Harris Technology Group Limited Annual Report 2018/19 | 1
Contents
Chairman and CEO Letter
FY19 Summary
FY20 Strategy
4
5
8
Directors’ Report including Remuneration Report 10
Auditor’s Independence Declaration
Corporate Governance Statement
Financial Statement
27
28
29
Notes to the Consolidated Financial Statements 33
Directors’ Declaration
Independent Auditor’s Report
Additional Information
72
73
77
Harris Technology Group Limited Annual Report 2018/19 | 2
Harris Technology Group Growth Strategy
Focus on Sales
and building
the brands in
the market
Emphasis on
Systemisation
to reduce costs
Ensure all sites
are Mobile &
Tablet-
Enabled to
increase
visibility
Harris Technology Group Limited Annual Report 2018/19 | 3
Chairman and CEO Letter
Dear Shareholders,
Harris Technology Group Limited (the Company)
and its controlled entities (the Group) present its
results for the financial year ended 30 June 2019
(“FY19”).
Review and Results of Operations
A review of Harris Technology Group for the
FY 19 is contained in three parts:
1. Continuing Operations;
2. Discontinued Operations; and
3. Forward View
Continuing Operations
The Group’s continuing operations recorded
revenue of $9,003,268 with net
loss of
$732,036.
The mainstay to the current operations is
Harris Technology. The business is stable albeit
competing in a tough marketplace, with
ongoing pressure on margins. The Group has
turned attention on improving connectivity
with consumers and improving web page
design and the sale process.
Discontinued Operations
On the 2nd of October 2018 the company
announced completion of sale of operating
company Anyware Corporation Pty Ltd to
Leader Computers Pty Ltd. Certain business
assets and liabilities were transferred to Leader
along with transfer of employees.
Sales Revenue for Anyware for the 18/19 year
was $11,027,280. Loss from discontinued
operations was $1,470,613.
The sale to Leader Computers has allowed the
group to remove
leased warehouse
its
footprint Australia wide and reduce the
significant cost base associated with this
operation.
Forward View
During the course of the last financial year the
company announced interest in a USA located
“Amazon” distributor. The potential deal did
not eventuate
to market)
however the company remains optimistic that
other opportunities will present themselves
and are we are keeping a look out to expand
our business footprint.
(as disclosed
Despite having a strong understanding of the
M2C business opportunities that are available
in China our joint venture operations in Hong
Kong remain dormant with hesitation to
develop in current business environment.
During the course of the last financial year the
company made a repayment of borrowings of
$3,319,024,
to
banking and other like institutions (excluding
directors) repaid.
therefore all borrowings
The outlook for FY 20 allows the directors to
be confident that management can manage
the Harris Technology business on its smaller
footprint with positive cash
flow and
expectation that revenue can be grown.
Andrew Plympton
Non-Executive Chairman
Melbourne, 30 September 2019
Garrison Huang
Managing Director
Melbourne, 30 September 2019
Harris Technology Group Limited Annual Report 2018/19 | 4
FY19 Summary
Full year profit and loss summary
Revenue from continuing operations
Sales revenue
Other revenue
Total revenue
Total comprehensive (loss)/profit
FY19
($m)
9.00
0.17
9.17
(0.73)
FY18
($m)
11.51
0.10
11.61
(0.57)
Change
($m)
(2.51)
(0.07)
(2.58)
(0.16)
Revenue and Cost of Sales
1,200,000
1,000,000
800,000
600,000
400,000
200,000
-
July'18 Aug'18 Sep'18 Oct'18 Nov'18 Dec'18 Jan'19 Feb'19 Mar'19 Apr'19 May'19 Jun'19
Revenue
Cost of Sales
Harris Technology Group Limited Annual Report 2018/19 | 5
Full year profit and loss summary - underlying
Non-statutory financial results include:
Gross profit
Loss before income tax
Total comprehensive (loss) / profit
Operating costs
Direct costs
Other costs and expenses
Balance Sheet
Cash and cash equivalents
Inventories
Property, plant and equipment
Intangible assets
Net assets
FY19
($m)
1.00
(0.73)
(2.20)
(0.15)
(1.33)
(0.25)
FY18
($m)
0.99
(0.57)
(2.06)
(0.16)
(1.14)
(0.26)
Change
($m)
(0.01)
(0.16)
(0.14)
(0.01)
(0.19)
0.01
30 Jun 19
($m)
30 Jun 18
($m)
1.00
0.41
0.11
0.29
1.78
6.34
0.73
-
(5.06)
(2.92)
Cash position
Cash and cash equivalents of $1,008,416 at 30 June 2019
Based on the cash position at end of FY19 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 FY20.
Cash and cash equivalent for June 18 to June 19
2,000.00
1,500.00
1,000.00
500.00
-
Jun'18
Sep'18
Dec'18
Mar'19
Jun'19
Harris Technology Group Limited Annual Report 2018/19 | 6
Management 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
Harris Technology Group Limited Annual Report 2018/19 | 7
FY20 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
Harris Technology Group Limited Annual Report 2018/19 | 8
Corporate Information
Non-Executive Chairman
Executive Director & CEO
Non-Executive Director
Non-Executive Director
DIRECTORS
Mr Andrew Plympton
Mr Garrison Huang
Mr Bob Xu
Mr Howard Chen
COMPANY SECRETARY
Mr Brett Crowley
REGISTERED OFFICE
Unit 6, 94 Abbott Road
Hallam, Victoria 3803
Tel: 1300 13 99 99
AUDITORS
EXCHANGE LISTING
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne Victoria 3000
Harris Technology Group Limited’s ordinary
shares are quoted on the Australian Securities
Exchange (ASX: HT8)
BANKER
STATE OF INCORPORATION
Westpac
360 Collins Street
Melbourne Victoria 3000
Victoria
SHARE REGISTRY
Boardroom Pty Limited
Level 12, 225 George Street
Sydney New South Wales 2000
Tel: 1300 13 99 99
Harris Technology Group Limited Annual Report 2018/19 | 9
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
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 2019 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.
In addition, Mr Plympton has served as a non-executive director/
Chairman of 9 ASX listed companies over the last twenty years.
Mr Plympton has extensive experience in sport and administration of the
sector. He was a long term member of The Australian Olympic Committee,
President of AFL club St Kilda for 8 years and continues as the longest
serving director of The Australian Sports Commission (including The
Australian Institute of Sport).
Other directorships held by
Director in the last 3 years
In the public company sector, during the last three years Mr Plympton
has also served as a director of the listed companies XPD Soccer Gear
Limited (ASX: XPD) from 7 February 2015 to 3 August 2017.
Special responsibilities
Chair of the Board
Relevant interest 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.
Harris Technology Group Limited Annual Report 2018/19 | 10
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Garrison Huang, Executive Director
Mr Huang was appointed to the Board on 3 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 in Australia. Anyware is a well-established 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 Office works, one
of Australia’s longest established and leading e-commerce businesses
focusing on technology products.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Huang has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest in Harris
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, Non -Executive Director
Mr Xu was appointed to the Board on 7 March 2016 as a Non-Executive Director. Appointed
Executive Director on 19 July 2016. He was re-appointed as a Non-Executive Director on “31
December 2018”.
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 an 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.
Other directorships held by
Director in the last 3 years
During the last three years, Mr Xu has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest 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.
Harris Technology Group Limited Annual Report 2018/19 | 11
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
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
During the last three years, Mr Chen has not served as a director of any
other listed companies.
Special responsibilities
None.
Relevant interest in Harris
Technology Group securities as
at the date of this report
Mr Chen has a relevant interest in 2,502,301 fully paid ordinary shares in
Harris Technology Group Ltd which are held by an entity Mr Chen
controls and by Mr Chen personally.
Brett Crowley, Company Secretary
Mr Crowley was appointed as Company Secretary on December 2018.
Experience and expertise
Mr Crowley is a practicing solicitor and a former Partner of Ernst &
Young in Hong Kong and Australia, and of KPMG in Hong Kong. Mr
Crowley is an experienced chairman, finance director and company
secretary of ASX-listed companies, and is a former Senior Legal Member
of the NSW Civil and Administrative Tribunal. He has been HT8 Secretary
since December 2018.
Harris Technology Group Limited Annual Report 2018/19 | 12
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Directors’ Meeting
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. Howard Chen
8
8
8
8
8
8
8
8
Board Committees
Functions previously being undertaken by the Nomination and Remuneration Committee and the
Audit and Risk Management Committee are currently being 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. Howard Chen 4
160,000
80,110,489
8,638,903
2,502,301
nil
nil
nil
nil
1.
2.
3.
4.
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 H & J Investment Pty Ltd ATF H & J Superannuation Fund which Mr. Chen controls; and by Mr.
Chen personally.
Harris Technology Group Limited Annual Report 2018/19 | 13
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Earnings Per Share
Earnings Per Share
Basic and diluted earnings per share
Cents
(0.46)
Dividends Paid, Recommended and Declared
No dividends were paid, declared or recommended since the start of the financial year ended 30
June 2019 (2018: nil).
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 2019. The Company’s subsidiary entities are set out in note 26 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 areas of technology
distribution and online retailing. There was a significant change to the Group’s principal activities
during the year, which are detailed below in ‘significant changes in the state of affairs.
Employees
The Group has 14 employees, inclusive of casual and part-time staff as at 30 June 2019 (2018:
69). The Group does not have consulting agreements with any contractors as at 30 June 2019 (2018:
Nil).
Group Performance over the five-year period
Basic earnings/(loss) per share (cents)
(0.46)
(1.46)
(2.20)
(1.08)
(0.47)
2019
2018
2017
2016
2015
Harris Technology Group Limited Annual Report 2018/19 | 14
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Financial position
The Group had net liabilities of $5,063,008 as at 30 June 2019 (2018: $2,919,908 net liabilities).
The Group had trade and other receivables of $347,965 as at 30 June 2019 (2018: $4,719,693).
The Group had trade and other payables of $2,068,926 as at 30 June 2019 (2018: $7,906,974).
Cash flows
The Group generated net cash outflows of $775,090 during the year ended 30 June 2019 (2018: net
cash outflows $435,758). Sales of Anyware Corporation net cash inflows were $3,416,084 and
repayments of Borrowings $3,319,024 in the year ended 30 June 2019.
There was a cash balance at 30 June 2019 of $1,008,416 (2018: $1,783,506).
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. In FY16 the
Company established an Audit and Risk Management Committee to oversee this audit and risk
management function of the Board. Following changes to the composition of the Board, the Audit
and Risk Management Committee has been suspended and its functions carried out by the Board as
a whole.
Significant changes in the state of affairs
The following significant changes in the state of affairs of the Group occurred during the financial
year:
Appointments and resignations of officeholders
Nil
Change of auditor
There is no change of auditor during the financial year.
Significant events after the balance date
No matter or circumstance has arisen since 30 June 2019 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.
Harris Technology Group Limited Annual Report 2018/19 | 15
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Environmental regulation
The Group’s operations are not subject to any significant Commonwealth or State environmental
regulations or laws.
Shares issued during the year
652,715 shares were issued in lieu of a Director's accrued and outstanding fees of $30,000.
350,000 shares were issued upon vesting of performance rights that were issued to employees under
the Company's Long-Term Incentive plan.
The Company issued 30,000,000 ordinary shares were issued to First Growth Funds Limited.
Share options (listed and unlisted)
As per ASX announcements, there were nil unlisted options under the Company’s Long-Term
Incentive Plan (LTIP) on issue.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where there
is a lack of good faith.
During the financial year, the company has not paid a premium in respect of a contract to insure the
auditor of the company or any related entity.
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 Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of the company, or to intervene in any proceedings to which the
company is a party for the purpose of taking responsibility on behalf of the company for all or part
of those proceedings.
Harris Technology Group Limited Annual Report 2018/19 | 16
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Audited)
This Remuneration Report for the year ended 30 June 2019 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 the Company’s 2016 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
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 directors
Mr Garrison Huang*
Director (executive)
(ii) Non-executive directors (NEDs)
Mr Andrew Plympton***
Chairman (non-executive)
Mr Bob Xu**
Director (non-executive)
Mr Howard Chen****
Director (non-executive)
(iii) Executive
*Garrison Huang appointed Executive Director and CEO on 19 July 2016.
**Bob Xu re-appointed as Non-Executive Director on 31st December 2018.
***Andrew Plympton temporarily appointed Executive Director on 11 March 2016, resumed regular duties as
Non-Executive Chairman on 19 July 2016.
****Howard Chen appointed Non-Executive Director on 19 July 2016.
Harris Technology Group Limited Annual Report 2018/19 | 17
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
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 Committee 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. Following changes to the structure of the Board, the
Nomination and Remuneration Committee has been suspended and its functions are currently being
performed by the entire Board.
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 salaries & fees, superannuation contributions and
shares where applicable.
Harris Technology Group Limited Annual Report 2018/19 | 18
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
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.
5.
Additional Information
The earnings of the group for the five years to 30 June 2019 are summarised below:
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
Total sales revenue
20,031
45,657
51,069
17,790
18,454
Less: Discontinued operations
11,028
34,144
-
-
-
Sales revenue
9,003
11,513
51,069
17,790
18,454
EBITDA
EBIT
Loss after income tax
(646)
(717)
(732)
(530)
(443)
(567)
782
(5,967)
(2,044)
(2,466)
(6,373)
(2,437)
(3,061)
(6,510)
(2,481)
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
2019
2018
2017
2016
2015
Share price at financial year end ($)
0.012
0.038
0.08
0.10
0.35
Total dividends declared (cents per
share)
Basic earnings per share (cents per
share)
-
-
-
-
-
(0.46)
(1.46)
(2.20)
(1.08)
(0.47)
Harris Technology Group Limited Annual Report 2018/19 | 19
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
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 %
Executive
Directors
Salary & fees
$
Cash
bonus
$
Superannuation
$
Options
$
Mr Garrison
Huang 1
2019
2018
13,963
35,166
Non-
Executive
Directors
Mr Bob Xu 2
2019
Mr Andrew
Plympton 3
Mr Howard
Chen 4
Other Key
Management
Personnel
Mr Brett
Crowley 5
Total KMP
2018
2019
2018
2019
2018
2019
2018
2019
2018
43,918
83,837
32,000
35,200
-
-
9,000
-
98,881
154,203
-
-
-
-
-
-
-
-
-
-
-
-
-
3,341
-
1,695
-
-
-
-
-
-
-
5,036
-
-
-
-
-
-
-
-
-
-
-
-
Shares
$
-
-
-
-
-
-
13,963
38,507
43,918
85,532
32,000
35,200
30,000
30,000
-
-
-
-
9,000
-
30,000
128,881
-
159,239
-
-
-
-
-
-
-
-
-
-
-
1.
2.
3.
4.
5.
Garrison Huang appointed Executive Director and CEO on 19 July 2016.
Bob Xu Re-appointed Non-Executive Director on 31st December 2018.
Andrew Plympton resumed his role as Non-Executive Chairman on 19 July 2016, after acting as Executive Chairman from 11 March
2016 to 18 July 2016.
Howard Chen appointed Non-Executive Director on 19 July 2016.
Brett Crowley appointed Company Secretary in December 2018
Harris Technology Group Limited Annual Report 2018/19 | 20
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
7.
a.
Additional disclosures relating to options and shares
Performance rights holdings of key management personnel
As at the end of FY19 there were zero options granted to KMP under the LTIP. No further options
have been granted.
Shares issued on exercise of options.
There were no shares issued to KMP during the year upon the exercise of options.
b.
Shareholdings of key management personnel
Acquired
during the
year pre-
consolidation
Post-
consolidat
ion
balance
Balance at
1 July 2018
Acquired/(dis
-posed)
during the
year post-
consolidation
Other
movements
No.
No.
No.
No.
Executive Directors
Mr Garrison Huang 1
80,110,489
Non-Executive
Directors
Mr Andrew Plympton 3
160,000
Mr Howard Chen 4
1,849,586
Mr Bob Xu 2
8,638,903
-
-
-
-
-
-
-
-
-
-
652,715
-
-
-
-
-
Balance at
30 June
2019
No.
80,110,489
160,000
2,502,301
8,638,903
1. The shares are held by Australian PC Accessories Pty Ltd ATF GWH A/C; Mr Huang controls this entity.
2. The shares are held by Aza International (Aud) Pty Ltd ; Mr Xu controls this entity.
3. The shares are held by Mr Andrew J Plympton & Mrs Kim P Plympton ; Mr Plympton
controls this entity.
4. The shares are held by Mr Chen personally and by H & J Investment Pty Ltd ; Mr Chen controls
this entity.
Harris Technology Group Limited Annual Report 2018/19 | 21
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation
during the year ended 30 June 2019 are set out below:
Date
Shares
Issue price
$
-
-
-
-
-
-
-
-
21/11/18
652,715
0.045
30,000
-
-
-
-
Executive Directors
Mr Garrison Huang 1
Non-Executive
Directors
Mr Andrew Plympton 3
Mr Howard Chen 4
Mr Bob Xu 2
Options
As per ASX announcements, there were nil unlisted options under the Company’s Long-Term
Incentive Plan (LTIP) on issue for key management personnel.
c. Loans from key management personnel and their related parties
Details of loans from directors of Harris Technology Group Limited and other key management
personnel of the group , including their close family members and entities related to them, are set
out below:
($)
2019
2018
Name of director Entity/Shareholder
Garrison Huang
Australian PC Accessories Pty Ltd
3,726,552
3,968,686
Bob Xu
AZA International (Aust) Pty Ltd
-
120,000
3,726,552
4,088,686
The payments of principal and interest on all directors’ loans have been deferred for a period through
to the 1st July 2021. The interest rate charged is 5.5% for loans of $2,008,305 and 12% the for loan of
$300,000. In addition, there are interest free loans to the value of $1,418,247.
Harris Technology Group Limited Annual Report 2018/19 | 22
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
d. Other transactions and balances with key management personnel and their related parties
All transactions were made on normal commercial terms and conditions and at market rates unless
otherwise stated.
Purchases from entities controlled by KMP and their related parties
Rental of office and warehouse buildings 1
Inventories 2
Management services 3
Interest expense on directors’ loans 4
Directors’ Salaries
Gain on Debt Forgiveness 4
Total related party purchases
Sales to entities controlled by KMP and their related parties
Inventories 2
Management services 3
Total related party sales
2019
$
2018
$
250,200
665,262
188,317
1,453,471
-
-
44,355
113,061
89,881
-
(165,685)
(115,620)
362,713
2,160,529
284,981
553,619
-
42,000
284,981
595,619
1. Rental to Garrison Huang and his controlling entity was $250,200 in FY19 (2018: $601,873); Rental to Bob
2.
Xu’s controlling entity was NIL in FY19 (2018: $63,339).
Inventories purchased from Bob Xu’s controlling entity were $80,290 in FY19 (2018: $567,412); Inventories
purchased from Howard Chen’s controlling entity were $108,026 in FY19 (2018: $886,058); Inventories
purchased from Anyware New Zealand Pty Ltd were $Nil in FY19 (2018:$Nil). Inventories sold to Anyware
New Zealand Pty Ltd were $218,307 in FY19 (2018: $553,619). Inventories sold to Bob Xu’s Controlling entity
in FY19 were $17,512 (FY18: $Nil), Inventories sold to Howard Chen’s controlling entity in FY19 were $49,162
(FY18: $Nil).
3. Management service fee charged by Bob Xu were $Nil in FY19 (2018: $44,355). Management service fee
charged to Anyware New Zealand Pty Ltd were $Nil in FY19 (2018: $42,000).
4. The Group accrued $165,685 interest expense in FY18 for loans from Garrison Huang. Garrison Huang
provided the Group with a debt forgiveness of $165,685 in FY19 for unpaid interest on loans.
Harris Technology Group Limited Annual Report 2018/19 | 23
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Remuneration Report (Cont.) (Audited)
($)
2019
2018
Current payables to entities controlled by KMP
Trade payables – Inventories
-
545,050
Current receivables from entities controlled by KMP
Trade receivables – Inventories
4,280
294,024
For the period up to the 31 August 2018, the following arm’s length transactions took place:
Anyware purchases inventories from AZA International Pty Ltd for its ordinary business activities at
arm’s length.
Anyware entered in lease agreements with Garrison Huang and his controlling entity for office and
warehouse buildings at Dandenong South, VIC, Banyo, QLD, Findon, WA. The leases are for a period
of 8 years commencing on 1 July 2012 which will end in October’2019.
Anyware purchases inventories from AZA International Pty Ltd for its ordinary business activities at
arm’s length.
Anyware purchases inventories from Ultra Imagination Pty Ltd whose director is Howard Chen for its
ordinary business activities at arm’s length.
Anyware purchases or/and sales inventories from/to Anyware New Zealand Pty Ltd whose director
is Garrison Huang for its ordinary business activities at a discounted gross margin between 8-10%.
The discount provided was approximately $20,000.
Anyware New Zealand pays management fees for operational services provided by Anyware in
purchasing, marketing, IT and management service provided by Anyware’s management team.
Post 31 August 2018, all such transactions have ceased due to the sale of the sale of Anyware
Corporation Pty Ltd ('Anyware') to Leader Computers Pty Ltd ('Leader').
This concludes the remuneration report, which has been audited.
Harris Technology Group Limited Annual Report 2018/19 | 24
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Tax consolidation
Harris Technology Group and its 100% owned subsidiaries are part of an income tax consolidated
group.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the
financial year by the auditor are outlined in note 26 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the
auditor (or by another person or firm on the auditor's behalf), is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 26 to the financial statements
do not compromise the external auditor's independence requirements of the Corporations Act
2001 for the following reasons:
●
●
all non-audit services have been reviewed and approved to ensure that they do not
impact the integrity and objectivity of the auditor; and
none of the services undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants
issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-
making capacity for the company, acting as advocate for the company or jointly
sharing economic risks and rewards.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been
rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Harris Technology Group Limited Annual Report 2018/19 | 25
Directors’ Report
(FOR THE YEAR ENDED 30 JUNE 2019)
Auditor’s independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations
Act 2001 is set out immediately after this directors' report.
Signed in accordance with a resolution of the Directors
Andrew Plympton
Non-Executive Chairman
Melbourne, 30 September 2019
Harris Technology Group Limited Annual Report 2018/19 | 26
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
2019, 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
Dated: 30 September 2019
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
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
27
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).
Harris Technology Group Limited Annual Report 2018/19 | 28
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
(FOR THE YEAR ENDED 30 JUNE 2019)
($)
Revenue
Sales revenue
Direct costs
Gross profit
Other income
Distribution expenses
Marketing expenses
Transaction expenses
Employee contractor and director expenses
Occupancy costs
Technology expenses
Holding company expenses
Depreciation and amortisation expenses
Impairment expenses
Other expenses
Finance costs
Exchange gain / (loss)
(Loss) / Profit before income tax
Income tax benefit / (expense)
(Loss) / Profit from continuing operations
Discontinued operations
Notes
2019
2018
7
7
8
8
8
8
9
5
9,003,268
11,513,394
(8,007,879)
(10,525,789)
995,389
169,346
(120,808)
(106,217)
(87,798)
(858,094)
(163,790)
(113,505)
(194,384)
(20,588)
(64,961)
(149,823)
(14,741)
(2,062)
987,605
102,027
(83,332)
(81,531)
(92,533)
(785,048)
(92,708)
(69,046)
(192,385)
(36,000)
-
(100,172)
(123,877)
34
(732,036)
(566,966)
-
-
(732,036)
(566,966)
(1,470,613)
(1,495,098)
Total comprehensive (loss) / profit for the period
(2,202,649)
(2,062,064)
Earnings per share from continuing operations (cents)
- Basic earnings / (loss) per share
- Diluted earnings / (loss) per share
10
10
(1.40)
(1.40)
(1.46)
(1.46)
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2018/19 | 29
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(AS AT 30 JUNE 2019)
($)
Notes
2019
2018
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments and deposits
Total Current Assets
Non-current Assets
Intangible assets
Property, plant and equipment
Total Non-current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liability
Employee benefit liabilities
Total Current Liabilities
Non-current Liabilities
Financial liability
Employee benefit liabilities
Total Non-current Liabilities
Total Liabilities
Net Assets / (Net Deficiency of Assets)
Equity
Contributed equity
Accumulated losses
Total Equity
11
12
13
14
15
16
17
18
19
18
19
20
21
1,008,416
347,965
405,123
34,727
1,783,506
4,719,693
6,341,556
151,679
1,796,231
12,996,434
291,867
109,744
401,611
-
732,838
732,838
2,197,842
13,729,272
2,068,926
1,408,472
53,578
3,530,976
3,726,553
3,321
3,729,874
7,906,974
4,097,840
465,420
12,470,234
4,158,499
20,447
4,178,946
7,260,850
16,649,180
(5,063,008)
(2,919,908)
7,654,464
7,594,915
(12,717,472)
(10,514,823)
(5,063,008)
(2,919,908)
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2018/19 | 30
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(FOR THE YEAR ENDED 30 JUNE 2019)
($)
At 1 July 2018
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Share based payments
At 30 June 2019
($)
At 1 July 2017
Loss for the period
Other comprehensive income
Total comprehensive income
Transactions with owners in their capacity as owners
Prior Period Adjustments / Placement issued
Share issued on reverse acquisition
Placement issued
At 30 June 2018
The accompanying notes form part of these financial statements.
Share Capital
Accumulated
Losses
Total Equity
7,594,915
(10,514,823)
(2,919,908)
-
-
-
(2,202,649)
(2,202,649)
-
-
(2,202,649)
(2,202,649)
59,549
-
59,549
7,654,464
(12,717,472)
(5,063,008)
Share Capital
Accumulated
Losses
Total Equity
6,706,411
(8,335,930)
(1,629,519)
-
-
-
-
(2,062,064)
(2,062,064)
-
-
(2,062,064)
(2,062,064)
(116,829)
(116,829)
146,299
742,205
146,299
-
742,205
7,594,915
(10,514,823)
(2,919,908)
Harris Technology Group Limited Annual Report 2018/19 | 31
CONSOLIDATED STATEMENT OF CASH FLOWS
(FOR THE YEAR ENDED 30 JUNE 2019)
($)
Notes
2019
2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
24,034,412
51,602,289
(24,923,562)
(52,430,828)
Net cash flows (used in) / provided by operating activities
11
(889,150)
(828,539)
Cash flows from investing activities
Disposal of business, net of cash consideration
5d
Payments for property, plant and equipment
Net cash flows (used in) / provided by investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
3,416,084
17,000
3,433,084
-
1,540
1,540
-
1,942,337
(3,319,024)
(1,551,096)
Net cash flows (used in) / provided by financing activities
(3,319,024)
391,241
Net increase / (decrease) in cash and cash equivalents
(775,090)
(435,758)
Cash and cash equivalents at the beginning of the financial year
1,783,506
2,219,264
Cash and cash equivalents at the end of the financial year
11
1,008,416
1,783,506
The accompanying notes form part of these financial statements.
Harris Technology Group Limited Annual Report 2018/19 | 32
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
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 2019 was
authorised for issue in accordance with a resolution of the Directors on 30 September 2019.
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)
Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.
New or amended Accounting Standards and Interpretations adopted
The group has adopted all of the new or amended Accounting Standards and Interpretations issued
by the Australian Accounting Standard Board (“AASB”) that are mandatory for the current reporting
period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not
been early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The group has adopted AASB 9 from 1 July 2018. The standard introduced new classification and
measurement models for financial assets. A financial asset shall be measured at amortised cost if it
is held within a business model whose objective is to hold assets in order to collect contractual cash
flows which arise on specified dates and that are solely principal and interest. A debt investment
shall be measured at fair value through other comprehensive income if it is held within a business
model whose objective is to both hold assets in order to collect contractual cash flows which arise
on specified dates that are solely principal and interest as well as selling the asset on the basis of its
fair value. All other financial assets are classified and measured at fair value through profit or loss
unless the entity makes an irrevocable election on initial recognised to present gains and losses on
equity instruments (that are not held-for-trading or contingent consideration recognised in a
business combination) in other comprehensive income (OCI). Despite these requirements, a financial
asset may be irrevocably designated as measured at fair value through profit or loss to reduce the
effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value
through profit or loss, the standard requires the portion of the change in fair value that relates to the
entity’s own credit risk to be presented in OCI (unless it would create an accounting mismatch).
Harris Technology Group Limited Annual Report 2018/19 | 33
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
AASB 9 Financial Instruments (Cont.)
New simpler hedge accounting requirements are intended to more closely align the accounting
treatment with the risk management activities of the entity. New impairment requirements use an
‘expected credit loss’ (‘ECL’) model to recognise an allowance. Impairment is measured using a 12-
month ECL method unless the credit risk on financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. For receivables, a simplified
approach to measuring expected credit losses using a lifetime expected loss allowance is available.
AASB 15 Revenue from Contracts with Customers
The group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive
model for revenue recognition. The core principal of the standard is that an entity shall recognise
revenue to depict the transfer of promised goods or services to customers at an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services.
The standard introduced a new contract-based revenue recognition model with a measurement
approach that is based on an allocation of the transaction price. This is described further in the
accounting policies below. Credit risk is presented separately as an expense rather than adjusted
against revenue. Contracts with customers are presented in an entity’s statement of financial position
as a contract liability, a contract asset, or a receivable, depending on the relationship between the
entity’s performance and the customer’s payment. Customer acquisition costs and costs to fulfil a
contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract
period.
Impact of adoption
AASB 9 and AASB 15 were adopted using the modified retrospective approach and as such
comparatives have not been restated. There was no impact of the adoption on opening retained
earnings as at 1 July 2018.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but
are not yet mandatory, have not been early adopted by the group for the annual reporting period
ended 30 June 2019. The consolidated entity's assessment of the impact of these new or amended
Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out
below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The
standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating
leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the
statement of financial position, measured at the present value of the unavoidable future lease
payments to be made over the lease term.
Harris Technology Group Limited Annual Report 2018/19 | 34
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
New Accounting Standards and Interpretations not yet mandatory or early adopted (Cont.)
The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such
as personal computers and small office furniture) where an accounting policy choice exists whereby
either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future
restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be
replaced with a depreciation charge for the leased asset (included in operating costs) and an interest
expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease,
the expenses associated with the lease under AASB 16 will be higher when compared to lease
expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and
depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the
lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) component. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases. The group will adopt this standard from 1 July
2019 and its impact on adoption is not expected to have a material impact and the lease commitment
outlined on note 23 with a value of $181,500 will be recorded as an asset and liability in the statement
of financial position.
Discontinued operations
A discontinued operation is a component of the group that has been disposed of or is classified as
held for sale and that represents a separate major line of business or geographical area of operations,
is part of a single co-ordinated plan to dispose of a line of business or area of operation, or is a
subsidiary acquired exclusively with a view to resale. The results of discontinued operations are
presented separately on the face of the statement of profit or loss and other comprehensive income.
(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.
Harris Technology Group Limited Annual Report 2018/19 | 35
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(c)
Going concern
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 group incurred a loss of
$2,202,649 (2018: $2,062,064 loss) and had net cash outflows from operating activities of $889,150
(2018: $828,539 outflows) for the year ended 30 June 2019. As at that date the group had net current
liabilities of $1,734,745 (2018: $526,200 net current assets) net liabilities of $5,063,008 (2018:
$2,919,908 net liabilities).
The Directors believe that there are reasonable grounds to believe that the group will be able to
continue as a going concern, after consideration of the following factors:
The group has prepared budgets and cash flow forecasts for the next 12 months from the
date of this report which indicate the group will have a positive cash balance during this
period;
The group expects to attain profitability by completing its cost saving measures after the sale
of the Anyware business and utilising growth opportunities from its other operations in the
next year;
The Directors with loans to the consolidated entity, equating to $3,726,552 of debt as at 30
June 2019, have provided commitments of financial support and irrevocably deferred
monthly payments of principal and interest on loans for a period through to 1 July 2020 , or
sooner if the group has the capacity to repay these loans without impacting the ongoing
viability of the consolidated entity; and
The Directors are negotiating with an external loan holder to extend the repayment terms of
a $1,000,000 loan, as disclosed in Note 18 Financial Liability, and are confident that the loan
extension will be successful.
Accordingly, the Directors believe that the group 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 group does not continue as a going
concern.
In the event that results are not achieved as forecast, or the $1,000,000 loan extension is not
successful, and should additional funding not be available from Directors, shareholders or new
investors to meet working capital requirements, there would be a material uncertainty as to whether
the group would 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.
Harris Technology Group Limited Annual Report 2018/19 | 36
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(d)
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2019. 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
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
Harris Technology Group Limited Annual Report 2018/19 | 37
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(e)
Revenue recognition
The group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the group is expected
to be entitled in exchange for transferring goods or services to a customer. For each contract with a
customer, the consolidated entity: identifies the contract with a customer; identifies the performance
obligations in the contract; determines the transaction price which takes into account estimates of
variable consideration and the time value of money; allocates the transaction price to the separate
performance obligations on the basis of the relative stand-alone selling price of each distinct good
or service to be delivered; and recognises revenue when or as each performance obligation is
satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the
customer such as discounts, rebates and refunds, any potential bonuses receivable from the
customer and any other contingent events. Such estimates are determined using either the 'expected
value' or 'most likely amount' method. The measurement of variable consideration is subject to a
constraining principle whereby revenue will only be recognised to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue recognised will not occur. The
measurement constraint continues until the uncertainty associated with the variable consideration is
subsequently resolved. Amounts received that are subject to the constraining principle are
recognised as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control
of the goods, which is generally at the time of delivery.
Rendering of services
Revenue from a contract to provide services is recognised over time as the services are rendered
based on either a fixed price or an hourly rate.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a
method of calculating the amortised cost of a financial asset and allocating the interest income over
the relevant period using the effective interest rate, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Harris Technology Group Limited Annual Report 2018/19 | 38
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
(f)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 of profit
or loss.
g)
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.
Harris Technology Group Limited Annual Report 2018/19 | 39
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
g)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Income tax and other taxes (Cont.)
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.
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.
Harris Technology Group Limited Annual Report 2018/19 | 40
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(h)
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.
(i)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any allowance for expected credit losses. Trade receivables
are generally due for settlement within 30 days.
The group has applied the simplified approach to measuring expected credit losses, which uses a
lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been
grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
(j)
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.
Harris Technology Group Limited Annual Report 2018/19 | 41
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(k)
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 impairment losses. Internally generated intangibles, excluding capitalised development
costs, are not capitalised and the related expenditure is reflected profit or loss in the period which
the expenditure is incurred.
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
2 years
Impairment of other intangible assets
Other intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate
that they might be impaired. Other intangible assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The
value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-
tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that
do not have independent cash flows are grouped together to form a cash-generating unit.
Harris Technology Group Limited Annual Report 2018/19 | 42
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
(l)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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:
Motor vehicles
5 - 6 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.
(m)
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 recognised as an expense
on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance,
are expensed as incurred.
(n)
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 or
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.
Harris Technology Group Limited Annual Report 2018/19 | 43
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(o)
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.
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.
(p)
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.
(q)
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.
(r)
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.
Harris Technology Group Limited Annual Report 2018/19 | 44
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
(s)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 group 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.
Harris Technology Group Limited Annual Report 2018/19 | 45
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
(t)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
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 expect future wage and salary levels,
experience of employee departures, and periods of service. Expected future payments are discounted
using market yields at the reporting date on 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.
(u)
Comparatives
Where necessary, comparative information has been reclassified and repositioned for consistency
with current year disclosures.
(v)
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 employee 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.
Harris Technology Group Limited Annual Report 2018/19 | 46
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
(w)
Share based payments (Cont.)
Equity settled transactions
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.
Harris Technology Group Limited Annual Report 2018/19 | 47
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
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, currency 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. Derivative financial instruments are used by the
Group to hedge exposure to exchange rate risk associated with foreign currency transactions. 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, hedging limits, credit allowances and future cash flow forecast projections.
Risk exposures and responses
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
debt obligations with the floating interest rate. At reporting date, the Group had the following
financial instruments exposed to Australian variable interest rate risk.
2019
$
2018
$
Financial assets
Cash and cash equivalents (interest bearing)
778,808
600,215
Financial liabilities
Interest bearing liabilities – floating rate (current)
-
(2,985,481)
Interest bearing liabilities – fixed rate (current)
(1,408,472)
(1,112,389)
Interest bearing liabilities – fixed rate (non-current)
(3,726,553)
(4,158,500)
Net exposure
(4,356,217)
(7,656,155)
Harris Technology Group Limited Annual Report 2018/19 | 48
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
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:
At 30 June 2019, 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)
2019
2018
2019
2018
Consolidated
+1% (100 basis points)
(43,562)
(76,562)
(43,562)
(76,562)
- 1% (100 basis points)
43,562
76,562
43,562
76,562
The movements in post-tax profit / (loss) and other comprehensive income are due to a larger net
exposure as at 30 June 2019. The sensitivity is lower in 2019 than in 2018 as a result of this decreased
net exposure.
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.
The maximum exposure to credit risk at the reporting date to recognised financial assets is the
carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement
of financial position and notes to the financial statements. The group has adopted a lifetime expected
loss allowance in estimating expected credit losses to trade receivables through the use of a
provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the group based on recent sales experience, historical
collection rates and forward-looking information that is available.
Harris Technology Group Limited Annual Report 2018/19 | 49
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
Foreign currency risk
The Group’s transactions are carried out mainly in AUD and USD. The Group enters into forward
exchange contracts to buy specified amounts of foreign currencies in the future at stipulated rates.
The objective in entering into the foreign exchange contracts is to protect the economic entity
against unfavourable exchange rate movements for the purchases undertaken in foreign currencies.
The Group’s risk management policy is to hedge between 25% and 50% of anticipated cash flows
(purchase of inventory) in US Dollars for the subsequent 12 months.
The Group’s exposure to foreign currency risk at the end of reporting period, expressed in Australian
dollars, was as follows:
Forward/Option exchange contracts
Buy US dollars
2019
$
-
-
2018
$
1,861,470
1,861,470
The carry amount of the Group’s foreign currency denominated financial assets and financial
liabilities at reporting date, expressed in Australian dollars, were as follows:
Financial assets
Cash - US dollars
Financial liabilities
Loans - US dollars
Net exposure
2019
$
2018
$
3,314
54
-
(62,500)
3,314
(62,446)
Harris Technology Group Limited Annual Report 2018/19 | 50
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
Foreign currency risk
At 30 June 2019, had the Australian dollar moved, with all other variables held constant, pre-tax profit
/ (loss) would have been affected as follows:
Consolidated
+5% (500 basis points)
- 5% (500 basis points)
Pre Tax Profit/(Loss) ($)
Higher / (Lower)
2019
2018
165
(165)
3,122
(3,122)
The percentage change is the expected overall volatility of the significant currency, which is based
on management’s assessment of reasonable possible fluctuations taking into consideration
movements over the last 6 months each year and the spot rate at each reporting date. The actual
foreign exchange loss for the year ended 30 June 2019 was $2,062 (2018: foreign exchange gain
$34).
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through
the use of private equity facility and equity raisings.
At 30 June 2019, 48.63% of the Group’s financial liabilities will mature in less than one year (2018:
74.90%).
The table below reflects all contractually fixed payables and receivables for settlement, repayments
and interest resulting from recognised financial assets and liabilities. The respective undiscounted
cash flows for the respective upcoming fiscal periods are presented. Cash flows for financial assets
and liabilities without fixed amount or timing are based on the conditions existing at 30 June 2019.
Harris Technology Group Limited Annual Report 2018/19 | 51
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
The remaining contractual maturities of the Group’s financial assets and liabilities are:
Year ended 30 June 2019
($)
Financial assets
< 1 year
1-2 years
2-5 years
> 5 years
Total
Cash and cash equivalents
1,008,416
Trade and other receivables
347,965
1,356,381
Financial liabilities
Trade and other payables
2,068,926
Loan and interest payable
1,408,472
-
-
-
-
-
Directors’ loans*
-
3,726,553
Net maturity
(2,121,017)
(3,726,553)
(3,477,398)
(3,726,553)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,008,416
347,965
1,356,381
2,068,926
1,408,472
3,726,553
(7,203,951)
(5,847,570)
*The repayments of directors’ loans have been irrevocably deferred for a period through to 1st July 2021
Year ended 30 June 2018
($)
Financial assets
< 1 year
1-2 years
2-5 years
> 5 years
Total
Cash and cash equivalents
1,783,506
Trade and other receivables
4,719,693
6,503,199
Financial liabilities
Trade and other payables
7,906,974
-
-
-
-
Loan and interest payable
4,097,840
69,813
Directors’ loans
-
4,088,686
(12,004,814)
(4,158,499)
Net maturity
(5,501,615)
(4,158,499)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,783,506
4,719,693
6,503,199
7,906,974
4,167,653
4,088,686
(16,163,313)
(9,660,114)
Harris Technology Group Limited Annual Report 2018/19 | 52
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
3.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
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 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.
Harris Technology Group Limited Annual Report 2018/19 | 53
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
4.
SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT.)
Provision for impairment of inventories
The provision for impairment of inventories assessment requires a degree of estimation and
judgement. The level of the provision is assessed by taking into account the recent sales experience,
the ageing of inventories and other factors that affect inventory obsolescence.
Allowances for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement.
It is based on the lifetime expected credit loss, group based on days overdue, and makes assumptions
to allocate an overall expected credit loss rate for each group. These assumptions include recent
sales experience and historical collection rates.
5.
DISCONTINUED OPERATION
On 31 August 2018, the company announced that it signed a Business Asset Purchase Agreement to
sell Anyware Corporation Pty Ltd ('Anyware') to Leader Computers Pty Ltd ('Leader'). The sale was
completed on 2 October 2018 with employees and certain business assets and liabilities transferred
to Leader. The consideration received from the sale was the carrying value of the business assets
and liabilities and $200,000. The residual assets of Anyware not sold to Leader, which consist
primarily of inventory, have been impaired and will be sold under the brand name APCA in the normal
course of business.
(a) Financial Performance ($)
2019
2018
Sales revenue
Direct costs
Impairment expenses
Depreciation and amortisation expenses
Employee expenses
Finance costs
Other expenses
Gain on sale of the business
11,027,280
34,143,510
(10,513,610)
(28,898,237)
(499,954)
(39,711)
(487,602)
-
(1,157,016)
200,000
-
(96,560)
(3,975,250)
(252,783)
(2,415,777)
-
Loss from discontinued operation
(1,470,613)
(1,495,098)
Harris Technology Group Limited Annual Report 2018/19 | 54
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
5.
DISCONTINUED OPERATION (CONT.)
(b) Cashflow information – ($)
2019
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
(404,913)
3,663,702
(4,323,066)
2018
(1,010,511)
1,100
1.278,457
Net decrease in cash and cash equivalents from
discontinued operations
(1,064,277)
(269,046)
(c) Carrying amounts of assets and liabilities disposed ($)
2019
2018
Trade and other receivables
Inventories
Trade and other payables
Employee benefit liabilities
Net assets
382,693
3,482,067
(431,273)
(217,316)
3,216,171
-
-
-
-
-
(d) Details of the sale of business ($)
2019
2018
Total disposal consideration
Carrying amount of net assets sold
Gain on sale before income tax
3,416,084
(3,216,084)
200,000
-
-
-
Harris Technology Group Limited Annual Report 2018/19 | 55
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
6.
PARENT ENTITY INFORMATION
Information relating to Harris Technology Group Ltd – Parent ($)
Current assets
Non-Current Asset
Total assets
Current liabilities
Non-Current Liabilities
Total liabilities
Net liabilities
Issued capital
Accumulated losses
Share based payments reserve
Total shareholders’ equity
Profit / (loss) after tax of the parent entity
2019
1,305
2018
7,272
-
1,670,705
1,305
1,677,977
(1,315,488)
(3,360,489)
(300,000)
(300,000))
(1,615,488)
(3,660,489)
(1,614,183)
(1,982,512)
8,899,293
8,839,744
(10,513,476)
(10,822,256)
-
-
(1,614,183)
(1,982,512)
308,780
(10,325,611)
Total comprehensive Profit / ( loss) of the parent entity
308,780
(10,325,611)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which
each company guarantees the debts of the others. No deficiencies of assets exist in any of these
subsidiaries.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019
and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as
disclosed in note 2, except for the following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and
its receipt may be an indicator of an impairment of the investment.
Harris Technology Group Limited Annual Report 2018/19 | 56
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
7.
REVENUE
($)
Revenue from operating activities
Sale of goods
Total sales revenue
($)
Other income
Sundry Income
Gain on debt forgiveness
2019
2018
9,003,268
11,513,394
9,003,268
11,513,394
2019
2018
13,416
106
135,653
100,821
Loss on the disposal of non-current asset
(15,223)
1,100
Gain on sale of business
Total other income
8.
EXPENSES
($)
Other expenses
Allowance for expected credit losses
Sundry expenses
Total other expenses
Depreciation
Plant, office and computer equipment
Total depreciation
Amortisation
Software development
Total amortisation
Impairment expense
Intangible assets
Total impairment expense
Finance costs
Interest expense – overseas
Total finance costs
35,500
-
169,346
102,027
2019
2018
108,576
41,247
149,823
20,588
20,588
-
-
64,.961
64,961
14,741
14,741
42,553
57,619
101,172
13,942
13,942
22,058
22,028
-
-
123,877
123,887
Harris Technology Group Limited Annual Report 2018/19 | 57
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
9.
INCOME TAX
Current tax
Deferred tax
Income tax (expense) / benefit
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:
2019
2018
$
-
-
-
$
-
-
-
Loss before income tax expense from continuing operations
(732,036)
(566,966)
Loss before income tax expense from discontinued
operations
(1,470,614)
(1,495,098)
(2,202,650)
(2,062,064)
At the Group’s statutory income tax rate of 30% (2018: 30%)
(660,795)
(618,619)
Tax effect amounts which are not deductible / (taxable) in
calculating taxable income:
Impairment expense
Deferred tax assets not recognised
Income tax (expense) / benefit
19,488
641,307
-
-
618,619
-
Unused tax losses for which no deferred tax asset has
been recognised
4,383,668
3,742,361
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 group 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.
Harris Technology Group Limited Annual Report 2018/19 | 58
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
9.
INCOME TAX (Cont.)
Unrecognised temporary differences
At 30 June 2019 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 2019 (2018: nil).
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)
Continuing operations
Discontinued operation
Basic and diluted (loss)/earnings per share from total
comprehensive income
2019
2018
(0.46)
(0.94)
(0.40)
(1.06)
(1.40)
(1.46)
Total comprehensive (loss)/profit for the year ($)
(2,202,649)
(2,062,064)
Weighted average number of ordinary shares used in calculating basic
earnings per share
157,652,586
140,811,756
Weighted average number of ordinary shares used in calculating diluted
earnings per share
157,652,586
140,811,756
Harris Technology Group Limited Annual Report 2018/19 | 59
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
11.
CASH AND CASH EQUIVALENTS
($)
Cash at bank and on hand
Consolidated
2019
2018
1,008,416
1,783,506
1,008,416
1,783,506
Cash at bank earns interest at floating rates based on daily bank deposit rates as disclosed in note
3.
Reconciliation of net (loss) / profit after tax to net operating
cash flows
2019
$
2018
$
Net loss after tax from continuing operation
(732,036)
(566,966)
Operations
Net (loss) / profit after tax
Non-cash items
Depreciation and amortisation
Amortisation
Loss on the disposal of non-current assets
Share based payment
Impairment expense
Gain on debt forgiveness
Changes in operating assets and liabilities
(1,470,613)
(1,495,098)
(2,202,649)
(2,062,064)
20,588
110,532
-
22,028
362,041
59,549
64,961
(135,653)
-
146,299
-
-
(Increase) / decrease in trade and other receivables
3,989,122
1,143,067
(Increase) / decrease in prepayments and deposits
(Increase) / decrease in inventories
116,951
2,454,366
(51,098)
896,684
Increase / (decrease) in trade and other payables
(5,406,775)
(975,718)
Increase / (decrease) in employee benefit liabilities
(211,651)
(58,269)
Net cash flows provided by/(used in) operating activities
(889,150)
(828,539)
Harris Technology Group Limited Annual Report 2018/19 | 60
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
12.
TRADE AND OTHER RECEIVABLES
$
Trade and other receivables
Allowance for expected credit losses
Allowance for expected credit losses
Consolidated
2019
2018
654,852
4,719,693
(306,887)
-
347,965
4,719,693
The group has recognised a loss of $306,887 (2018: $0) in profit or loss in respect of the expected
credit losses for the year ended 30 June 2019.
Expected credit
rate
loss
Carrying amount
Allowance for
expected credit
losses
2019
2018
2019
2018
2019
2018
Consolidated
Not overdue
0 to 3 months overdue
Over 3 months overdue
%
1%
10%
80%
%
-
-
-
$
$
$
$
217,300
63,443
374,108
654,851
-
-
-
-
2,173
6,344
298,370
306,887
Movements in the allowance for expected credit losses as follows:
$
Opening balance
Additional provision recognised
Receivables written off during the year as uncollectable
Closing Balance
Consolidated
2019
2018
-
306,887
-
306,887
-
-
-
-
-
-
-
-
Harris Technology Group Limited Annual Report 2018/19 | 61
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
13.
INVENTORIES
($)
Inventories
Provision for stock obsolescence
14.
PREPAYMENTS AND DEPOSITS
($)
Prepayments
Deposits
15.
INTANGIBLE ASSETS
($)
Gross carrying amount
At 1 July 2018
Addition from acquisition
Impairment
Business assets acquired
At 30 June 2019
Consolidated
2019
2018
1,146,273
6,341,556
(741,150)
-
405,123
6,341,556
Consolidated
2019
2018
12,154
22,573
133,688
17,991
34,727
151,679
Software
Total
-
-
356,828
356,828
(64,961)
(64,961)
-
-
291,867
291,867
In 2019, Harris Technology Limited acquired 100% of LINCD HQ Pty Ltd (LINCD) assets from First
Growth Funds Limited. LINCD is a software and services company that has developed a platform
connecting legacy software to blockchain protocols.
Harris Technology Group Limited Annual Report 2018/19 | 62
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
16.
PROPERTY, PLANT AND EQUIPMENT
Office and
warehouse
equipment
$
Improvement
$
Computer
$
Motor
vehicles
$
Total
$
Gross carrying amount
At 1 July 2018
380,042
532,700
512,556
267,966
1,693,264
Additions
Disposal
-
-
-
-
-
(380,042)
(532,700)
(512,556)
(113,279)
(1,538,577)
Business assets acquired
At 30 June 2019
-
-
-
-
-
-
-
-
154,687
154,687
Depreciation and
impairment
At 1 July 2018
(223,412)
(113,466)
(494,763)
(128,785)
(960,426)
Depreciation charge for the
year
Discontinued operation
disposal
-
-
(9,050)
(11,538)
(20,588)
223,412
113,466
503,813
95,380
936,071
At 30 June 2019
-
-
-
(44,943)
(44,943)
Net carrying amount
At 30 June 2019
-
-
-
109,744
109,744
At 30 June 2018
156,630
419,234
17,793
139,181
732,838
Harris Technology Group Limited Annual Report 2018/19 | 63
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
17.
TRADE AND OTHER PAYABLES
Trade and other payables - current ($)
2019
2018
Consolidated
Trade payables
Other payables
2,002,377
7,279,230
66,549
627,744
2,068,926
7,906,974
Terms and conditions of the above financial liabilities:
(i)
(ii)
Fair value
Trade payables are non-interest bearing and are normally settled on 30 days EOM terms.
Other creditors are non-interest bearing and are normally payable within 30 and 90 days
Due to the short term nature of these payables, their carrying value is assumed to approximate their
fair value.
Foreign exchange and interest rate risk
Detail regarding foreign exchange and interest rate risk exposure is disclosed in note 3.
18.
FINANCIAL LIABILITY
Financial liability ($)
At 1 July 2018
Secured
Trade finance facility
Equipment finance
Unsecured
Loan and interest payable
Total Current
Secured
Equipment finance
Unsecured
Directors’ Loans (Note 22)
Total Non-current
Total
Consolidated
2019
2018
-
2,985,451
39,593
49,889
1,368,879
1,062,500
1,408,472
4,097,840
-
69,813
3,726,553
3,726,553
5,135,025
4,088,686
4,158,499
8,256,340
The payments of principal and interest on all directors’ loans have been deferred for a period through
to 1st July 2021.
Harris Technology Group Limited Annual Report 2018/19 | 64
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
18.
FINANCIAL LIABILITY (CONT.)
Trade finance facility ($)
Trade finance facility
Used at the reporting date
Unused at the reporting date
Consolidated
2019
2018
-
-
-
4,000,000
2,985,481
1,014,519
The Westpac facility has been settled during the year. There are no more finance facilities available
for the Group.
Security
The hire purchase facility is secured against the asset being financed.
No other financing facilities or liabilities available for the Group as of the 30 June 2019.
19.
EMPLOYEE BENEFIT LIABILITIES
($)
Current
Annual leave
Long service leave
Non-current
Long service leave
Consolidated
2019
2018
42,629
10,949
258,226
207,194
53,578
465,420
3,321
3,321
20,447
20,447
Harris Technology Group Limited Annual Report 2018/19 | 65
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
20.
CONTRIBUTED EQUITY
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:
2019
2018
7,654,464
7,595,915
-
-
7,654,464
7,595,915
Number of Shares
$
153,999,096
7,594,915
Issue of shares in satisfaction of directors’ fees
Issue of shares on exercise of performance rights
652,715
350,000
30,000
29,549
The company issued ordinary shares to First Growth Funds Ltd
30,000,000
-
Closing balance
185,001,811
7,654,464
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.
Capital management
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.
Harris Technology Group Limited Annual Report 2018/19 | 66
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
21.
ACCUMULATED LOSSES
($)
Consolidated
2019
2018
Balance at beginning of financial year
(10,514,823)
(8,335,930)
Prior period adjustments / placement issued
Dividend paid
-
-
(116,829)
-
Net profit/(loss) for the year
(2,202,649)
(2,062,064)
Balance at end of financial year
(12,717,472)
(10,514,823)
22.
DIRECTORS’ LOANS
During the FY16 and FY17, the group has executed number of borrowing from directors to fund the
three merge and acquisitions and provide a source of working capital. The loan balances as of 30
June 2019 are set out as below.
($)
2019
2018
Name of director Entity/Shareholder
Garrison Huang
Australian PC Accessories Pty Ltd
3,726,553
3,968,686
Bob Xu
AZA International (Aust) Pty Ltd
-
120,000
3,726,553
4,088,686
23.
COMMITMENTS
Operating lease commitments ($)
2019
2018
Operating leases contracted
Within one year
After one year but not more than five years
More than five years
71,500
110,000
-
556,770
685,883
-
181,500
1,242,653
Harris Technology Group Limited Annual Report 2018/19 | 67
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
24. CONTINGENT ASSETS AND LIABILITIES
The Company has no contingent assets and no contingent liabilities which require disclosure.
25.
SIGNIFICANT EVENTS AFTER THE BALANCE DATE
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may
significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
26.
AUDITOR’S REMUNERATION
($)
2019
2018
Amounts received or due and receivable by RSM Australia Partners
An audit or review of the financial report of the entity and any other entity
in the group paid to RSM Australia Partners
55,000
55,000
Other services
27.
RELATED PARTY DISCLOSURE
(a) Subsidiary
2,500
-
57,500
55,000
The consolidated financial statements include the financial statements of Harris Technology Group
Limited and the subsidiaries listed in the following table:
Name of entity
APCA Trading Pty Ltd
Harris Technology Pty Ltd
AER Group Pty Ltd*
Lincd HQ Pty Ltd
Country of
Incorporation
% of Equity interest
2019
2018
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
-
*AER Group Pty Ltd brand Wow Baby was sold to Witton Construction Pty Ltd
On 24 May 2019, the group entered into a Share purchase agreement to acquire 100% of the issued
equity of Lincd HQ Pty Ltd (Lincd) from First Growth Funds Limited (FGF) in consideration for issue
of 30,000,000 ordinary shares and earnout options in Harris Technology Group Limited.
Harris Technology Group Limited Annual Report 2018/19 | 68
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
27.
RELATED PARTY DISCLOSURE (CONT.)
(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
The inter-group entities have provided or received intercompany loans within the group for working
capitals. The intercompany loans are repayable to the inter-group entities at call and no interest is
payable. At 30 June 2019, those loans have been eliminated in the balance sheet.
(d) Other related party transactions
During the financial year ended 30 June 2019, there were a total of $3,726,553 Directors’ loans
reported by the Group, refer to note 22 (2018: $4,088,686).
All Transactions were made on normal commercial terms and conditions and at market rates unless
otherwise stated.
Refer to 7d. Of Remuneration Report for more details relating to other related party transactions.
28.
KEY MANAGEMENT PERSONNEL
The total remuneration paid to KMP of the company and the Group during the year are as follows:
($)
Short-term employee benefits
Post-employment benefits
Share based payments
2019
98,881
-
30,000
2018
154,203
5,036
-
128,881
159,239
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.
Harris Technology Group Limited Annual Report 2018/19 | 69
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
28.
KEY MANAGEMENT PERSONNEL(CONT.)
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.
29. 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.
30. SHARE-BASED PAYMENTS
Performance Rights
On 5 July 2017, 1,070,000 shares were issued to key management personnel at an issue price of
0.09 per share and a total transactional value of $95,800. Under the LTI plan, selected employees
may be granted performance rights which will entitle them to receive ordinary shares in the
Company, subject to the Company meeting performance objectives.
Set out below are summaries of options granted under the plan:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/ Balance at
the end of
forfeited/
the year
other
5/7/2017
5/7/2020
$0.09
1,070,000
1,070,000
-
-
(350,000)
(620,000)
(350,000)
(620,000)
100,000
100,000
2018
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/ Balance at
the end of
forfeited/
the year
other
5/7/2017
5/7/2020
$0.09
- 1.070,000
-
1.070,000
-
-
-
-
1,070,000
1,070,000
Harris Technology Group Limited Annual Report 2018/19 | 70
Notes to the Consolidated Financial Statements
(for the Financial Year ended 30 June 2019)
30. SHARE-BASED PAYMENTS (Cont.)
Options
In August 2019, Harris Technology Limited (HT8) entered into an agreement with First Growth Funds
(FGF) to a acquire 100% of Lincd HP Pty Ltd(Lincd), a software and services company that has
developed a platform connecting legacy software to blockchain protocols. The acquisition terms
included:
30,000,000 of HT8 shares to be issued to FGF.
20,055,334 of HT8 options with exercise price of $0.025 to FGF, when Lincd generates no
less then $1.35m in revenue within 24 months of the issue date.
20,000,000 of HT8 options with exercise price of $0.025 to FGF, when Lincd generates no
less than $1.35m in revenue within 24 months of the issue date.
Set out below are summaries of options granted:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/ Balance at
forfeited/ the end of
the year
other
24/5/2019
24/5/2019
24/6/2021
24/6/2021
$0.02.5
$0.03.5
20,055,334
20,000,000
40,055,334
-
-
-
-
-
-
- 20,055,334
- 20,000,000
- 40,055,334
2018
No options were issued during the 2018 financial year.
Harris Technology Group Limited Annual Report 2018/19 | 71
Directors’ Declaration
(For the Financial Year Ended 30 June 2019)
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 2019 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 2019 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(b); 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 2019.
On behalf of the Board
Andrew Plympton
Non-Executive Chairman
Melbourne 30 September 2019
Harris Technology Group Limited Annual Report 2018/19 | 72
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
Opinion
We have audited the financial report of Harris Technology Group Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and
the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including
a summary of significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(c) in the financial report, which indicates that the Group incurred a net loss of
$2,202,649 and had net cash outflows from operating activities of $889,150 during the year ended 30 June 2019
and, as of that date, the Group had net current liabilities of $1,734,745 and net liabilities of $5,063,008. As stated
in Note 2(c), these events or conditions, along with other matters as set forth in Note 2(c), indicate that a material
uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
73
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
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
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How our audit addressed this matter
the year,
Discontinued Operations
Refer to Note 5 in the financial statements
During
the consolidated entity sold
Anyware, a separate major line of business of the
group. The business sale is presented and disclosed
under the requirements of AASB 5 Non-current
Assets Held for Sale and Discontinued Operations.
We identified discontinued operations as a key audit
matter, as the Anyware business represented a
significant portion of
the consolidated entity’s
activities, and as a result the presentation of the
financial results of the consolidated entity are
significantly
the discontinued
operations disclosures.
impacted due
to
Stock Obsolescence
Refer to Note 13 in the financial statements
The consolidated entity’s inventory balance, as
disclosed in Note 13, consists primarily of finished
goods of various technology products and solutions.
Inventory is valued at the lower of cost or net
realisable value. The assessment of
the net
realisable value of inventory requires a significant
includes
degree of management
assumptions
for
concerning
obsolescence, as well as future market conditions
based on changing customer needs and market
trends.
It
provision
judgment.
the
On the basis of the factors set out above, the
valuation of inventory was considered to be a key
audit matter.
Our audit procedures in relation to the discontinued
operation included:
obtaining
the business sale agreement
the
transaction and
understand
accounting implications;
testing the accounting for the transaction, including
the consideration received and assets and liabilities
sold;
the
to
related
assessing the allocation of revenue and expense
items included in the discontinued operations
disclosure to ensure they relate solely to the
Anyware business; and
ensuring compliance of the financial presentation
and disclosures with the requirements of AASB 5.
Our audit procedures in relation to the valuation of
inventory included:
evaluating management
and
estimates applied to the provision for obsolescence
through analysis of historical sales levels by
inventory product from the date the product was
purchased
the
quantity of products;
in conjunction with assessing
assumptions
assessing the company’s application of its policy
for determining the provision for obsolescence;
performing analytical procedures in respect of
inventory holdings and inventory turnover; and
testing the sales prices of inventory to ensure
inventory is not being sold at less than cost.
74
Acquisition Accounting
Refer to Note 15 in the financial statements
During the year, the consolidated entity completed
the acquisition of LINCD HQ Pty Ltd (LINCD).
Management have determined this acquisition does
not meet the requirements of AASB 3 Business
Combinations as LINCD is not a business and is
therefore an asset acquisition. The consideration for
this asset acquisition has been accounted for under
AASB 2 Share-based payments.
We considered this transaction to be a key audit
matter because of the judgements involved in
determining whether the transaction is a business
combination, the estimates involved in the calculation
of the fair value of the consideration paid and the
assets and liabilities acquired. .
Our audit procedures included:
obtaining the share purchase agreement and other
associated documents to understand the nature of
the transaction;
assessing whether LINCD is defined as a business
under AASB 3 and confirming management’s
assessment that the transaction is an asset
acquisition;
assessing the fair value of the assets and liabilities
acquired;
assessing the consideration paid under AASB 2
and
reviewing the reasonableness of the share option
valuation and management’s estimates on the
probability of the contingent consideration being
paid to the vendor.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2019 but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
75
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description
forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of Harris Technology Group Limited, for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
Dated: 30 September 2019
Melbourne, Victoria
76
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 27 September 2019
(Reporting Date).
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 substantially complies 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 Limited’s website (www.ht8.com.au/investor-relations/corporate-
governance) 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 particularise each Recommendation that needs to be reported against by Harris
Technology Group Limited and will provide shareholders with information as to where relevant governance
disclosures can be found.
The Company’s corporate governance policies and charters are all available on Harris Technology Group
Limited’s website (www.ht8.com.au/investor-relations/corporate-governance).
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
Australian PC
Accessories Pty Ltd
Ordinary Shares
80,110,489
43.3%
First Growth Funds Ltd
Ordinary Shares
30,000,000
16.22%
Blooming Star
Consultants Limited
Ordinary Shares
14,844,086
8.02%
Harris Technology Group Limited Annual Report 2018/19 | 77
Number of holders
As at the Reporting Date, the number of holders in each class of equity securities:
Class of Equity Securities
Fully Paid Ordinary Shares
eStore vendor shares held in voluntary escrow until further notice
Performance rights vesting on 5 July 2020
Performance Rights vesting on 12 September 2020
Number of holders
2,064
1
13
1
Voting rights of equity securities
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 2109 holders of a total of 184,201,108 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.
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
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
Holders
1,488
293
90
140
53
Total Units
166,397
731,935
686,414
5,185,276
%
0.09
0.39
0.37
2.80
177,419,005
96.34
2,064
185,001,811
100.00
Harris Technology Group Limited Annual Report 2018/19 | 78
Distribution of performance rights holders
Holdings Ranges
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
Totals
Holders of
performance rights
vesting 5 July 2020
Holders of
performance rights
vesting 5 July 2020
-
-
-
2
-
2
-
-
-
-
-
-
Distribution of escrowed shares
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
Totals
-
-
-
-
1
1
-
-
-
-
321,661
321,661
%
-
-
-
100
-
100
%
-
-
-
-
100
100
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
185,001,811
2,829,227
1,942
1.53
Voluntary escrow
Class of restricted securities
Type of restriction
Number of securities
End date of escrow period
Ordinary Shares
Voluntary escrow
321,661
Until further notice
Unquoted equity securities
The number of each class of unquoted equity securities on issue, and the number of their holders are as
follows:-
Harris Technology Group Limited Annual Report 2018/19 | 79
Class of restricted securities
Number of unquoted
Equity Securities
Number of Holders
Performance Rights
100,000
2
There are no person who hold 20% or more of equity securities in each unquoted class other than under an
employee incentive scheme.
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.
Harris Technology Group Limited Annual Report 2018/19 | 80
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
AUSTRALIAN PC ACCESSORIES PTY LTD
FIRST GROWTH FUNDS LIMITED
BLOOMING STAR CONSULTANTS LIMITED
AZA INTERNATIONAL (AUST) PTY LTD
WELLAND INDUSTRIAL CO LTD
CHA SHIN CHI INVESTMENT CO LTD
PING SHEN
MISS PING YU
Mr GUO QIANG XIA
TIGER DOMAINS PTY LTD
MISS XIAOFEI XU
Balance as at Reporting
Date
80,110,489
30,000,000
14,844,086
8,638,903
8,216,242
5,488,969
4,545,455
4,136,097
2040602
1,780,467
1,536,304
%
43.30%
16.22%
8.02%
4.67%
4.41%
2.97%
2.46%
2.24%
1.10%
0.97%
0.83%
DOMINET DIGITAL CORPORATION PTY LTD
1,406,836
0.76%
HJ INVESTMENT PTY LTD
MR SIJIN CHEN
MR CORREIA DAVID
MS ZHEN MA
ASB NOMINEES LIMITED <291495 – ML A/C>
MONEXBOOM SECURITIES HKLTD
DIAMOND BOWL PTY LTD
1,273,777
1,228,524
940,090
828,000
800,000
750,739
694,008
0.69%
0.66%
0.51%
0.45%
0.43%
0.41%
0.38%
Total number of shares of Top 20 Holders
170,060,291
91.92%
Total Remaining Holders Balance
14,941,520
8.08%
Harris Technology Group Limited Annual Report 2018/19 | 81
Item 7 issues of securities
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.
Company Secretary
The Company’s secretary is Mr. Brett Crowley
Registered Office
The address and telephone number of the Company’s registered office are:
Unit 6, 94 Abbott Road,
Hallam, Victoria 3803
Tel: 1300 13 99 99
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).
Harris Technology Group Limited Annual Report 2018/19 | 82
Harris Technology Group Limited Annual Report 2018/19 | 83