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2023 ReportExcellence in Recruitment & Consulting HiTech Group Australia Limited A.B.N. 41 062 067 878 Financial Statements 2021 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Table of Contents DIRECTORS’ REPORT ............................................................................................................................... 3 DIRECTORS’ DECLARATION ..................................................................................................................... 9 AUDITOR’S INDEPENDENCE DECLARATION ..........................................................................................10 INDEPENDENT AUDIT REPORT ..............................................................................................................11 CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME.............16 CONSOLIDATED STATEMENT OF FINANCIAL POSITION........................................................................17 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.........................................................................18 CONSOLIDATED STATEMENT OF CASH FLOWS.....................................................................................19 NOTES TO THE FINANCIAL STATEMENTS..............................................................................................20 Page 2 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 DIRECTORS’ REPORT The directors of HiTech Group Australia Limited present their report on the company and its controlled entities for the financial year ended 30 June 2021. Directors Information on directors The following persons were Directors of HiTech Group Australia Limited during the whole of the financial year and up to the date of this report, unless otherwise stated. Raymond Hazouri Chairman, Company Secretary (appointed Company Secretary 13 February 2015) Qualifications: BA (Sydney University), DipEd. Experience: Founded HiTech in 1993 and has over 30 years’ experience in the IT industry. Prior to establishing HiTech, Ray worked in several capacities in the information technology industry ranging from management positions, technical IT consulting roles including systems analysis/programming, project management and sales roles. Ray worked and consulted for a broad range of employers in the private, multinational, SME, and public sectors. Interest in shares and options: 17,660,000 ordinary shares and 2,000,000 options in HiTech Group Australia Limited. Other current and former directorship in last three years: Nil George Shad Non-executive Director. Qualifications: Solicitor Experience: Appointed to the Board on 30 July 2003. Principal of Shad Partners Solicitors with thirty years’ experience as a lawyer specialising in commercial and conveyancing work. George is a panel solicitor for several major banks and his expertise and contacts in the corporate sector will assist HiTech in furthering its client base. Special responsibilities: Chairman of the Audit and Risk Committee Interest in shares: 250,000 ordinary shares in HiTech Group Australia Limited. Other current and former directorship in last three years: Nil Elias Hazouri Executive Director, Chief Executive Officer, Company Secretary (appointed Company Secretary 13 February 2015) Qualifications: B Sc, MBA Experience: Appointed to the Board on 30 July 2003 as an alternate Director representing Ray Hazouri when he was not available. Over 30 years’ experience in IT and banking. Elias was previously a director of HiTech from 1993-March 2000. Elias’s knowledge of HiTech’s business is extensive. Throughout his career, Elias has been integral to the development of many IT systems and IT support departments. He has held roles ranging from programmer to technology support head. Elias is a key resource and knowledge base to the HiTech account managers and is jointly responsible for generating new business. Elias has advised on business strategy, both from a financial and operational perspective, since the inception of HiTech in 1993. Elias is employed in the capacity of Chief Executive Officer. Interest in shares and options: 7,776,202 ordinary shares, 1,050,000 options in HiTech Group Australia Limited beneficially owned by him. Other current and former directorship in last three years: Nil Page 3 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Company Secretaries Ray Hazouri (Director) Elias Hazouri (Director) Directors’ meetings The following table sets out the number of directors’ meetings (including meeting of committees of directors) held during the financial year and the number of meetings attended by each director (while they were a director or a committee member). During the financial year 2 board meetings and 2 audit committee meetings were held. Board of Directors Audit Committee No eligible to Attend Attended No eligible to Attend Attended Mr R Hazouri (*by invitation) Mr E Hazouri Mr G Shad 2 2 2 2 2 2 2* 2 2 2* 2 2 Dividends The directors have declared a fully franked dividend of 5 cents per share which will be paid on 15 September 2021 to shareholders registered on close of business on 1 September 2021. Earnings per share Basic and Diluted earnings per share 9.32 Corporate structure HiTech Group Australia Limited is a listed public company, limited by shares, and is incorporated and domiciled in Australia. HiTech has prepared a consolidated financial report incorporating the entities that it controlled during the financial year. Nature of operations and principal activities The consolidated entity’s principal activity during the financial year was the supply of recruitment services for permanent and contract staff to the ICT sector. During the financial year, there were no significant changes in the nature of these operations. Group overview The HiTech Group currently supplies permanent and contract staff from its large, personalised, database of over 386,000 specialised ICT, Finance and Office Support professionals which has been developed over the past 28 years. Its main business comes from IT contracting/consulting. The HiTech client base is well established, with strong representation by technology companies, banking/financial services companies plus Federal & State Government departments and agencies. HiTech has also entered into preferred supplier agreements for the supply of staff in both the public and private sectors. Page 4 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Operating and financial review Operating results For the financial year ended 30 June 2021, the consolidated entity’s operating revenue is $42,168,504 an increase of 26% over the previous corresponding period (pcp): EBITDA is $5,214,886, an increase of 20% over pcp Gross Profit is $7,059,491, an increase of 16% over pcp (FY20: $6,105,679). NPAT is $3,636,602, an increase of 9% over pcp Basic and Diluted EPS is 9.32 cents, an increase of 6% over pcp Our Net Tangible Assets (NTA) is $0.16 per share. Permanent recruitment comprises the search and selection of candidates for full time employment. ICT contracting, comprising the provision of ICT professionals for temporary and other non-permanent staffing needs of clients for specific projects has continued to supply HiTech with strong recurring cash flow. HiTech’s recruitment business is broadly based in the ICT sector and operates across the full range of ICT services, including digital transformation, systems development, infrastructure architecture & cloud integration, operations, support and project management. As the digital transformation cycle gains momentum, there is a growing need for skilled ICT professionals, especially in the digital specialisation space. HiTech is addressing the demand for specialised ICT skills by making use of its database and comprehensive contacts internationally. We have scope to grow our revenue by further developing our other divisions including; office support, sales and finance. Whilst this diversification remains minor in comparison to ICT consulting and recruitment, it allows us to potentially grow our earnings further. HiTech’s reputation for top quality service and the provision of the best talent available, has resulted in HiTech establishing a small but successful niche market position. The demand for quality technical candidates has accelerated over the past 12 months. HiTech’s market share of the total multibillion dollar Australian consulting & recruitment market is relatively small but increasing. This represents a significant growth potential for the group. HiTech is focused on servicing existing clients by providing a complete recruitment and ICT service solutions (Managed Services) in addition to contracting. As HiTech’s core competency is in recruitment & talent acquisition, our strategy is to build on our existing client base and maximise revenue from existing clients by effectively providing personnel to not only the ICT sector but also to other sectors such as administration and office support, sales and marketing, and finance. There is also a possibility of broadening the consolidated entity’s operations into geographical markets in which HiTech operates. We are working towards winning new business and ensuring that operating costs are kept to a minimum. Future developments, prospects and business strategies The FY2022 growth will depend on the prevailing economic conditions at the time. Whilst the COVID- 19 impact has been to slow national economic activity, there are signs of continuing demand for ICT digital specialists in the market despite lockdown conditions. The most significant fact for us will be the continuation of strong demand for ICT specialists including cloud & cyber security expertise. Skilled professionals of top quality remain in high demand. We cannot, at this point, forecast with any certainty the results of next year. The directors’ main objective will be organic growth in the consolidated entity’s core business and further enhancing existing client business. Significant Changes in state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Events subsequent to reporting date The directors declared a fully franked final dividend of 5 cents per share. The dividend will be paid on 15 September 2021 to shareholders registered on close of business on 1 September 2021. (Note 18) Page 5 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Environmental regulations The consolidated entity’s operations are not subject to any significant environmental regulation under a law of the Commonwealth or of a State or Territory. Indemnifying officers or auditor During or since the end of the financial year, the company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums as follows: The company has paid premiums to insure all of the directors of the company has named above, the company secretaries and all executive officers of the company against any liability incurred as such by a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or any related body corporate against a liability incurred as such by an officer or auditor. Remuneration report - Audited This report outlines the remuneration arrangements in place for directors and executives of HiTech Group Australia Limited. The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001. The names of directors in office at any time during or since the end of the year are: Mr Raymond Hazouri, Mr George Shad and Mr Elias Hazouri Remuneration Policy The Board determine the remuneration policy applicable to each executive key management person as and when required based on market rates and capacity to pay. All executive key management were appointed under arm’s length agreements acceptable to both parties.Key management personnel are entitled to participate in the employee share option benefits at the discretion of the Board. Details of remuneration Details of the remuneration of the Directors, the key management personnel of the Group (as defined in AASB 124 Related Party Disclosures) and specified executives of HiTech Group Australia Limited are set out in the following table: Refer to note 29 for disclosure of share and option details. Page 6 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Remuneration - Key management personnel of the Group 2021 2021 Short-term employee Benefits Post-employment benefits Long-term benefits Cash salary and fees Superannuation Long service leave Name Non-executive directors G. Shad* Sub-total non-executive directors Executive directors R. Hazouri E. Hazouri Sub-total Executive directors Name Non-executive directors G. Shad* Sub-total non-executive directors Executive directors R. Hazouri E. Hazouri Sub-total $ 10,000 10,000 275,000 576,133 851,133 $ 10,000 10,000 475,000 450,133 $ - - 26,124 54,732 80,856 80,856 - - 5,301 - 5,301 5,301 $ - - 30,874 54,732 48,712 48,712 - - 5,316 - 5,316 5,316 Total $ 10,000 10,000 306,425 630,865 937,290 947,290 Total $ 10,000 10,000 511,190 504,865 1,016,055 1,026,055 Total compensation (group) 861,133 Remuneration - Key management personnel of the Group 2020 2020 Short-term employee Benefits Post-employment benefits Long-term benefits Cash salary and fees Superannuation Long service leave Executive directors 799,896 Total compensation (group) 809,896 * Wholly paid to a related entity of the key management person Group performance in relation to key management personnel compensation The following table shows the performance of the Consolidated Group over the past six financial years:- FY 2015 2016 2017 2018 2019 2020 2021 Sales Revenue $ 15,104,907 18,322,169 22,234,598 26,356,197 30,256,920 33,357,189 42,051,802 NPAT/(NLAT) $ 807,721 2,171,768 2,485,346 2,675,554 2,898,316 3,336,117 3,636,602 Basic EPS Cents Diluted EPS Cents 2.61 7.01 6.57 6.75 7.62 8.77 9.32 2.61 7.01 6.55 6.75 7.62 8.77 9.32 NTA per Net Equity share Dividends $ 3,749,499 5,953,683 6,664,836 7,411,833 7,266,148 6,349,515 6,319,116 cents 12.08 19.00 19.00 19.00 19.00 16.00 16.00 $ - - 1,674,500 2,460,500 3,044,000 3,614,750 3,667,001 Average Share Price Cents 7.50 22.00 56.00 83.22 101.00 119.90 182.00 The outlook for FY2022 will depend on the prevailing state of the local and global economy. We cannot forecast exact results at this point. Page 7 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Employment contracts Mr Ray Hazouri, is employed under a contract, and the CEO, Mr Elias Hazouri, is employed under a contract. Under the terms of the present contracts, these executives may resign from their positions and thus terminate their contract by giving one year’s written notice. The company may terminate these employment agreements by providing twelve months written notice or by payment in lieu of the notice period based on the executives’ fixed component of remuneration. END OF AUDITED REMUNERATION REPORT Page 8 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 DIRECTORS’ DECLARATION The Directors of the Company declare that: 1. the financial statements and notes, as set out on pages 16-34, are in accordance with the Corporations Act 2001, including: a) Complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and b) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date, and 2. there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declaration by the Chief Executive Officer and Chief Financial Officer as required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Ray Hazouri Director Sydney, 14 September 2021 Page 9 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June, 2021, as required under section 307C of the Corporations Act 2001, has been received and is set out on page 19 of the financial report. Non-audit services The board of directors, in accordance with advice received from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditor imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons: all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. The following fees for non-audit services were paid/payable to the auditors for the year ended 30 June, 2021: Taxation services $ 1,800 Proceedings on behalf of the Company No person has applied for leave of 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 any part of those proceedings. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 23 of the Corporations Act 2001. Signed in accordance with a resolution of the board of directors. . Raymond Hazouri Director Sydney, 14 September 2021 Page 10 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME For the Financial Year Ended 30 June 2021 Revenue from continuing operations Sales Revenue Cost of sales Gross Profit Other revenue Marketing expenses Occupancy expenses Insurance and legal expenses Administration expenses Other expenses Profit before income tax Income tax expense Profit attributable to members of the parent entity Other comprehensive income Total comprehensive income for the year Earnings per Share: Note 4(a) 5 Consolidated Group 2021 $ 2020 $ 42,051,802 33,357,189 (34,992,311) (27,251,510) 7,059,491 6,105,679 4(b) 116,702 23,720 (10,982) (17,242) (171,484) (202,774) (16,055) (11,011) (1,662,359) (1,472,949) (203,687) (188,989) 5,111,626 4,236,434 6 (1,475,024) (900,317) 3,636,602 3,336,117 - - 3,636,602 3,336,117 Basic and diluted earnings (cents per share) 28 9.32 8.77 Notes to financial statements are included on pages 20-34 Page 16 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2021 Consolidated Group 2021 $ 2020 $ Notes 7 8 9 10 12 13 14 15 22 11 16 22 16 6,612,460 7,608,206 3,443,031 2,805,159 63,639 32,730 10,119,130 10,446,095 536,741 222,430 166,454 - 234,236 48,206 8,700 - 400,580 47,734 985,637 679,444 11,104,767 11,125,539 3,646,307 3,358,486 270,052 173,885 - 552,393 157,610 50,921 185,867 126,537 378,447 240,030 4,654,358 4,485,977 76,588 54,705 250,473 39,574 131,293 290,047 4,785,651 4,776,024 6,319,116 6,349,515 17 3,738,213 3,738,213 185,638 185,638 2,395,265 2,425,664 6,319,116 6,349,515 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Plant and equipment Deferred tax assets Intangible assets Right of Use assets Other non-current assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Provision for taxation Lease liabilities Other current liabilities Deferred tax liabilities Short-term provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Lease liabilities Long term provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Retained earnings TOTAL EQUITY Notes to financial statements are included on pages 20-34 Page 17 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Financial Year Ended 30 June 2021 Share Capital Ordinary Retained Earnings Employee Equity-settled Benefits Reserve Total $ $ $ $ Balance at 1/7/2019 3,738,213 2,704,297 185,638 6,628,148 Total dividends paid for the year Total comprehensive profit for the year Balance at 30/6/2020 Balance at 1/7/2020 Total Dividends paid for the year Total comprehensive income for the year - - (3,614,750) 3,336,117 - - (3,614,750) 3,336,117 3,738,213 2,425,664 185,638 6,349,515 3,738,213 2,425,664 185,638 6,349,515 - - (3,667,001) 3,636,602 - - (3,667,001) 3,673,902 6,319,118 Balance at 30/6/2021 3,738,213 2,395,265 185,638 Page 18 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 CONSOLIDATED STATEMENT OF CASH FLOWS For the Financial Year Ended 30 June 2020 Note Consolidated Group 2021 $ 2020 $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Income tax (expenses)/refund Net cash provided by operating activities 27 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets Purchase for property, plant and equipment Net cash (used in) / provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of Borrowings Dividend Paid Net cash (used in) / provided by financing activities Net (decrease) / increase in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 42,713,728 36,351,779 (38,481,592) (30,362,728) 2,857 (1,354,375) 2,880,375 (20,585) (205,053) (225,638) 22,767 (859,594) 5,152,224 (18,439) 3,870 (14,569) 16,275 157,610 (3,667,001) (3,614,750) (3,650,726) (3,457,140) (995,746) 7,608,206 6,612,460 1,680,516 5,927,960 7,608,206 Page 19 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of HiTech Group Australia Limited and its subsidiaries. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report was authorised for issue on 14 September 2021 by the Board of Directors. (i) Compliance with IFRS The consolidated financial statements of the HiTech Group Australia Limited Group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention These financial statements have been prepared under the historical cost convention, modified where applicable by the measurement at fair value of selected financial assets and financial liabilities. (b) Financial report prepared on a going concern basis The Directors believe that it is appropriate to prepare the financial report on a going concern basis because a) b) The Group had $6,612,460 in cash at 30 June 2021; The Group has budgeted for sales in FY2022 at the same level of FY2021 with expected new contracting income from NSW Government contracts. (c) Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of HiTech Group Australia Limited ('company' or 'parent entity') as at 30 June 2021 and the results of all subsidiaries for the year then ended. HiTech Group Australia Limited and its subsidiaries together are referred to in this financial report as the group or the consolidated entity. Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (d) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Page 20 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 (e) Revenue recognition The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group's activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue for the rendering of contracting and consulting services is recognised upon delivery of the service to the client while permanent placement fees are brought to account at the time of placement rather than the day of commencement of work. Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. All Australian revenue is stated net of the amount of goods and services tax (GST). Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence, refer to note 1(k). (f) Income tax The income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company's subsidiaries and associates operate and generate taxable income. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the company is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. HiTech Group Australia and its wholly-owned Australian controlled entities have not implemented the tax consolidation legislation. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Operating Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are In relation to operating leases, a right of use asset and a lease liability is recognised with classified as operating leases. the right of use asset being depreciated and the lease liability being unwound in principal and interest components over the life of the lease. (h) Impairment of assets Assets are tested 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. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Page 21 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. Trade receivables (j) Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. Investments and other financial assets (k) Classification The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting date. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled within 12 months; otherwise they are classified as non-current. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables (note 8) and receivables in the statement of financial position. Financial assets – reclassification The group may choose to reclassify a non-derivative trading financial asset out of the held for trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held for trading or available-for-sale categories if the group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. (l) Investments and other financial assets (continued) Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. Recognition and derecognition Purchases and sales of financial assets are recognised on trade-date – the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from investment securities. Page 22 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTES TO THE FINANCIAL STATEMENTS Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses). Impairment The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. Impairment testing of trade receivables is described in note 1(j). (m) Plant and equipment Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation is calculated on a diminishing balance or straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives. Leasehold improvements are depreciated over the shorter of either the expired period of the lease or the estimated useful lives of the improvements. The following estimated useful lives are used in the calculation of depreciation: Plant and equipment Motor vehicles Useful Life 3-5 years 5 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(h)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. When revalued assets are sold, it is group policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. (n) Intangible assets Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to the Non-current asset – Intangible Assets (Note 12). Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a diminishing balance basis at 40% per annum. (o) Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (p) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits plus annual leave and long service leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. Page 23 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 (ii) Share-based payments Share-based compensation benefits may be provided to directors, employees and company consultants. The fair value of shares or options granted is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the shares/options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity (q) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (r) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (s) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except, where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis except for the GST component of cash flows arising from investing and financing activities which are disclosed as operating cash flows. (t) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (u) Critical accounting estimates and judgements The directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Key estimates – Impairment The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in- use calculations performed in assessing recoverable amounts incorporate a number of key estimates. The group’s financial assets at fair value through profit or loss are financial assets held for trading and are shares in listed entities which are recorded at fair value at balance date being the closing market bid price on that day. Impairment gains during the reporting period have been recorded as other income in the statement of profit or loss and other comprehensive income. Key judgements – impairment of receivables The directors have reviewed outstanding debtors as at 30 June 2019 and have formed the opinion that all debtors outstanding are collectible and have therefore decided that a provision for impairment should not be made. The major portion of debtors outstanding at balance date was with Australian Government departments with little or no risk of default. (v) Parent entity financial information The financial information for the parent entity, HiTech Group Australia Limited, disclosed in Note 25 has been prepared on the same basis as the consolidated financial statements, except as set out below, Investments in subsidiaries Investments in subsidiaries are accounted for at cost in the financial statements of HiTech Group Australia Limited. Page 24 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTE 2: FINANCIAL RISK MANAGEMENT The Groups activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include analysing the effect of interest rate rises, and other price risks, aging analysis for credit risk and comparison of the investment portfolios against the ASX All Ordinaries Index to determine market risk. Risk management is carried out by management under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas including interest rate risk, credit risk, and investment of excess liquidity. The groups functional and presentation currency is the Australian dollars and the Group has no foreign exchange dealings and therefore does not use derivative financial instruments. The total for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash Deposits at call Trade and other receivables Financial assets at fair value through profit or loss Other assets Financial Liabilities Trade and other payables (a) Credit risk Consolidated Group 2021 $ 2020 $ 5,062,301 6,060,904 1,550,159 1,547,302 3,443,031 2,805,159 - - 48,206 47,733 10,103,697 10,461,098 3,646,307 2,720,486 3,646,307 2,720,486 Credit risk arises from cash and cash equivalents, and deposits with banks and financial institutions, as well as credit exposure to customers as outstanding receivables. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Group. The compliance with credit limits by customers is regularly monitored by line management. Sales to customers are required to be settled in cash, mitigating credit risk. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Consolidated Group 2021 $ 2020 $ Trade and other receivables Counterparts with external credit rating (Moody’s) AAA Federal government departments and instrumentalities 3,204,682 2,481,541 Counterparts without external credit rating Group 1 Group 2 Group 3 Total trade and other receivables Cash at bank and short-term bank deposits AA2 - 238,349 - 48,654 274,964 - 3,443,031 2,805,159 6,612,460 7,608,206 Group 1 — new customers (less than 6 months) Group 2 — existing customers (more than 6 months) with no defaults in the past Group 3 — existing customers (more than 6 months) with some defaults in the past. The default was not recovered. Page 25 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 (b) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial Liabilities. The Group manages this risk through the following mechanisms: • • • • preparing forward looking cash flow analysis in relation to its operational and financing activities; Ensuring that adequate capital raising activities are undertaken; maintaining a reputable credit profile; and investing surplus cash only with major financial institutions. The Group has no long term financial requirements. All financial liabilities are due to be settled in less than one year. liabilities and uses existing cash and funds generated from operations to balance cash flow Weighted Av. Interest Rate Interest free Floating Fixed interest maturing 1 to 5 years 1 year or less Total 2021 Financial Assets Cash Deposits at call Trade and other receivables Other assets Financial Liabilities Trade and other payables 2020 Financial Assets Cash Deposits at call Trade and other receivables Other assets Financial Liabilities Trade and other payables NA 1.00% NA NA NA - 5,062,301 1,550,159 3,443,031 3,443,031 6,612,460 48,206 48,206 3,646,307 3,646,307 Weighted Av. Interest Rate Interest free Floating Fixed interest maturing 1 to 5 years 1 year or less NA 1.01% NA NA NA - 6,060,904 1,547,302 2,805,159 32,730 2,805,159 7,640,936 47,734 47,734 2,720,486 2,720,486 Page 26 of 34 - - - - 5,062,301 1,550,159 3,443,031 48,206 10,103,697 3,646,307 3,646,307 Total 6,060,904 1,547,302 2,805,159 80,464 10,493,829 2,720,486 2,720,486 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTE 3: SEGMENT INFORMATION The Consolidated Group operates primarily in one geographical and in one business segment, namely the recruitment industry in Australia and reports to the Board on the performance of the Group as a whole. NOTE 4: REVENUE Revenue from continuing operations (a) Services Consolidated Group 2021 $ 2020 $ - Contracting and permanent placement revenue (i) 42,051,802 33,357,189 (b) Other revenue - Interest received – other entities - Other Total revenue 3,329 113,373 23,720 - 42,168,504 33,380,909 (i) Contracting revenue includes permanent placement fees, commission earned on contracting and contract services provided. NOTE 5: EXPENSES Cost of providing services Rental expenses on operating leases - Minimum lease payments Depreciation and amortisation of non-current assets - Plant and equipment - Motor vehicles - Software Net transfers to provisions – employee benefits NOTE 6: INCOME TAX (a) Income tax expense Current tax Deferred tax Consolidated Group 2021 $ 2020 $ 34,992,311 27,251,510 171,483 202,774 36,251 53,122 43,240 45,733 20,855 19,298 153,548 58,886 1,289,358 818,988 185,666 81,329 1,475,024 900,317 (b) Numerical reconciliation of income tax (benefit)/expenses to prima facie tax payable Page 27 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Profit before income tax expense at 26% Add tax effect of: Other assessable income Non-deductible depreciation and amortisation and other non-allowable items Less tax effect of: Non-assessable income Deductible Expenses DTA previously not recognised Income tax expense NOTE 7: CASH AND CASH EQUIVALENTS Cash at bank and in hand Bank term deposits The effective interest rate on bank deposits at call is 1.00% Reconciliation of cash Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the statement of financial position as follows: Cash and cash equivalents Interest rate exposure The Group and the parent entity’s exposure to interest rate risk is discussed in Note 2. NOTE 8: CURRENT ASSETS - TRADE AND OTHER RECEIVABLES Trade and other receivables (a) Impaired trade receivables 1,329,023 1,134,166 (74,030) (226,924) (6,856) - 9,750 50,683 1,775 166,454 (8,700) 1,475,024 900,317 Consolidated Group 2021 $ 5,062,301 1,550,159 2020 $ 6,060,904 1,547,302 6,612,460 7,608,206 6,612,460 6,612,460 7,608,206 7,608,206 Consolidated Group 2021 $ 2020 $ 3,443,031 2,805,159 As at 30 June 2021, none of the trade receivables of the Group were impaired (2020: $0) (b) Past due but not impaired As at 30 June 2021, trade receivable of $264,784 (2020: $86,803) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows: 30-60 days 61-90 days 90+ days (c) Credit terms Page 28 of 34 134,088 130,696 65,977 23,424 - (2,598) 264,784 86,803 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Credit terms which apply to trade customers are payment within 30 days from date of invoice. (d) Fair value and credit risk Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned above. Refer to Note 2 for further information on the risk management policy of the Group and the credit quality of the entity’s trade receivables. NOTE 9: OTHER CURRENT ASSETS Prepayment 63,639 32.730 63,639 32,730 NOTE 10: NON-CURRENT ASSETS – PLANT AND EQUIPMENT As at 01 July 2020 Cost or fair value Accumulated depreciation Net book value Year ended 30 June 2021 Opening net book balance Additions Depreciation charge Net book balance As at 30 June 2021 Cost or fair value Accumulated depreciation Net book value Consolidated Entity Plant & Equipment Leasehold Improvements Motor vehicles $ $ $ 482,286 (448,892) 33,394 33,394 165,962 (26,911) 172,445 648,248 (475,803) 172,445 79,303 (68,321) 10,981 10,981 - (9,340) 1,641 79,303 (77,662) 1,641 278,772 (100,717) 178,055 178,055 227,841 (43,241) 362,655 506,613 (143,958) 362,655 TOTAL $ 840,361 (617,930) 222,430 222,430 393,803 (79,492) 536,741 1,234,164 (697,423) 536,741 Plant and equipment has been tested for impairment at 30 June 2021 resulting in no impairment loss. NOTE 11: DEFERRED TAX LIABILITIES The balance comprises temporary differences attributable to: Provisions Total deferred tax liabilities NOTE 12: NON-CURRENT ASSETS - INTANGIBLE ASSETS Consolidated Group 2021 $ 2020 $ Note 185,666 185,666 126,537 126,537 At 1 July 2019 Computer software at cost Accumulated Amortisation and impairment Net book value Year ended 30 June 2020 Page 29 of 34 Consolidated Group $ 1,108,370 (1,107,511) 859 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Opening net book balance Additions Amortisation and impairment Net book value As at 30 June 2020 Computer software at cost Accumulated Amortisation and impairment Net book value Year ended 30 June 2021 Opening net book balance Additions Amortisation and impairment Net book value As at 30 June 2020 Computer software at cost Accumulated Amortisation and impairment Net book value NOTE 13: NON-CURRENT ASSETS – OTHER ASSETS Security deposit for leased premises NOTE 14: CURRENT LIABILITIES - TRADE AND OTHER PAYABLES Unsecured liabilities Trade payables Sundry payables and accrued expenses NOTE 15: PROVISION FOR TAXATION Current Income Tax 859 18,438 (19,297) - 1,126,809 (1,126,809) - - 20,855 (20,855) - 1,126,809 (1,126,809) - Consolidated Group 2021 $ 48,206 48,206 2020 $ 47,734 47,734 Consolidated Group 2021 $ 315,835 3,330,472 3,646,307 2020 $ 315,835 2,252,734 2,720,486 Consolidated Group 2021 $ 270,433 2020 $ 552,393 Page 30 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 NOTE 16: CURRENT LIABILITIES – SHORT-TERM PROVISIONS Consolidated Group Employee benefits Reconciliation of movement in the liability is recognized in the statement of financial position as follows:- Prior year closing balance Increase / (Decrease) in provision Current year closing balance Provisions - - Total current Total non-current NOTE 17: CONTRIBUTED EQUITY 39,000,000 ordinary shares (2020: 38,050,000) 3,738,213 2021 $ 2020 $ 433,152 279,604 279,604 155,548 220,718 58,886 279,604 220,718 378,447 240,030 54,705 39,574 433,152 279,604 Consolidated Group 2021 $ 3,738,213 2020 $ Ordinary shareholders participate in dividends and the proceeds of winding-up of the parent entity in proportion to the number of shares held. At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Share Options Information relating to the group’s employee share option plan, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the financial year, is set out in Note 29. Capital risk management The group’s objective when managing capital is to safeguard their ability to continue as a going concern, so that they can continue to provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. There are no externally imposed capital requirements and the group’s capital management strategy has not changed during the reporting period. NOTE 18: DIVIDENDS Dividends paid NOTE 19: KEY MANAGEMENT PERSONNEL DISCLOSURES Page 31 of 34 Consolidated Group 2021 $ 2020 $ 3,667,001 3,614,750 Consolidated Group 2021 $ 2020 $ HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 (a) Key management personnel compensation: Short-term employee benefits Post-employment benefits Long Service Leave 861,133 80,856 935,133 85,606 5,301 5,316 947,290 1,026,055 Details of key management personnel compensation are disclosed in the Remuneration Report on pages 16-18. (b) Equity instrument disclosures relating to key management personnel (i) Options provided as remuneration and shares issued on exercise of such options Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options can be found in the Remuneration Report on pages 16-18. (ii) Options holdings 2021 Staff 2020 Staff Balance 1.7.20 Granted as Remuneration Options Exercised 4,000,000 - - - - - Options Cancelled/ lapsed - - Balance 30.6.20 4,000,000 - Total Vested and Exercisable 30.6.21 950,000 - Total un- exercisable 30.6.21 3,050,000 - Balance 1.7.19 Granted as Remuneration Options Exercised 4,000,000 - - - - - Options Cancelled/ lapsed - - Balance 30.6.19 4,000,000 - Total Vested and Exercisable 30.6.20 - - Total un- exercisable 30.6.20 4,000,000 - (iii) Shareholdings 2021 No of shares held by Key Management Personnel R. Hazouri E. Hazouri Balance 1.7.20 Received as Remuneration Options Exercised Balance 30.6.21 17,660,000 6,826,202 24,486,202 - - - - 950,000 - 17,660,000 7,776,202 25,436,202 NOTE 20: REMUNERATION OF AUDITORS During the year the following fees were paid or payable for services provided by the auditor of the parent entity: Audit and review of the financial statements Other services: - preparation of tax return and other services 14,225 14,225 1,800 1,800 16,025 16,025 Consolidated Group 2021 2020 $ $ NOTE 21: CONTINGENT ASSETS AND CONTINGENT LIABILITIES There were no contingent assets or contingent liabilities at balance date. NOTE 22: COMMITMENTS Non-cancellable operating leases Lease commitments The Company has obligation under the terms of these leases of its office premises for terms of up to 5 years, there are contractual options to extend the leases. Lease payments are payable in advance by equal monthly instalments due on the 1st day of each month. Future minimum rental payables under non-cancellable operating leases as at 30 June 2021 are as follows: Consolidated Group 2021 2020 Page 32 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Due not later than one year Due later than one year and not later than five years $ 173,885 76,588 250,473 $ 157,610 _____ 250,473__ 408,083 . NOTE 23: RELATED PARTY DISCLOSURES (a) (b) Subsidiaries Interests in subsidiaries are set out in Note 24. Key management personnel Disclosures relating to key management personnel are set out in Note 19. NOTE 24: SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 1(b) Name of entity Country of Incorporation Class of Shares Equity holding** 2021 2020 Parent entity HiTech Group Australia Limited Controlled entities HiTech Contracting Pty Ltd* eConsulting Australia Pty Ltd* Australia Australia Australia Ordinary Ordinary Ordinary 100% 100% 100% 100% * These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission. ** The proportion of ownership interest is equal to the proportion of voting power held. NOTE 25: PARENT ENTITY FINANCIAL INFORMATION The individual financial statements for the parent entity show the following aggregate amounts: Statement of Financial Position Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Contributed equity Option reserve Retained Profit Total equity Profit for the year Total Comprehensive income Parent Entity 2021 $ 2020 $ 10,119,130 10,446,095 11,104,767 11,125,539 4,654,358 4,785,651 4,485,977 4,776,024 3,738,213 185,638 2,395,265 6,319,116 3,636,602 3,636,602 3,738,213 185,638 2,425,664 6,349,515 3,336.117 3,336,117 NOTE 26: SUBSEQUENT EVENTS The directors have declared a fully franked interim dividend of 5 cents per share. Total amount of $1,950,000 to be paid on 15 September 2021 to shareholders registered at close of business on 01 September 2021. NOTE 27: RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES Consolidated Group Page 33 of 34 HiTech Group Australia Limited and Controlled Entities A.B.N. 41 062 067 878 Profit after income tax Depreciation and amortisation of non-current assets Decrease / (Increase) in assets Trade and other receivables Deferred tax assets Overprovision for taxation Increase/ (Decrease) in liabilities Provisions for taxation Trade and other payables Provisions Deferred tax liabilities Net cash flows provided by/(used in) operating activities 2021 $ 2020 $ 3,636,602 3,336,117 110,589 118,153 30,781 (380,062) (157,754) - (8,700) - (282,341) (665,936) 153,548 860,854 1,424,623 58,886 59,130 (257,647) 2,880,619 5,152,224 NOTE 28: EARNINGS PER SHARE Basic and diluted earnings per share Basic and diluted earnings per share The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share are as follows:- 9.32 8.77 Cents per ShareCents per Share Earnings (i) Weighted average number of ordinary shares (ii) $ $ 3,636,602 3,336,117 No 39,000,000 No. 38,050,000 (i) Earnings used in the calculation of basic earnings per share are net profit after tax as per the statement of profit and loss and other comprehensive income. (ii) The options outstanding are considered to be potential ordinary shares and therefore have not been included in the determination of basic earnings per share. Where dilutive, these potential ordinary shares are included in the determination of diluted earnings per share on the basis that each option will convert to one ordinary share (refer below). NOTE 29: SHARE-BASED PAYMENTS Employee option plan The Company has established an employee share option plan in respect of which share options may be issued to participating employees and executive directors. Options issued to directors are approved by shareholders at annual general meetings. The directors consider that the option plan provides employees and directors invited to take part in the plan, with an opportunity and an incentive to participate in the company’s future growth and success. The allocation of options to an employee or directors under the option plan is based on his or her potential future contributions to the growth and profitability of the company. Options generally lapse on the employee’s resignation or termination. When the options are converted to shares they carry full dividend and voting rights. The closing share price of an ordinary share of HiTech Group Australia Limited on the Australian Stock Exchange at 30 June 2021 was $2.14. Balance at beginning of financial year (i) Granted during the financial year (ii) Exercised during the financial year Lapsed/cancelled during the financial year (iii) Outstanding at end of financial year (iv) Exercisable at end of financial year (v) 2021 Weighted Average Exercise Price 0.75 No 4,000,000 - 950000 3,050,000 - 2020 Weighted Average Exercise Price 0.75 No 4,000,000 - - 1,600,000 4,000,000 - Page 34 of 34
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