1
Harris Technology Group Ltd (ASX: HT8) has the mission to be a
leading ASX-listed online e-commerce destination in Australia.
Contents
Chairman and CEO Letter
FY16 Summary
FY17 Strategy
Directors’ Report including Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Financial Statement
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Information
4
6
9
17
37
38
39
43
83
84
86
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Harris Technology Group Brands
Harris Technology Group Growth Strategy
Focus on
Sales and
building the
brands in the
market
Strategic
online
shopping
Acquisitions
Emphasis on
Systemisation
to reduce
costs
Ensure all
sites are
Mobile &
Tablet-
Enabled to
increase
visibility
3
Chairman and CEO Letter
Dear Shareholders,
Limited
Technology Group
(the
Harris
its controlled entities (the
Company) and
Group) present its results for the financial year
ended 30 June 2016 (FY16). The results reflect
the Group’s continuing capital investment in
building a scalable operating platform, and
expenditure
associated with developing
associated capabilities.
During FY16, the Group generated revenue of
$17,789,785, down 3.60% on the previous year
(FY15: $18,453,912). The Group incurred a net
loss from continuing operations of $6,543,393,
and a net loss of $6,510,012.
to undertake
Subsequent to the end of FY16 on 19 July 2016,
the Company completed
its merger with
Anyware Corporation Pty Ltd, a distributor of
business technology equipment and owner of
the Harris Technology online retail business
(Merger). After completion of the Merger, the
a
Company determined
consolidation of its websites and platforms, in
order to facilitate operational efficiencies and
realise cost savings in respect to development
and IT expenses. As part of the website and
platform consolidation, the Company closed
down its existing Warcom and eStore websites,
and redirected traffic from those websites to its
centralised business
technology website
ht.com.au.
The Company reported an impairment expense
of $1,027,386 for FY16, which relates primarily
to goodwill and intangible assets associated
with the website closure and migration, and
platform
consolidation. Depreciation and
amortisation was $405,721 for FY16, up from
$392,974 in the prior year.
Professional fees incurred in FY16 were a total
of $453,882, up from $445,720 in the prior year,
as a result of one-off accounting and legal fees
of approximately $130,000 incurred in respect
to the Merger.
As the Merger was completed after the end of
FY16, the Group’s reported results do not
include trading results of Anyware Corporation
Pty Ltd or its subsidiary Harris Technology Pty
Ltd.
Financials
Revenues of $17.8m down 3.6% on FY15
(Guidance: $18m, FY15: $18.5m)
Loss $6.5m (FY15: $2.6m). Loss reflective
of:
Continuous investment in
infrastructure upgrades and
developments
Impairment of goodwill and intangible
assets associated with the website
closure, migration and platform
consolidation
One-off accounting and legal fees in
respect to the merger with Anyware
and Harris Technology
Termination or replacement of senior
executives and senior management,
including CEO, COO and CFO
Onerous contract provision in respect
to the warehouse relocation as part of
the new management’s cost down
initiative
Downturn in sales and lower trading
margin influenced by bus-tech sector
Operations
Minimal full year revenue rate drop-off in
an increasingly difficult market, despite a
disappointing Christmas that affected the
entire industry
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acquisitions. The Board remains confident
that all the building blocks are now in place
for
continued
improvement in shareholder returns.
sustained growth
and
Harris Technology Group continues
to
provide quality brands across homewares,
kitchenware, office technology and baby
products at great prices. We continue to
expand our categories and offerings to our
customers. We look forward to continuing the
growth trajectory and further proving the
results of our organic and acquisitive online
retail strategy.
Thank you for your ongoing support and we
look forward to meeting with those of you
who are able to attend our upcoming Annual
General Meeting.
Andrew Plympton
Non-Executive Chairman
Melbourne, 29 September, 2016
Garrison Huang
Managing Director
Melbourne, 29 September, 2016
Upheaval in systems and process
management that has led to greater
clarity and understanding in reporting
and business outlook
Revenue run-rate baseline of $5.5m per
month set, significant growth from prior
run-rate
Greater brand awareness achieved for
Your Home Depot and Wow Baby
through extensive television advertising
and online customer feedback
Extended range of suppliers and brands
to increase market share
Further growth in positive relationships
with key suppliers in each market vertical
Significant capital investment undertaken
to improve customer interface & enhance
customer online experience
Increased focus on customer service and
building stronger, lasting customer
relations
Management team overhauled – new
management team comes with rich
experience in specifically running and
maintaining profitable businesses
The business strategy and operating model
thoroughly positive
has undergone a
overhaul aligning
to meet and exceed
shareholders’ progressive expectations. The
objective is to achieve sustainable growth in
earnings and maintain high returns. This will
be achieved through creating a differentiated
offering for customers, growth in emerging
markets and capitalising upon value-creating
5
FY16 Summary
Full year profit and loss summary
Revenue from continuing operations
Sales Revenue
Finance Revenue
Total Revenue
FY16
($m)
FY15
($m)
Change
($m)
17.79
18.45
(0.66)
0.13
0.04
0.09
17.92
18.49
(0.57)
Total Comprehensive (loss)/profit
(6.51)
(2.48)
(4.03)
Full year profit and loss summary - underlying
FY16
($m)
FY15
($m)
Change
($m)
Non-statutory financial results include:
Gross Profit
1.22
3.16
(1.94)
Loss before income tax
(6.54)
(2.57)
(3.97)
Total Comprehensive (loss)/profit
(6.51)
(2.48)
(4.03)
Operating costs
Direct costs
(16.57)
(15.30)
(1.27)
Other costs and expenses
(7.76)
(5.73)
(2.03)
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Balance Sheet
Cash and cash equivalents
Inventories
Property, plant and equipment
Intangible assets
Net assets
Cash position
30 June 16
($m)
30 Jun 15
($m)
0.42
0.67
0.06
1.51
(1.68)
2.31
1.76
0.24
3.12
3.84
Cash and cash equivalent of $418,622 at 30 June 2016
Based on the cash position at end of FY16 and as a result of a stringent budgeting process, the
company believes it is in a position to meet planned operational and capital expenditure
throughout FY17.
Cash and cash equivalents for June 2015 to June 2016 (000's)
$2,307
$1,007
$867
$467
$419
Jun-15
Jul-15
Aug-15
Sep-15 Oct-15 Nov-15 Dec-15
Jan-16
Feb-16 Mar-16 Apr-16 May-16
Jun-16
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Strengthened Team
Garrison Huang
Executive Director & Chief Executive Officer
20 years’ experience in management in the IT
Importing and Distributing industry
Co-Founder of Anyware Corporation Pty Ltd – a
leading IT accessory distributor with well-established
importing & distribution channels
Appointed Executive Director and Chief Executive
Officer on 19 July 2016
Bob Xu
Executive Director
Founder of successful
import and distribution
company AZA International
Business Director for Anyware Corporation Pty Ltd
since 2012
Appointed Executive Director on 19 July 2016
Howard Chen
Non-Executive Director
Extensive experience in global product sourcing,
development, brand marketing and sales
Managing Director of Ultra Imagination Technology
Pty Ltd, which holds ownership of mbeat
Appointed Non-Executive Director on 19 July 2016
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FY17 Strategy
Growth of
revenue
Operationally
profitable
Capitalising and growing on monthly revenue position
Continual improvement in business processes to improve
our position
Seek appropriate acquisition opportunities
Acquisitions
With the merged entity, Wholesales and Online
properties can be integrated into the operating model
and deliver ongoing revenue growth
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Long Term Prospects
As suitable opportunities arise, we intend to grow organically and by acquisition to enable us
diversify our product offerings and enter additional e-commerce markets.
We are utilising Anyware's existing infrastructure and knowledge od importing and distribution to
deliver a "direct model" to the business of Your Home Depot and Wow Baby. In particular, we will
launch a business model called: "Cross Border Direct Shipping with Local Presence” (CBDSLP). With a
team based in China and the ability to sell directly online to consumers in Australia, this model's key
benefits are:
No stock holding required
Cost is most competitive
Business is direct to end user (Direct Model - almost Factory to Consumer)
Existing local presence, including customer support call centre, where business can be
operated with confidence and inspire trust and loyalty among consumers
Existing Chinese partner's company structure and resources can be fully utilised
Scope to expand on range of market verticals such as furniture, travel goods and
sporting goods
10
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Anyware / Harris Technology’s team is made up of a group of
experiences professionals with a 20 year history in the import and
distribution businesses in Australia. The new merged company
can
leverage Anyware’s existing strong ties with overseas
suppliers and manufacturers for product sourcing.
Significant expense savings can be achieved by combining the
office and warehouse operations. Business processes can be
streamlined across the group. Centralised and shared services
across business operations including IT systems, marketing and
customer support means cost savings and better communication
for the whole group.
With a dedicated team in Shenzhen, China, the company can
source the best products at competitive prices with the highest
quality and best availability.
A single e-commerce system / platform (in progress) instead of
several different systems ensures efficiency in operation and big
savings on development and IT expenses.
By merging or sharing the customer database, the new company
can cross-promote and upsell items to a larger consolidated
customer database.
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Strategies and plans
The individual strategies of each business will be addressed below; however the underlying theme
across the group is to enable each area of the business to grow whilst complementing the others.
A strong sales increase is forecast across the group whilst carefully managing expenditure on
procurement, marketing and human resources.
Anyware
Founded in 1996, Anyware Corporation has long been established as one of the premiere
distribution businesses in Australia and New Zealand for IT equipment, accessories, electrical,
lighting, home entertainment, education, corporate infrastructure and more. This position of
strength has been achieved through careful and considered planning and through successful
execution of sourcing, sales and marketing plans. Anyware stands today with a solid foundation
forged over our 20-year history; a foundation which has allowed us to expand into new markets as
the opportunity has arisen, utilising existing infrastructure, business experience and executive
personnel to ensure success.
Strategies and Plans
Growth is forecast across the Electrical Installer / Wholesale segment of the Anyware market
following investment in resources to enhance our expansion into this area. Anyware’s
existing product offering caters to this market, along with strategic additions to allow us to
achieve significant growth.
The addition of Wow Baby and YHD into the group has begun to present new markets
which may allow Anyware to explore new distribution and importing opportunities.
Harris Technology
Since its inception in 1986, Harris Technology has remained a cornerstone of the IT industry in
Australia. The scope and longevity of HT’s business are unmatched, providing both customers and
vendors with the security and size of a big retailer with the agility of an online store.
Comprehensive SMB-focused product range of over 10,000 items available online
Local call center staffed by category expert
Outstanding 30-year reputation and brand equity
Cutting edge marketing campaigns with strong digital focus
As Harris Technology enters its 30th year the face of retail business in Australia has seen countless
changes. Despite the changing landscape, HT’s focus has remained wholly toward the SMB
marketplace. This market has not traditionally been serviced strongly by the industry as a whole,
providing an enormous opportunity. Harris Technology is dedicated to ensuring positive customer
experience through outstanding customer service and by providing products and services that
meet the unique requirements of this SMB segment.
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Strategies and Plans
Continue to keep product ranges up-to-date & brands current
Pricing requires constant attention to maintain competitiveness
Investment in our staff with training to ensure we can best service our customers
Building a Cloud & Services product offering following investment in this burgeoning
category
Continue to expand and improve upon the existing Drop Ship model in order to minimise
stock holding liability
Pending IT developments we expect to add an eBay store in late 2016 which is expected to
bring an immediate 5-10% sales boost
Your Home Depot
Founded in 2003, Your Home Depot (YHD) is one of Australia’s leading online homewares and
home appliance retailers, offering high-end kitchenware, homewares and electrical appliances
nationwide via its online website www.yourhomedepot.com.au. In June 2014 YHD was acquired
by Shoply Ltd (now Harris Technology Group Ltd) as the centerpiece of the company’s expansion
into burgeoning online shopping markets. The addition complemented the Group’s existing
properties in IT and baby products, cementing a compelling diversity of enterprises across
numerous fast-moving verticals.
The Online Kitchen and Diningware Sales industry is driven by big name brands, brands which Your
Home Depot has forged strong, secure relationships with over more than a decade. The new
ownership and management structure at YHD necessitates consolidation of these supplier
relationships which has been a successful undertaking throughout previous months.
Strategies and Plans
Competitive pricing – it is YHD’s intention to remain competitive on price alongside a select
group of online competitors, but to strike a balance ensuring healthy margins and avoiding
‘price wars.’
Strict ROI – all marketing activities, and business expenses throughout, will be subject to
strict campaign measurement to ensure return on investment is significant.
Careful stock management – regular, disciplined forecasting and ordering by trained
professionals will minimise stock-outs as well as overstocks, striking a meticulous balance.
Development work for software tools to aid in such processes is underway.
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Wow Baby
In March 2014 Shoply Ltd Group (now Harris Technology Ltd Group) acquired WowBaby.com.au,
an online baby products retailer. Established in October 2010, Wow Baby possesses a strong,
respected identity in the market. It holds strong relationships with key vendors and distributors,
supported by innovative marketing and committed customer support which has allowed Wow
Baby to grow significantly since being acquired.
Already strong in a number of categories such as prams, nappy bags and high-chairs, the focus for
2016 has been to diversify further into growing categories. Within a short span Wow Baby has
secured successful dealings with Tier 1 brands Tomy, Boon, Munchkin, Mamaway and many more,
contributing to categories including toys, bins, feeding and pregnancy-wear.
This rapid development has been achievable due to a number of logistical considerations:
Leveraging Harris Technology Group’s significant warehouse storage capacity
Introducing a ‘Drop Ship’ option with selected suppliers to minimise required stock
holdings
Supplementing the above with regular ordering from local suppliers
Strategies and Plans
Ensuring repeat business is a key area in 2016-17. This will be achieved by introducing categories
such as nappies, wipes, bin-refills and formula. These encourage ongoing purchases over a number
of years for each customer/parent, a key component of Wow Baby’s growth strategy.
Price analysis will be undertaken to allow Wow Baby sell prices to be more competitive in the
market.
Range rationalisation – Be selective in adding suppliers to strategically assist segment
growth
Add tactical new segments / brands in line with market movement
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Corporate Information
Non-Executive Chairman
Executive Director & CEO
Executive Director
Non-Executive Director
Non-Executive Director
DIRECTORS
Mr Andrew Plympton
Mr Garrison Huang
Mr Bob Xu
Mr Mark Goulopoulos
Mr Howard Chen
COMPANY SECRETARY
Ms Alyn Tai
REGISTERED OFFICE
Level 1, 61 Spring Street
Melbourne Victoria 3000
AUDITORS
SHARE REGISTRY
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne Victoria 3000
BANKERS
Westpac
360 Collins Street
Melbourne Victoria 3000
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Tel: 1300 737 760
EXCHANGE LISTING
Harris Technology Group Limited (Formerly
Shoply Limited)’s ordinary shares are quoted on
the Australian Securities Exchange (ASX: HT8)
STATE OF INCORPORATION
Victoria
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Directors’ Report
The Directors present their report together with the financial report of the consolidated entity
consisting of Harris Technology Group Limited (the Company) and its controlled entities (the
Group), for the financial year ended 30 June 2016 and independent auditor’s report thereon.
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
The qualifications, experience and special responsibilities of each person who has been a Director
of Harris Technology Group Limited, together with details of the Company Secretary, during the
financial year and until the date of this report are as follows. Directors were in office for this entire
period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Andrew Plympton, Independent, Non-Executive Chairman
Mr Plympton was appointed to the Board on 9 February 2010 as an Independent Non-Executive
Chairman. Mr Plympton assumed the role of Executive Chairman from 11 March 2016 – 19 July
2016, after which he resumed his role as Non-Executive Chairman.
Experience and expertise
Mr Plympton joined the Company in February 2010 and brings a wealth
of experience in a diverse range of commercial activities.
Mr Plympton has spent more than 35 years in the financial services area,
as Managing Director and/or Executive Chairman of a number of
international insurance brokers and risk managers. In addition he held
the role of Chairman in Underwriting Agencies and Captive Insurance
Managers.
Other directorships held by
Director in the last 3 years
In the public company sector Mr Plympton is a director of XPD Soccer
Gear Limited (ASX: XPD) (appointed 7 February 2015) and Energy Mad
Limited (NZX: MAD).
Mr Plympton is an Executive Member of The Australian Olympic
Committee and Director of The Australian Olympic Foundation Limited.
He is a Commissioner of the Australian Sports Commission and Advisory
Board Member of Global Risk Advisory Company Aon
During the last three years Mr Plympton has also served as a director of
the listed companies NewSat Limited (ASX: NWT) from 18 February 2010
to 30 June 2014, Sunbridge Group Limited (ASX: SBB) from 23 July 2013
to 30 December 2014 and has been a director of Bluestone Global
Limited (ASX: BUE) since 19 July 2013. Mr Plympton was also Chairman
of KneoMedia Limited (ASX: KNM) from 26 August 2010 to 21 October
2015.
Special responsibilities
Chair of the Board, Member of Audit and Risk Management Committee,
Member of Nomination and Remuneration Committee.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Plympton has a relevant interest in 160,000 fully paid ordinary shares
which are held by an entity Mr Plympton controls.
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Garrison Huang, Executive Director
Mr Huang was appointed to the Board on 03 March 2016 as a Non-Executive Director. Mr Huang
was appointed as Executive Director and CEO on 19 July 2016.
Experience and expertise
Mr Huang came to Australia from Shanghai, where he was born, and
became an Australian citizen in 1996. Mr Huang holds a Bachelor of
Engineering degree from Zhejiang University, in China, a Graduate
Diploma in Computer Systems Engineering from Swinburne University
and a Graduate Certificate in Marketing from Melbourne University.
Mr Huang is a co-founder of Anyware Corporation Pty Ltd – a leading IT
accessory distributor
is a well-established
in Australia. Anyware
importing and distribution business with offices and warehouses in
Melbourne, Sydney, Brisbane, Perth and Adelaide. In 2015 Anyware
Corporation Pty Ltd acquired Harris Technology (www.ht.com.au) from
Officeworks, one of Australia’s longest established and leading e-
commerce businesses focusing on technology products. Mr Huang was
the CEO and Executive Director of Harris Technology.
Other directorships held by
Director in the last 3 years
None.
Special responsibilities
None.
interest
in Harris
Relevant
Technology Group securities as
at the date of this report
Mr Huang has a relevant interest in 80,110,489 fully paid ordinary shares
which are held by an entity that Mr Huang controls.
Bob Xu, Executive Director
Mr Xu was appointed to the Board on 07 March 2016 as a Non-Executive Director. Mr Xu was
appointed as Executive Director on 19 July 2016.
Experience and expertise
Mr Xu came to Australia in 1987, and became an Australian Citizen in
1995. Mr Xu holds a Diploma in Mechanical Engineering from the
Shanghai Aviation Technology Institute, and studied Engineering for four
years at TongJi University.
Mr Xu started import and distribution business with AZA International
Pty Ltd in 1996. Mr Xu has served as Business Director of Anyware
Corporation Pty Ltd (Anyware) since 2012. Mr Xu was also Executive
Director of Harris Technology Pty Ltd.
Other directorships held by
Director in the last 3 years
None.
Special responsibilities
None.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Xu has a relevant interest in 8,638,903 fully paid ordinary shares
which are held by an entity that Mr Xu controls.
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Mark Goulopoulos, Non-Executive Director
Mr Goulopoulos was appointed to the Board on 1 November 2012 as a Non-Executive Director.
Experience and expertise
Mr Goulopoulos, BCom (Acc&Fin), GDAFI, is an Associate Director of
Wealth Management at Patersons Securities and has over 15 years’
experience as an investment adviser. He has broad based knowledge
which applies across many areas of financial markets and specialises in
strategic investment advice for high net worth clients, international
hedge funds and family offices. Mr Goulopoulos has particular expertise
with small capitalisation stocks and this has been a catalyst in him
originating, arranging and distributing transactions in Equity Capital
in capital markets Mr
Markets.
Goulopoulos has also co-founded companies in the digital arena
focussed on e-commerce and mobile applications.
In addition to his experience
Other directorships held by
Director in the last 3 years
During the last three years, Mr Goulopoulos has not served as a director
of any other listed companies.
Special responsibilities
Member of Audit and Risk Management Committee.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Goulopoulos has a relevant interest in 1,268,645 fully paid ordinary
shares in Harris Technology Group which are held by various entities
which Mr Goulopoulos controls.
Howard Chen, Non-Executive Director
Mr Chen was appointed to the Board on 19 July 2016 as a Non-Executive Director.
Experience and expertise
Mr Chen holds a Masters of Microelectronics degree from Griffith
University, and is a member of the Institution of Engineers Australia. Mr.
Chen has a strong background in and deep understanding of electrical
and IT products, with years of extensive experience in global product
sourcing, development, brand marketing and sales.
Prior to the
completion of his Masters degree, he worked as the system design
engineer in Quanta Computer (Shanghai), the global number one in
laptop and hardware manufacturing. Mr Chen is also a graduate of
Jiliang University.
Mr Chen is currently the managing director of Ultra Imagination
Technology Pty Ltd. The company owns mbeat, one of the most dynamic
and fast growing lifestyle tech brands in Australia. mbeat holds a
heavyweight presence in the Australian and New Zealand National
retailer and online sectors, being retailed through the likes of Harvey
Norman, Officeworks, The Warehouse Group, Catchoftheday and Kogan,
and is currently breaking into the US market.
Other directorships held by
Director in the last 3 years
None.
Special responsibilities
None.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Chen has a relevant interest in 1,469,512 fully paid ordinary shares in
Harris Technology Group Ltd which are held by an entity Mr Chen
controls.
19
Domenic Carosa, Former Non-Executive Director
Mr Carosa was appointed to the Board on 18 June 2013 as a Non-Executive Director. Mr Carosa
retired from the board on 19 July 2016.
Experience and expertise
(a
Mr Carosa holds a Masters of Entrepreneurship & Innovation from
Swinburne University and has over 20 years of experience in business
and technology. He is co-founder and Chairman of Future Capital
registered Pooled Development
Development Fund Pty Ltd
Fund). Future Capital has successfully raised in excess of $8M in patient
equity capital in recent years, invested in 14 early stage investees. He is
also Chairman of Dominet Digital Corporation Pty Ltd, a boutique
internet investment group. Mr Carosa was previously the co-founder and
Group CEO of ASX-listed Destra Corporation which was the largest
independent media and entertainment company in Australia. He stepped
aside in April 2008.
Other directorships held by
Director in the last 3 years
Mr Carosa is the Executive Director/CEO of ASX listed global mobile
entertainment company Crowd Mobile Limited (ASX: CM8), having been
appointed to this role on 13 January 2015.
Mr Carosa is also a Non-Executive Director of ASX listed company
Collaborate Corporation Limited (ASX: CL8) having been appointed 8
August 2014.
Special responsibilities
Chair of Nomination and Remuneration Committee.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Carosa has a relevant interest in 4,274,433 fully paid ordinary shares
in Harris Technology Group which are held by various entities which Mr
Carosa is associated with or controls.
Matthew Dickinson, Independent, Former Non-Executive Director
Mr Dickinson was appointed to the Board on 1 May 2015 as an Independent Non-Executive
Director and retired from the Board on 1 March 2016.
Experience and expertise
Mr Dickinson holds a Bachelor of Information Technology (BIT) from the
University of Technology Sydney (UTS) and has been an internet
entrepreneur, startup advisor and investor for the past 15 years. He
founded the iMega Group, one of the world’s first programmatic online
ad-tech companies in 2005. The ASX listed Photon Group acquired
iMega in an 8 figure deal.
He is a mentor at Startmate (Australia's leading start-up accelerator) and
has advised hundreds of founders in the past 10 years in Australia and
the USA. He started the Worldsites business, one of the first digital web
agencies in Australia, focused on helping SME's get results on the
internet. He was also an e-commerce management consultant at KPMG
& Cisco Systems. Mr Dickinson also worked across the family rag-trade
business gaining experience in all facets of the retail and wholesale
businesses.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Dickinson has not served as a director of
any other listed companies.
20
Special responsibilities
Member of Nomination and Remuneration Committee.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Dickinson has a relevant interest in 694,008 fully paid ordinary shares
in Harris Technology Group which are held by an entity with which Mr
Dickinson is associated.
Lorenzo Coppa, Former Non-Executive Director
Mr Coppa was appointed to the Board on 24 June 2015 as a Non-Executive Director and retired
from the Board on 1 March 2016.
Experience and expertise
in physical sciences
in Communications
Mr Coppa holds a BSc
Electronics and Econometrics from La Trobe University. He founded the
City Software group of companies (City Software) in 1991 and served as
the CEO of City Software for nearly 25 years. City Software grew to be
the nation’s leading software reseller to small to medium businesses,
charities, educational institutions, students and home users. Founded
with $32,000, City Software delivered $1,000,000 revenue during its first
year of trading and successfully delivered the first IT reseller website in
1994.
Other directorships held by
Director in the last 3 years
Mr Coppa served as an independent, non-executive director with
June
SteriHealth Limited
2014. Serving as chairman in the latter years, Mr Coppa led a scheme to
privatise the business with 97% shareholder approval.
from September 2008
(ASX: STP)
to
Special responsibilities
Chair of Audit and Risk Management Committee.
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Mr Coppa has a relevant interest in 800,703 fully paid ordinary shares in
Harris Technology Group of which he has the right to control the
exercise of the vote.
Alyn Tai, Company Secretary
Ms Tai was appointed as Company Secretary on 24 June 2015.
Experience and expertise
interest
Relevant
in Harris
Technology Group securities as
at the date of this report
Ms Tai, LL.B (Hons) Exon., is a practising lawyer. She joined the law firm
Corporate Counsel Pty Ltd, which provides corporate and company
secretarial services to Australian companies in 2010. Prior to joining
Corporate Counsel, she trained as an advocate at the Bar in London. Ms
Tai has acquired international legal experience from working in law firms
and barristers’ chambers in London, Singapore and Melbourne. Ms Tai
graduated from the University of Exeter in the United Kingdom in 2008,
and was called to the Bar of England and Wales before being admitted
to the Supreme Court of Victoria as an Australian lawyer. Ms Tai is a
member of the Honourable Society of Inner Temple in the United
Kingdom and the Law Institute of Victoria.
Ms Tai has a relevant interest in 80,000 fully paid ordinary shares in
Harris Technology Group.
21
Directors’ Meetings
The number of meetings of the Board of Directors held during the financial year and the numbers
of meetings attended by each Director (while they were a Director) were as follows:
Director
Eligible to Attend
Number Attended
Mr Andrew Plympton
Mr Garrison Huang
Mr Bob Xu
Mr Mark Goulopoulos
Mr Dominic Carosa
Mr Howard Chen
Mr Lorenzo Coppa
Mr Matthew Dickinson
Neville Christie*
Holger Arians#
12
4
3
12
12
0
9
9
2
3
12
4
3
11
6*#
0
8
8
2
3
*alternate for Domenic Carosa attended in his stead 27 October 2015 and 24 November 2015
#alternate for Domenic Carosa attended in his stead 15 December 2015 and 21 January 2016
Note: DC in attendance and NC present at 24/11/15 meeting
Board Committees
During the financial year, the Group established an Audit and Risk Management Committee (ARC).
The Group has a Nomination and Remuneration Committee (NRC) which was established in FY15.
During the year, there were a number of changes to the composition of the Board due to the
merger between the Company and Anyware Corporation Pty Ltd. As a result of the Board changes,
operation of the Board sub-committees (being the ARC and NRC) has been temporarily suspended.
Since suspension the functions of those committees have been performed by the Board as a whole.
This will continue to be the case until the Board determines otherwise.
Directors’ Interests in Shares and Options of the Group
As at the date of this report, the relevant interests of the Directors (and former Directors during the
year) in the shares and options of the Group were:
Director
Number of ordinary shares
Number of options (unlisted)
Mr Andrew Plympton 1
Mr Garrison Huang 2
Mr Bob Xu 3
Mr Mark Goulopoulos 4
160,000
80,110,489
8,638,903
1,268,645
22
nil
nil
nil
nil
Mr Dominic Carosa 5
Mr Howard Chen 6
Mr Lorenzo Coppa 7
Mr Matthew Dickinson 8
4,274,433
1,469,512
800,703
694,703
nil
nil
nil
nil
1.
2.
3.
4.
5.
6.
7.
8.
The shares are held by Mr Andrew J Plympton & Mrs Kim P Plympton ATF Plympton Exec Super Fund A/C; Mr
Plympton controls this entity.
The shares are held by Australian PC Accessories Pty Ltd ATF GWH A/C; Mr Huang controls this entity.
The shares are held by Aza International (Aust) Pty Ltd ATF North City Family A/C; Mr Xu controls this entity.
The shares are held by Atlantis MG Pty Ltd ATF MG Family Super Fund A/C and Atlantic MG Pty Ltd ATF MG Family
A/C; Mr Goulopoulos is the practical controller of Atlantis MG Pty Ltd.
The shares are held by Tiger Domains Pty Ltd ATF Tiger Domains Unit Trust, MP3 Australia Pty Ltd ATF MP3
Australia Unit Trust A/C in each of which Mr Carosa is both a 50% shareholder and unit holder and Dominet Digital
Corporation Pty Ltd ATF The Carosa Family A/C in which Mr Carosa is a beneficiary.
The shares are held by H & J Investment Pty Ltd ATF H & J Superannuation Fund; Mr Chen controls this entity.
The shares are held by Isabel Coppa ATF Coppa Family A/C; Mr Coppa has the right to control how this entity votes
its shares.
The shares are held by Diamond Bowl Pty Ltd ATF the Diamond Bowl Super Fund A/C; Mr Dickinson is associated
with this entity and has a relevant interest in shares it holds.
Earnings Per Share
Earnings Per Share
Basic and diluted earnings per share
Cents
(1.08)
Dividends paid, recommended and declared
No dividends were paid, declared or recommended since the start of the financial year ended 30
June 2016.
23
OPERATING AND FINANCIAL REVIEW
Corporate Structure
Harris Technology Group Limited is a company limited by shares that is incorporated and
domiciled in Australia and listed on the Australian Securities Exchange (ASX). Harris Technology
Group Limited has prepared a consolidated financial report incorporating the entities that it
controlled during the financial year ended 30 June 2016. The Company’s subsidiary entities are set
out in note 30 to the consolidated financial statements.
Nature of operations and principal activities
The Group’s principal activities during the course of the financial year were in the area of online
retailing. There has been no significant change in the nature of these activities during the financial
year.
Employees
The Group has 13 employees, inclusive of casual and part-time staff as at 30 June 2016 (2015: 49).
The Group had consulting agreements with 3 contractors as at 30 June 2016 (2015: 4 contractors)
who performed the primary activities of the Group at 30 June 2016.
Group Performance over the five-year period
Basic earnings/(loss) per share (cents)
(1.08)
(0.47)
(0.54)
0.02
(1.35)
(1.12)
2016
2015
2014
2013
2012
2011
Financial position
The Group had net liabilities of $1,683,999 as at 30 June 2016 (2015: $3,837,025 net assets).
The Group had trade and other receivables of $117,586 as at 30 June 2016 (2015: $650,686).
The Group had trade and other payables of $1,400,834 as at 30 June 2016 (2015: $3,587,161).
Cash flows
The Group generated net operating cash outflows of $5,088,307 during the year ended 30 June
2016 (2015: net cash outflows $123,283). Net investing cash outflows were $292,818 in the year
ended 30 June 2016 (2015: $892,789).
Net financing cash inflows were $3,492,500 in the year ended 30 June 2016 (2015: net financing
cash out flows of $186,939).
There was a cash balance at 30 June 2016 of $418,622 (2015: $2,307,247).
24
Likely developments and future prospects
The Company is pleased with the development of its dual strategy of acquisitive and organic
growth as an online retail company.
Harris Technology Group intends to continue to provide quality brands across homewares,
kitchenware, office technology and baby products, and expand its categories and offerings to
customers. Harris Technology Group further intends to continue its growth trajectory and prove the
results of its organic and acquisitive online retail strategy.
The Directors are optimistic that, despite the early stage nature of the company, it is positioned to
achieve its objective of continued revenue growth in the 2017 financial year.
Key business risks
The Group’s operations are subject to a number of risks. The Audit and Risk Management
Committee and Board regularly review the possible impact of these risks and seek to minimise this
impact through a commitment to its corporate governance principles and its various risk
management functions. A number of specific risk factors that may impact the future performance
of the Group are described below. Shareholders should note that this list is not exhaustive, and
only include risks that could affect the Group’s financial prospects, taking into account the nature
and business of the Group and its business strategy.
(a)
Risks related to the Group’s e-commerce activities
E-commerce risks – There are a number of inherent risks associated with operating in the e-
commerce sector, including but not limited to security breaches (particularly in relation to
credit card security), fraud exposure, customer disputes and chargebacks. For instance,
security risks arising from intrusions from viruses and hackers could disrupt the Group’s
business operations and may lead to loss in customer confidence and sales revenue.
(b)
General risks
Reliance on technology – The successful operation of the Group’s business is dependent on
various technologies including the internet and co-located dedicated servers. Any
significant disruption to these systems could have a materially detrimental effect on the
Group’s business. Further, there is no guarantee that the technology utilised by the Group
will not, in the future, be superseded by other technologies.
Intellectual property – One of the Group’s significant assets is its intellectual property rights
in products and services, which it has developed. The Company relies on a combination of
copyright and trademark laws, confidentiality procedures and contractual provisions to
protect these assets. Unauthorised use of the Company’s intellectual property could have a
materially adverse effect on the Company and there can be no assurance that the
Company’s legal remedies would adequately compensate it for the damage to its business
caused by such use.
25
Competition – The Group is not unique in developing and marketing many of its products
and services. There is a risk that its products and services may not, in the future, be able to
compete with competitors' products and services on cost or technical grounds.
Risk Management
The Board takes a proactive approach to risk management. The Board is responsible for ensuring
that risks, and also opportunities, are identified on a timely basis and that the Company’s
objectives and activities are aligned with the risks and opportunities identified by the Board. The
Company has in FY16 established an Audit and Risk Management Committee to oversee this audit
and risk management function of the Board.
Significant changes in the state of affairs
The following significant changes in the state of affairs of the Group occurred during the financial
year:
Operational
On 2 March 2016, Harris Technology Group announced that it had entered into a heads of
Agreement for a proposed merger with Anyware / Harris Technology Group.
On 3 March 2016, Harris Technology Group completed a $1m placement from Garrison
Huang. The 139,909,396 shares were issued at $0.007147 per share to Garrison Huang.
On 16 June 2016, Harris Technology Group advised that it would be holding an
extraordinary general meeting of shareholders on 15 July 2016 (EGM).
Appointments and resignations of officeholders
On 1 March 2016, Mr Matthew Dickinson resigned as a Director of Harris Technology Group
On 1 March 2016, Mr Lorenzo Coppa resigned as a Director of Harris Technology Group
On 3 March 2016, Mr Garrison Huang was appointed as a Non-Executive Director of Harris
Technology Group.
On 7 March 2016, Mr Bob Xu was appointed as a Non-Executive Director of Harris
Technology Group.
On 19 July 2016, Mr Garrison Huang was appointed as an Executive Director and CEO of
Harris Technology Group.
On 19 July 2016 Mr Howard Chen was appointed as a Non-Executive Director of Harris
Technology Group.
On 19 July 2016 Mr Domenic Carosa resigned as a Director of Harris Technology Group.
Change of auditor
There is no change of auditor during the financial year.
26
Issue of shares and options
Prior to FY15, on 30 June 2014, Harris Technology Group’s SHPO class of ASX-listed options
expired. In accordance with an underwriting agreement between Harris Technology Group
and Patersons Securities Limited (Patersons), under which Patersons agreed to act as
underwriter for the exercise of the SHPO options, Patersons and/or its sub-underwriters
subscribed for the total shortfall of 3,071,199 underlying shares on 9 July 2014.
During the year, the Company issued a number of shares SHPOA on exercise of option.
During the year, the Company issued a number of shares to Garrison Huang as the
consideration of $1m share placement.
Significant events after the balance date
Effective 19 July 2016, Harris Technology Group completed the merger with Anyware /
Harris Technology Group
On 19 July 2016, Harris Technology Group issued a number of shares in relation to:
2,403,456,940 shares (Consideration Shares issued for nil cash, in consideration for the
Company’s acquisition of 100% of the issued capital in Anyware Corporation Pty Ltd
(Anyware), as announced to the market on 2 March 2016 (Anyware Acquisition)
12,000,000 shares issued for nil cash consideration under the Company’s long term
incentive plan (LTIP) to company officeholders (LTIP Shares)
15,914,435 shares issued for nil cash consideration, in satisfaction of the Company’s
obligation to issue any further earn-out shares to Warcom (Aust) Pty Ltd under the
terms of the Warcom Assets Purchase Agreement (Earn-out Shares)
146,964,775 shares issued in conversion of loans (principal and interest) at a conversion
price $0.007 per Share (Conversion Shares)
Environmental regulation
The Group’s operations are not subject to any significant Commonwealth or State environmental
regulations or laws.
Shares issued during the year
SHPOA options were exercised by holders prior to the expiry date. The shares in respect to the
45,784 exercised options have been issued.
139,909,396 shares were issued to Garrison Huang as the consideration of $1m share placement.
27
Share options (listed & unlisted)
As at 1 July 2015, there were nil unlisted options under the Company’s Long Term Incentive Plan
(LTIP) on issue.
On 1 December 2015, 18 million Options were issued under the Company’s LTIP to the directors
and the company secretary, and are designed to provide incentives to the recipients who are
integral to the operations and ongoing success of the Company. These incentives are designed to
encourage greater productivity from the recipients and to better enable the Company to retain its
management personnel in a highly competitive industry.
In order to provide certainty as to the capital structure of the Company after completion of the
proposed merger (19 July 2016), the directors and company secretary of Harris Technology Group,
who collectively held 18 million options to acquire shares in Harris Technology Group, have
consented to the cancellation of all 18 million options for no consideration. As a result of the
cancellation, there are no options currently on issue in Harris Technology Group.
Indemnification and insurance of directors and officers
The Company agreed to indemnify all directors and executive officers for losses which they may
become legally obligated to pay on account of any claim first made against them during the policy
period for a wrongful act committed before or during the policy.
Total amount of insurance contract premium paid was $9,900 (GST inc).
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, RSM Australia
Partners, as part of the terms of its audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment has been made to indemnify RSM
Australia Partners during or since the financial year.
Proceedings on behalf of the Consolidated Entity
No person has applied for leave of Court to bring proceedings on behalf of the Group.
28
Remuneration Report (Audited)
This Remuneration Report for the year ended 30 June 2016 outlines the remuneration
arrangements of the Company and the Group in accordance with the requirements of the
Corporations Act 2001 (the Act) and its regulations. This information has been audited as required
by section 308(3C) of the Act.
At its 2013 Annual General Meeting, shareholders approved Harris Technology Group’s Long Term
Incentive Plan (LTIP).
The remuneration report is presented under the following sections:
1.
2.
3.
4.
5.
6.
7.
Key Management Personnel (KMP) disclosed in this report
Remuneration Governance
Executive remuneration arrangements
Non-executive director remuneration arrangements
Additional information
Details of Key Management Personnel Remuneration
Additional disclosures relating to options and shares
29
1.
Key Management Personnel (KMP) disclosed in this report
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling activities of the Group, including any Director of the Group.
Key Management Personnel during the financial year are as follows:
(i) Executive director
Mr Andrew Plympton*
Chairman (executive)
(ii) Non-executive directors (NEDs)
Mr Garrison Huang
Mr Bob Xu
Mr Mark Goulopoulos
Mr Domenic Carosa
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Mr Matthew Dickinson**
Director (non-executive)
Mr Lorenzo Coppa***
Director (non-executive)
(iii) Executive
Mr Simon Crean****
Mr Graeme Lay*****
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
Mr Vaughan Clark******
Chief Operating Officer (COO)
*Andrew Plympton appointed Executive Director on 11 March 2016.
**Matthew Dickinson resigned as a Non-Executive Director on 1 March 2016.
***Lorenzo Coppa resigned as a Non-Executive Director on 1 March 2016.
****Simon Crean resigned as CEO on 9 February 2016.
*****Graeme Lay resigned as CFO on 29 April 2016.
******Vaughan Clark appointed as CEO on 9 February 2015. Employment date 16 June 2014, Vaughan Clark resigned as
CEO on 11 March 2016.
The following changes to KMP occurred after the reporting date and before the date the financial
report was authorised for issue.
Garrison Huang was appointed as an Executive Director and CEO on 19 July 2016
Dominic Carosa retired as a Non-Executive Director on 19 July 2016
Howard Chen was appointed as a Non-Executive Director on 19 July 2016
30
2.
Remuneration Governance
Remuneration Policy
The performance of the Group depends upon the quality of its Directors and executives. To be
successful, the Group must attract, motivate and retain highly skilled Directors and executives. To
this end, the Group seeks to provide competitive rewards to attract high calibre executives. The
Nomination and Remuneration Committee assesses the appropriateness of the nature and amount
of remuneration of Non-Executive Directors, the Chief Executive Officer and other Key
Management Personnel on a periodic basis. In doing so, the Nomination and Remuneration has
reference to relevant employment market conditions, with the overall objective of ensuring
maximum stakeholder benefit from the retention of a high quality Board and executive team. A
recommendation of the Nomination and Remuneration Committee is presented to the Board of
Directors for adoption and approval.
Hedging of equity awards
The Group has a policy in place to prohibit Directors and executives from entering into equity
hedging arrangements to protect the value of unvested options.
Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive and
executive remuneration is separate and distinct.
3.
Executive remuneration arrangements
The Group aims to reward executives with a level and mix of remuneration commensurate with
their position and responsibilities within the Group so as to:
Reward executives for the Group and individual performance;
Align the interests of executives with those of shareholders;
Link reward with the strategic goals and performance of the Group; and
Ensure total remuneration is competitive by market standards.
Currently remuneration is paid in the form of cash remuneration, superannuation contributions and
share options where applicable. For the financial year ended 30 June 2016, key executives had
remuneration packages which include components that are dependent on meeting specified
performance conditions.
4.
Non-Executive Director remuneration arrangements
The Group’s constitution provides that the total amount of remuneration provided to all non-
executive Directors must not exceed $500,000.
31
5.
Additional Information
The earnings of the consolidated entity for the five years to 30 June 2016 are summarised below:
2016
2015
2014
2013
2012
$’000
$’000
$’000
$’000
$’000
Sales revenue
17,790
18,454
1,657
2,779
2,620
EBITDA
EBIT
(5,967)
(2,044)
(1,458)
(6,373)
(2,437)
(1,490)
Profit after income tax
(6,510)
(2,481)
(1,490)
51
51
45
(1,344)
(1,525)
(1,650)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
2016
2015
2014
2013
2012
Share price at financial year end ($)
0.10
0.35
0.525
0.275
0.25
Total dividends declared (cents per
share)
Basic earnings per share (cents per
share)
-
-
-
-
-
(1.08)
(0.47)
(0.54)
0.02
(1.35)
32
Executive
Directors
Mr Andrew
Plympton*
Non-Executive
Directors
Mr Garrison
Huang
Mr Bob Xu
Mr Domenic
Carosa
Mr Mark
Goulopoulos
Mr Matthew
Dickinson**
Mr Lorenzo
Coppa***
Mr Damien
London ****
Ms Sophie
Karzis*****
Other Key
Management
Personnel
Mr Simon
Crean******
Mr Vaughan
Clark*******
Mr Graeme
Lay********
6.
Details of Key Management Personnel Remuneration
Details of remuneration received by key management personnel of the Group for the current
financial year are set out in the following table:
Short-term benefits
Post employment
Security based
payments
Total
$
Performance
related %
Salary & fees
$
Cash
bonus
$
Superannuation
$
2016
2015
2016
2016
2016
2015
2016
2015
2016
2015
2016
2015
2015
48,000
37,500
-
-
30,000
29,300
30,000
29,300
22,500
5,000
10,000
-
13,342
2015
29,300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Options
$
-
48,000
-
(5,500)
32,000
(17.19)
-
-
-
-
-
30,000
-
-
-
(5,500)
23,800
(23.11)
-
-
-
-
-
-
2,850
2,784
-
32,850
-
(5,500)
26,584
(20.69)
-
-
-
-
-
-
-
-
-
-
22,500
5,000
10,000
-
-
-
-
-
(5,500)
7,842
(70.14)
(5,500)
23,800
(23.11)
2016
2015
2016
2015
2016
2015
160,810
-
13,782
(34,536)
140,056
(24.66)
173,333
21,000
16,467
19,875
230,675
4.28
224,278
149,128
133,069
109,467
-
-
-
-
-
17,223
14,167
11,592
10,399
241,501
163,295
144,661
119,866
-
-
-
-
-
-
-
45,447
(34,536)
669,568
(5.16)
Total KMP
2016
658,657
2015
575,670
21,000
43,817
(7,625)
632,862
(1.20)
*Andrew Plympton appointed Executive Director on 11 March 2016.
**Matthew Dickinson resigned as a Non-Executive Director on 1 March 2016.
***Lorenzo Coppa resigned as a Non-Executive Director on 1 March 2016.
33
****Damien London resigned as Non-Executive Director on 18 December 2014.
*****Sophie Karzis resigned as Non-Executive Director on 24 June 2015.
******Simon Crean resigned as CEO on 9 February 2016.
*******Vaughan Clark appointed as CEO on 9 February 2015. Employment date 16 June 2014. Vaughan Clark resigned as CEO on 11 March
2016.
********Graeme Lay resigned as CFO on 29 April 2016.
7.
Additional disclosures relating to options and shares
a.
Performance rights holdings of key management personnel
As at the end of FY16 there were zero options granted to KMP under the LTIP.
Listed option holdings of key management personnel
Balance at 1
July 2015
Issued during
year
Lapsed during
year
Exercised during
year
Balance at
30 June 2016
No.
No.
No.
No.
No.
Executive Directors
Mr Andrew Plympton
Non-Executive Directors
Mr Garrison Huang
Mr Bob Xu
Mr Domenic Carosa
Mr Mark Goulopoulos
Mr Matthew Dickinson
Other key management
personnel
-
-
-
333,334
400,000
-
Mr Simon Crean
83,334
Mr Graeme Lay
Mr Vaughan Clark
Ms Alyn Tai
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,334#
400,000#
-
83,334#
-
-
2,000,000
2,000,000*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
816,668
2,000,000
2,816,668
# Lapsed at expiry date 31 July 2015
*Cancelled pursuant to Anyware agreement
Shares issued on exercise of options
There were no shares issued to KMP during the year upon the exercise of options.
34
b.
Shareholdings of key management personnel
Balance at
1 July 2015
Acquired during year
Cancelled
during year
Sold during year
Balance at
30 June 2016
No.
No.
No.
No.
No.
Executive Directors
Mr Andrew Plympton
Non-Executive Directors
Mr Garrison Huang 1
Mr Bob Xu
-
-
-
-
139,909,396
-
Mr Mark Goulopoulos 2
12,697,565
1,337,525
Mr Domenic Carosa 3
63,534,991
12,333,333
Mr Lorenzo Coppa 4
11,976,048
8,041,504
Mr Matthew Dickinson 5
17,350,199
Other key management
personnel
Mr Simon Crean
802,222
Mr Graeme Lay
-
-
-
-
Mr Vaughan Clark 6
4,793,384
3,910,187
Total
111,154,409
165,531,945
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
139,909,396
-
14,035,090
75,868,324
20,017,552
17,350,199
802,222
-
8,703,571
276,686,354
1.
2.
3.
4.
5.
6.
The share are held by Australian PC Accessories Pty Ltd ATF GWH A/C; Mr Huang controls this entity.
The shares are held by Atlantis MG Pty Ltd ATF MG Family Super Fund A/C and Atlantic MG Pty Ltd ATF MG Family A/C; Mr
Goulopoulos is the practical controller of Atlantis MG Pty Ltd.
The shares are held by Tiger Domains Pty Ltd ATF Tiger Domains Unit Trust and MP3 Australia Pty Ltd ATF MP3 Australia Unit
Trust A/C, in each of which Mr Carosa is both a 50% shareholder and unit holder, and Dominet Digital Corporation Pty Ltd ATF
The Carosa Family A/C , in which Mr Carosa is a beneficiary.
The shares are held by Isabel Coppa ATF Coppa Family A/C; Mr Coppa has the right to control how this entity votes its shares.
The shares are held by Diamond Bowl Pty Ltd ATF The Diamond Bowl Super Fund A/C; Mr Dickinson is associated with this entity
and has a relevant interest in shares it holds.
The shares are held by Vautes Investments Pty Ltd as trustee of the Vaughan Clark family trust, of which Mr Clark is a beneficiary,
and Clark Family SMSF Pty Ltd , an entity with which Mr Clark is associated.
c.
Loans to key management personnel and their related parties
There were no loans made to key management personnel and their related parties during the
financial year and none are outstanding as at the date of this report.
35
d.
Other transactions and balances with key management personnel and their related
parties
Paid to key management personnel - related entities
Related party paid
Accrued superannuation & annual leave payable to key management
personnel
Fees paid to key management personnel
Total related party payables
2016
2015
$
-
$
-
221,802
114,255
221,802
114,255
During the financial year ended 30 June 2016 payments to key management related parties were
company secretarial services to Corporate Counsel, market platform management fees to
Indemand and data entry services to Elliot Macintosh.
Tax consolidation
Harris Technology Group and its 100% owned subsidiaries are part of an income tax consolidated
group.
Auditor’s independence declaration
A copy of an auditor’s independence declaration in relation to the audit for the financial year is
provided with this report.
Non-audit services
RSM Australia Partners did not perform any non-assurance services during the year.
Signed in accordance with a resolution of the Directors
Andrew Plympton
Non-Executive Chairman
Melbourne, 29 September 2016
36
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Harris Technology Group Limited for the year ended 30 June
2016, I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Melbourne, VIC
29 September 2016
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
37
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
Corporate Governance Statement
The Company’s Directors and management are committed to conducting the Group’s business in
an ethical manner and in accordance with the highest standards of corporate governance. The
Company 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 the Group’s operations.
The Company has prepared a statement which sets out the corporate governance practices that
were in operation throughout the financial year for the Company, identifies any recommendations
that have not been followed, and provides reasons for not following such recommendations
(Corporate Governance Statement).
In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be
available for review on Harris Technology Group’s website (www.ht8.com.au), and will be lodged
together with an Appendix 4G with ASX at the same time that this Annual Report is lodged with
ASX.
The Appendix 4G will identify each Recommendation that needs to be reported against by Harris
Technology Group, and will provide shareholders with information as to where relevant governance
disclosures can be found.
The Company’s corporate governance policies and charters and policies are all available on Harris
Technology Group’s website (www.ht8.com.au).
38
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(FOR THE YEAR ENDED 30 JUNE 2016)
($)
Revenue
Sales revenue
Direct costs
Gross profit
Other Income
Distribution expense
Performance marketing expense
Transaction expense
Employee contractor and director expenses
Occupancy costs
Onerous contract expense
Professional fees
Depreciation and amortisation expenses
Impairment expense
Other expenses
Performance rights issued (non-cash)
Finance costs
Exchange gain / (loss)
(Loss) / Profit before income tax
Income tax benefit / (expense)
(Loss) / Profit from continuing operations
Discontinued operations
Other Comprehensive Income
Notes
2016
2015
6
6
7
7
7
7
7
7
7
9
8
17,789,785
18,453,912
(16,565,733)
(15,297,214)
1,224,052
3,156,698
131,774
(92,107)
41,945
(108,326)
(1,136,108)
(834,566)
(587,251)
(366,447)
(2,568,861)
(2,655,466)
(481,603)
(509,307)
(608,793)
-
(453,882)
(445,720)
(405,721)
(392,974)
(1,027,386)
-
(511,737)
(345,038)
128,105
(147,850)
(6,025)
(61,489)
(53,941)
-
(6,543,393)
(2,574,631)
-
-
(6,543,393)
(2,574,631)
33,381
93,199
-
-
Total Comprehensive (loss) / profit for the period
(6,510,012)
(2,481,432)
Earnings per share from continuing operations (cents per share)
- Basic earnings/(loss) per share
- Diluted earnings/(loss) per share
10
10
(1.08)
(1.08)
(0.47)
(0.47)
The accompanying notes form part of these financial statements.
39
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(AS AT 30 JUNE 2016)
($)
Notes
2016
2015
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments and deposits
Assets classified as held for disposal
Total Current Assets
Non-current Assets
Property, plant and equipment
Intangible Assets
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liability
Employee benefit liabilities
Onerous contract provision
Deferred Income
Liabilities classified as held for disposal
Total Current Liabilities
Non-current Liabilities
Financial liability
Onerous contract provision
Employee benefit liabilities
Total Non-current Liabilities
Total Liabilities
Net Assets / (Net Deficiency of Assets)
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
The accompanying notes form part of these financial statements.
40
11
12
13
14
15
16
17
18
19
26
18
26
19
20
21
22
418,622
117,586
673,833
178,216
-
2,307,247
650,686
1,756,381
189,801
-
1,388,257
4,904,115
57,210
1,508,630
1,565,840
243,364
3,116,510
3,359,874
2,954,097
8,263,989
1,400,834
1,281,252
29,351
178,645
75,383
3,587,161
564,135
58,076
-
-
-
31,764
2,965,465
4,241,136
1,241,552
430,148
931
1,672,631
173,369
-
12,459
185,828
4,638,096
4,426,964
(1,683,999)
3,837,025
34,546,214
33,469,847
40,726
128,105
(36,270,939)
(29,760,927)
(1,683,999)
3,837,025
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(FOR THE YEAR ENDED 30 JUNE 2016)
($)
At 1 July 2015
Share Capital Reserves Accumulated Losses
Total Equity
33,469,847
128,105
(29,760,927)
3,837,025
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Placement and rights issued
Shares issued
Performance rights expense
Share option reserve from convertible loan
Transaction costs on shares issued
-
-
-
1,000,000
76,367
-
-
-
-
-
(128,105)
40,726
-
(6,543,393)
(6,543,393)
33,381
33,381
(6,510,012)
(6,510,012)
-
-
-
-
1,000,000
76,367
(128,105)
40,726
-
At 30 June 2016
34,546,214
40,726
(36,270,939)
(1,683,999)
($)
At 1 July 2014
Share Capital Reserves Accumulated Losses
Total Equity
32,868,235
66,616
(27,279,495)
5,655,356
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Placement and rights issued
Cash on exercise of share options
-
-
-
603,604
181
-
-
-
-
-
Performance rights expense
-
61,489
Transaction costs on shares issued
(2,173)
-
(2,481,432)
(2,481,432)
-
-
(2,481,432)
(2,481,432)
-
-
-
-
603,604
181
61,489
(2,173)
At 30 June 2015
33,469,847
128,105
(29,760,927)
3,837,025
The accompanying notes form part of these financial statements.
41
CONSOLIDATED STATEMENT OF CASH FLOWS
(FOR THE YEAR ENDED 30 JUNE 2016)
($)
Notes
2016
2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Finance costs
20,238,094
19,742,103
(25,305,970)
(19,897,878)
9,939
(30,370)
41,945
(9,453)
Net cash flows (used in) / provided by operating activities
11
(5,088,307)
(123,283)
Cash flows from investing activities
Acquisition of intangible assets
Acquisition of businesses, net of cash consideration
Payments for property, plant and equipment
(280,893)
(376,598)
-
(500,000)
(11,925)
(16,191)
Net cash flows (used in) / provided by investing activities
(292,818)
(892,789)
Cash flows from financing activities
Proceeds from placement and rights issued
Proceeds from borrowings
Repayment of borrowings
Payment for security deposits
Cash from the exercise of share options
Capital raising costs
1,000,000
2,500,000
(7,500)
-
-
-
-
-
-
(145,408)
181
(41,712)
Net cash flows (used in) / provided by financing activities
3,492,500
(186,939)
Net increase / (decrease) in cash and cash equivalents
(1,888,625)
(1,203,011)
Cash and cash equivalents at the beginning of the financial year
2,307,247
3,510,259
Cash and cash equivalents at the end of the financial year
11
418,622
2,307,247
The accompanying notes form part of these financial statements.
42
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2016)
1.
CORPORATE INFORMATION
The consolidated financial report of Harris Technology Group Limited (the Company or Harris
Technology Group) and controlled entities (the Group) for the year ended 30 June 2016 was
authorised for issue in accordance with a resolution of the Directors on 29 September 2016.
Harris Technology Group is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Securities Exchange.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a)
Basis of preparation
The financial report is a general purpose financial report that has been prepared in accordance with
Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001. For the purposes of preparing the financial
statements, Harris Technology Group Limited is a for profit entity.
The financial report covers Harris Technology Group and controlled entities as a consolidated
entity. Harris Technology Group is a listed public company, limited by shares, incorporated and
domiciled in Australia.
The financial report has been prepared in accordance with the historical cost convention and,
except where stated, does not take into account changing money values or current valuations of
non-current assets. Cost is based on the fair values of the consideration given in exchange for
assets. The financial report is presented in Australian dollars.
The following is a summary of material accounting policies adopted by the consolidated entity in
the preparation and presentation of the financial report. The accounting policies have been
consistently applied, unless otherwise stated.
(b)
Statement of compliance
The financial report complies with Australian Accounting Standards as issued by the Australian
Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board.
(c)
Going concern basis of accounting
The financial statements have been prepared on the going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and discharge of liabilities in
the normal course of business.
As disclosed in the financial statements, the consolidated entity incurred a loss of $6,510,012 (2015:
$2,481,432 loss) and had net cash outflows from operating activities of $5,088,307 (2015: $123,283
outflow) for the year ended 30 June 2016. As at that date the consolidated entity had net current
liabilities of $1,577,208 (2015: $662,979 net current assets) and net liabilities of $1,683,999 (2015:
$3,837,025 net assets).
43
These conditions indicate the existence of a material uncertainty which may cast significant doubt
about the consolidated entity’s ability to continue as a going concern and therefore whether it will
realise its assets and extinguish its liabilities in the normal course of business and at the amounts
stated in the financial report.
The Directors believe that there are reasonable grounds to believe that the consolidated entity will
be able to continue as a going concern, after consideration of the following factors:
As set out in note 28, subsequent to year end the consolidated entity acquired Anyware
Corporation Pty Ltd. The transaction was a reverse acquisition with Anyware Corporation
Pty Ltd becoming the controlling entity for accounting purposes:
The combined entity has a stronger financial position and has restructured the business
to take advantage of economies of scale which lowers the combined operating cost
base of the two entities moving forward.
The combined entity has access to a $2 million short term trade finance facility, of which
$1.1million has been drawn down post 30 June 2016.
Loan holders of the combined entity, equating to $4,138,304 of debt, have provided
commitments of financial support and irrevocably deferred monthly payments of
principal and interest on loans for a period of not less than 12 months to 30 June 2017.
These payments are $110,870 per month.
The combined entity is in the process of raising $2 million in long term debt to fund its
continuing working capital demands.
Also set out in both note 23 and note 28, the directors’ convertible note liability of $1
million has been converted to shares subsequent to year end.
Accordingly, the Directors believe that the consolidated entity will be able to continue as a going
concern and that it is appropriate to adopt the going concern basis in the preparation of the
financial report.
The financial report does not include any adjustments relating to the amounts or classification of
recorded assets or liabilities that might be necessary if the consolidated entity does not continue as
a going concern.
(d)
New standards and interpretations issued but not yet effective
At the date of this financial report the following standards and interpretations, which may impact
the entity in the period of initial application, have been issued but are not yet effective. The impact
of the initial application of these new standards has not been assessed.
Reference
Title
Summary
AASB 2010-7
Amendments to Australian
Standards
Accounting
arising
9
(December 2010)
from AASB
Amends AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118,
120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 &
1038 and Interpretations 2, 5, 10, 12, 16, 19, 107 &
127 for issuance of AASB 9.
Application date
(financial years
beginning)
1-Jan-18
44
Reference
Title
Summary
AASB 14
Regulatory
Accounts
Deferral
first-time adopters
This Standard permits
to
recognise amounts related to rate regulation in
accordance with their previous GAAP requirements,
when first adopting IFRS.
Application date
(financial years
beginning)
1-Jan-16
AASB 2014-1 D
Amendments to Australian
Accounting Standards
AASB 2014-3
AASB 2014-4
AASB 2014-9
AASB 2014-10
AASB 2015-1
AASB 2015-2
AASB 2015-5
Part D of AASB 2014- 1 makes amendments to AASB
1 First-time Adoption of Australian Accounting
Standards, which arise from the issuance of AASB 14
Regulatory Deferral Accounts in June 2014.
1-Jan-16
This Standard amends AASB 11 to provide guidance
on the accounting for acquisitions of interests in
joint operations in which the activity constitutes a
business.
1-Jan-16
Standards
Amendments to Australian
–
Accounting
Accounting for Acquisitions
of
Joint
Operations
Interests
in
Standards
Amendments to Australian
Accounting
–
Clarification of Acceptable
Methods of Depreciation
and Amortisation
1-Jan-16
This Standard amends AASB 116 and AASB 138 to
establish the principle for the basis of depreciation
and amortisation as being the expected pattern of
consumption of the future economic benefits of an
asset, and to clarify that revenue
is generally
presumed to be an inappropriate basis for that
purpose.
Amendments to Australian
Accounting
–
Equity Method in Separate
Financial Statements
Standards
This amending standard allows entities to use the
equity method of accounting for investments in
subsidiaries, joint ventures and associates in their
separate financial statements.
1-Jan-16
Amendments to Australian
Accounting Standards – Sale
or Contribution of Assets
between an Investor and its
Associate or Joint Venture
1-Jan-16
This amending standard requires a full gain or loss to
be recognised when a transaction involves a business
(even if the business is not housed in a subsidiary),
and a partial gain or loss to be recognised when a
transaction involves assets that do not constitute a
business (even if those assets are housed in a
subsidiary).
Standards
Improvements
Amendments to Australian
–
Accounting
to
Annual
Australian
Accounting
Standards 2012-2014 Cycle
Amendments to Australian
–
Accounting
Disclosure
Initiative:
Amendments to AASB 101
Standards
to various
The Standard makes amendments
Australian Accounting Standards arising from the
IASB’s Annual Improvements process, and editorial
corrections.
1-Jan-16
The Standard makes amendments to AASB 101
Presentation of Financial Statements arising from the
IASB’s Disclosure Initiative project.
1-Jan-16
Amendments to Australian
Accounting
–
Investment Entities: Applying
the Consolidation Exception
Standards
This Standard makes amendments to AASB 10, AASB
12 and AASB 128 arising from the IASB’s narrow
scope amendments associated with
Investment
Entities.
1-Jan-16
AASB 15
Revenue
with Customers
from Contracts
AASB 2014-5
Amendments to Australian
Standards
Accounting
arising from AASB 15
It contains a single model for contracts with
five-step analysis of
customers based on a
transactions
two
approach, a single time or over time, for revenue
recognition.
for revenue recognition, and
1-Jan-18
Consequential amendments arising
issuance of AASB 15.
from
the
1-Jan-18
45
Reference
Title
Summary
Application date
(financial years
beginning)
AASB 2014-7
Amendments to Australian
Standards
Accounting
arising
9
(December 2014)
from AASB
AASB 9
Financial Instruments
AASB 16
Leases
Consequential amendments arising
issuance of AASB 9
from
the
1-Jan-18
1-Jan-18
1-Jan-19
This Standard supersedes both AASB 9 (December
2010) and AASB 9 (December 2009) when applied. It
introduces a “fair value through other comprehensive
income” category for debt
instruments, contains
requirements for impairment of financial assets, etc.
removes
AASB 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases.
This standard
the current distinction
between operating and financing leases and requires
recognition of an asset (the right to use the leased
item) and a financial liability to pay rentals for almost
all
in the
recognition of almost all leases on the statement of
lessors,
financial position. The accounting by
however, will not significantly change.
lease contracts, effectively resulting
AASB 112 2016-1
AASB 2016-2
Amendments to Australian
Accounting
–
Recognition of Deferred Tax
Assets for Unrealised Losses
Standards
Amendments to Australian
–
Accounting
Disclosure
Initiative:
Amendments to AASB 107
Standards
AASB 2016-3
Amendments to Australian
Accounting Standards ––
Clarifications to AASB 15
2016-1 clarifies the accounting requirements on
recognition of deferred tax assets for unrealised
losses on debt instruments measured at fair value.
1-Jan-17
This Standard amends AASB 107 to require entities
preparing financial statements in accordance with
Tier 1 reporting requirements to provide disclosures
that enable users of financial statements to evaluate
changes in liabilities arising from financing activities,
including both changes arising from cash flows and
non-cash changes.
2016- 3 amends AASB 15 to clarify the requirements
on identifying performance obligations, principal
versus agent considerations and the timing of
recognising revenue from granting a licence. In
addition, it provides further practical expedients on
transition to AASB 15.
1-Jan-17
1-Jan-18
(e)
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2016. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. Specifically, the Group controls an investee if and only if the
Group has:
Power over the investee (i.e. existing rights that give it the current ability to direct the
relevant activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
46
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group
loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or
disposed of during the year are included in the statement of comprehensive income from the date
the Group gains control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with the Group’s accounting policies. All intra-group assets and
liabilities, equity, income, expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it:
De-recognises the assets (including goodwill) and liabilities of the subsidiary
De-recognises the carrying amount of any non-controlling interests
De-recognises the cumulative translation differences recorded in equity
Recognises the fair value of the consideration received
Recognises the fair value of any investment retained
Recognises any surplus or deficit in profit or loss
Reclassifies the parent’s share of components previously recognised in OCI to profit or
loss or
retained earnings, as appropriate, as would be required if the Group had directly
disposed of the related assets or liabilities
(f)
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured, regardless of when the payment is being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into
account contractually defined terms of the payment and excluding taxes or duty. The Group
assesses its revenue from the provision of services to customers and recognised upon delivery of
the service to the customer.
Revenue from online shopping is the sale of products. The sale of products is recognised on gross
basis. Any return or refund allowances will reduce revenue. The sale of products is recognised when
products are sold and significant risks and rewards of ownership of the goods have passed to the
buyer, usually on despatch of the goods.
Interest income
Interest income and expenses are reported on an accrual basis using the effective interest method.
Interest income is included in finance income in the statement of profit or loss.
All revenue is stated net of the amount of goods and services tax (GST).
47
(g)
Profit or loss from discontinued operations
A discontinued operation is a component of the entity that either has been abandoned, disposed
of, or is classified as held for sale, and:
represents a separate division of business or geographical area of operations; or
is part of a single co-ordinated plan to dispose of a separate major division of business or
geographical area of operations.
Discontinued operations are excluded from the results of continuing operations and are presented
as a single amount as profit or loss after tax from discontinued operations in the statement or
profit or loss.
Additional disclosures are provided in Note 8. All other notes to the financial statements mainly
include amounts for continuing operations, unless otherwise mentioned.
(h)
Income tax and other taxes
Current income tax expense is the tax payable on the current year’s taxable income. This is based
on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities.
Deferred tax assets and liabilities are recognised for temporary differences between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. No deferred tax
asset or liability is recognised in relation to temporary differences arising from the initial
recognition of an asset or a liability if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable
profit or loss.
Deferred tax assets are recognised for temporary differences and unused tax losses only when it is
probable that future taxable amounts will be available to utilise those temporary differences and
losses.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation
Harris Technology Group Limited and its wholly-owned subsidiaries have formed an income tax
consolidated group under tax consolidation legislation.
The head entity, Harris Technology Group Limited and the controlled entities in the tax
consolidated group continue to account for their own current and deferred tax amounts. The
Group has applied the Group allocation approach in determining the appropriate amount of
current taxes and deferred taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, Harris Technology Group Limited also
recognizes the current tax liabilities (or assets) and the deferred tax assets arising from unused tax
losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the Group.
48
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax
consolidated entities.
GST taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
When the GST incurred on a purchase of goods and services is not recoverable from the
taxation authority, in which case the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable.
Receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST
component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority is classified as part of operating cash
flows.
(i)
Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original
maturity of three months or less held at call with financial institutions and bank overdrafts. Bank
overdrafts are shown within short-term borrowings in current liabilities on the statement of
financial position.
Cash and cash equivalents also include amounts collected in respect of online sales during the
period by agents on behalf of the Company where clear title of ownership exists.
(j)
Trade and other receivables
Trade and other receivables are recognised and carried at the net of original invoice amount less
an allowance for any uncollectible amounts. An estimate for doubtful debts is made when there is
objective evidence that collection of the full amount is no longer probable. Bad debts are written
off when identified.
(k)
Business Combinations
The Group accounts for its business combinations using the acquisition method. The cost of an
acquisition is measured as the aggregate of the consideration transferred measured at acquisition
date fair value. Acquisition-related costs are expensed as incurred and included in administrative
expenses.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination
regardless of whether they have been previously recognised in the acquiree’s financial statements
prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their
acquisition-date fair values.
Business combinations are initially recorded on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and will recognise additional assets or liabilities during
the measurement period, based on new information obtained about the facts and circumstances
that existed at the acquisition date. The measurement period ends on either the earlier of 12
49
months from the date of the acquisition or when the acquirer receives all the information possible
to determine fair value.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interests, and any previous interest
held, over the net identifiable assets acquired and liabilities assumed. If the fair value of the net
assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and
reviews the procedures used to measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For
the purpose of impairment testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating units that are expected to
benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units. Goodwill is not amortised but tested annually for impairment, or more
frequently if events or changes in circumstances.
(l)
Intangibles assets other than goodwill
Intangible assets acquired separately are initially measured at cost. The cost of intangible assets
acquired in a business combination is at its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any
accumulated
intangibles, excluding capitalised
Internally generated
development costs, are not capitalised and the related expenditure is reflected profit or loss in the
period which the expenditure is incurred.
impairment
losses.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortised over their useful life and tested for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period
and the amortisation method for an intangible asset with a finite useful life is reviewed at least at
each financial year end. Changes in the expected useful life or the expected pattern of
consumption of future economic benefits embodied in the asset are accounted for prospectively
by changing the amortisation period or method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or
loss in the expense category consistent with the function of the intangible asset. The estimated
useful life of each class of intangible asset is as follows:
Software Development
Domain & Websites
Customer databases
Brands
2 years
10 years
10 years
10 years
50
(m)
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation and/or any
accumulated impairment losses, if any.
The carrying amount of plant and equipment is reviewed for impairment annually by the Directors
for events or changes in circumstances that indicate the carrying value may not be recoverable. If
any such indication exists and where the carrying value exceeds the estimated recoverable amount,
the assets are written down to their recoverable amount.
Depreciation
The depreciable amounts of fixed assets are depreciated on a straight-line basis over their
estimated useful lives of the assets as follows:
Computers
Office equipment
Warehouse fit-out
3 years
5 years
10 years
In the case of leasehold property, expected useful lives are determined by reference to comparable
owned assets or over the term of the lease, if shorter.
(n)
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of
the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a
right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Operating leases
Where the Group is a lessee, payments on operating lease agreements are recognise as an expense
on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
(o)
Impairment of property, plant, equipment, goodwill and intangible assets
The Group assesses at each reporting date whether there is an indication that an asset may be
impaired. The assessment will include the consideration of external and internal sources of
information. If such an indication exists, an impairment test is carried out on the asset by
comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs
to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over
its recoverable amount is expensed to the statement of comprehensive income, unless the asset is
carried at revalued amount in which case the impairment loss is treated as a revaluation decrease.
(p)
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the latest
purchase price method, and are valued at the lower of cost or net realisable value. This valuation
requires the group to make judgements, based on currently available information, about the likely
method of disposition and expected recoverable values of each disposition category.
51
Net realisable value is the estimated selling price in the ordinary course of business, less the
estimated cost necessary to make the sale.
All inventories carried are finished goods, ready for sale.
(q)
Financial instruments
Classification
The Group classifies its financial instruments in the following categories: loans and receivables and
financial liabilities. The classification of investments depends on the purpose for which the
investments were acquired. Management determines the classification of its investments at initial
recognition.
Financial liabilities
The Group’s financial liabilities include trade payables, other payables and loans from third parties
including inter-company balances and loans from or other amounts due to director-related
entities.
The Group’s financial liabilities are recognised at fair value and carried at amortised cost,
comprising original debt less principal payments and amortisation.
Financial liability – Deferred consideration by shares
In accordance with the assets purchase agreement for the acquisition of the business and assets of
Warcom and eStore, the consideration for the Company’s acquisition of the Warcom and eStore
businesses includes a share based component, under which Harris Technology Group will issue
ordinary shares in the Company to the vendor’s nominee in tranches over a two year earn-out
period, subject to the satisfaction of prescribed revenue and profit margin targets of the Warcom
and eStore businesses. At acquisition date, the deferred consideration by shares was recognised
initially as a financial liability for earn-out on acquisition at fair value using a present value
technique.
After initial recognition, the earn-out liability is recognised at fair value through profit or loss and is
remeasured each reporting period. Movements in the liability from these changes are reported in
the consolidated statement of profit or loss and other comprehensive income.
(r)
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end
of the financial period 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-
60 days of recognition.
(s)
Provisions
Provisions are measured at the estimated expenditure required to settle the present obligation,
based on the most reliable evidence available at the reporting date, including the risks and
uncertainties associated with the present obligation. Where there are a number of similar
obligations, the likelihood that an outflow will be required at settlement is determined by
considering the class of obligations as a whole. Provisions for earn out on the Warcom and eStore
acquisitions, the Group recognised the provision using present value technique which is using a
52
discounted rate that reflects the risks specific to the liability, where the time value of money is
material.
(t)
Foreign Currencies
Functional and presentation currency
The financial statements of each group entity are measured using its functional currency, which is
the currency of the primary economic environment in which that entity operates. The consolidated
financial statements are presented in Australian dollars, as this is the parent entity’s functional and
presentation currency.
Transactions and balances
Transactions in foreign currencies of entities within the consolidated entity are translated into
functional currency at the rate of exchange ruling at the date of the transaction.
Foreign currency monetary items that are outstanding at the reporting date (other than monetary
items arising under foreign currency contracts where the exchange rate for that monetary item is
fixed in the contract) are translated using the spot rate at the end of the financial year.
Resulting exchange differences arising on settlement or re-statement are recognised as revenues
and expenses for the financial year.
Group companies
The financial statements of foreign operations whose functional currency is different from the
group’s presentation currency are translated as follows:
Assets and liabilities are translated at year-end exchange rates prevailing at that reporting
date;
Income and expenses are translated at average exchange rates for the period; and
All resulting exchange differences are recognised as a separate component of equity.
Exchange differences arising on translation of foreign operations are transferred directly to the
group’s foreign currency translation reserve as a separate component of equity in the reserve
account.
(u)
Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, and annual leave that are
expected to be settled within 12 months of the reporting date are recognised in respect of
employees’ services up to the reporting date. They are measured at the amounts expected to be
paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when
the leave is taken and are measured at the rates paid or payable. All other short-term employee
benefit obligations are presented as payables.
The liability for long service leave is recognised and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date
using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures, and periods of service. Expected future payments are
53
discounted using market yields at the reporting date on national government bonds with terms to
maturity and currencies that match, as closely as possible, the estimated future cash outflows.
Contributions to defined contribution superannuation plans are expensed in the period in which
they are incurred.
(v)
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency
with current year disclosures.
(w)
Share based payments
Equity settled transactions
The Group provides benefits to the directors and senior executives in the form of share
options/performance rights under Harris Technology Group’s Long Term Incentive Plan. These are
equity settled transactions under Australian Accounting Standards.
The cost of these equity-settled transactions with directors and senior executives is measured by
reference to the fair value of the equity instruments at the date when the grant is made using an
appropriate valuation model. The cost is recognised together with a corresponding increase in
other capital reserve in equity over the period in which the performance and /or service conditions
are fulfilled in employees benefits expense. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Group’s best estimate of the number of equity instruments that will
ultimately vest.
In valuing equity-settled transactions, no account is taken of any non-market vesting conditions.
The charge to the statement of comprehensive income for the period is the cumulative amount as
calculated less the amounts already charged in previous periods. There is a corresponding entry to
equity.
No expense is recognised for awards that do not ultimately vest, except for equity-settled
transactions for which vesting are conditional upon a market or non-vesting condition. These are
treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are satisfied.
(x)
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the parent divided by
the weighted average number of ordinary shares.
Diluted earnings per share is calculated as net profit attributable to members of the parent, divided
by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
54
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise cash, receivables and other receivables,
payables and other payables.
The Group manages its exposure to key financial risks, including interest rate risk in accordance
with the Group’s financial risk management policy. The objective of the policy is to support the
delivery of the Group’s financial targets whilst protecting future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, credit risk and
liquidity risk. The Group uses different methods to measure and manage different types of risks to
which it is exposed. These include monitoring levels of exposure to interest rate risk and
assessments of market forecasts for interest rates. Ageing analyses and monitoring of specific
credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the
development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Board. The
Board reviews and agrees policies for managing each of the risks identified below, including the
setting of limits for interest rate risk, credit allowances and future cash flow forecast projections.
Risk exposures and responses
Interest rate risk
At reporting date, the Group had the following financial assets exposed to Australian variable
interest rate risk. The Group has no floating interest rate exposure on financial liabilities as the
Group has no floating rate debt.
Financial assets
Cash and cash equivalents
Net exposure
2016
$
418,622
418,622
2015
$
2,307,247
2,307,247
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given
to potential renewals of existing positions, alternative financing and the mix of fixed and variable
interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at
reporting date:
55
At 30 June 2016, if interest rates had moved, as illustrated in the table below, with all other
variables held constant, post-tax profit/(loss) and other comprehensive income would have been
affected as follows:
Post Tax Profit/(Loss) ($)
Other Comprehensive Income ($)
Higher/
(Lower)
Higher/
(Lower)
2016
2015
2016
2015
Consolidated
+1% (100 basis points)
-0.5% (50 basis points)
5,866
(2,933)
29,059
(14,529)
-
-
-
-
The movements in post-tax profit/(loss) and other comprehensive income are due to lower cash
balances on hand as at 30 June 2016. The sensitivity is lower in 2016 than in 2015 as a result of
lower cash holdings at 30 June 2016.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents
and trade and other receivables. The Group’s exposure to credit risk arises from potential default
of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.
Exposure at balance date is addressed in each applicable note.
It is the Group’s policy that all customers who wish to trade on credit terms are assessed as to
creditworthiness, including an assessment of their independent credit rating, financial position, past
experience and industry reputation. Risk limits are set for individual customers.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not significant.
Foreign currency risk
The Group’s transactions are carried out in AUD. Hence, there are minimum exposures to the
Group’s statement of financial position that can be affected by foreign currencies. The Group does
not have a hedge policy in place.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility
through the use of private equity facility and equity raisings.
At 30 June 2016, 68% of the Group’s financial liabilities will mature in less than one year (2015:
96%).
56
The table below reflects all contractually fixed payables and receivables for settlement, repayments
and interest resulting from recognised financial assets and liabilities. The respective undiscounted
cash flows for the respective upcoming fiscal periods are presented. Cash flows for financial assets
and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2016.
The remaining contractual maturities of the Group’s financial assets and liabilities are:
Year ended 30 June 2016 ($)
< 1 month
1-3 months
3-12 months
1 to 2 years
Total
Financial assets
Cash and cash equivalents
418,622
-
-
Trade and other receivables
33,948
23,619
60,019
-
-
418,622
117,586
452,570
23,619
60,019
-
536,208
Financial liabilities
Trade and other payables
941,753
430,029
29,052
-
1,400,834
Loan and interest payable
281,252
1,241,552
1,522,804
Director's convertible notes*
1,000,000
1,000,000
1,941,753
430,029
310,304
1,241,552
3,923,638
Net maturity
(1,489,183)
(406,410)
(250,285)
(1,241,552)
(3,387,430)
*The directors’ convertible notes have been converted to 146,964,775 pre-consolidated shares on 19th July 2016
Year ended 30 June 2015 ($)
< 1 month
1-3 months
3-12 months
1 to 2 years
Total
Financial assets
Cash and cash equivalents
2,307,247
-
Trade and other receivables
377,085
273,601
2,684,332
273,601
Financial liabilities
Trade and other payables
1,671,646
1,947,279
-
-
-
-
-
-
-
-
2,307,247
650,686
2,957,933
3,618,925
Earn-out on acquisition*
564,135
173,369
737,504
1,671,646
1,947,279
564,135
173,369
4,356,429
Net maturity
1,012,686
(1,673,678)
(564,135)
(173,369)
(1,398,496)
*The earn-out on acquisition above is recognised at present value with applicable discount rate.
Maturity analysis of financial assets and liabilities based on management’s expectation
Management’s expectation reflects a balanced view of cash inflows and outflows. The Group’s
assets mainly consist of cash and trade receivables with the liabilities consisting of trade payables
from the ongoing operations of the business. To monitor existing financial assets and liabilities as
57
well as to enable an effective controlling of funding for the business, the Group has established risk
that reflects expectations of management in terms of expected settlement of financial assets and
liabilities.
All financial assets and most liabilities are payable within 12 months of reporting date.
Accordingly, the book value of each liability is equivalent to its fair value.
The liabilities due after 12 months are loans with fixed interest rate. The carrying values of these
loans are equivalent to their fair value.
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group’s consolidated financial statements requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting policies, management has made the following
judgements, which have the most significant effect on the amounts recognised in the consolidated
financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amount
of assets and liabilities within the next financial year, are described below. The Group based its
assumptions and estimates on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future developments, however, may
change due to market changes or circumstances arising beyond the control of the Group. Such
changes are reflected in the assumptions when they occur.
Impairment of goodwill and intangible assets
The fair value of assets acquired are initially estimated by the Group taking into consideration all
available information at the acquisition date. Fair value on goodwill and intangible assets has been
impaired due to the significant losses that arose on the previous acquisition. To determine the
value in use of the tested CGUs, cash flow forecasts with an appropriate discount rate have been
prepared.
Useful lives of depreciable assets
The Group determines the estimated useful lives and related depreciation and amortisation
charges for its property, plant and equipment and intangible assets with finite lives. The useful lives
could change significantly as a result of technical innovations or some other event. The
depreciation and amortisation charge will increase where technical obsolescence or non-strategic
assets that have been abandoned or sold will be written off or written down.
Financial liability - earn-out on acquisition
The Group recorded a financial liability - earn-out on acquisition for the deferred consideration by
shares in a business combination for a two year earn-out period. This financial liability - earn-out
58
on acquisition was recognised at fair value at the present value of expected costs to settle the
obligation using a discount rate.
The Group has reversed the deferred consideration on the pervious earn-out on acquisition due to
the losses occurred on the acquisition. $585,752 has been impaired to goodwill and $121,835 has
been recognised as gain on acquisition. The financial liability is reviewed at each reporting period.
Movement in the financial liability from these changes are reported in the consolidated statement
of profit or loss and other comprehensive income.
Tax losses
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax assets that can be recognised,
based upon the likely timing and the level of future taxable profits together with future tax
planning strategies.
The Group has $3,102,481 (2015: $1,522,679) of unused tax losses for which no deferred tax asset
has been recognised. The tax losses pre 2011 may not be used to offset future taxable income
because they may not meet the continuity of ownership or same business tests.
5.
PARENT ENTITY INFORMATION
Information relating to Harris Technology Group Ltd – Parent ($)
2016
2015
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Share based payments reserve
Total shareholders’ equity
Loss of the parent entity
8,559,784
6,023,131
8,562,042
6,044,341
(1,375,634)
(127,675)
(2,617,186)
(127,675)
34,546,214
33,469,847
(28,642,084)
(27,681,287)
40,726
128,105
5,944,856
5,916,666
(960,797)
(964,603)
Total comprehensive (loss) of the parent entity
(960,797)
(964,603)
There are no guarantees entered into by the parent entity in relation to the debts of its subsidiary.
The parent entity has no contingent liabilities. The parent entity has no contractual commitments
for the acquisition of property, plant or equipment.
6.
REVENUE
($)
Revenue from operating activities
59
2016
2015
Sale of goods
Total sales revenue
Other income
Bank interest receivable
Gain on acquisition*
Total other income
*Being write back of earn-out provision for Warcom as mentioned in note 4
7.
EXPENSES
Distribution expenses
Packing materials
General warehouse expenses
Total distribution expenses
Employee benefits expenses
17,789,785
18,453,912
17,789,785
18,453,912
9,939
41,945
121,835
-
131,774
41,945
2016
$
68,558
23,549
92,107
2015
$
97,106
11,220
108,326
Wages, salaries and contractors
2,120,002
2,043,895
Director expenses
Defined contribution plan expense
Other employee benefits
Payroll Tax expense
149,187
185,933
59,365
54,374
145,511
174,897
163,672
127,491
Total employee contractor and director expenses
2,568,861
2,655,466
Onerous contract expense
Total Onerous contract expense
608,793
608,793
-
-
Depreciation
Plant and equipment
Total depreciation
131,067
131,067
43,825
43,825
60
Amortisation
Intangible assets
Software development
Total amortisation
Impairment expense
Goodwill
Intangible assets
Software development
Total Impairment expense
Other expenses
Advertising
Contractors development
General expenses
Insurance
Hosting & Domain Licenses
Internet & telephone
Software Licenses & Subscriptions
Loss on sales of non-current assets
18,714
255,940
274,654
271,768
77,381
349,149
2016
$
807,912
111,023
108,451
1,027,386
2015
$
-
-
-
-
113,881
169,282
27,820
48,639
30,249
100,930
45,499
76,726
67,993
23,118
8,128
21,807
41,057
32,698
48,948
-
Total Other expenses
511,737
345,038
Finance costs
61
Interest costs
Bank and merchant fee
Total finance costs
137,222
10,628
147,850
44,502
9,439
53,941
8.
DISCONTINUED OPERATION
The results of the online advertising division for the year are presented below:
Revenue
Direct costs
Gross Profit
Contractors
Receivables impairment
Administrative (expenses) write-back
Profit before tax from a discontinued operation
Tax expense
2016
2015
$
-
-
-
-
-
$
-
-
-
-
-
33,381
33,381
-
93,199
93,199
-
Profit for the year from a discontinued operation
33,381
93,199
There are minimal assets and liabilities related to the discontinued
operation. As at 30 June 2016, the remaining assets and liabilities are
summarised as below:
Assets
Trade receivables & other receivables (net of impairment)
Cash and cash equivalents (Note 11)
Assets classified as held for disposal
Liabilities
Trade payables and accruals
Liabilities classified as held for disposal
The group assess at each reporting date the requirement to record
assets and liabilities of discontinued operations.
62
-
-
-
-
-
-
-
-
(31,764)
(31,764)
9.
INCOME TAXES
Current and deferred tax expense for the year ended 30 June 2016
were $nil (2015: $nil)
A reconciliation between tax expense and the product of
accounting profit/(loss) before income tax multiplied by the Group’s
applicable income tax rate is as follows:
2016
2015
$
-
$
-
Accounting (loss)/profit before income tax
(6,510,012)
(2,481,432)
At the Group’s statutory income tax rate of 30% (2015: 30%)
(1,953,004)
(744,430)
Adjustments:
Utilisation of previously unrecognised tax losses
-
Non recognition of current year tax loss
1,953,004
774,430
Income tax benefit reported in the consolidated income statement
-
Income tax losses
Unused tax losses for which no deferred tax asset has been
recognised
3,102,481
1,522,679
Tax Loss Deferred Tax Asset recognition
Deferred tax assets will only be recognised if:
a) future assessable income is derived of a nature and amount sufficient to enable the benefit
from the deductions to be realised;
b) the conditions for deductibility imposed by tax legislation are complied with; and
c) no changes in tax legislation adversely affect the consolidated entity in realising the benefit.
Unused tax losses for which no deferred tax asset has been recognised comprise current year
estimated tax losses only and are not yet confirmed.
Tax losses pre 2011 are not recognised because they are not expected to meet the continuity of
ownership or same business tests.
Unrecognised temporary differences
At 30 June 2016 there are no temporary differences recognised in the consolidated financial
position, on the basis of an assessment that recovery through future taxable income of those
amounts is not probable at 30 June 2016 (2015: nil).
63
Tax consolidation
Harris Technology Group and its 100% owned subsidiaries are part of an income tax consolidated
group.
10.
EARNINGS PER SHARE
Basic earnings/(loss) per share is calculated by dividing net profit/(loss) for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings/(loss) per share is calculated by dividing the net profit/(loss) for the year
attributable to ordinary equity holders of the parent by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the calculations of basic and diluted
earnings per share:
Basic and diluted (loss)/earnings per share (cents)
2016
(1.08)
2015
(0.47)
Net (loss)/profit for the year ($)
(6,510,012)
(2,481,432)
Weighted average number of ordinary shares used in calculating basic
earnings per share
604,121,389
530,405,894
Weighted average number of ordinary shares used in calculating
diluted earnings per share
604,121,389
530,405,894
64
11.
CASH AND CASH EQUIVALENTS
Cash at bank and on hand
2016
$
2015
$
418,622
2,307,247
418,622
2,307,247
Cash at bank earns interest at floating rates based on daily bank deposit rates.
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30
June 2016:
Cash at bank and on hand
Cash attributable to discontinued operations
Reconciliation
Net loss before tax
Non cash flows
Depreciation and amortisation
Performance rights issued (non-cash)
Finance costs
Capital Raising costs
Profit / (loss) on sales of non – current assets
Gain on acquisition
Impairment expense
(Increase) / decrease in trade and other receivables
(Increase) / decrease in Prepayments & deposits
(Increase) / decrease in inventories
2016
$
2015
$
418,622
2,307,247
-
-
418,622
2,307,247
(6,510,012)
(2,481,432)
405,721
392,974
(128,105)
117,480
-
67,993
(121,835)
1,027,386
61,489
44,489
39,539
-
-
-
533,100
(577,316)
11,585
-
1,082,548
(223,950)
Increase/ (decrease) in trade and other payables
(2,182,961)
2,620,924
Increase / (decrease) in Onerous contract provision
608,793
-
Net cash flows provided by/(used in) op act
(5,088,307)
(123,283)
65
12.
TRADE AND OTHER RECEIVABLES
($)
Trade receivables
Allowance for Impairment loss
Other receivables
2016
2015
85,512
426,510
-
-
32,074
224,176
117,586
650,686
Trade receivables are non-interest bearing.
Other receivables are non-interest bearing and have a repayment terms between 30 to 90 days.
For terms and conditions relating to related party receivables refer to note 30.
Allowance for impairment loss
Trade receivables are non-interest bearing and are generally on cash on delivery terms. The
Group’s trade and other receivables have been reviewed for impairment. No allowance for
impairment loss noted and recognised by the Group during the year.
Other balances within trade and other receivables do not contain impaired assets and are not past
due.
Fair value and credit risk
Due to the short term nature of these receivables, their carrying value has been assessed to
approximate their fair value.
The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as
security, nor is it the Group’s policy to transfer (on-sell) receivables to special purpose entities.
Foreign exchange and interest rate risk
Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3.
13.
INVENTORIES
($)
Inventories
Goods in transit
Provision for Stock obsolescence
2016
701,131
36,804
(64,102)
673,833
2015
1,828,102
-
(71,721)
1,756,381
66
14.
PREPAYMENTS AND DEPOSITS
($)
Current assets
Prepaid insurance
Rental deposit
Hosting servers
Deposits
2016
2015
9,989
22,574
245
2,846
29,500
12,048
145,408
145,407
178,216
189,801
15.
PROPERTY, PLANT AND EQUIPMENT
Gross carrying amount
At 30 June 2014
Additions
Assets acquired
At 30 June 2015
Assets acquired
Warehouse
Fit-out
$
Office
equipment
$
Computers
$
Total
$
200,000
-
5,310
205,310
1,834
1,600
-
8,680
10,280
6,551
64,190
265,790
-
-
10,955
24,945
75,145
290,735
9,521
17,906
At 30 June 2016
207,144
16,831
84,666
308,641
Depreciation and impairment
At 30 June 2014
Depreciation charge for the year
At 30 June 2015
Depreciation and disposal charge for the
year
(1,095)
(20,081)
(21,176)
(101,604)
(16)
(2,435)
(3,546)
(1,199)
(1,215)
(1,807)
(22,545)
(43,825)
(24,980)
(47,371)
(27,656)
(131,067)
Disposal charge for the year
(66,096)
(4,252)
(2,644)
(72,992)
At 30 June 2016
(188,876)
(7,274)
(55,280)
(251,430)
Net carrying amount
At 30 June 2016
At 30 June 2015
18,268
184,134
9,557
9,065
29,386
57,210
50,165
243,364
67
16.
INTANGIBLE ASSETS
Software
Development
Domain &
Websites
Customer
databases
Brands
Goodwill
Total
$
$
$
$
$
$
Gross carrying amount
At 30 June 2014
-
196,785
260,347
117,768
1,276,682
1,851,582
Additions
328,515
57,410
-
-
-
385,925
Business assets acquired
-
-
162,375
201,427
1,001,175
1,364,977
At 30 June 2015
Additions
At 30 June 2016
Amortisation and
impairment
At 30 June 2014
Amortisation
Impairment
At 30 June 2015
Amortisation
Impairment
Revaluation Adjustments
Write Back of
Liability (eStore)
Financial
At 30 June 2016
Net carrying amount
At 30 June 2016
328,515
254,195
422,722
319,195
2,277,857
3,602,484
272,535
1,489
-
-
-
274,024
601,050
255,684
422,722
319,195
2,277,857
3,876,508
-
9,839
13,017
5,888
-
28,744
77,381
121,714
95,975
54,079
-
349,149
-
8,082
-
-
100,000
108,082
77,381
139,635
108,992
59,967
100,000
485,975
255,940
4,796
7,930
5,988
-
274,654
108,451
111,023
-
-
807,912
1,027,386
-
-
(1,509)
(2,496)
(1,884)
-
(5,889)
-
-
-
585,752
585,752
441,772
253,945
114,426
64,071
1,493,664
2,367,878
159,278
1,739
308,296
255,124
784,193
1,508,630
At 30 June 2015
251,134
114,560
313,730
259,228
2,177,857
3,116,510
The group has assessed the carrying value of goodwill relating to eStore and Warcom using a
discounted cash flow model. $807,912 has been impaired from goodwill in respect of the eStore
and Warcom businesses; $585,752 of financial liability has been reversed in respect of deferred
consideration for the eStore earn-outs.
There is no impairment on Your Home Depot ("YHD") goodwill based on the assessment using
discounted cash flow method described below.
68
Impairment testing
The recoverable amount of the consolidated entity's goodwill has been determined by a value-in-
use calculation using a discounted cash flow model, based on a 24 months projection period
approved by management and extrapolated for a further 3 years using the following rates in key
assumptions, together with a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is
most sensitive.
The following key assumptions were used in the discounted cash flow model for YHD and Wow
baby:
a. 15.4% post-tax discount rate;
b. $5.8m projected revenue for 2017, 50% per annum growth in 2018, 10% for 2019 and 5%
for 2020 per annum projected revenue growth rate;
c. 16.1% gross margin consistent for the next 5 years projection period;
d. Significant costs and overheads reduction of $1m in 2017, gradually 10% increased
overheads in 2018 and 5% for 2019 to 2020 per annum increase in operating costs and
overheads.
The discount rate of 15.4% reflects management’s estimate of the time value of money and the
consolidated entity’s weighted average cost of capital adjusted for YHD, the risk free rate and the
volatility of the share price relative to market movements
The directors believe for FY2017, the revenue is conservatively assumed with the recent restructure
and transition of YHD and Wow baby businesses. In FY2018, the directors believe the revenue will
naturally return to standard trading level of $8m (YHD and Wow baby achieved greater than $9m
revenue in FY2016). The projected revenue growth rate in the later 3 years is achievable based on
the new management’s strategies and plans and the positive market outlook for the businesses.
The YHD and Wow Baby overheads were reduced in late FY2016 as part of the restructure and
include rationalised performance marketing expenses, heavily reduced headcount, combining
office and warehouse operations, examining through freight expenses on out-bound deliveries,
termination of inefficient third party professional service and consultancies. This reduction will
continue in FY2017.
The overheads increase from FY2018 onwards will be mainly used on improving marketing
strategies, improving market awareness of the brands and creating much better IT platform for the
business operations.
The calculated present value of the cash flow generating from YHD and Wow baby are $186k more
than the CGU value from the balance sheet as of 30 June 2016, no impairment is needed.
The directors believe with the closure and merger of the website to ht.com.au, eStore and Warcom
will not generate enough cash flow to justify the goodwill assumed on acquisition.
69
Sensitivity
As disclosed in note 4, the directors have made judgements and estimates in respect of impairment
testing of goodwill. Should these judgements and estimates not occur the resulting goodwill
carrying amount may decrease. The sensitivities are as follows:
(a) Revenue would need to decrease by more than 2.1% before goodwill would need to be
impaired, with all other assumptions remaining constant.
(b) The discount rate would be required to increase by 1.8% before goodwill would need to be
impaired, with all other assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the
recoverable amount of goodwill is based would not cause the cash-generating unit’s carrying
amount to exceed its recoverable amount.
If there are any negative changes in the key assumptions on which the recoverable amount of
goodwill is based, this would result in a further impairment charge for goodwill.
Fair value recognised on acquisition
Goodwill ($)
YHD
Warcom
eStore
Total
2016
784,193
-
-
784,193
2015
784,193
392,489
1,001,175
2,177,857
70
17.
TRADE AND OTHER PAYABLES
Trade and other payables - Current ($)
Trade payables
Other payables
Related parties
2016
1,105,845
294,989
-
2015
2,922,309
664,852
-
1,400,834
3,587,161
Terms and conditions of the above financial liabilities:
(i)
(ii)
Trade payables are non-interest bearing and are normally settled on 30-day terms.
Other creditors are non-interest bearing and are normally payable within 30 and 90 days
(iii)
Details of the terms and conditions of related party payables are set out in notes 29.
Fair value
Due to the short term nature of these payables, their carrying value is assumed to approximate
their fair value.
Related party payables
For details of related party payables refer to note 30.
Foreign exchange and interest rate risk
Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3.
18.
FINANCIAL LIABILITY
($)
At 1 July 2015
Unsecured
Loan and interest payable
Director's convertible note (note 23)
Financial liability - earn-out on acquisition
Discount rate adjustment
Fair value at 30 June 2016
Current
Non-Current
2016
2015
1,522,804
1,000,000
-
-
2,522,804
1,281,252
1,241,552
2,522,804
-
-
816,662
-79,158
737,504
564,135
173,369
737,504
71
On 28 April 2016, the Group received $1m from Shu-Mei Chang with 10% annual interest rate. The
loan is repayable monthly to the lender for an 18 month term. Total interest of $8,333 accrued in
the balance sheet as of 30 June 2016.
On 18 May 2016, the Group received $500k from Welland with 10% annual interest rate. The loan is
repayable monthly to the lender for a 24 month term. Total interest of $5,811 accrued in the
balance sheet as of 30 June 2016.
Directors’ convertible notes have been converted to 146,964,775 pre-consolidated shares on 19th
July 2016; the fair value is equivalent to the book value of the convertible note.
No other financing facilities or liabilities available for the Group as of the 30 June 2016.
19.
EMPLOYEE BENEFIT LIABILITIES
($)
Current
Annual leave
Non-current
Long service leave
2016
2015
29,351
58,076
931
12,459
72
20.
CONTRIBUTED EQUITY
a) Issued and paid up capital
Ordinary shares
Ordinary shares fully paid
Listed options
Contributed equity
Movements in ordinary
shares on issue
Opening balance
Shares issued during the year:
2016
2015
$
$
34,546,214
33,352,308
-
117,539
34,546,214
33,469,84
7
Number of Shares
$
559,941,747
33,469,847
Issue of shares on 4 August 2015 on exercise of listed option
45,784
-
Issue of shares on 3 March 2016 as consideration for $1m share
placement
Issue of shares on 19 July 2016 under settlement agreement dated
26 February 2016 in satisfaction of Warcom earn-outs
Closing balance
139,909,396
1,000,000
-
76,367
699,896,927
34,546,214
The group issued 139,909,396 ordinary shares on 3 March 2016 on $1m placement from Garrison
Huang (or his controlled entity Australian PC Accessories Pty Ltd), the shares were issued to raise
funds, which will be applied to Group's working capital requirements.
Terms and conditions of ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the
Company, to participate in the proceeds from the sale of all surplus assets in proportion to the
number and amounts paid up on shares held. Ordinary shares entitle their holder to one vote,
either in person or by proxy, at a meeting of the Company.
73
(b) Listed options
Movements in listed options over ordinary shares Number of
Number of
Options
$
Options
$
2016
2016
2015
2015
Opening balance
59,985,032
117,539
59,990,207
117,720
Listed options issued during the year:
Cancellation of option on issue
(59,985,032)
(117,539)
-
-
Exercise of options
Closing balance
(c) Capital management
-
-
-
(5,175)
(181)
- 59,985,032 117,539
The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios to support its business and maximise the shareholder’s
value.
The Group manages its capital structure and makes adjustments to it in light of changes in
economic conditions. To maintain or adjust the capital structure, the Group may return capital to
shareholders or issue new shares. The Group monitors capital using a gearing ratio, which is net
debt divided by total capital plus net debt.
21.
RESERVES
($)
Options, performance rights granted and convertible notes
option reserve
Balance at beginning of financial year
Movement for the year
Balance at end of financial year
2016
2015
128,105
(87,379)
40,726
66,616
61,489
128,105
Nature and purpose of options granted reserve
This reserve is used to record the value of share based payments arising on the grant of share
options and performance rights to employees, including key management personnel, as part of
their remuneration under the employee share option plan.
Convertible notes option reserve
This reserve of $40,726 as of 30 June 2016 (2015: nil) is used to record the value of $1m convertible
notes received from directors in March 2016 and converted to shares on 19 July 2016. (Refer to
note 23)
74
Unlisted options or performance rights
In accordance with the provisions of the employee share option plan, the outstanding unlisted
options or performance rights during the financial year and as at 30 June 2016 are set out below:
2016
2016
2015
2015
Number of
Options
Weighted
Average Exercise
Price
Number of
Options
Weighted
Average
Exercise Price
Balance at beginning of year
9,000,000
$0.05
13,500,000
$0.05
Granted
Expired
Lapsed
Other changes during the year
-
-
-
(9,000,000)
$0.05
Balance at end of year
Exercisable at end of year
-
-
-
-
(1,600,000)
(2,900,000)
9,000,000
$0.1
$0.03
$0.05
2,333,332
$0.05
22.
ACCUMULATED LOSSES
($)
2016
2015
Balance at beginning of financial year
(29,760,927)
(27,279,495)
Net profit/(loss) for the year
(6,510,012)
(2,481,432)
Balance at end of financial year
(36,270,939)
(29,760,927)
75
23.
DIRECTORS’ CONVERTIBLE NOTES
The Group received total of $1,000,000 from the following directors, this has been converted to
shares on 19 July 2016 through resolution approved on EGM held on 15 July 2016.
Name of
director
Entity/Shareholder
Principal of
loan
Number of shares
issued in repayment
of principal (pre-
consolidation)
Number of shares
issued in repayment
of interest (pre-
consolidation)
Total number of
shares issued
(principal + interest)
(pre-consolidation)
Mark
Goulopoulos
Garrison
Huang
Bob Xu
Howard
Chen
Howard
Chen
Domenic
Carosa
Total
Atlantis MG Pty Ltd
Australian
Accessories
PC
Ltd
Pty
AZA International (Aust)
Pty Ltd
$100,000
14,285,714
395,303
14,681,017
$350,000
50,000,000
1,493,151
51,493,151
$100,000
14,285,714
424,658
14,710,372
Sijin Chen
$150,000
21,428,571
614,090
22,042,661
H & J Investment Pty Ltd
$100,000
14,285,714
409,394
14,695,108
Dominet
Corporation
Pty
Digital
Ltd
Family
$200,000
28,571,429
771,037
29,342,466
$1,000,000
142,857,142
4,107,633
146,964,775
76
24.
BUSINESS COMBINATIONS
In March 2015, the Group bought an asset business combination, eStore. The business operates
online shopping based in Australia. The Group acquired this business to enlarge the range of
products in the online shopping division.
The fair values of the identifiable assets of eStore as at the date of acquisition were:
Cash and cash equivalents
Inventories
Property, plant & equipment (Note 15)
Identifiable intangibles (Note 16)
Total identifiable assets at fair value
Goodwill arising on acquisition (Note16)
Purchase consideration transferred
Cash paid
Share consideration paid
Financial liability - Deferred consideration by shares*
Net cash flow on acquisition
*recognised as financial liability.
eStore
Fair value recognised on
acquisition ($)
-
16,132
10,000
363,801
389,933
1,001,175
1,391,107
(500,000)
(369,343)
(521,764)
1,391,107
The assets recognised on 30 June 2015 accounts were based on a provisional assessment of their
fair value at acquisition dates. The Group will have 12 months from the date of the acquisition date
to finalise the fair value measurements of the assets based on more information obtained and to
perform valuation on the identifiable intangibles and goodwill.
Subsequent to the merger with Anyware Corporation and Harris Technology, the Group decided to
merge the eStore website into ht.com.au. The group has assessed the goodwill fair value using a
discounted cash flow model. $415,423 has been impaired from goodwill in respect of eStore.
$585,752 of financial liability has been reversed in respect of deferred consideration for eStore
earn-outs (Refer to note 16).
77
25.
COMMITMENTS
The Group entered into a commercial property lease in Victoria on the 16th of April 2015. This
lease replaces the initial Victoria property lease that was entered into on 7 May 2013, the lease was
finalised on 30 May 2015. The New South Wales lease that took effect 1 July 2014, with rent
payable monthly in advance remains in place.
In July 2016, the business operations were relocated from the New South Wales Castile Hill and
Victoria Alphington. Onerous contract provision of total $608,793 has been recognised in the
financial statements, refer to note 26.
Operating Lease Commitments ($)
2016
2015
Operating leases contracted
Within one year
After one year but not more than five years
More than five years
440,456
1,122,716
1,308,593
3,974,660
-
-
1,749,049
5,097,376
The property lease in Victoria is for a 4 year term with an option to extend the lease for another 4
year term at the latest exercising option date of 30 January 2019. The lease required a security
deposit of an amount equivalent to 4 months’ rent plus GST. The Company has elected to pay the
security deposit by a bank guarantee.
The property lease in New South Wales is for 6 year term with no option to extend. The termination
date for the lease is 30 June 2020. This lease required a bank guarantee with an amount equivalent
to 3 months of rent and tenant’s proportion of outgoings and GST totalling to $95,408 issued on
the 21 July 2014. At the same time, an equal amount of a term deposit is being placed with the
bank for issuing the bank guarantee.
78
26. ONEROUS CONTRACT PROVISION
AASB 137 para 66 - 69 defines an onerous contract as a contract in which the unavoidable
costs of meeting the obligations under the contract exceed the economic benefits expected
to be received under it. The unavoidable costs under a contract reflect the least net cost of
exiting from the contract, which is the lower of the cost of fulfilling it and any compensation
or penalties arising from failure to fulfil it.
The contingent liabilities were calculated on present value of remaining lease commitments
discounted by WACC (15.4%) assuming 50% of the lease can be recovered through sub-
leasing.
Onerous contract provision ($)
Within one year
After one year but not more than five years
More than five years
2016 2015
178,645
430,148
-
608,793
-
-
-
-
27. CONTINGENT ASSETS AND LIABILITIES
The Company had no contingent assets and no contingent liabilities as at 30 June 2016 (2015: nil).
28.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
The consolidated entity had the following events after balance date for disclosures:
15 July 2016
EMG held for approving the merger with Anyware Corporation Pty Ltd and Harris
Technology Pty Ltd
19 July 2016
Completion of Anyware/Harris Technology Merger
a)
b)
c)
d)
2,403,456,940 Shares (Consideration Shares) were issued for nil cash, in consideration for
the Company’s acquisition of 100% of the issued capital in Anyware Corporation Pty Ltd
(Anyware), as announced to the market on 2 March 2016 (Anyware Acquisition)
12,000,000 Shares were issued for nil cash consideration under the Company’s long term
incentive plan (LTIP) to company officeholders (LTIP Shares)
15,914,435 Shares were issued for nil cash consideration, in satisfaction of the Company’s
obligation to issue any further earn-out shares to Warcom (Aust) Pty Ltd under the terms of
the Warcom Assets Purchase Agreement (Earn-out Shares)
146,964,775 Shares were issued in conversion of loans (principal and interest) at a
conversion price $0.007 per Share (Conversion Shares)
79
20 July 2016
Change of Company name and ASX issuer code
The company announced changing name to “Harris Technology Group Limited” and its ASX
issuer code to "HT8" – the change in ASX issuer code became effective on 5 August 2016.
25 July 2016
Share consolidation and interim ASX issuer code
Harris Technology Group Limited (formerly Shoply Limited) (the Company) refers to the
proposed consolidation of the Company’s share capital into a smaller number in the ratio of
25 to 1, as approved by shareholders at the Company’s Extraordinary General Meeting
(EGM) held on Friday 15 July 2016 (Consolidation).
28 July 2016
Completion of share consolidation
The Company announced that the Consolidation had been completed effective 28 July
2016. Following the Consolidation, the Company had 131,129,774 fully paid ordinary shares
on issue.
Apart from the matters detailed above, no other matter or circumstance has arisen since 30 June
2016 that has significantly affected, or may significantly affect the consolidated entity’s operations,
the results of those operations, or the consolidated entity’s state of affairs in future financial years.
29.
AUDITOR’S REMUNERATION
($)
2016
2015
Amounts received or due and receivable by Ernst & Young and RSM
Australia Partners for:
An audit or review of the financial report of the entity and any
other entity in the consolidated entity paid to Ernst & Young
An audit or review of the financial report of the entity and any
other entity in the consolidated entity paid to RSM Australia
Partners
-
66,318
45,000
58,125
45,000
124,443
80
30.
RELATED PARTY DISCLOSURE
(a) Subsidiary
The consolidated financial statements include the financial statements of Harris Technology Group
Limited and the subsidiaries listed in the following table:
Name of entity
Country of
Incorporation
% of Equity interest
Investment ($)
2016
2015
2016
2015
AdEffective Business Networks Pty Ltd
Australia
AER Group Pty Ltd
Australia
100
100
100
100
100
100
100
100
(b) Ultimate parent
The consolidated financial statements include the financial statements of Harris Technology Group
Limited and its controlled entities. Harris Technology Group Limited is the ultimate parent
company.
(c) Inter-group transactions
Loans
There was an intercompany loan of $8,317,169 due to the parent entity from its controlled entity -
AER Group Pty Ltd (2015: $3,847,055).
(d) Other related party transactions
During the financial year ended 30 June 2016, there were a total of $1m Directors’ convertible
notes received by the Group, refer to note 23 (2015: nil). There was a $31,108 payment made to
Geo-Store, a Lorenzo Coppa related party, for CRM and ERP related services. These are additional
to the service fees stated in the remuneration report.
31.
KEY MANAGEMENT PERSONNEL
The total remuneration paid to KMP of the company and the Group during the year are as follows:
($)
Short-term employee benefits
Post-employment benefits
Share based payments
2016
658,657
45,447
(34,536)
669,568
2015
596,670
43,817
(7,625)
632,862
81
Short-term employee benefits
These amounts include fees and benefits paid to the non-executive Chair and non-executive
directors as well as all salary, paid leave benefits, fringe benefits and cash bonuses awarded to
executive directors and other KMP.
Post-employment benefits
These amounts are superannuation contributions made during the year.
Share-based payments
These amounts represent the expense related to the participation of KMP in equity-settled
benefit schemes as measured by the fair value of the options, rights and shares granted on
grant date.
Further information in relation to KMP remuneration can be found in the Directors' Report.
32.
SEGMENT INFORMATION
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed
and used by the Board of Directors (who are identified as the Chief Operating Decision Markers
(CODM)) in assessing the performance of the Group, and determining investment requirements.
The operating segments are based on the manner in which services are provided to the market.
The Group consists of one business segment which operates in one geographical area, being
Australia.
82
Directors’ Declaration
(For The Financial Year Ended 30 June 2016)
In accordance with a resolution of the directors of Harris Technology Group Limited and its
controlled entities, I state that:
1.
In the opinion of the directors:
(a)
the financial statements and notes of Harris Technology Group Limited and its
controlled entities for the financial year ended 30 June 2016 are in accordance with
the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30
June 2016 and of its performance for the year ended on that date; and
(ii) complying with Accounting Standards and the Corporations Regulations 2001;
(b)
(c)
the financial statements and notes also comply with International Financial
Reporting Standards as disclosed in Note 2(a); 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.
2. This declaration has been made after receiving the declarations required to be made to
the directors by the chief executive officer in accordance with section 295A of the
Corporations Act 2001 for the financial year ended 30 June 2016.
On behalf of the Board
Andrew Plympton
Non-Executive Chairman
Melbourne, 29 September 2016
83
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
HARRIS TECHNOLOGY GROUP LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Harris Technology Group Limited, which comprises the
consolidated statement of financial position as at 30 June 2016, and the consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the directors'
declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility 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 is free from material misstatement,
whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the financial report in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
84
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of Harris Technology Group Limited, would be in the same terms if given to the directors as at the time of this auditor's
report.
Opinion
In our opinion:
(a) the financial report of Harris Technology Group Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2(b).
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2c in the financial report, which indicates that the consolidated
entity incurred a loss of $6,510,012 (2015: $2,481,432 loss) and had cash outflows from operating activities of
$5,088,307 (2015: $123,283 outflow) during the year ended 30 June 2016. As of that date, the consolidated entity had
net current liabilities of $1,577,208 (2015: $662,979 net current assets) and net liabilities of $1,683,999 (2015:
$3,837,025 net assets). These conditions, along with other matters as set forth in Note 2c, indicate the existence of a
material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going
concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the
normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 29 to 36 of the directors’ report for the year ended 30
June 2016. 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.
Opinion
In our opinion the Remuneration Report of Harris Technology Group Limited for the year ended 30 June 2016 complies
with section 300A of the Corporations Act 2001.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Melbourne, VIC
29 September 2016
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Additional Information
In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders
not elsewhere disclosed in this Annual Report. The information provided is current as at 29 September 2016
(Reporting Date).
Corporate Governance Statement
The Company has prepared a Corporate Governance Statement which sets out the corporate governance
practices that were in operation throughout the financial year for the Company. In accordance with ASX
Listing Rule 4.10.3, the Corporate Governance Statement will be available for review on Harris Technology
Group Limited’s website (www.ht8.com.au), and will be lodged with ASX at the same time that this Annual
Report is lodged with ASX.
Substantial holders
As at the Reporting Date, the names of the substantial holders of Harris Technology and the number of
equity securities in which those substantial holders and their associates have a relevant interest, as disclosed
in substantial holding notices given to Harris Technology, are as follows:
Holder of Equity Securities
Class of Equity Securities
Number of Equity Securities
held
% of total, issued
securities capital in
relevant class
Ordinary Shares
80,110,489
61.09
Ordinary Shares
8,638,903
6.59
Garrison Huang and
associated entity
Bob Xu and associated
entity
Number of holders
As at the Reporting Date, the number of holders in each class of equity securities:
Class of Equity Securities
Ordinary Shares
Voting rights of equity securities
Number of holders
2,305
The only class of equity securities on issue in the Company which carries voting rights is ordinary shares.
As at the Reporting Date, there were 2,305 holders of a total of 131,129,774 ordinary shares of the Company.
At a general meeting of Harris Technology, every holder of ordinary shares present in person or by proxy,
attorney or representative has one vote on a show of hands and on a poll, one vote for each ordinary share
held. On a poll, every member (or his or her proxy, attorney or representative) is entitled to vote for each fully
paid share held and in respect of each partly paid share, is entitled to a fraction of a vote equivalent to the
proportion which the amount paid up (not credited) on that partly paid share bears to the total amounts paid
and payable (excluding amounts credited) on that share. Amounts paid in advance of a call are ignored when
calculating the proportion.
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Distribution of holders of equity securities
The distribution of holders of equity securities on issue in the Company as at the Reporting Date is as
follows:
Distribution of ordinary shareholders
Holdings Ranges
Holders
Total Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
1,522
389
125
224
45
183,399
1,003,712
948,938
7,925,560
121,068,165
Totals
2,305
131,129,774
%
0.140
0.765
0.724
6.044
92.327
100.00
Less than marketable parcels of ordinary shares (UMP Shares)
The number of holders of less than a marketable parcel of ordinary shares based on the closing market price
at the Reporting Date is as follows:
Total Securities
UMP Shares
UMP Holders
% of issued shares held
by UMP holders
131,129,774
747,752
1,807
0.57709
Voluntary escrow
of
Class
securities
restricted
Type of restriction
Number of securities
End date of escrow
period
Ordinary shares
Voluntary escrow
920,464 Until further notice
Ordinary shares
Voluntary escrow
636,578
18 August 2016
Unquoted equity securities
The Company does not have any unquoted equity securities on issue.
On-market buyback
The Company is not currently conducting an on-market buy-back.
On-market purchase of securities under employee incentive scheme
No securities were purchased on-market during the reporting period under or for the purposes of an
employee incentive scheme; or to satisfy the entitlements of the holders of options or other rights to acquire
securities granted under an employee incentive scheme.
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Twenty largest shareholders
The Company only has one class of quoted securities, being ordinary shares. The names of the 20 largest
holders of ordinary shares, and the number of ordinary shares and percentage of capital held by each holder
is as follows:
Holder Name
Balance as at
Reporting Date
%
AUSTRALIAN PC ACCESSORIES PTY LTD >
80,110,489
61.093
AZA INTERNATIONAL (AUST) PTY LTD
WELLAND INDUSTRIAL CO LTD
CHA SHIN CHI INVESTMENT CO LTD
MISS PING YU
DOMINET DIGITAL CORPORATION PTY LTD
TIGER DOMAINS PTY LTD
MISS XIAOFEI XU
RETZOS EXECUTIVE PTY LTD
ATLANTIS MG PTY LTD
MR SIJIN CHEN
MRS ISABEL COPPA (COPPA FAMILY A/C)
DIAMOND BOWL PTY LTD
T E & J PASIAS PTY LTD
MP3 AUSTRALIA PTY LTD
H & J INVESTMENT PTY LTD
MR PAUL WARREN
VAUTES INVESTEMNTS PTY LTD (VAUGHAN CLARK FAMILY A/C)
NUTSVILLE PTY LTD
ATLANTIS MG PTY LTD
Total number of shares of Top 20 Holders
Total Remaining Holders Balance
Item 7 issues of securities
8,638,903
5,488,969
5,488,969
3,392,673
1,819,299
1,780,467
1,536,304
912,878
893,441
881,707
800,703
694,008
680,000
674,667
587,805
580,424
491,978
400,000
375,204
6.588
4.186
4.186
2.587
1.387
1.358
1.172
0.696
0.681
0.672
0.611
0.529
0.519
0.515
0.448
0.443
0.375
0.305
0.286
116,228,888
88.637
131,129,774
11.363
There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act
which have not yet been completed.
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Company Secretary
The Company’s secretary is Ms Alyn Tai.
Registered Office
The address and telephone number of the Company’s registered office are:
Level 1, 61 Spring Street
Melbourne Victoria 3000
Tel: +61 (0)3 9286 7500
Share Registry
The address and telephone number of the Company’s share registry, Boardroom Pty Limited, are:
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Tel: 1300 737 760
Stock Exchange Listing
Harris Technology’s ordinary shares are quoted on the Australian Securities Exchange (ASX issuer code: HT8).
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