILLROTH PTY LTD

12 BARNEY & ALIEN CONSOLIDATED PTY LTD

13 RTEC (NSW) PTY LTD

14 MR EDWARD TIMOTHY KEATING + MRS LINDA JOY KEATING

15 QOC FOUNDERS NOMINEES PTY LIMITED

16 MR WILLIAM ROBERT CARTER + MS SARAH VICTORIA WILLIAMS

17 MR JAMES BROOMHEAD

18 OLD DILKARA PTY LTD

19 MATTALLI PTY LTD

20 MR BARRIE WOODLEY + MRS NOLA JEAN PRISK

Totals: Top 20 holders of FULLY PAID ORDINARY SHARES (Total)

Total Remaining Holders Balance

Units

% Units

50,104,717

21,241,244

19,399,702

17,552,290

17,278,297

14,334,686

11,197,948

8,653,410

8,470,278

7,853,961

7,643,815

6,742,808

5,659,284

5,588,888

5,503,614

4,860,000

4,305,207

4,100,000

4,000,000

7.73

3.28

2.99

2.71

2.67

2.21

1.73

1.33

1.31

1.21

1.18

1.04

0.87

0.86

0.85

0.75

0.66

0.63

0.62

228,490,149

419,728,205

35.25

64.75

UNQUOTED EQUITY SECURITIES

Options over ordinary shares 65,535,999

58 Annual Report 2020

FIRSTWAVECLOUD TECHNOLOGY07

Corporate Directory

Directors

John Grant - Executive Chairman

Scott Lidgett - Non-Executive Director

Paul MacRae - Non-Executive Director

David Acton - Non-Executive Director

Company Secretary

Gai Stephens

Registered office

Share register

Auditor

Level 10, 132 Arthur Street
North Sydney, NSW 2060
Australia
Tel: +61 2 9409 7000

Computershare Investor Services Pty Limited
Level 5, 115 Grenfell Street
Adelaide, SA 5000
Australia
Tel: 1300 787 272

Grant Thornton Audit Pty Ltd.
Level 17, 383 Kent Street
Sydney, NSW 2000

Stock exchange listing

FirstWave Cloud Technology Limited shares are listed on the Australian Securities Exchange (ASX
code: FCT)

Website

www.firstwavecloud.com

Corporate Governance
Statement

The directors and management are committed to conducting the business of FirstWave Cloud
Technology Limited in an ethical manner and in accordance with the highest standards of corporate
governance. FirstWave Cloud Technology Limited has adopted and has substantially complied with the
ASX Corporate Governance Principles and Recommendations (Third Edition) (‘Recommendations’) to
the extent appropriate to the size and nature of its operations.

The consolidated entity’s Corporate Governance Statement, which sets out the corporate
governance practices that were in operation during the financial year and identifies and explains any
Recommendations that have not been followed and ASX Appendix 4G are released to the ASX on
the same day the Annual Report is released. The Corporate Governance Statement and Corporate
Governance Compliance Manual can be found on the company’s website at www.firstwavecloud.com/
corporate-governance

Annual Report 2020 59

FIRSTWAVECLOUD TECHNOLOGY2020

ANNUAL REPORT

+61 2 9409 7000

Head Office
Level 10, 132 Arthur Street,
North Sydney, NSW 2060

www.firstwavecloud.com

FirstWave Cloud Technology LimitedFIRSTWAVECLOUD TECHNOLOGYFIRSTWAVECLOUD TECHNOLOGY