APPENDIX 4E STATEMENT
(Listing rule 4.3A)
IDENTITII LIMITED
FINAL REPORT
for the year ended 30 June 2019
Results for announcement to the market
1. Revenues from ordinary
activities
30 June 2019
$
635,134
30 June 2018
$
185,833
2. Loss from ordinary
(8,163,297)
(2,929,945)
activities after tax
attributable to members
% change to prior year
up
up
224%
179%
Dividend information
3. Total dividend per ordinary share
No dividends were proposed for the years ending 30 June 2019 and 30 June 2018.
4. Record date for determining entitlements to the final dividend
Not applicable
5. Net tangible asset per security
Net tangible assets
30 June 2019
30 June 2018
$
5,358,634
$
594,926
Number of shares Number of shares
Total number of ordinary shares of the Company
54,518,799
34,202,371
Net tangible asset backing per ordinary security
$0.10
$0.02
This information should be read in conjunction with any public announcements made in the period by Identitii
Limited in accordance with continuous disclosure requirements of the Corporations Act 2001 and Listing Rules.
Additional information supporting the Appendix 4E disclosure requirements can be found in the Director’s report
and the consolidated financial report for the year ended 30 June 2019, which has been independently audited by
KPMG. The Independent Audit Report by KPMG is included in the consolidated financial report for the year ended
30 June 2019.
Identitii Limited
ABN 83 603 107 044
ASX: ID8
2019 Annual Report
Identitii Limited
ABN 83 603 107 044
ASX: ID8
Identitii Limited
2019 Annual Report
Contents
Chairman’s Letter i
Operational Review iii
Directors’ Report 3
Auditor’s Independence Declaration 18
Consolidated Statement of Profit or Loss and Other
Comprehensive Income 19
Consolidated Statement of Financial Position 20
Consolidated Statement of Changes in Equity 21
Consolidated Statement of Cash Flows 22
Notes to the Consolidated Financial Statements 23
Directors’ Declaration 64
Auditor’s Report 65
Additional ASX Information 69
Corporate Directory 71
Chairman’s letter
i
tokenisation, Overlay+ can associate information
such as invoices, remittance advices, Know
Your Customer and fraud alerts, with a payment
so payments can be reconciled with ease. This
creates an ecosystem for suppliers, buyers,
banks and regulators to share information.
Driving the uptake of Identitii’s solution is a
combination of increasing regulatory pressure
on banks and changing expectations within
their corporate customer base, along with Open
Banking which pushes banks to bring new
products and services to market faster, or risk
losing customers to non-bank challengers.
Identitii is an Australian FinTech
company that has developed an open
banking platform to help release the
estimated US$9 trillion locked up on
corporate balance sheets because of
missing payment information.1
Large fines, provisions for compensation and
the high cost of remediation are driving banks to
ensure that they comply fully with all regulatory
requirements for payment transactions; have a
higher degree of automation; and have a strong
audit trail across the end-to-end transaction.
This is challenging due to the limited capacity for
information that can be provided by most legacy
payment networks. At the same time, due to a
decline in fee revenues from retail customers,
banks are increasingly alert to the demands of
their corporate customers for improved payment
services and greater integration with their own
systems to align with their own digital strategies
and reduce cost.
Recognising the opportunity presented by our
cornerstone client, global Tier 1 bank HSBC, we
have throughout the year made the most of the
Dear fellow shareholder,
It is with pleasure that I present Identitii’s Annual
Report for 2019, our first as a listed company
after completing our initial public offering on the
Australian Securities Exchange in October 2018.
Identitii is an Australian FinTech company that
has developed an open banking platform to help
release the estimated US$9 trillion locked up on
corporate balance sheets because of missing
payment information.1 Incredibly, 71% of payment
information is still being sent over legacy channels
such as fax, post, telephone and email.2 With
cash locked up, unreconciled, companies are
less able to get on with business, which slows the
supply of goods and payroll, limits discounts to
buyers and increases borrowing costs.
Identitii is uniquely positioned to solve this
problem with our core technology, Overlay+,
which makes paying and collecting money
frictionless. It does this by enabling the secure
overlay of transaction level detail on top of
financial messages, such as those sent via the
SWIFT network. Using a private blockchain and
1. https://blog.tradeshift.com/the-9-trillion-dollar-question-why-is-so-much-liquidity-locked-up-in-the-supply-chain/
2. https://www.jpmorgan.com/global/ts/future-of-automated-reconciliation?source=cib_di_ jp_irri0518
Identitii Limited2019 Annual Report
ii
global licence framework agreement we have with
it to expand our business with the Group. This
has seen us work with HSBC to move from the
initial launch in India of HSBC DART, their Digital
Account Receivables Tool, to preparations for its
roll-out across a number of new markets in Asia.
HSBC DART leverages our innovative tokenisation
technology and integrates with HSBC’s existing
receivables technology infrastructure to streamline
the client experience and automate the accounts
receivable process for HSBC’s corporate clients
and their network of buyers.
In August, following the end of the financial
year, we signed a new licence to provide
Overlay+ to HSBC Australia. This represents
the second licence agreement under the
existing Global Framework Agreement and the
commercialisation of a new use case for Identitii’s
technology. Overlay+ is expected to go live with
HSBC Australia following implementation work
which will be completed in Q2 2020.
In addition to continuing to grow our partnership
with HSBC in new geographies, we are
advancing discussions with other corporate
banks and engaging directly with corporates. Our
initial focus is on the Australian market to drive
transaction volume through our platform, and
therefore generate scalable revenue. However,
globally there are forecasted to be more than 763
billion non-cash payment transactions in 2020,
making expansion into the broader APAC region
and beyond an appealing market for Identitii.
At the time of our listing we raised $11 million
to further develop and commercialise our
tokenisation technology, as well as build our
operational team through the appointment of
key talent in business development, marketing,
account management and professional services.
I’m very pleased with the progress we have made
against these objectives.
In October 2018, we launched Overlay+ to
potential banks and corporate customers and
already we can see the strong momentum
building in our sales pipeline.
We have also built up the senior management
team with industry experts particularly focused
on driving sales and marketing. Participation in
industry conferences, media coverage and our
new website have seen a strong growth in brand
recognition and importantly a growing stream of
inbound enquiries.
We have a great team in place now and I’d
like to take this opportunity to thank them for
the hard work, skill and dedication they’ve
shown throughout the year. We are also proud
of the diversity of talent Identitii has managed
to attract, which was recognised by FinTech
Australia when we won Best Workplace
Diversity at the 2019 Finnies.
On behalf of the Board, I’d like to thank all our
shareholders for their ongoing support. Through
our initial public offering, we were delighted to
welcome institutional support from Paradice
Investment Management, Terra Capital, KTM
Ventures and Lind Partners, with Regal Funds
Management recently taking on KIS Capital’s
holding to join our register later this year.
Looking ahead, Identitii is highly focused on
building licence and transaction revenues
through continued expansion across the HSBC
global footprint and continuing to build a strong
pipeline of new bank and corporate customers,
as well as new partnerships to support global
reach and scale. While we operate in an industry
that typically has long sales and implementation
cycles, a strong foundation has already been
laid and our expectation is that the financial year
2020 will be very fruitful.
Yours sincerely,
Michael Aston
Chairman
Identitii Limited
Identitii Limited2019 Annual Report iii
Operational Review
Identitii Limited
Identitii is an Australian FinTech company using
blockchain and tokenisation to connect banks
and businesses with the data they need to
process, reconcile and report on payments to
reduce last mile payment hold ups.
The Company is focused on building commercial
scale by signing up new corporate banks and
corporates, as well as partnering with global
technology organisations. Identitii generates
revenue through professional services fees
for customisation and implementation work, a
monthly licence fee for its technology platform
and scalable API call fees which are volume
driven.
Founded in 2014, Identitii Limited is
headquartered in Sydney, Australia with an office
in Hong Kong.
Overlay+
Identitii’s flagship Overlay+ platform was
launched in October 2018. It uses an innovative
tokenisation technology to collect, store and
securely share the increasing volumes of data
and documents required to reconcile and report
on payments. A key differentiator is that Overlay+
takes advantage of the technology systems
already in place at banks and corporates,
including the SWIFT network and internal
Enterprise Resource Planning (ERP) systems,
as opposed to requiring companies to replace
technology that has been in place for decades.
Overlay+ enables information to be shared
between any party to a transaction, creating an
ecosystem in which suppliers, buyers, banks and
regulators have access to the data needed to
reconcile and report on payments in real-time.
This is a core tenet of the Open Banking trend
sweeping the globe and being implemented here
in Australia through the Consumer Data Right
legislation.
Overlay+ uses innovative tokenisation technology
to create an unalterable audit trail of activity. This
simplifies Know Your Customer and financial
crime compliance, payments, cash management,
document management and standards adoption
for financial institutions and corporates, and their
counterparties.
Identitii’s flagship Overlay+ platform
was launched in October 2018. It uses
an innovative tokenisation technology
to collect, store and securely share
the increasing volumes of data and
documents required to reconcile and
report on payments.
Global Tier One Banking Customer
Identitii has been working with its customer
HSBC under a Global Framework Agreement
since 2017. This innovative work has focused
on solving the challenge of simplifying and
automating the flow of information between
HSBC corporate clients and their customers in
the receivables process.
In June 2019, HSBC announced the launch of its
Digital Accounts Receivable Tool (HSBC DART) to
its corporate clients in India. HSBC DART was built
on Identitii’s innovative tokenisation technology for
HSBC’s Global Liquidity and Cash Management
(GLCM) business and it integrates with HSBC’s
existing receivables technology infrastructure.
HSBC DART uses a unique information layer to
securely communicate information associated
with an invoice or payment. This streamlines the
client experience and automates the accounts
receivable process for HSBC’s corporate clients
and their network of buyers, by reducing their
dependence on manual processes. In turn, this
Identitii Limited2019 Annual Report
iv
enhances working capital efficiency.
Following the launch of HSBC DART in India,
Identitii is now enabling HSBC as it rolls out
HSBC DART into new geographies in Asia.
In addition, Identitii signed a new licence
agreement to provide its Overlay+ platform to
HSBC Australia following the end of the financial
year, in August 2019. This represents the second
licence agreement for Identitii’s technology under
the existing Global Framework Agreement.
Overlay+ is expected to go live with HSBC
Australia following implementation work which
will be completed in Q2 2020.
Commercialisation Strategy
Direct & Partnership Approaches
Identitii is further commercialising its tokenisation
technology through sales of its core platform
Overlay+ to new customers. The Company is
initially focused on building relationships with
corporate banks and corporates in Australia and
across the Asia Pacific region.
In addition, the Company is building its direct
relationships with large Australian corporates
to highlight the benefits of its technology which
unlocks cash that would otherwise sit unreconciled
in the corporate’s bank account, slowing the
supply of goods and payroll, limiting discounts to
buyers and increasing borrowing costs.
Identitii is also focused on partnering with global
technology organisations to greatly extend its
sales reach.
New Partnerships – Trace Financial &
Microsoft
Identitii partnered with leading message
transformation software provider Trace Financial,
in April 2019, to target SWIFT member banks that
wish to reduce the significant cost of converting
their existing payments technology systems to
comply with a new financial message standard,
ISO 20022. SWIFT has mandated its 11,000
member banks and institutions in over 200
countries to adopt the new standard messaging
format through a phased process between 2021
and 2026, to update and enhance functionality
and security.
The partnership with Trace Financial represents
a new channel to market for Identitii, extending
its reach into significant revenue opportunities.
Interest from a number of overseas banks
and other industry players has already been
generated from early presentations of this
proposition.
In June 2019, Identitii became a Microsoft
‘Co-Sell Ready’ partner, enabling it to pursue
commercial opportunities with Microsoft’s
global customer base. The partnership includes
sales opportunities to combine Overlay+ with
Microsoft’s products, including its cloud platform
Microsoft Azure. This allows Identitii to provide
multiple API-based integration options to connect
with existing corporate systems.
The partnership with Microsoft also provides
Identitii with access to Microsoft’s global sales
expertise and marketing capabilities, including
marketing assets and campaign content.
Accelerated Marketing Efforts
During the financial year, Identitii accelerated
its marketing efforts for Overlay+, attending and
presenting at multiple key industry conferences in
Australia and Europe, including:
•
•
Sibos (October 2018) – the leading
global financial services conference
attended by more than 7,000 payments,
risk, trade services and corporate treasury
professionals. Identitii showcased its
newly launched platform Overlay+ at the
conference.
HSBC Cash Academy roadshow
(February 2019) - a series of events aimed
at HSBC’s corporate clients to discuss digital
transformation for corporates and Open
Banking opportunities in Australia.
•
ACCELERATERegTech19 (March 2019)
– an industry event that included 300
Identitii Limited2019 Annual Report v
regulators, regulated entities, governments,
technology firms and allied associations
brought together to support the development
of world leading regulatory technology
in Australia and to promote the adoption
of RegTech solutions in the banking and
financial services industry.
•
EBAday 2019 (June 2019) - the Euro
Banking Association’s annual conference
held in Stockholm Sweden, focused on
innovation, infrastructure and reinvention for
banking executives and fintechs.
These marketing and sales efforts have built
a strong sales pipeline of corporate banks and
corporates which the Company expects to
engage with further in the 2020 financial year.
Strengthened Team
During the financial year, Identitii appointed key
executives to augment the expertise of its high
calibre Senior Leadership Team. This entailed
the appointment of a Chief Marketing Officer
and Chief Commercial Officer to help Identitii
accelerate growth and drive its go-to-market
strategy. In addition, the Company recruited
a Head of Corporate Development, a Head of
Client Engagement and a Head of People and
Culture during the financial year.
Continual Technology Innovation
Throughout the financial year, Identitii continued
to invest in the innovation of its tokenisation
technology.
The technology team has progressed the
development of version three of Overlay+ which
the Company expects to release in the first
quarter of the 2020 financial year. Version three
includes a library of third-party applications that
offer increasing value to Identitii customers,
and a developer centre, designed to enable
third party and customer developers to more
easily create applications on top of the Overlay+
platform, and enhances Identitii’s ability to
onboard integration partners.
More recently, the development team has
commenced its work program to align its
software with Corda blockchain, which is an open
source private blockchain supported by R3 and
used by the Corda Network, an internet of Corda
nodes operated by network participants. Corda
is run by financial institutions across the world,
including the Commonwealth Bank of Australia
and Accenture, making it the ideal blockchain for
Identitii to leverage to achieve commercialisation
with its target customers. Development work is
progressing well and is expected to be complete
by mid-September.
Following the end of the financial year, Identitii
signed a perpetual licence with Loot Financial
Services Limited to leverage its user interface
mobile and web applications for Overlay+. The
new licence accelerates the Company’s ability
to offer white-labelled mobile and web apps
to medium sized banks and their customers. It
also delivers significant time and cost savings to
Identitii, which had previously planned to build the
apps in-house. The Company is integrating the
apps into its Overlay+ solution.
Corporate Summary
Identitii successfully listed on the Australian
Securities Exchange in October 2018, following
the completion of a fully underwritten initial public
offering (IPO) raising $11 million before costs at
$0.75 per share.
The funds raised are being used to further
the development and commercialisation of
Identitii’s tokenisation technology, as well as
appoint key resources in business development,
sales, marketing, account management and
professional services.
Identitii Hong Kong Limited was incorporated
in January 2019. The Hong Kong team is
responsible for expanding new and existing
customer relationships in the APAC region.
Identitii Limited2019 Annual Report 3
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
The Directors present their report together with the consolidated financial statements of the Group
comprising of Identitii Limited (the Company) and its subsidiary for the year ended 30 June 2019 and
the auditor’s report thereon.
Directors
The Directors of the Company at any time during the year ended 30 June 2019 and up to the date of
this report are:
Name, qualification and independence
status
Experience, special responsibilities and other
directorships
Executive
Mr. Nicholas Armstrong
B. Sc
Director
Chief Executive Officer
Appointed 28 November 2014
Non-Executive
Mr. Michael Philip Aston
B. E. Eng
Independent Non-Executive Director
Chairman
Appointed 29 June 2018
Nick is an entrepreneur, with 15 years’ experience
in building and scaling technology businesses.
Nick was founder and CEO of COzero Holdings
Ltd, an energy technology company, until a
majority investment by a Japanese strategic
investor in 2013. Nick co-founded Identitii in 2014
with Eric Knight and is also the CEO.
Michael is an experienced senior executive and
FinTech entrepreneur with an international career
in building and leading global technology
businesses. Michael was CEO, Chairperson and
co-founder of Distra Pty Limited, a leading next
generation payments platform, until it was
acquired by ACI worldwide in 2012. Michael has
held a number of executive and board positions
with large global corporates including GEC
Marconi, Serco Systems Limited, CAE
Incorporated and is currently Business Executive
Advisor to Accenture. Michael is a member of the
Australian Institute of Directors and received an
NSW Pearcey Award for entrepreneurship in
2013.
Chairman of the Nomination and Remuneration
Committee and member of the Audit and Risk
Committee.
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D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Name, qualification and independence
status
Experience, special responsibilities and other
directorships
Non-Executive
Mr. Martin Rogers
B.Eng (Chem), B.Sc (Computer)
Non-Executive Director
Appointed 16 January 2018
Mr. Peter Lloyd
MAICD
Independent Non-Executive Director
Appointed 4 September 2018
Martin is a start-up investor and company Director
with experience in incubating companies and
publicly listed organisations. Martin has
experience in many aspects of financial, strategic
and operational management and has been both
an investor and senior executive in a private
funded advisory business in the technology,
science and life sciences sector. Martin is Chief
Investment Officer of KTM Ventures Innovation
Fund LP and is also a Director of Independent
Reserve, a leading institutional Australian
cryptocurrency exchange. Martin was previously a
Non-Executive Director of OncoSil Medical Limited
(ASX: OSL) (resigned October 2016) and Non-
Executive Chairman of Actinogen Medical Limited
(ASX:ACW) (resigned November 2016).
Member of the Nomination and Remuneration
Committee and the Audit and Risk Committee.
Peter has over 40 years’ experience in computing
technology, having worked for both computer
hardware and software providers. For the past 35
years, Peter has been involved in the provision of
payments solutions for banks and financial
institutions. Currently Peter is an Independent
Non-Executive Director of ASX listed companies
Integrated Research Limited (ASX:IRI) (appointed
July 2010) and Flamingo AI Limited (ASX:FGO)
(appointed April 2018).
Chairman of the Audit and Risk Committee and
member of the Nomination and Remuneration
Committee.
Dr. Gregory John Clark AC
Ph.D. (Physics)
Independent Non-Executive Director
Appointed 29 June 2018 (resigned 30 July
2018)
Dr Gregory Clark AC is a technologist,
businessman and scientist with extensive
governance, corporate and commercial expertise
on an international level. He most recently served
as a Director on the Board of the ANZ Banking
Group Limited which he served on for 9 years until
November 2013.
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Directors Report
Identitii Limited
For the year ended 30 June 2019
Company secretary
Mrs. Margarita Claringbold was appointed to the position of company secretary on 7 May 2018 and
resigned from this position effective 1 January 2019 with the concurrent appointment of Elissa Hansen.
Elissa is a chartered secretary with over 15 years’ experience as a company secretary and corporate
governance professional. She has worked with boards and management on a range of ASX and NSX
listed companies including assisting a number of organisations through the IPO process. Elissa is
experienced in the specific requirements of companies in industries including resources, information
technology, industrials and biotechnology.
Directors’ meetings
The number of Directors’ meetings and number of meetings attended by each of the Directors of the
Company during the financial year are:
Board of Directors
Audit and Risk
Committee
Nomination and
Remuneration
Committee
A
8
8
8
7
-
B
8
8
8
6
-
A
-
1
1
1
-
B
-
1
1
1
-
A
-
1
1
1
-
B
-
1
1
1
-
Nicholas Armstrong
Michael Aston
Martin Rogers
Peter Lloyd
Gregory Clark 1
1 Ceased as a Director on 30 July 2018
A – Eligible to attend
B – Attended
Principal activities
The principal activities of the Group during the financial year were the development of the Overlay+
platform. Overlay+ uses blockchain technology to create a secure and unalterable audit trail of activity
for each financial transaction, addressing a bank’s need to Know Your Transaction. It simplifies
customer and financial crime compliance, payments, cash management, document management and
standards adoption for financial institutions and corporates and their counterparties by enhancing
financial messages with information related to the purpose, origin and beneficiary of a payment at the
time a payment is made.
Operating and financial review
Review of operations
In October 2018, the Group raised $11 million via a fully underwritten Initial Public Offering (IPO) and
listed on the Australian Securities Exchange (ASX).
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D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Operating and financial review (continued)
On 18 October 2018, the Group announced the launch of its new platform Overlay+. This platform
was born out of Identitii Serra and introduces significant functionality and customer experience
enhancements for banks and corporates. New features available include deep integration with
Microsoft Outlook and other mail clients as well as incorporating a real time data stream from Robotic
Process Automation (RPA) market leader Blue Prism. Overlay+ is also integrated with Dow Jones
Risk & Compliance and global LEI databases, simplifying customer due diligence and compliance
checks.
On 1 January 2019, Ms. Elissa Hansen was appointed as company secretary. Ms. Hansen replaced
Mrs. Margarita Claringbold who resigned from her position as company secretary effective on the
same date.
On 8 January 2019, the Group successfully incorporated a wholly owned subsidiary in Hong Kong,
Identitii Hong Kong Limited. This will allow the Group to develop its Asia Pacific team to support new
and existing clients in the region.
On 13 March 2019, the Group announced commencement of work on Phase two of the project with
HSBC. Phase two will deliver additional functionality to support HSBC’s plans to roll out the platform
solution into multiple geographies. This phase is expected to generate additional revenue for the
Group of up to US$480,000 with US$80,000 billed during the year ended 30 June 2019.
On 8 April 2019, the Group announced its industry partnership with Trace Financial with whom the
Group intends to target SWIFT member banks who are mandated to adopt ISO 20022, a new financial
message standard. This partnership has a joint focus on sales and marketing, extending reach into
new revenue opportunities.
On 3 June 2019, the Group became a Microsoft Corporation (Microsoft) ‘Co-Sell Ready’ partner. This
enables the Group to pursue joint commercial opportunities with Microsoft to drive global sales of
Overlay+, representing a new channel to market and significantly scaling its customer reach.
On 18 June 2019, the Group advised that its customer, HSBC, had announced the launch of its Digital
Accounts Receivable Tool (HSBC DART) using the Group’s innovative tokenisation technology, to its
corporate clients in India.
Review of financial conditions
The Group reported revenue from contracts with customers of $635,134 for the year ended 30 June
2019 (30 June 2018: $185,833), an increase of 242% from the prior year. This reflects the progress
of the Group in its path to becoming revenue generating and self-sustaining. The Group reported a
net loss after tax of $8,163,297 for the year ended 30 June 2019 which was substantially driven by
salary and employee benefit expenses and expenditure on research and development (R&D) related
activities.
The Group held no borrowings at 30 June 2019, had a positive net current asset balance of $4,934,806
and positive overall net asset balance of $5,358,634.
The Group had $4,120,380 of cash and cash equivalents on hand at 30 June 2019 and reported a net
cash outflow from operating activities of $5,096,441 during the year ended 30 June 2019.
Significant changes in the state of affairs
In the opinion of the Directors there were no other significant changes in the state of affairs of the
Group that occurred during the year ended 30 June 2019.
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Directors Report
Identitii Limited
For the year ended 30 June 2019
Dividends
No dividends were declared or paid by the Company during the financial year ended 30 June 2019.
Events subsequent to reporting date
On 30 July 2019, the Group announced the signing of a non-exclusive perpetual licence agreement
with Loot Financial Services Limited (Loot). The licence allows the Group to use Loot’s fully developed
user facing mobile and web applications for a cash consideration of £35,000 ($62,150) with no ongoing
financial or non-financial commitments.
On 20 August 2019, the Group announced the signing of a new licence agreement to provide its
Overlay+ platform to HSBC Australia, representing the commercialisation of a new use case for the
Overlay+ technology. Implementation is to be completed in Q2 2020 with the platform expected to go
live thereafter. The agreement is for an initial five-year term and has a minimum contract value of
$511,600 with scope to be extended.
Other than the matters discussed above, there has not arisen in the interval between the end of the
year and the date of this report any item, transaction or event of a material and unusual nature likely,
in the opinion of the Directors, to affect significantly in future financial years the operations of the
Group, the results of those operations, or the state of affairs of the Group.
Likely developments
The Group will continue to develop the Overlay+ platform and continue to sign new customers and
grow its pipeline of partners. This will require further investment in product and business development
and marketing.
To address the going concern basis of preparation note in the financial statements and to enable the
Company to fulfil its obligations as and when they fall due for a period of no less than 12 months from
the issuance of this financial report, the Company is evaluating its plans to raise additional capital from
a variety of both debt and equity sources. To continue as a going concern the Company is reliant on
achieving its forecast revenue and R&D tax incentive income milestones, as well as securing
additional funding to meet its working capital requirements.
Based on the above, the financial report for the year ended 30 June 2019 has been prepared on a
going concern basis as the Directors conclude there are reasonable grounds to believe that the
Company will continue to pay its debts as and when they become due and payable for a period of at
least 12 months from the date of signing this report.
Further information about likely developments in the operations of the Group and the expected results
of those operations in future financial years has not been included in this report because disclosure
of the information would likely result in unreasonable prejudice to the Group.
Environmental regulation
The Group’s operations are not regulated by any significant law of the Commonwealth or of a State
or Territory relating to the environment.
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D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Directors interests
The relevant interest of each Director in the shares and options over shares issued by the companies
within the Group, as notified by the Directors to the ASX in accordance with S205G(1) of the
Corporations Act 2001, at the date of this report is as follows:
Nicholas Armstrong (1)
Michael Aston (2)
Martin Rogers (3)
Peter Lloyd
Ordinary shares
9,478,340
252,897
2,134,003
-
Options over
ordinary shares
1,350,000
400,000
-
-
(1) 275 Invest 2 Pty Ltd ATF the 275 Investment Trust, of which Nicholas Armstrong is a beneficiary, holds and
controls the majority number of shares on issue in the Company and has been allocated options under the
Equity Incentive Plan
(2) M&M Funds Management Pty Ltd ATF Savu Superannuation fund, of which Michael Aston is a beneficiary,
holds a minor shareholding in the Company and has been allocated options under the Director option plan.
(3) Structure Investments Pty Ltd ATF Rogers Family Trust and Rogers SF Management Pty Ltd ATF Rogers
Super Fund, of which Martin Rogers is a beneficiary, holds a minor shareholding in the Company.
Share options
Unissued shares under option
At the date of this report, unissued shares of the Group under option are:
Expiry date
28 August 2019
1 July 2021
1 July 2021
1 July 2021
19 November 2022
8 October 2022
2 October 2022
1 January 2023
14 January 2023
11 February 2023
6 March 2023
18 March 2023
27 May 2023
18 March 2024
1 July 2028
6 July 2028
1 August 2028
Total unissued shares under option
Exercise price Number of shares
$0.63099
4,485,918
$0.90
$0.98
$1.20
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
$0.75
650,000
650,000
650,000
200,000
50,000
2,658,334
200,000
25,000
25,000
100,000
50,000
100,000
200,000
400,000
1,350,000
1,250,000
13,044,252
8
Identitii Limited2019 Annual ReportFinancial Report
9
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Share options (continued)
All unissued shares are ordinary shares of the Company.
All options issued to employees under the Group’s Equity Incentive Plan expire on the earlier of their
expiry date or termination of the employee’s employment, unless approved otherwise by the Board.
All other options expire on their expiry date.
Further details about share-based payments to Directors and key management personnel (KMP) are
included in the remuneration report in Table 1.
Shares issued on exercise of options
During or since the end of the financial year, the Group issued ordinary shares of the Company as a
result of the exercise of options as follows (there are no amounts unpaid on the shares issued):
Number of shares
5,014,028
635,734
Amount paid on each share
$0.04343
$0.23
Indemnification and insurance of officers and auditors
The Company has entered into a director protection deed with each Director. Under these deeds, the
Company indemnifies the Directors against all liabilities to another person that may arise from their
position as Director of the Company and its controlled entities.
The Company has not indemnified or made a relevant agreement for indemnifying against a liability
to any person who is or has been an auditor of the Group.
The Group paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses
insurance contracts for the year ended 30 June 2019 and subsequent to the year end. Such insurance
contracts insure against certain liability (subject to specific exclusions) persons who are or have been
Directors or Executive Officers of the Group.
Non-audit services
During the year KPMG, the Group auditor, has performed certain other services in addition to the audit
and review of the financial statements.
The Board has considered the non-audit services provided during the year by the auditor and is
satisfied that the provision of those non-audit services during the year by the auditors is compatible
with, and did not compromise, the auditor independence requirements of the Corporations Act 2001
for the following reasons:
• all non-audit services have been reviewed by the Board to ensure they do not impact integrity
and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set
out in the APES 110 Code of Ethics for Professional Accountants.
9
Identitii Limited2019 Annual ReportFinancial Report
10
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Non-audit services (continued)
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and
non-audit services provided during the year are set out below.
Services other than audit and review of financial statements:
Investigating accountants report
Audit and review of financial statements
Total paid to KPMG
Proceedings on behalf of the Group
30 June 2019
$
79,250
60,030
139,280
No person has applied for leave of court to bring proceedings on behalf of the Group or intervene in
any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the
Group for all or any part of those proceedings.
The Group was not a party to any such proceedings during the year.
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 on page 18 and forms part of the Directors’ report for the year ended 30 June 2019.
Rounding of Amounts to the Nearest Dollar
In accordance with ASIC Corporations (Rounding of Financial/Directors’ Reports) Instrument
2016/191, the amounts in the Directors’ Report and consolidated financial statements have been
rounded to the nearest dollar.
10
Identitii Limited2019 Annual ReportFinancial Report
11
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
Audited Remuneration Report
The Directors present the Remuneration Report (the Report) for the Company and its subsidiary (the
Group) for the year ended 30 June 2019. This Report forms part of the Directors’ Report and has been
audited in accordance with Section 300A of the Corporations Act 2001. The Report details the
remuneration arrangements for the Group’s Key Management Personnel (KMP):
• Executive KMP
• Non-Executive Directors
KMP are those persons who, directly or indirectly, have authority and responsibility for planning,
directing and controlling the major activities of the Group.
1. Principles of remuneration
The performance of the Group depends upon the quality and commitment of the Directors and
Executives. The philosophy of the Directors in determining remuneration levels is to:
• set competitive remuneration packages to attract and retain high calibre employees;
•
link executive rewards to shareholder value creation; and
• establish appropriate hurdles for variable executive remuneration.
The Nomination and Remuneration Committee reviews and make recommendations to the Board on
the Group’s remuneration policies, procedures and practices. It also defines the individual packages
offered to Executive Directors and KMP, for recommendation to the Board.
The Board may consider engaging an independent remuneration consultant, to advise the Board on
appropriate levels of remuneration relative to its industry peer group.
In accordance with Corporate Governance best practice (Recommendation 8.2), the structure of non-
executive director and executive remuneration is separate and distinct as follows:
a) Non-executive Directors
Fixed and variable remuneration
The Board seeks to set non-executive Directors’ remuneration at a level that provides the Group with
the ability to attract and retain Directors of a high calibre whilst incurring a cost that is acceptable to
shareholders.
The ASX Listing Rules specify that the aggregate remuneration of non-executive Directors shall be
determined from time to time by a general meeting. This amount has been fixed by the Company at
$250,000. The amount of aggregate remuneration and the manner in which it is apportioned amongst
directors is reviewed annually. The Board considers advice from shareholders and takes into account
the fees paid to non-executive Directors of comparable companies when undertaking the annual
review process.
Non-executive Directors’ base fees cover all main board activities and membership of all committees;
however, they do not receive performance-related compensation and are not provided with retirement
benefits apart from statutory superannuation. Non-executive Directors are entitled to participate in the
Equity Incentive Plan.
11
Identitii Limited2019 Annual ReportFinancial Report
12
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
1. Principles of remuneration (continued)
Year ended to
30 June 2019
30 June 2018
Chairman’s Fee
Non-executive Directors
$
115,000
50,000
$
75,000
50,000
Effective 1 May 2019, the Board approved an increase in Michael Aston’s remuneration from $75,000
p.a. to $115,000 p.a. commensurate with Michael’s increase in engagement, namely an additional
one day per week to provide assistance with sales, partnerships, business development and investor
relation activities.
b) Executives and executive Director remuneration
Remuneration for executives and executive Directors consists of fixed and variable remuneration only.
Executives do not receive any performance related remuneration.
Fixed remuneration
Fixed remuneration is reviewed annually by the Directors. The process consists of a review of relevant
comparative remuneration in the employment market and within the Group. The Group may engage
an independent remuneration consultant to advise the Board on appropriate levels of remuneration
for the Group’s Executive Directors relative to its industry peer group.
Variable remuneration
Variable remuneration is provided in the form of share options under the Group Equity Incentive Plan
(EIP). Under the EIP, one share option entitles the holder to one share in the Company subject to
vesting conditions. Executives and executive Directors vesting conditions are linked to continued
years of service and not to performance hurdles. The Board have the discretion to settle share options
with a cash equivalent payment. Participants in the EIP will not pay any consideration for the grant of
the share option unless determined otherwise. Share options will not be listed and may not be
transferred, assigned or otherwise dealt with unless approved by the Directors. If the executive’s
employment terminates before the share options have vested, the share options will lapse, unless
approved otherwise by the Board.
2. Details of remuneration
Details of the remuneration of the Key Management Personnel (KMP) as defined in AASB 124 Related
Party Disclosures are set out in Table 1 which follows.
The KMP of the Group have authority and responsibility for planning, directing and controlling the
activities of the Group. The KMP make or participate in making decisions that affect the whole, or a
substantial part, of the business or who have the capacity to affect significantly the Group’s financial
standing.
The KMP of the Group are the executive and non-executive Directors and the Chief Financial Officer.
12
Identitii Limited2019 Annual ReportFinancial Report
13
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Identitii Limited2019 Annual ReportFinancial Report
15
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
3. Service agreements
The following is a summary of the current major provisions of the agreement relating to remuneration
of the Executive Director.
Nicholas Armstrong – Chief Executive Officer
Nicholas Armstrong is the Chief Executive Officer of the Group and is considered a key member of
the Group’s management team.
Employment Conditions
Commencement date: 28 November 2014
Term: Ongoing until notice is given by either party
Review: Annually
Notice period required on termination: 3 months by either party
Termination benefits: None
Independent Review
To ensure the Group complies with industry best practice in relation to the remuneration of its
Executive Director, the non-executive Directors of the Group will consider engaging the services of a
remuneration consultant to conduct an independent assessment of the remuneration packages
negotiated with its Executive Director.
The following is a summary of the current major provisions of the agreement relating to remuneration
of executive KMP:
Margarita Claringbold – Chief Financial Officer
Margarita has been engaged by the Group pursuant to the terms of a written Executive Service
Agreement to oversee all finance functions in her appointed role as Chief Financial Officer. The
executive services agreement is in effect until terminated.
Margarita receives $11,000 per month (exclusive of GST), with provision for additional days of work
as required.
Employment Conditions
Commencement date: December 2017 (with current Executive Services Agreement in place since 1
August 2018)
Term: Ongoing until notice is given by either party
Notice period required on termination: 3 months by either party
Termination benefits: None
4. Equity instruments
All share options refer to options over ordinary shares of Identitii Limited, which are exercisable on a
one-for-one basis under the Equity Incentive Plan (EIP).
15
Identitii Limited2019 Annual ReportFinancial Report
16
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
a) Options over equity instruments granted as compensation
Number of
options
granted
during the
year
Nicholas Armstrong
1,350,000
Fair
value per
option at
grant
date
Exercise
price per
option
$0.52
$0.75
Grant
date
6 July
2018
Expiry
date
6 July
2028
Number
of
options
vested
during
the year
-
All options expire on the earlier of their expiry date or termination of the individual’s employment.
Vesting is conditional on the individual remaining in employment during the vesting period.
No vested options were exercised or forfeited during the year.
b) Analysis of movements in equity instruments
The movement during the year in the number of options over ordinary shares in Identitii Limited held,
directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
Number
held at 1
July 2018
Number
held at 30
June 2019
Vested
during the
year
Granted
Nicholas Armstrong
-
1,350,000
1,350,000
-
Vested and
exercisable
at 30 June
2019
-
Michael Aston
400,000
-
400,000
150,000
250,000
5. KMP transactions
a) Loans to KMP and their related parties
There were no loans outstanding at the end of the reporting period to KMP and their related parties,
where the individual’s aggregate loan balance exceeded $100,000 in the reporting period.
Unsecured loans issued to Nicholas Armstrong during the year ended 30 June 2019 amounted to
$10,320. During the year, Nicholas Armstrong repaid $nil of the balance outstanding on the loan. No
interest is payable on the loan and it has no fixed term of repayment.
b) Other transactions with KMP
A number of KMP, or their related parties, hold positions in other entities that result in them having
control, or joint control, over the financial or operating policies of that entity.
A number of these entities transacted with the Group during the year. The terms and conditions of the
transactions with KMP and their related parties were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-KMP related
entities on an arm’s length basis.
16
Identitii Limited2019 Annual ReportFinancial Report
17
D
Directors Report
Identitii Limited
For the year ended 30 June 2019
c) Movements in shares
The movement during the reporting period in the number of ordinary shares in Identitii Limited held,
directly, indirectly or beneficially, by each KMP, including their related parties, is as follows:
Nicholas Armstrong
Michael Aston
Martin Rogers
Peter Lloyd
Margarita Claringbold
Held at 1
July 2018
9,866,050
166,666
2,126,670
-
-
Acquired
80,000
86,231
7,333
-
7,000
Disposed
(467,710) (1)
-
-
-
-
Held at 30
June 2019
9,478,340
252,897
2,134,003
-
7,000
(1) Shares disposed of prior to the Initial Public Offering in October 2018
This Directors’ Report is signed in accordance with a resolution of the Board of Directors:
Michael Aston
Chairman
Sydney
28 August 2019
17
Identitii Limited2019 Annual ReportFinancial Report
D
Auditor’s Independence Declaration
18
kpmg
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Identitii Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Identitii Limited for
the financial year ended 30 June 2019 there have been:
(i)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPM_INI_01
KPMG
KPMG
Nic Buchanan
Partner
Sydney
28 August 2019
18
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
18
Identitii Limited2019 Annual ReportFinancial Report
19
D
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Identitii Limited
For the year ended 30 June 2019
Revenue from contracts with customers
R&D tax incentive
Government grants
Interest income
Note
9
10
30 June 2019
$
635,134
30 June 2018
$
185,833
1,184,264
174,210
51,553
906,257
495,800
8,619
Total revenue and other income
2,045,161
1,596,509
Expenses
Salaries and employee benefit expenses
4,778,511
Consultants fees
Advertising and marketing
Depreciation and amortisation
General expenses
Interest expense
Legal expenses
Office expenses
Travel and accommodation
Rent
IPO listing expenses
Impairment reversal on trade receivables
Research and development expenses
Total expenses
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income
885,731
363,149
33,192
424,161
24,832
283,671
169,463
151,765
99,238
207,067
(1,036)
1,595,511
256,206
97,484
2,862
231,911
5,409
101,751
49,734
33,390
16,226
-
-
2,783,714
10,203,458
2,086,390
4,476,874
(8,158,297)
(2,880,365)
11
5,000
49,580
(8,163,297)
(2,929,945)
-
-
Total comprehensive loss for the year
(8,163,297)
(2,929,945)
Basic loss per share (cents)
Diluted loss per share (cents)
12
12
(16.27)
(16.27)
(9.14)
(9.14)
19
Identitii Limited2019 Annual ReportFinancial Report
D
Consolidated Statement of Financial Position
20
Identitii Limited
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
R&D tax receivable
Trade receivables
Other receivables
Prepayments
Total current assets
Non-current assets
Note
30 June 2019
$
30 June 2018
$
13
9
4,120,380
1,205,915
218,358
73,876
97,160
259,995
883,327
192,606
43,892
-
5,715,689
1,379,820
Property, plant and equipment
14
Other non-current assets
Total non-current assets
407,836
15,992
423,828
32,636
-
32,636
Total assets
6,139,517
1,412,456
Liabilities
Current liabilities
Trade and other payables
Employee provisions
Contract liabilities
Lease liability
Loans and borrowings
Total current liabilities
Total liabilities
Net assets
Equity
Share capital
Share options reserve
Foreign currency translation reserve
Retained losses
Total equity
15
16
9
22
17
18
394,141
322,064
34,425
30,253
-
780,883
215,173
202,357
-
-
400,000
817,530
780,883
817,530
5,358,634
594,926
16,261,495
2,584,528
(1,729)
3,939,439
1,975,966
-
(13,485,660)
(5,320,479)
5,358,634
594,926
20
Identitii Limited2019 Annual ReportFinancial Report
21
D
Consolidated Statement of Changes in Equity
Identitii Limited
For the year ended 30 June 2019
Note
5(a)
5(b)
Balance at 1 July 2018
Initial application of AASB 15
Initial application of AASB 9
Adjusted balance at 1 July
2018
Total comprehensive loss
Issue of ordinary share capital
18
10,999,975
Share
capital
Share
option
reserve
$
$
Foreign
currency
translation
reserve
$
Retained
losses
Total equity
$
$
3,939,439
1,975,966
-
-
-
-
3,939,439
1,975,966
-
(828,713)
-
-
-
28
28
28
1,926,667
(1,895,397)
224,127
(224,127)
-
2,728,086
-
-
-
-
(5,320,479)
594,926
1,487
(3,371)
1,487
(3,371)
(5,322,363)
593,042
(1,729)
(8,163,297)
(8,165,026)
-
-
-
-
-
-
-
-
-
-
10,999,975
(828,713)
31,270
-
2,728,086
Costs of equity raising
Share options exercised
Share options forfeited
Equity-settled share based
payments
Balance at 30 June 2019
Balance at 1 July 2017
Total comprehensive loss
Issue of ordinary share capital
Share options exercised
Equity-settled share based
payments
Balance at 30 June 2018
16,261,495
2,584,528
(1,729)
(13,485,660)
5,358,634
1,904,746
1,058,571
-
1,976,931
57,762
-
-
-
-
917,395
3,939,439
1,975,966
-
-
-
-
-
-
(2,390,534)
572,783
(2,929,945)
(2,929,945)
-
-
-
1,976,931
57,762
917,395
(5,320,479)
594,926
21
Identitii Limited2019 Annual ReportFinancial Report
22
D
Consolidated Statement of Cash Flows
Identitii Limited
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Receipts from government grants and tax incentives
Payments to suppliers and employees
Cash flow utilised in operations
Interest received
Interest and other costs of finance paid
Note
30 June 2019
$
30 June 2018
$
637,300
989,398
(6,769,681)
(5,142,983)
50,929
(4,387)
-
1,031,101
(3,364,039)
(2,332,938)
8,619
-
Total cash flows from operating activities
20
(5,096,441)
(2,324,319)
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and
equipment
Other cash items from investing activities
(443,912)
(35,498)
2,740
45,115
-
-
Total cash flows from investing activities
(396,057)
(35,498)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to loans and borrowings
Proceeds from the issue of shares
Proceeds from exercise of share options
Transaction costs related to issue of shares
Total cash flows from financing activities
-
(400,000)
(20,445)
10,999,975
31,270
(1,255,050)
9,355,750
400,000
(80,000)
(11,408)
1,976,931
57,762
-
2,343,285
Net increase in cash held
3,863,252
(16,532)
Opening cash balance
Effect of movement in exchange rates
Closing cash balance
13
259,995
(2,867)
4,120,380
276,527
-
259,995
22
Identitii Limited2019 Annual ReportFinancial Report
23
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
1. Reporting entity
Identitii Limited (the Company) is a Company incorporated and domiciled in Australia and whose
shares are publicly traded on the Australian Securities Exchange (ASX:ID8). The registered office and
principal place of business is Level 2, 129 Cathedral Street, Woolloomooloo, NSW 2011. These
consolidated financial statements comprise the Company and its subsidiary (together referred to as
the Group).
The Group is a for profit entity and is primarily involved in developing and licensing enterprise software
for financial services and banking institutions. Its main product Overlay+ is an application that enables
the secure and trusted exchange of information over financial networks using a secure private
blockchain.
2. Basis of preparation
These consolidated financial statements are general purpose financial statements which have been
prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian
Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB). They were authorised for issue by the Board of
Directors on 28 August 2019.
Details of the Group’s accounting policies are included in Note 6.
This is the first set of the Group’s annual financial statements in which AASB 15 Revenue from
Contracts with Customers and AASB 9 Financial Instruments have been applied. Changes to
significant accounting policies are described in Note 5.
Going concern
The financial report has been prepared on the going concern basis which contemplates the continuity
of normal business activities and the realisation of assets and settlement of liabilities in the ordinary
course of business and assumes the Company will have sufficient cash resources to pay its debts as
and when they become due and payable for at least 12 months from the date of signing the financial
report.
The statement of profit or loss and OCI for the year ended 30 June 2019 reflects a loss after income
tax of $8,163,297. As at 30 June 2019, the statement of financial position reflects a net asset position
of $5,358,634.
To address future funding requirements and to enable the Company to fulfil its obligations as and
when they fall due for a period of no less than 12 months from the issuance of this financial report, the
Company has evaluated its current contractual revenue pipeline and working capital forecasts,
together with the ability to utilise a variety of financing facilities. The Company is also evaluating plans
to raise additional equity capital to meet its development expenses and cash flow requirements.
Consequently, the Directors have concluded there are reasonable grounds to believe that the Group
will continue to be able to pay its debts as and when they become due and payable for a period of no
less than 12 months from the date of signing this financial report and that the preparation of the 30
June 2019 financial report on a going concern basis is appropriate.
23
Identitii Limited2019 Annual ReportFinancial Report
24
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
3. Functional and presentation currency
These consolidated financial statements are presented in Australian dollars which is the Group’s
functional currency. The Group is of a kind referred to in ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that instrument, amounts
in the consolidated financial statements and directors’ report have been rounded off to the nearest
Australian dollar, unless otherwise stated.
4. Use of judgements and estimates
In preparing these consolidated financial statements, management has made judgements and
estimates that affect the application of the Group’s accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognised prospectively.
a) Judgements
Information about judgements made in applying accounting policies that have the most significant
effects on the amounts recognised in the financial statements is included in the following notes:
Note 9 – revenue recognition: whether revenue from licence fees is recognised over time or at a point
in time.
b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties at 30 June 2019 that have a significant
risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next
financial year are as follows:
Note 6(c) – measurement and realisation of R&D tax incentive: determining the percentage of
expenditure that is directly attributable to eligible R&D activities when measuring the R&D tax
incentive. Uncertainty exists over the quantum and timing of realisation of the R&D tax incentive claim
until such time as the claim has been examined and accepted by the Australian Tax Office (ATO);
Note 11 – recognition of deferred tax assets: availability of future taxable profit against which
deductible temporary differences and tax losses carried forward can and cannot be utilised;
Note 21.ii(b) – measurement of ECL allowance for trade receivables: key assumptions in determining
the weighted average loss rate such as expected future loss based on industry comparatives; and
Note 28 – share based payments: key assumptions in determining the valuation of share based
payment transactions on grant date. Key assumptions include expected expiry dates, volatility rates
and likelihood of vesting.
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25
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
5. Changes in significant accounting policies
The Group has initially adopted AASB 15 Revenue from Contracts with Customers and AASB 9
Financial Instruments from 1 July 2018.
A number of other new standards are effective from 1 July 2018, but they do not have a material
impact on the Group’s financial statements, namely:
• AASB 2016-5: Amendments to Australian Accounting Standards – Classification and
Measurement of Share-based Payment Transactions
• AASB 2016-6: Amendments to Australian Accounting Standards – Applying AASB 9
Financial Instruments with AASB 4 Insurance Contracts
• AASB 2017-1: Amendments to Australian Accounting Standards – Transfers of Investment
Property, Annual Improvements 2014–2016 Cycle and Other Amendments, and
•
Interpretation 22: Foreign Currency Transactions and Advance Consideration.
a) AASB 15 Revenue from contracts with customers
AASB 15 establishes a comprehensive framework for determining whether, how much and when
revenue is recognised. It replaced AASB 118 Revenue, AASB 111 Construction Contracts and related
interpretations. Under AASB 15, revenue is recognised when a customer obtains control of the goods
or services. Determining the timing of the transfer of control – at a point in time or over time – requires
judgement.
The Group has adopted AASB 15 using the cumulative effect method (without practical expedients),
with the effect of initially applying this standard recognised at the date of initial application (1 July
2018). Accordingly, the information presented for the prior year has not been restated and is therefore
presented as previously reported, under AASB 118, AASB 111 and related interpretations.
Additionally, the disclosure requirements in AASB 15 have not generally been applied to comparative
information.
The following table summarises the impact, net of tax, of transition to AASB 15 on retained losses at
1 July 2018.
Note
Impact of AASB 15
at 1 July 2018
Retained losses
Revenue from contracts with customers – maintenance fees
(i)
$
1,487
The following tables summarise the impact of adopting AASB 15 on the Group’s consolidated
statement of financial position as at 30 June 2019 and its consolidated statement of profit or loss and
OCI for the year then ended for each of the line items affected. There was no impact on the Group’s
consolidated statement of cash flows for the year ended 30 June 2019.
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26
Without
adoption of
AASB 15
$
218,358
5,921,159
6,139,517
47,437
746,458
793,895
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
5. Changes in significant accounting policies (continued)
Impact on the consolidated statement of financial position
30 June 2019
Note
As reported Adjustments
Assets
Trade receivables
Others
Total assets
Contract liabilities
Others
Total liabilities
Net assets
Equity
Retained losses
Others
Total equity
$
218,358
5,921,159
6,139,517
34,425
746,458
780,883
$
-
-
-
13,012
-
13,012
(i)
5,358,634
(13,012)
5,345,622
(13,485,660)
(13,012)
(13,498,672)
18,844,294
-
18,844,294
5,358,634
(13,012)
5,345,622
Impact on the consolidated statement of profit or loss and OCI
30 June 2019
Note
As reported Adjustments
Without
adoption of
AASB 15
$
$
$
Revenue and other income
(i)
2,045,161
(11,525)
2,033,636
Expenses
Income tax expense
Loss for the year
(10,203,458)
(5,000)
-
-
(10,203,458)
(5,000)
(8,163,297)
(11,525)
(8,174,822)
Total comprehensive loss for the year
(8,163,297)
(11,525)
(8,174,822)
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27
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
5. Changes in significant accounting policies (continued)
(i) Maintenance fees: Under AASB 118, revenue for maintenance fees was recognised when the
Group had an obligation to invoice under the contract. Under the contract, no maintenance fees were
payable by the customer until 31 March 2019 after which maintenance fees were to be billed annually
upfront for the remainder of the contract term. Under AASB 15, revenue is recognised when the
performance obligation to provide maintenance services is met, which is the date the licence was first
transferred on 31 May 2018.
AASB 15 did not have a significant impact on the Group’s accounting policies with respect to other
revenue streams. Furthermore, R&D tax incentives and government grant income do not fall within
the scope of AASB 15. Refer to Note 9 for further details.
b) AASB 9 Financial instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and
some contracts to buy or sell non-financial items. This standard replaces AASB 139 Financial
Instruments: Recognition and Measurement.
As a result of the adoption of AASB 9, the Group has adopted consequential amendments to AASB
101 Presentation of Financial Statements, which require impairment of financial assets to be
presented in a separate line item in the statement of profit or loss. Additionally, the Group has adopted
consequential amendments to AASB 7 Financial Instruments: Disclosures that are applied to current
year disclosures but have not been generally applied to comparative information.
The following table summarises the impact, net of tax, of transition to AASB 9 on retained losses at 1
July 2018.
Retained losses
Expected credit losses (ECLs)
Note
Impact of AASB 9 at
1 July 2018
(ii)
$
3,371
i. Classification and measurement of financial assets and financial liabilities
AASB 9 contains three principal classification categories for financial assets: measured at amortised
cost, fair value in other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL).
The classification of financial assets under AASB 9 is generally based on the business model in which
a financial asset is managed and its contractual cash flow characteristics. AASB 9 eliminates the
previous AASB 139 categories of held to maturity, loans and receivables and available for sale. Under
AASB 9, derivatives embedded in contracts where the host is a financial asset in the scope of the
standard are never separated, Instead, the hybrid financial instrument as a whole is assessed for
classification.
AASB 9 largely retains the existing requirements in AASB 139 for the classification and measurement
of financial liabilities.
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28
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
5. Changes in significant accounting policies (continued)
The adoption of AASB 9 has not had a significant effect on the Group’s accounting policies related to
financial assets and liabilities.
For an explanation of how the Group classifies and measures financial instruments and accounts for
related gains and losses under AASB 9, refer to Note 6(h).
The following table below indicates the original measurement categories under AASB 139 and the
new measurement categories under AASB 9 for each class of the Group’s financial assets and
financial liabilities as at 1 July 2018, the date of transition.
Note
Original
classification
New
classification
Original
carrying
amount
New
carrying
amount
$
$
Loans and receivables Amortised cost
259,995
259,995
Financial Assets
Cash and cash
equivalents
Trade receivables
(A)
Loans and receivables Amortised cost
192,606
189,235
Other receivables
Loans and receivables Amortised cost
43,892
43,892
Financial Liabilities
Trade and other
payables
Loans and borrowings
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
Other financial
liabilities
215,173
215,173
400,000
400,000
(A) Trade receivables that were classified as loans and receivables under AASB 139 are now
classified at amortised cost. An increase of $3,371 in the allowance for impairment over these
receivables was recognised in opening retained losses at 1 July 2018 on transition to AASB 9.
Other than noted in (A) above, there was no material impact as a result of adopting AASB 9 on the
classification and measurement of financial assets and liabilities in the Group’s financial statements
on 1 July 2018.
ii.
Impairment of financial assets
AASB 9 replaces the ‘incurred loss’ model with an ‘expected credit loss’ (ECL) model. The new
impairment model applies to financial assets measured at amortised cost, contract assets and debt
investments at fair value in other comprehensive income, but not to investments in equity instruments.
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29
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
5. Changes in significant accounting policies (continued)
Under AASB 9, loss allowances are measured on either of the following bases:
•
•
12-month ECLs: these are ECLs that result from possible default events within the 12 months
after the reporting date; or
lifetime ECLs: these are ECLs that result from all possible default events over the expected life of
a financial instrument.
For assets in the scope of the AASB 9 impairment model, impairment losses are generally expected
to increase and become more volatile. The Group has determined that the application of AASB 9’s
impairment requirements at 1 July 2018 results in an additional allowance for impairment as follows.
Loss allowance as at 30 June 2018 under AASB 139
Additional impairment recognised at 1 July 2018 on:
Trade receivables as at 30 June 2018
Loss allowance as at 1 July 2018 under AASB 9
$
-
3,371
3,371
Additional information about how the Group measures the allowance for impairment is described in
Note 6(i).
iii. Hedge accounting
The Group does not apply hedge accounting. As such there have been no changes to the financial
statements for the year ended 30 June 2019 in relation to hedge accounting.
iv. Transition
The Group has used an exemption not to restate comparative information for prior periods with respect
to classification and measurement (including impairment) requirements. Differences in carrying
amounts of financial assets and financial liabilities resulting from the adoption of AASB 9 are
recognised in retained losses and reserves as at 1 July 2018. Accordingly, the information presented
for 2018 does not generally reflect the requirements of AASB 9, but rather those of AASB 139.
Furthermore, the determination of the business model within which a financial asset is held has been
made on the basis of facts and circumstances that existed on the date of initial application.
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30
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
6. Significant accounting policies
a) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at the
exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary items that are measured based on historical
cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign
currency differences are generally recognised in profit or loss and presented within general expenses.
b) Revenue from contracts with customers
The Group has initially applied AASB 15 from 1 July 2018. Information about the Group’s accounting
policies relating to contracts with customers is provided in Note 9. The effect of initially applying AASB
15 is described in Note 5(a).
c) Research and development tax incentive
The research and development (R&D) tax incentive encourages companies to engage in R&D
benefiting Australia, by providing a tax offset (or a cash refund if in a tax loss position) for eligible R&D
activities. The Group recognises the R&D tax incentive in profit or loss when the Group incurs the
eligible R&D expenditure. The R&D tax incentive income is presented on a gross basis and is not
netted off against the R&D costs to which it relates.
d) Government grants
The Group recognises an unconditional government grant in profit or loss when the grant becomes
receivable. The Group received income from two government grants during the year under review.
The Accelerating Commercialisation (AC) grant provides businesses with funding to cover eligible
commercialisation costs, up to a maximum expenditure of $1 million, to assist in taking products to
market. The Group recognises the AC grant in profit or loss when project milestones are achieved and
the Group receives an unconditional right to the income. The AC grant is presented on a gross basis
and is not netted off against the eligible commercialisation costs to which it relates. The final amount
owing under the AC grant was received in the year ended 30 June 2019.
The Export Market Development Grant (EMDG) scheme is a key Australian Government financial
assistance program that encourages small to medium sized Australian businesses to develop export
markets by granting funding to cover eligible export expenditure, up to a maximum claim of $150,000.
The Group recognises the EMDG in profit or loss when the application is successful and the Group
receives an unconditional right to the income. The EMDG income is presented on a gross basis and
is not netted off against the eligible export expenditure to which it relates.
Refer to Note 10 for further details.
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31
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
e) Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid under short
sharing plans if the Group
has a present legal or constructive obligation to pay this amount as a result of past service provided
by the employee and the obligation can be estimated reliably.
term cash bonus or profit
-
-
Other long
term employee benefits
-
term employee benefits is the amount of future benefit
The Group’s net obligation in respect of long
that employees have earned in return for their service in the current and prior periods. That benefit is
discounted to determine its present value. Re-measurements are recognised in profit or loss in the
period in which they arise.
-
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer
of those benefits and when the Group recognises costs for a restructuring. If benefits are not expected
to be settled wholly within 12 months of the reporting date, then they are discounted.
Share based payment arrangements
The grant date fair value of equity settled share based payments arrangements granted to employees
is generally recognised as an expense, with a corresponding increase in equity over the vesting period
of the award. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that
the amount ultimately recognised is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date. For share based payment awards with non-
vesting conditions, the grant date fair value of the share based payment is measured to reflect such
conditions and there is no true up for differences between expected and actual outcomes.
f)
Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity.
Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect of previous years. The amount of
tax payable or receivable is the best estimate of the tax amount expected to be paid or received that
reflects uncertainty related to incomes taxes, if any. It is measured using tax rates enacted or
substantively enacted at the reporting date. Current tax also includes any tax liability arising from
dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
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32
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
f) Income tax (continued)
Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss; and
temporary differences related to investments in subsidiaries to the extent that the Group is able
to control the timing of the reversal of the temporary differences and it is probable that they will
not reverse in the foreseeable future.
Deferred tax assets are recognised for unused tax losses, tax credits and deductible temporary
differences, to the extent that it is probable that future taxable profits will be available against which
they can be utilised. Future taxable profits are determined based on the reversal of relevant taxable
temporary differences. If the amount of taxable temporary differences is insufficient to recognise a
deferred tax asset in full, the future taxable profits, adjusted for reversals of existing temporary
differences, are considered, based on the business plans for individual subsidiaries in the Group.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such reductions are reversed when the
probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent
that is has become probable that future taxable profits will be available against which they can be
used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantively enacted at the reporting date. The
measurement of deferred tax reflects the tax consequences that would follow the manner in which the
Group expects, at the reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
g) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
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33
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
g) Property, plant and equipment (continued)
Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable that the future economic benefits
associated with the expenditure will flow to the Group.
Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less their
estimated residual values using the straight-line method over their estimated useful lives and is
generally recognised in profit or loss.
The estimated useful lives of property, plant and equipment for current and comparative periods are
as follows:
Office fit out
Computer equipment
Office equipment
2019
6 years
3 years
5 years
2018
-
3 years
-
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
h) Financial instruments
Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and
financial liabilities are initially recognised when the Group becomes a party to the contractual
provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial
liability is initially measured at fair value plus transaction costs that are directly attributable to its
acquisition or issue. A trade receivable without a significant financing component is initially measured
at the transaction price.
Classification and subsequent measurement
Financial assets – policy from 1 July 2018
On initial recognition, a financial asset is classified as measured at: amortised cost; fair value in other
comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or fair value through
profit or loss (FVTPL).
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes
its business model for managing financial assets, in which case all affected financial assets are
reclassified on the first day of the first reporting period following the change in the business model.
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34
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
h) Financial instruments (continued)
A financial asset is measured at amortised cost if it meets both of the following conditions and is not
designated as FVTPL:
-
-
It is held within a business model whose objective is to hold assets primarily to collect contractual
cash flows; and
Its contractual term gives rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding (SPPI test).
The Group does not have any debt or equity investments that are classified and measured at FVOCI.
Therefore, all financial assets that do not meet the classification requirements for amortised cost are
classified and measured at FVTPL.
Financial assets – assessment whether contractual cash flows are solely payments of principal and
interest - policy applicable from 1 July 2018
For the purpose of this assessment, principal is defined as the fair value of the financial asset on initial
recognition. Interest is defined as consideration for the time value of money and for the credit risk
associated with the principal amount outstanding during a particular period of time and for other basic
lending risks and costs, as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the
Group considers the contractual terms of the instrument. This includes assessing whether the financial
asset contains a contractual term that could change the timing or amount of contractual cash flows
such that it would not meet this condition. In making this assessment, the Group considers:
-
-
- prepayment and extension features; and
-
contingent events that would change the amount or timing of cash flows;
terms that may adjust the contractual coupon rate;
terms that limit the Group’s claim to cash flows from specified assets.
A prepayment feature is consistent with the solely payments of principal and interest criterion if the
prepayment amount substantially represents unpaid amounts of principal and interest on the principal
amount outstanding, which may include reasonable additional compensation for early termination of
the contract. Additionally, for a financial asset acquired at a discount or premium to its contractual par
amount, a feature that permits or requires prepayment at an amount that substantially represents the
contractual par amount plus accrued contractual interest is treated as consistent with this criterion if
the fair value of the prepayment feature is insignificant at initial recognition.
Financial assets – subsequent measurement and gains and losses – policy applicable from 1 July
2018
Financial assets at
FVTPL
Financial assets at
amortised cost
These assets are subsequently measured at fair value. Net gains and
losses, including any interest or dividend income, are recognised in profit or
loss.
These assets are subsequently measured at amortised cost using the
effective interest method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses and impairment
are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.
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35
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
h) Financial instruments (continued)
Financial liabilities – classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is
classified as FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on
initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses,
including any interest expenses, are recognised in profit or loss. Other financial liabilities are
subsequently measured at amortised cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition
is also recognised in profit or loss.
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the financial asset are transferred or in
which the Group neither transfers nor retains substantially all of the risks and rewards of ownership
and it does not retain control of the financial asset. The Group also derecognises a financial asset
when its terms are modified and the cash flows associated with the modified asset are substantially
different, in which case a new financial asset based on the modified terms is recognised at fair value.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled
or expire. The Group also derecognises a financial liability when its terms are modified and the cash
flows of the modified liability are substantially different, in which case a new financial liability based on
the modified terms is recognised at fair value. On derecognition of a financial liability, the difference
between the carrying amount extinguished and the consideration paid (including any non-cash assets
transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Group currently has a legally enforceable right to set off
the amounts and it intends either to settle them on a net basis or to realise the asset and settle the
liability simultaneously.
i)
Impairment
A. Non-derivative financial assets
Policy applicable after 1 July 2018
Financial instruments and contract assets
The Group recognises loss allowances for expected credit losses (ECLs) on:
financial assets measured at amortised cost; and
•
• contract assets
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Identitii Limited2019 Annual ReportFinancial Report
36
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
i) Impairment (continued)
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following,
which are measured at 12-month ECLs:
-
financial assets (excluding trade receivables) that are determined to have low credit risk at the
reporting date; and
- other financial assets and bank balances for which credit risk (ie. the risk of default occurring over
the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured at an amount equal
to lifetime ECLs and are calculated using a provision matrix under the simplified approach.
When determining whether credit risk of a financial asset has increased significantly since initial
recognition and when estimating ECLs, the Group considers reasonable and supportable information
that is relevant and available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Group’s historical experience and informed credit
assessment and includes forward looking information and the use of macro-economic factors.
The Group assumes that the credit risk on a financial asset has increased if it is more than 30 days
past due.
The Group considers a financial asset to be in default when:
-
-
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the
Group to actions such as realising security (if held); or
the financial asset is more that 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a
financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12
months after the reporting date (or a shorter period if the expected life of the instrument is less than
12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which
the Group is exposed to credit risk.
Measurement of ECLs
ECLs are a probability weighted estimate of credit losses. Credit losses are measured as the present
value of all cash shortfalls (ie. the difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the
effective interest rate of the asset.
ECLs for trade receivables and contract assets are calculated using a provision matrix based on
historical default rates adjusted for current and forecast credit conditions including other business,
financial and economic factors such as geographical region and external credit rating.
36
Identitii Limited2019 Annual ReportFinancial Report
37
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
i) Impairment (continued)
Credit impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost are
credit impaired. A financial asset is credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit impaired includes the following:
significant financial difficulty of the borrower;
-
- a breach of contract such as default or being more that 90 days past due;
-
restructuring of an amount due to the Group on terms that the Group would not consider
otherwise; or
it is probable that the borrower will enter bankruptcy or other financial reorganisation.
-
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying
amount of the assets.
There have been no changes in estimation techniques or significant assumptions made during the
year.
Write off
The gross carrying amount of a financial asset is written off when the Group has no reasonable
expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers,
the Group individually makes an assessment with respect to the timing and amount of write off based
on whether there is reasonable expectation of recovery. The Group expects no significant recovery
for the amount written off. However, financial assets that are written off could still be subject to
enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.
Policy applicable before 1 July 2018
Financial assets not classified as at fair value through profit or loss, were assessed at each reporting
date to determine whether there was objective evidence of impairment.
Objective evidence that financial assets were impaired included:
- default or delinquency by a debtor;
-
restructuring of an amount due to the Group on terms that the Group would not consider
otherwise;
indications that a debtor or issuer would enter bankruptcy;
-
- adverse changes in the payment status of borrowers or issuers;
-
the disappearance of an active market for a security.
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Identitii Limited2019 Annual ReportFinancial Report
38
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
i) Impairment (continued)
B. Non
financial assets
-
At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or
CGUs.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less
costs to sell. Value in use is based on the estimated future cash flows, discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable
amount. Impairment losses are recognised in profit or loss. They are allocated to reduce the carrying
amount of assets in the CGU on a pro rata basis. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
j) Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction
from equity. Income tax relating to transaction costs of an equity transaction is accounted for in
accordance with AASB 112. Refer to Note 6(f) for further details.
k) Leases
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Group separates
payments and other consideration required by the arrangement into those for the lease and those for
other elements on the basis of their relative fair values.
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight line basis over
the term of the lease. Lease incentives received are recognised as an integral part of the total lease
expense, over the term of the lease.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
l) Fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence,
the most advantageous market to which the Group has access at that date. The fair value of a liability
reflects its non-performance risk. A number of the Group’s accounting policies and disclosures require
the measurement of fair values, for both financial and non-financial assets and liabilities.
When one is available, the Group measures fair value of an instrument using the quoted price in an
active market for that instrument. A market is regarded as active if transactions for the asset or liability
take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If
there is no quoted price in an active market, then the Group uses valuation techniques that maximise
the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen
valuation technique incorporates all of the factors that market participants would take into account in
pricing a transaction.
The best evidence of the fair value of a financial instrument on initial recognition is normally the
transaction price ie. the fair value of the consideration given or received. If the Group determines that
the fair value on initial recognition differs from the transaction price and the fair value is evidenced
neither by a quoted price in an active market for an identical asset or liability nor based on a valuation
technique for which any unobservable inputs are judged to be insignificant in relation to the
measurement, then the financial instrument is initially measured at fair value, adjusted to defer the
difference between the fair value on initial recognition and the transaction price. Subsequently, that
difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no
later than when the valuation is wholly supported by observable market data or the transaction is
closed out.
7. New standards and interpretations not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning
on or after 1 January 2019 and earlier application is permitted; however, the Group has not early
adopted them in preparing this annual financial report.
AASB 16 Leases
AASB 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC® 4 Determining whether
an Arrangement contains a Lease, SIC-15® Operating Leases – Incentives and SIC-27 Evaluating
the Substance of Transactions Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption
is permitted.
AASB 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee
recognises a right-of-use asset representing its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. Lessor accounting remains similar to the current
standard – i.e. lessors continue to classify leases as finance or operating leases.
The Group has completed a more detailed assessment of the potential impact on its financial
statements. The Group has considered current economic conditions, including the Group’s estimated
borrowing rate at 1 July 2019, the composition of the Group’s lease portfolio at this date, whether it
will exercise any lease renewal options and the extent to which the Group will choose to use practical
expedients and recognition exemptions.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
7. New standards and interpretations not yet adopted (continued)
Currently the impact identified is that the Group will recognise a new asset and liability for the operating
lease on its office facilities. The Group intends to apply the modified retrospective approach to
transition and will apply the recognition exemption to leases where the remaining term of the lease is
less than 12 months from date of transition. At 30 June 2019, the Group’s future minimum lease
payments under its office operating leases amounted to $851,469 on an undiscounted basis. This
assumes the Group will exercise its 3 year lease renewal option when the current lease term expires
on 6 August 2021, thus extending the lease to 6 August 2024. On transition date of 1 July 2019, the
Group will recognise a right of use asset totalling $656,227 and a lease liability totalling $715,679.
There are no other standards that are not yet effective and that would be expected to have a significant
impact on the Group’s financial statements in the current or future reporting periods.
8. Operating segments
An operating segment is a component of the Group
•
that engages in business activities from which it may earn revenues and incur expenses
(including revenue and expenses relating to transactions with the Group’s other components),
and
• whose operating results are reviewed regularly by the Group’s chief operating decision maker
for the purpose of making decisions about allocating resources to the segment and assessing
its performance.
The Group has one reportable segment, which develops and licenses enterprise software for financial
services and banking institutions. As the Group continues to grow, it will re-evaluate the information
provided to the chief operating decision maker which may change the Group’s operating segments
going forward.
Geographic information
The Group’s main operations and place of business is in Australia, with majority of its revenue being
derived in Asia.
Revenue from contracts with customers
Asia
Other
30 June 2019
$
614,773
20,361
30 June 2018
$
185,833
-
635,134
185,833
Revenue is based on the location of the customer. Refer to Note 9 for further detail on major
customers, products and services.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
8. Operating segments (continued)
Location of non-current assets
Australia
Other
30 June 2019
$
418,684
5,144
30 June 2018
$
32,636
-
423,828
32,636
Non-current assets include property, plant and equipment and rental security deposits.
9. Revenue
The effect of initially applying AASB 15 on the Group’s revenue from contracts with customers is
described in Note 5(a). Due to the transition method chosen in applying AASB 15, comparative
information has not been restated to reflect the new requirements.
The Group generates revenue primarily from the licensing of enterprise software to financial
institutions and the provision of professional and maintenance services to its customers.
i. Performance obligations and revenue recognition policies
Other than a one-off finite contract with a customer during the year, the Group’s current and ongoing
revenue stream is derived from a single customer under a number of different contracts.
Under the contracts, the Group grants a global licence for the use of its software product to its
customer. The licence start date per the agreement is 31 March 2018 and will terminate on 31 March
2021. The contract continues for three years unless terminated earlier and may be extended by the
customer at any time up to an additional two years on written notice to the Group.
The contracts also facilitate the provision of certain software, training, maintenance, customisation
and configuration or other services from the Group in consideration for the payment of fees. The
customer is granted, for the term of each contract, a non-exclusive, perpetual, irrevocable and royalty-
free licence to use the software in a specific use case. The Group retains all rights, title and interest
in the intellectual property of the software.
The Group is currently recognising revenue under these contracts for licence fees, maintenance fees
and professional services, each regarded as a separate performance obligation. Revenue is
measured based on the consideration specified in the contract and is recognised when the Group
transfers control over the product or service to its customer. Charges are determined by a number of
factors including transaction volume, customisation requirements, ongoing support and maintenance
and new feature releases. Pricing changes for each renewal term after the first year are to be mutually
agreed in writing.
All invoices are to be paid 45 days from the date of receipt.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
9. Revenue (continued)
The following table provides information about the nature and timing of the satisfaction of performance
obligations in its contracts with customers including the related revenue recognition policies.
Product and
services
Licence fees
Nature and timing of satisfaction of performance obligations
The contract requires the Group to undertake maintenance and software enhancement
activities throughout the licence period that significantly affects the intellectual property
(IP) to which the customer has rights. The nature of the Group’s performance obligation
in granting a licence is regarded as a right to access the IP and thus the Group
recognises the licence fee revenue over time.
Licence fee revenue is recognised in equal monthly instalments from the date the
licence was first transferred on 31 May 2018 and for the term of the contract. The
licence fee is a fixed annual fee as specified in the contract.
The transaction price allocated to unsatisfied, or partially unsatisfied, performance
obligations that has not been recognised as revenue at 30 June 2019 amounts to
$300,000.
Maintenance fees Maintenance (software, equipment and hosted services maintenance) is to be
provided to the customer on an ongoing basis from the date the licence was first
transferred and throughout the term of the contract.
Under the terms of the contract no maintenance fee is payable for the first year until
the warranty period has expired, after which the maintenance fee is to be billed
annually upfront with the first invoice issued on 31 March 2019. The maintenance fee
is a fixed annual fee as specified in the contract.
Under AASB 15, the performance obligation to provide maintenance services is first
met upon transfer of the licence and is ongoing throughout the term of the contract.
The total revenue to be billed under the contract is recognised in equal monthly
instalments over time from the date the licence is first transferred on 31 May 2018 even
though no fee is payable by the customer for the first year.
The transaction price allocated to unsatisfied, or partially unsatisfied, performance
obligations that has not been recognised as revenue at 30 June 2019 amounts to
$31,230.
Professional
services
Professional services include setup, training and support costs as well as individual
customisation projects that are separate and distinct performance obligations.
(including setup,
training and other
support costs)
The Group recognises revenue at a point in time based on time and materials incurred
in delivering the product and services to the customer as per the terms and prices
specified in the contract. Invoices are generated on confirmation of product and service
delivery and revenue is recognised at that point in time.
The transaction price allocated to unsatisfied, or partially unsatisfied, performance
obligations that has not been recognised as revenue at 30 June 2019 amounted to
$571,429.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
9. Revenue (continued)
Where revenue is billed in advance, a contract liability is recognised and amortised over the period of
the invoice. Where revenue is billed in arrears, a contract asset is recognised at the time of revenue
recognition and transferred to trade receivables when the invoice is generated.
Warranties, returns and refunds
The warranty period is a period of at least 12 months from the licence start date. During this period no
maintenance fees are payable by the customer however maintenance fees are recognised in revenue
under AASB 15 from the date the licence is first transferred. Under the warranty period the Group
undertakes that the product and services supplied are of satisfactory quality and fit for purpose, free
from defects in design, operate in accordance with the contract and that appropriate master copies
are maintained by the Group.
In the event of an unresolved third party intellectual property rights claim, the customer may elect to
return all deliverables under the contract and be refunded in full for all charges paid by the customer
to date. Revenue is recognised to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. Due to the absence of any third party
intellectual property rights claim during the current and prior year, no adjustment has been made to
revenue recognised during the period for expected returns.
The customer may terminate or partially terminate the contract, under specific conditions or for no
reason, by written notice to the Group. The customer shall be entitled to a pro-rata refund of fees paid
in advance of the termination date unless termination by the customer is for no reason. Due to the
absence of any such written notice to the Group during the current and prior year, no adjustment has
been made to revenue recognised during the period for expected refunds on termination.
ii. Disaggregation of revenue
In the following table, revenue is disaggregated by nature of product and service and is done so in
conjunction with the Group’s reporting segment.
For the year ended 30 June
Nature of product and service
Licence fees
Maintenance fees
Professional services
Revenue from contracts with customers
Enterprise Software Development and
Licensing
2019
2018
$
181,675
17,845
435,614
635,134
$
-
-
185,833
185,833
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
9. Revenue (continued)
iii. Contract balances
The following table provides information about receivables and contract liabilities from contracts with
customers.
Trade receivables
Contract liabilities
30 June 2019
30 June 2018
$
218,358
(34,425)
$
192,606
-
Contract liabilities primarily relate to the billing of licence fees in advance in relation to revenue which
is recognised over time
Contract assets primarily relate to the Group’s right to consideration for work completed but not billed
at the reporting date. An amount of $1,487 was recognised in contract assets on 1 July 2018, on initial
adoption of AASB 15, in relation to maintenance fees and has been recognised as revenue for the
year ended 30 June 2019.
No information has been provided about remaining performance obligations at 30 June 2019 that have
an original expected duration of one year or less, as allowed by AASB 15.
10. Government grants
Accelerating commercialisation grant
Export market development grant
Refer to Note 6(d) for further details.
11. Income tax expense
i. Amounts recognised in profit or loss
Current tax expense
Current year
Tax expense
30 June 2019
30 June 2018
$
50,000
124,210
174,210
$
495,800
-
495,800
30 June 2019
$
30 June 2018
$
5,000
5,000
49,580
49,580
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45
D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
11. Income tax expense (continued)
ii. Reconciliation of accounting loss to taxable loss
Loss before tax
Adjustments to accounting profit
Non-deductible expenses
Tax exempt income
Taxable loss
R&D recoupment of tax on gross grant income
Tax expense
30 June 2019
30 June 2018
$
$
(8,158,297)
(2,880,365)
6,187,151
(1,184,264)
(3,155,410)
5,000
5,000
3,212,425
(906,257)
(574,197)
49,580
49,580
The Group is in a net tax loss position and does not recognise a deferred tax asset. The Group claims
the R&D Tax Incentive and therefore is required to pay tax on the gross amount of grant income
received, taxed at a concessional rate of 10%.
iii. Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items, because it is not
probable that future taxable profit will be available against which the Group can use the benefits
therefrom.
30 June 2019
30 June 2018
Gross
amount
Tax effect
3,867,626 1,160,288
Gross
amount
822,042
Tax effect
246,613
Tax losses
12. Loss per share
i. Basic loss per share
The calculation of basic loss per share has been based on the following loss attributable to ordinary
shareholders and weighted-average number of ordinary shares outstanding.
Loss for the year attributable to owners of the Group
(8,163,297)
(2,929,945)
30 June 2019
30 June 2018
$
$
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
12. Loss per share (continued)
Weighted-average number of ordinary shares
Issued ordinary shares at 1 July
Effect of share options exercised
Effect of shares issued during the year
Weighted-average number of ordinary shares at 30
June
30 June 2019
$
30 June 2018
$
34,202,371
5,092,525
10,889,497
28,386,453
10,932
3,671,976
50,184,393
32,069,361
Basic loss per share (cents)
(16.27)
(9.14)
Diluted loss per share
ii.
The calculation of diluted loss per share has been based on the following loss attributable to
ordinary shareholders and weighted-average number of ordinary shares outstanding after adjustment
for the effects of all dilutive potential ordinary shares.
30 June 2019
30 June 2018
$
$
Loss for the year attributable to owners of the Group
(8,163,297)
(2,929,945)
Weighted-average number of ordinary shares
Weighted average number of ordinary shares (basic)
Effect of share options on issue (1)
50,184,393
32,069,361
-
-
Weighted-average number of ordinary shares (diluted)
50,184,393
32,069,361
Diluted loss per share (cents)
(16.27)
(9.14)
(1) At 30 June 2019 8,558,334 share based payment options (30 June 2018: 6,486,711) and 4,485,918
Series A options (30 June 2018: 4,485,918) were excluded from the diluted weighted average number
of ordinary shares calculation because their effect would have been anti-dilutive.
13. Cash and cash equivalents
Bank balances
Term deposits
30 June 2019
$
30 June 2018
$
1,102,988
3,017,392
4,120,380
259,995
-
259,995
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
14. Property, plant and equipment
i. Reconciliation of carrying amount
Office fit out
Computer
equipment
Office
equipment
Cost
Balance at 1 July 2017
Additions
Balance at 30 June 2018
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Accumulated depreciation
Balance at 1 July 2017
Depreciation
Balance at 30 June 2018
Balance at 1 July 2018
Depreciation
Disposals
Balance at 30 June 2019
Carrying amounts
At 1 July 2017
Balance at 30 June 2018
Balance at 30 June 2019
15. Trade and other payables
Trade payables
Other payables and accruals
$
-
-
-
-
351,024
-
351,024
-
-
-
-
38,765
-
38,765
-
-
312,259
$
-
31,181
31,181
31,181
55,270
(2,990)
83,461
-
2,054
2,054
2,054
23,662
(663)
25,053
-
29,127
58,408
$
-
4,317
4,317
4,317
Total
$
-
35,498
35,498
35,498
37,618
443,912
-
(2,990)
41,935
476,420
-
808
808
808
3,958
-
4,766
-
2,862
2,862
2,862
66,385
(663)
68,584
-
-
3,509
32,636
37,169
407,836
30 June 2019
$
30 June 2018
$
147,389
246,752
394,141
215,353
(180)
215,173
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
16. Employee provisions
Provision for annual leave
Superannuation payable
PAYG payable
Mandatory provident fund contributions payable
17. Loans and borrowings
R&D finance loan
30 June 2019
$
30 June 2018
$
140,295
83,758
87,174
10,837
322,064
54,115
46,442
101,800
-
202,357
30 June 2019
$
30 June 2018
$
-
400,000
During the prior year the Group had a loan facility in place with Rocking Horse Nominees Pty Ltd that
was secured against the R&D tax incentive cash refund expected to be received in relation to eligible
R&D expenditure incurred during that financial year. The interest rate on the loan principal was 1.67%
per month with a minimum loan term of 91 days. This loan was fully repaid in August 2018.
i. Reconciliation of movements in loans and borrowings to cash flows arising from financing
activities
Balance at 1 July
Changes from financing cash flows
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to loans and borrowings
Total changes from financing cash flows
Other changes
Finance costs
Balance at 30 June
2019
$
400,000
-
(400,000)
(20,445)
(420,445)
20,445
-
2018
$
80,000
400,000
(80,000)
(11,408)
308,592
11,408
400,000
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
18. Share capital
In issue at beginning of the year
Issued for cash, net of costs of equity
raising
Exercise of share options for ordinary
shares
In issue at end of the year –
authorised, fully paid and no par value
Ordinary Shares
30 June 2019
30 June 2018
$
3,939,439
Number of
shares
34,202,371
$
1,904,746
Number of
shares
28,386,453
10,171,262
14,666,666
1,976,931
4,485,918
2,150,794
5,649,762
57,762
1,330,000
16,261,495
54,518,799
3,939,439
34,202,371
All ordinary shares rank equally with regard to the Company’s residual assets.
Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to
one vote per share at general meetings of the Company.
Issue of ordinary shares
On 6 August 2018, 5,649,762 vested options were exercised by key management personnel for
ordinary shares in the Company.
On 3 October 2018, as part of the IPO, the Board approved the issue of 14,666,666 ordinary shares
in the Company at a price of $0.75 per share.
Nature and purpose of reserves
The share option reserve comprises the cost of the Company shares issued under the Group’s share
based payment plans. Refer to Note 28.
The foreign currency translation reserve comprises all foreign currency differences arising from the
translation of the financial statements of foreign operations.
Dividends
No dividends were declared or paid by the Company for the current or previous year.
19. Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Management monitors the return on
capital.
The Group monitors capital using a ratio of net debt to equity. Net debt is calculated as total liabilities
(as shown in the statement of financial position) less cash and cash equivalents. The Group’s policy
is to keep the ratio below 2. The Group’s net debt to equity ratio at 30 June was as follows:
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
19. Capital management (continued)
Cash and cash equivalents
Less: total liabilities
Net assets / (debt)
30 June 2019
30 June 2018
$
4,120,380
780,883
3,339,497
$
259,995
817,530
(557,535)
Equity
5,358,634
594,926
Net debt to equity ratio
n/a
0.94
20. Reconciliation of cash flows from operating activities
Cash flows from operating activities
Total comprehensive loss for the year
Adjustments for:
30 June 2019
$
30 June 2018
$
(8,163,297)
(2,929,945)
Equity settled share based payment transactions
2,728,086
Depreciation and amortisation
Gain on disposal of asset
Bank revaluation
Interest expense and other finance costs
IPO listing expenses
Initial application of AASB 15
Initial application of AASB 9
Other non-cash generating expenses
Changes in:
Trade and other receivables
R&D tax receivable
Prepayments
Trade and other payables
Employee provisions
Contract liabilities
Lease liability
66,385
(413)
1,305
20,445
426,338
1,487
(3,371)
(36,871)
917,395
2,862
-
-
11,408
-
-
-
-
(4,959,906)
(1,998,280)
(80,140)
(322,588)
(97,160)
178,968
119,707
34,425
30,253
(201,709)
(321,376)
6,701
148,327
42,018
-
-
Net cash from operating activities
(5,096,441)
(2,324,319)
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
21. Financial instruments – fair values and risk management
The effect of initially applying AASB 9 on the Group’s financial instruments is described in Note 5(b).
Due to the transition method chosen, comparative information has not been restated to reflect the new
requirements.
i. Accounting classifications and fair values
The carrying amount of the Group’s financial assets and financial liabilities is a reasonable
approximation of fair value due to their short term nature.
ii. Financial risk management
The Group has exposure to the following risks arising from financial instruments:
- credit risk (see ii (b))
-
-
liquidity risk (see ii (c))
foreign currency risk (see ii (d))
a) Risk management framework
The Company’s Board of Directors has overall responsibility for the establishment and oversight of
the Group’s risk management framework. The Board of Directors has established the Audit and Risk
Committee, which is responsible for developing and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the
Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk
management policies are reviewed regularly to reflect changes in market conditions and the Group’s
activities.
b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises principally from the Group’s receivables
from customers. The carrying amounts of financial assets and contract assets represent the maximum
credit exposure. Impairment losses on financial assets and contract assets recognised in profit or loss
are as follows:
Impairment loss on trade receivables and contract assets
arising from contracts with customers
Trade receivables and contract assets
30 June 2019
30 June 2018
$
2,335
$
-
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each
customer. Management also considers the factors that may influence the credit risk of its customer
base including the default risk associated with the industry and country in which the customers
operate.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
21. Financial instruments – fair values and risk management (continued)
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment
period of 45 days for corporate customers.
Expected credit loss assessment for corporate customers
The Group uses a provision matrix to measure ECLs of trade receivables from corporate customers,
which comprise of a small number of large balances.
The Group is still in its early stages of revenue generation with a small customer base and therefore
doesn’t have extensive historical information on which to base its loss rates. Its loss rates are
management’s best estimate based on industry comparatives and will be updated at every reporting
period to reflect current and forecast credit conditions including other business, financial and economic
factors. Loss rates are determined separately for each credit risk grade, based on external credit rating
definitions from agency, Fitch. To date no customer balances have been written off or credit impaired
at the reporting date.
The following tables provides information about the exposure to credit risk and ECLs for trade
receivables and contract assets for corporate customers as at 30 June 2019.
30 June 2019 ($)
Not past due
External
credit rating
(Fitch)
BBB- to AAA
Weighted
average loss
rate
0.1%
Credit
impaired
No
181-360 days past due
BB- to BB+
10.0%
No
Gross
carrying
amount
199,336
21,357
220,693
Impairment
loss
allowance
199
2,136
2,335
Cash and cash equivalents and other receivables
The Group held cash and cash equivalents of $4,120,380 at 30 June 2019 (30 June 2018: $259,995).
The cash and cash equivalents are held with financial institution counterparties, which are rated A- to
AA-, based on Fitch ratings. The Group considers its cash and cash equivalents to have low credit
risk based on the external credit ratings of the counterparties.
The Group held other receivables of $73,876 at 30 June 2019 (30 June 2018: $43,892) which includes
a related party loan with CEO, Nicholas Armstrong. The Group considers its other receivables to have
low credit risk based on historical data available, the reputation of the counterparties and the
systematic ease with which the receivables are recoverable.
On initial application of AASB 9, the Group did not recognise an impairment allowance for cash and
cash equivalents and other receivables as at 1 July 2018. This did not change during the current year
under review.
Movements in the allowance for impairment in respect of trade receivables, contract assets
and other financial assets
The movement in the allowance for impairment in respect of trade receivables, contract assets and
other financial assets during the year was as follows.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
21. Financial instruments – fair values and risk management (continued)
Balance at 1 July 2018 under AASB 139
Adjustment on initial application of AASB 9
Balance at 1 July 2018 under AASB 9
Amounts written off
Net remeasurement of loss allowance
Balance at 30 June 2019
c) Liquidity risk
30 June 2019
$
-
3,371
3,371
-
(1,036)
2,335
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s
approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to
meet its liabilities when they are due without incurring unacceptable losses or risking damage to the
Group’s reputation.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate, but
manageable, borrowing facilities are maintained. The Group also monitors the level of expected cash
inflows on trade and other receivables together with expected cash outflows on trade and other
payables.
Exposure to liquidity risk
The following are the contractual maturities of financial liabilities at the reporting date. The amounts
are gross, undiscounted and include contractual interest payments where applicable.
At 30 June 2019 ($)
Loans and borrowings
Trade payables
At 30 June 2018 ($)
Loans and borrowings
Trade payables
Carrying
amount
-
147,389
147,389
Carrying
amount
400,000
215,353
615,353
Contractual cash flows
Total
-
(147,389)
(147,389)
2 months or
less
-
(147,389)
(147,389)
2-12 months
-
-
-
Contractual cash flows
Total
(400,000)
(215,353)
(615,353)
2 months or
less
(400,000)
(215,353)
(615,353)
2-12 months
-
-
-
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
d) Foreign currency risk
The Group is exposed to transactional foreign currency risk to the extent that there is a mismatch
between the currencies in which sales, purchases, receivables and borrowings are denominated and
the respective functional currencies of the Group companies. The Group’s exposure to foreign
currency risk is concentrated primarily in trade receivables which are invoiced in United States Dollars
(USD). As USD sales increase there will be a natural hedge in place as majority of Group expenditure
is in Australian Dollars (AUD). Other foreign currency risk is not material at present.
Exposure to foreign currency risk
The following is the summary quantitative data about the Group’s exposure to currency risk as
reported to the management of the Group:
Trade receivables
Trade payables
Net statement of financial position exposure
Sensitivity analysis
30 June 2019
30 June 2018
USD
125,000
(1,875)
123,125
USD
146,620
-
146,620
If foreign exchange rates were to increase / decrease by 10 per cent from rates used to determine fair
values as at the end of the reporting period, assuming all other variables that might impact fair value
remain constant, then the impact on profit or loss for the year would be as follows:
Impact on profit after tax
10% increase in USD/AUD exchange rate
10% decrease in USD/AUD exchange rate
30 June 2019
30 June 2018
$
17,531
(15,937)
$
19,801
(18,001)
There has been no change in assumptions or method used to determine foreign currency sensitivity
from the prior year.
22. Operating leases
The Group leases office premises under an operating lease. The lease is for a three year term with a
3.5% annual increase each year and includes an option to renew for a further three years from August
2021.
A lease liability of $30,253 has been recognised as at 30 June 2019 in relation to a three month rent
free period granted on signing of the lease. The lease liability is being amortised to the statement of
profit or loss over the remaining lease term.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
22. Operating leases (continued)
i. Future minimum lease payments
At 30 June, the future minimum lease payments under non-cancellable leases, on the assumption the
three year lease renewal is accepted, are payable as follows:
Less than one year
Between one and five years
More than five years
ii. Amounts recognised in profit or loss
Lease expense
23. Commitments
30 June 2019
$
30 June 2018
$
175,937
661,002
14,530
851,469
88,134
-
-
88,134
30 June 2019
$
30 June 2018
$
198,476
108,171
The Group has no commitments or contingencies other than those described in the Operating Leases
note above.
24. Auditors’ remuneration
Audit and review services
Auditors of the Group - KPMG
Audit and review of financial statements
Other services
Auditors of the Group - KPMG
30 June 2019
30 June 2018
$
$
60,030
60,030
50,975
50,975
Investigating accountants report (IPO)
79,250
95,000
The Board has considered the non-audit services provided during the year by the auditor and is
satisfied that the provision of those non-audit services during the year by the auditors is compatible
with, and did not compromise, the auditor independence requirements of the Corporations Act 2001.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
25. Related parties
A. Parent and ultimate controlling party
Identitii Limited is the parent and ultimate controlling party of the Group.
B.
Transactions with key management personnel
a) Key management personnel compensation
Key management personnel (KMP) compensation comprised the following:
Compensation by category
Short-term employment benefits
Post-employment benefits
Other long-term employment benefits
Share-based payments
30 June 2019
30 June 2018
$
450,286
25,704
12,308
552,709
1,041,007
$
213,885
-
-
203,063
416,948
Compensation of the Group’s KMP includes salaries, non-cash benefits and mandatory contributions
to post-employment superannuation and provident funds.
Certain Directors as well as senior employees of the Group are entitled to participate in the Equity
Incentive Plan.
b) Key management personnel transactions
Directors of the Company control approximately 22% of the voting shares of the Company.
A number of KMP, or their related parties, hold positions in other entities that result in them having
control, or joint control, over the financial or operating policies of that entity.
A number of these entities transacted with the Group during the year. The terms and conditions of the
transactions with KMP and their related parties were no more favourable than those available, or
which might reasonably be expected to be available, on similar transactions to non-KMP related
entities on an arm’s length basis.
The aggregate value of transactions and outstanding balances related to KMP and entities over which
they have control or significant influence were as follows:
Transactions ($)
Loans to Director – Nicholas
Armstrong
Transaction values for
year ended 30 June
Note
2019
2018
Balance outstanding
as at 30 June
2019
2018
(i)
-
1,137
10,320
10,320
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
25. Related parties (continued)
(i) Unsecured loans were advanced to Director and CEO Nicholas Armstrong. No interest is payable
on the loan and it has no fixed term of repayment. This loan is included in other receivables in the
statement of financial position.
26. List of subsidiaries
The Company has one wholly owned subsidiary in Hong Kong, Identitii Hong Kong Limited, which
was incorporated on 8 January 2019. The Company provided $333,783 of financial support during the
year to its subsidiary to assist with the payment of current and ongoing general operating costs mostly
in relation to salaries and employee benefit expenses.
27. Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2019, the parent entity of the Group was
Identitii Limited.
Results of parent entity
Total comprehensive loss for the year
Financial position for the parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity
Share capital
Reserves
Retained losses
Total equity
30 June 2019
30 June 2018
$
$
(8,163,297)
(2,929,945)
5,715,689
6,139,517
1,379,820
1,412,456
780,883
780,883
817,530
817,530
16,261,495
2,582,799
3,939,439
1,975,966
(13,485,660)
(5,320,479)
5,358,634
594,926
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
28. Share based payment arrangements
For the year ended 30 June 2019, the Group recognised a share based payment expense of
$2,728,086 in the statement of profit or loss (30 June 2018: $917,395) under the following share based
payment arrangements.
Share option programme
Director options
Canaccord options
Equity incentive plan
In issue at end of the year (1)
(i)
(ii)
(iii)
(iv)
Share options
30 June 2019
30 June 2018
$
4,996
109,627
620,303
Number of
options
-
400,000
1,950,000
1,849,602
6,208,334
$
1,932,115
Number of
options
6,086,711
43,851
400,000
-
-
-
-
2,584,528
8,558,334
1,975,966
6,486,711
(1) Further to the above, the Company has 4,485,918 Series A share options on issue as at 30 June
2019 (30 June 2018: 4,485,918) however these options fall outside the scope of AASB 2 Share Based
Payments.
a) Description of share based payment arrangements
(i) Share Option Programme (equity settled) – closed
In 2016 the Group established the share option programme. This programme entitled key
management personnel and senior employees to purchase ordinary shares in the Company
subject to vesting conditions. Vesting conditions attached to these options required the employees
to complete a specified period of service with the Group. Under this programme, vested options
issued on or before 21 October 2016 were exercisable for ordinary shares at a price of $0.04343
per share. Vested options issued on or before 22 September 2017 were exercisable at a price of
$0.23 per share.
On 28 June 2018, the Board exercised its discretion to vest all outstanding options and issue
ordinary shares to the value of the shares that would otherwise have been issued under the
scheme less the aggregate exercise price payable in respect of exercise.
On 6 August 2018, 370,000 options were granted to key management with an exercise price of
$0.23 per share. The Board exercised its discretion to vest these options and issue ordinary
shares to the value of the shares that would otherwise have been issued under the scheme less
the aggregate exercise price payable in respect of exercise.
On 6 August 2018, 5,649,762 vested options valued at $1,895,397 were exercised by key
management personnel for ordinary shares in the Company and 806,949 vested options valued
at $224,127 were forfeited as part of a cashless exercise.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
28. Share based payment arrangements (continued)
•
•
5,014,028 share options were exercised and 281,222 share options were forfeited at a price
of $0.04343 per share, and
635,734 share options were exercised and 525,727 share options were forfeited at a price of
$0.23 per share.
At 30 June 2019, all share options awarded under the share option programme have vested and
been exercised for ordinary shares in the Company and, as such, this programme is now closed.
The fair value of share options granted under the share option programme have been measured
using the Black-Scholes model. A share based payment expense of $192,405 in relation to these
options has been recognised in the statement of profit or loss for the year ended 30 June 2019.
Grant date
20 March 2016
20 March 2016
14 June 2016
29 July 2016
15 August 2016
1 September 2016
11 September 2016
21 October 2016
22 September 2017
6 August 2018
Share options issued
Exercised for ordinary shares
Forfeited
Share options on issue as
at 30 June 2019
Number of
instruments
1,050,000
1,974,000
630,000
1,300,000
700,000
720,000
180,000
180,000
1,930,000
370,000
9,034,000
(6,979,762)
(2,054,238)
-
Vesting conditions
3 years (1)
4 years (2)
4 years (2)
4 years (2)
3 years (1)
3 years (1)
4 years (2)
4 years (2)
4 years (2)
Vest immediately on
grant date
Contractual life of
options
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
10 years
(1) 3 year share option programme – 1/3 of share options issued vest 3 months after grant date,
and the remaining 2/3 of options issued vest monthly over the remaining 33 months of the vesting
term. Subsequently, all options were vested on 28 June 2018 as per Board discretion and
exercised on 6 August 2018.
(2) 4 year share option programme – 1/3 of share options issued vest 3 months after grant date,
and the remaining 2/3 of options issued vest monthly over the remaining 45 months of the vesting
term. Subsequently, all options were vested on 28 June 2018 as per Board discretion and
exercised on 6 August 2018.
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Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
28. Share based payment arrangements (continued)
(ii) Share options issued to Director Michael Aston (equity settled)
On 28 June 2018, Michael Aston was granted 400,000 share options at an exercise price of $0.75
per share in his capacity as Director of the Company. 25% of the options vested immediately on
issue with the remaining 75% vesting in equal annual tranches over two years.
The fair value of share options granted to Michael Aston have been measured using the Black-
Scholes model. A share based payment expense of $65,776 in relation to these options has been
recognised in the statement of profit or loss for the year ended 30 June 2019.
(iii) Share options issued to supplier of services
Canaccord Genuity (Australia) Limited (equity settled)
On 17 October 2018, the Company issued 1,950,000 share options to Canaccord Genuity
(Australia) Limited (Canaccord) in consideration for corporate advisory services to be provided in
connection with the Group’s ongoing capital markets strategy. The options vested immediately
and are subject to a mandatory escrow of 24 months commencing from the date of issue. The
options expire on 1 July 2021.
The fair value of share options granted have been measured using the Black-Scholes model. A
share based payment expense of $620,303 in relation to these options has been recognised in
the statement of profit or loss for the year ended 30 June 2019.
(iv) Equity Incentive Plan (equity settled)
On 10 January 2018 the Group established the Equity Incentive Plan (EIP). This is a long-term
plan under which share options or performance rights to subscribe for shares may be offered to
eligible employees and consultants as selected by the Directors at their discretion. Currently only
share options have been awarded under the EIP.
Under the EIP, one share option entitles the holder to one share in the Company subject to vesting
conditions such as the satisfaction of performance hurdles and/or continued employment. The
Board have the discretion to settle share options with a cash equivalent payment. Participants in
the EIP will not pay any consideration for the grant of the share option unless determined
otherwise. Share options will not be listed and may not be transferred, assigned or otherwise dealt
with unless approved by the Board. If the employee’s employment terminates before the share
options have vested, the share option will lapse, unless approved otherwise by the Board. Eligible
employees holding a share option pursuant to the EIP have no rights to dividends and are not
entitled to vote at shareholder meetings until that share option is vested and, where required,
exercised.
The fair value of share options granted have been measured using the Black-Scholes model. A
share based payment expense of $1,849,602 in relation to these options has been recognised in
the statement of profit or loss for the year ended 30 June 2019.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
28. Share based payment arrangements (continued)
The terms and conditions of share options granted under the EIP during the year ended 30 June
2019 are as follows.
Grant date
CEO Nicholas Armstrong
(6 July 2018)
Key management
(1 August 2018)
Key management
(2 October 2018 – 30 June 2019)
Consultant
(1 January 2019)
Key management
(18 March 2019)
Share options issued
Forfeited
Share options on issue as at
30 June 2019
Number of
instruments
1,350,000
Vesting conditions
Contractual life
of options
3 years (1)
10 years
1,250,000
10% upfront, 3 years (2)
10 years
3,250,000
3 years (1)
4 years
200,000
2 years (3)
4 years
4 years (4)
5 years
200,000
6,250,000
(41,666)
6,208,334
(1) 3 year equity incentive plan – share options vest in equal annual instalments over 3 years
from grant date
(2) 3 year equity incentive plan – 10% of share options vest immediately on grant date with the
remaining 90% of share options held vesting in equal annual instalments over 3 years from grant
date
(3) 2 year equity incentive plan – share options vest in equal annual instalments over 2 years
from grant date
(4) 4 year equity incentive plan – share options vest in three equal instalments from grant date
pending three specific performance hurdles being met relating to product proof of value,
commercialisation and go-live. Share option vesting has been estimated at 4 years.
b) Measurement of grant date fair values
The following inputs were used in the measurement of the fair values at grant date of the share based
payment awards granted during the year:
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
28. Share based payment arrangements (continued)
Share Option
Programme
Canaccord
Equity Incentive Plan
$0.52
$0.75
$0.23
113%
>1
Nil
$0.51
$0.85
$1.03
107%
3
Nil
CEO
$0.52
$0.75
$0.75
100%
4
Nil
Key
management
$0.52
$0.72
$0.75
108%
4
Nil
Consultant
$0.49
$0.70
$0.75
104%
4
Nil
2.12%
2.10%
2.06%
2.01%
1.81%
Fair value at grant date
Share price at grant date
Exercise price
Expected volatility (1)
Expected option life (years)
Expected dividends
Risk free rate (2)
(1) Expected volatility is based on a review of comparator companies as a proxy to examine
fluctuations in share prices with the length of the estimation period commensurate with the life of each
share based payment.
(2) Risk free rate is based on Australia’s 3-year bond yield.
c) Reconciliation of outstanding share options
The number and weighted-average exercise price of share options under the share based payment
arrangements noted above were as follows:
Outstanding at 1 July
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at 30 June
Number of
options
2019
6,486,711
(848,615)
(5,649,762)
8,570,000
8,558,334
Weighted-
average
exercise price
2019
$0.11
$0.20
$0.06
$0.79
$0.78
Number of
options
2018
6,734,000
(1,247,289)
(1,330,000)
2,330,000
6,486,711
Weighted-
average
exercise price
2018
$0.04
$0.09
$0.04
$0.32
$0.11
Exercisable at 30 June
2,333,334
$0.98
6,186,711
$0.08
29. Subsequent events
On 30 July 2019, the Group announced the signing of a non-exclusive perpetual licence agreement
with Loot Financial Services Limited (Loot). The licence allows the Group to use Loot’s fully developed
user facing mobile and web applications for a cash consideration of £35,000 ($62,150) with no
ongoing financial or non-financial commitments.
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D
Notes to the Consolidated Financial Statements
Identitii Limited
For the year ended 30 June 2019
29. Subsequent events (continued)
On 20 August 2019, the Group announced the signing of a new licence agreement to provide its
Overlay+ platform to HSBC Australia, representing the commercialisation of a new use case for the
Overlay+ technology. Implementation is to be completed in Q2 2020 with the platform expected to go
live thereafter. The agreement is for an initial five-year term and has a minimum contract value of
$511,600 with scope to be extended.
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D
Directors’ Declaration
Identitii Limited
For the year ended 30 June 2019
1. In the opinion of the Directors of Identitii Limited (‘the Company’):
a. the consolidated financial statements and notes that are set out on pages 19 to 63 are 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
ii.
its performance for the financial year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b. 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. The Directors draw attention to Note 2 to the financial statements, which includes a statement of
compliance with International Financial Reporting Standards.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act
2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30
June 2019.
Signed in accordance with a resolution of the Board of Directors:
Michael Aston
Chairman
Sydney
28 August 2019
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D
Independent Auditor’s Report to the Members of Identitii
Limited
kpmg
Independent Auditor’s Report
To the shareholders of Identitii Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Identitii Limited (the Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
• 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 ended on that date; and
• complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2019
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of cash
flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors' Declaration.
The Group consists of Identitii Limited (the Company) and
the entities it controlled at the year end or from time to
time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 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 fulfilled our other ethical responsibilities in accordance with the Code.
Material uncertainty related to going concern
We draw attention to Note 2, Basis of preparation, Going Concern, in the financial report. The conditions
disclosed in Note 2 indicate a material uncertainty exists that may cast significant doubt on the Group’s
ability to continue as a going concern and, therefore, whether it will realise its assets and discharge its
liabilities in the normal course of business, and at the amounts stated in the financial report. Our opinion is
not modified in respect of this matter.
In concluding there is a material uncertainty related to going concern, we evaluated the extent of the
uncertainty regarding events or conditions casting significant doubt on the Group’s assessment of going
concern. Our approach to this involved:
•
Assessing the Group’s cash flow forecasts for incorporation of the Group’s operations and plans
to address going concern, in particular in light of the development costs incurred and history of
loss making operations;
65
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
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Independent Auditor’s Report to the Members of Identitii
Limited
66
kpmg
•
Evaluating the feasibility, quantum and timing of the Group’s plans to raise additional capital or
funds to address going concern; and
• Determining the completeness of the Group’s going concern disclosures for the principal matters
casting significant doubt on the Group’s ability to continue as a going concern, the Group’s plans
to address these matters, and the material uncertainty.
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 matter described below to be the Key Audit Matter.
Accounting for Share-Based Payments and Share Option Reserve (AUD $2,584,528)
Refer to Note 6e Significant accounting policies & Note 28 Share-based payment arrangements
The key audit matter
How the matter was addressed in our audit
Accounting for Share-Based Payments and Share
Option Reserve is a key audit matter due to:
(i) The significant judgement we used to assess
the volatility and risk free rate inputs used by
the Group in the Black-Scholes valuation
model for share options issued under the
Group’s share based compensation plans.
This required the involvement of our valuation
specialists.
(ii) The Group’s manual share based payment
expense calculation includes a number of
inputs such as share options granted, vested,
exercised and forfeited across three different
share based compensation plans, which
increases the risk of error. This resulted in
increased audit effort.
(iii) The complexity of the Group’s range of share
based compensation plans, which increases
the risk of interpretational differences against
principles based criteria contained in
accounting standards.
Our procedures included:
• Evaluated the appropriateness of the Group’s
accounting policy for share-based payments
against the principles based criteria in AASB 2
Share-based Payment.
• Obtained an understanding of the Group’s share
based compensation plans by inquiring with the
Group and inspection of the Group’s policies and
underlying share option offers in their shared
based payment compensation plans.
• Worked with our valuation specialists to:
•
•
•
assess the appropriateness of the Group’s
Black-Scholes valuation model against the
requirements of the accounting standard
and industry practice,
compare the market derived inputs being
the risk free rate and volatility rate used in
the Group’s Black-Scholes valuation model
against publicly available market data for
comparable entities, and considered
differences for the Group. We used our
knowledge of the Group and our industry
experience; and
perform an independent Black-Scholes
valuation of the share options using the
publicly available risk free rate and volatility
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rate from the procedure noted above. We
compared the valuations to those recorded
by the Group.
• Checked a sample of the various inputs to the
Group’s manual share based payment expense
calculation, such as grants, exercise, vests and
forfeitures. We compared to underlying offer
letters, shared based payment compensation
plans, and the grant date fair value calculated by
the Group. We recalculated the share based
payment expense and compared this to the
expense recognised by the Group.
• Compared the value of the share options
recorded by the Group in the general ledger to
the value of share options determined by the
Group’s Black-Scholes valuation model.
• Assessed the adequacy of disclosures against
the requirements of the accounting standards.
Other Information
Other Information is financial and non-financial information in Identitii Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the
Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
• implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error
• assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.
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Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• 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 Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They 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 the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Identitii Limited for the year
ended 30 June 2019, complies with
Section 300A of the Corporations Act
2001.
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 responsibilities
We have audited the Remuneration Report included in pages
11 to 17 of the Directors’ report for the year ended 30 June
2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Nicholas Buchanan
Partner
Sydney
28 August 2019
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Additional ASX Information
In accordance with corporate governance statement ASX 4.10.3, the Directors provide the following
information as at 12 August 2019.
a) Distribution of shareholders and options holders
Fully paid ordinary shares
holding ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-9,999,999,999
Totals
Holders
Number of shares
% of issued capital
37
164
101
101
41
444
25,852
476,053
736,726
3,351,277
49,928,891
54,518,799
0.047
0.873
1.351
6.147
91.581
100.000
There are 57 shareholders holding less than a marketable parcel of 1,471 shares each (i.e. less than
$500 per parcel of shares) based on the closing price of AUD 0.34 on 12 August 2019 representing a total
of 50,319 shares.
b) Twenty largest shareholders
Shareholder
275 Invest 2 Pty Ltd
UBS Nominees Pty Ltd
Holywell Ford Pty Limited
Wodi Wodi Pty Limited
J P Morgan Nominees Australia Pty Limited
KTM Ventures Innovation Fund LP
HSBC Custody Nominees (Australia) Limited
Structure Investments Pty Limited
The Australian Special Opportunity Fund LP
1
2
3
4
5
6
7
8
9
10 Mr Benjamin Buckingham
11 Mr Elliot Shepherd
12
KTM Ventures Co-Investment Services Pty Ltd
Bannaby Investments Pty Limited
13 Oxleigh Pty Ltd
14
15 Mainstay Holdings Pty Ltd
16 Mr Daniel Friedman
17 Mainstay Holdings Pty Ltd
18 Mr Jeremy Manoto
19 Mr Elvis Jarnecic
20
Total Securities of Top 20 Holdings
Total Securities
Citicorp Nominees Pty Limited
Number of
shares held
9,398,340
6,207,193
4,633,953
3,040,749
2,847,347
2,567,306
2,204,174
2,126,670
2,094,566
1,386,501
1,326,538
% of
issued
capital
17.24
11.39
8.50
5.58
5.22
4.71
4.04
3.90
3.84
2.54
2.43
1,283,653
2.35
1,017,277
945,981
752,757
720,000
700,000
656,974
481,618
431,868
44,823,465
54,518,799
1.87
1.74
1.38
1.32
1.28
1.21
0.88
0.79
82.22
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Additional ASX Information
c) Substantial shareholders
A substantial shareholder is one who has a relevant interest in 5 per cent or more of the total issued shares
in the Company. Following are the substantial shareholders in the Company based on notifications provided
to the Company under the Corporations Act 2011:
Shareholder
275 Invest 2 Pty Ltd
Regal Funds Management Pty Ltd
Martin Rogers
Australian Special Opportunity Fund LP
Wodi Wodi Pty Limited
d) Voting rights
Number of
shares
9,398,340
6,220,193
5,984,962
3,094,566
3,040,749
% of issued
capital
17.24
11.41
10.98
5.68
5.58
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a
meeting or by proxy has one vote on a show of hands. There are no other classes of equity securities.
e) Restricted securities
The Company has the following fully paid ordinary restricted securities:
ASX escrowed for 24 months to 17 October 2020
Voluntarily escrowed for 24 months to 17 October 2020
Total restricted securities
Free float
Total shares
Number of shares
22,679,774
5,313,621
27,993,395
26,525,404
54,518,799
Holders
19
15
34
410
444
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Corporate Directory
Share Registry
Boardroom Pty Limited
Level 12
225 George Street
Sydney
NSW 2000
Telephone: (02) 9290 9600
Directors
Michael Aston, Chair
Nicholas Armstrong
Martin Rogers
Peter Lloyd
Company Secretary
Elissa Hansen
Registered Office
Level 2
129 Cathedral Street
Woolloomooloo
NSW 2011
Telephone: (02) 9056 4160
ABN 83 603 107 044
Company Website
https://identitii.com/
Auditors
KPMG
300 Barangaroo Avenue
Sydney
NSW 2000
Solicitors
Watson Mangioni Lawyers
Pty Limited
Level 23
85 Castlereagh Street
Sydney
NSW 2000
Securities Exchange Listing
Identitii Limited shares are
Listed on the Australian
Securities Exchange.
ASX Code: ID8
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