Identitii Limited
ABN : 83 603 107 044
ASX : ID8
FY20
Annual Report
Contents
3 A letter from our Chairman
5 A letter from our CEO
7 FY20 Highlights
8
Directors’ Report
24 Auditor’s Independence Declaration
25 Consolidated Statement of Profit or Loss and Other Comprehensive Income
26 Consolidated Statement of Financial Position
27 Consolidated Statement of Changes in Equity
28 Consolidated Statement of Cash Flows
29 Notes to the Consolidated Financial Statements
70 Directors’ Declaration
71 Auditor’s Report
75 Additional ASX Information
77 Corporate Directory
About Identitii
Identitii is helping reduce regulatory
risk, without replacing legacy
technology.
Identitii LimitedAnnual Report FY20 Identitii Limited
Identitii Limited
Annual Report FY20
Identitii Limited
Annual Report FY20
Annual Report FY20
Chairman’s Letter
A letter from our CEO
A letter from our CEO
A letter from
our Chairman
Dear shareholders and friends,
FY20 Highlights:
• Customer revenue increased 48% year
on year
• Quarterly operating cash flows
reduced 45% between Q1 and Q4
I am pleased to provide Identitii’s FY20 Annual
Report. Overall, Identitii had a successful year,
hitting a number of key milestones as we work
to become a self-sustaining, global business.
• Second licence customer, HSBC Australia
• Raised $1.9million, with an additional
$1.9million raised after year end
A strategy for the future
Identitii Limited
Identitii is progressing well towards key
strategic goals, which are driven by the needs
of our customers. Not only are we responding
ABN 83 603 107 044
to structural changes in the global financial
ecosystem, but to trends that impact our
customers businesses. These include increasing
regulatory obligations, acceleration of digital
transformation and changing customer
Annual Financial Report
expectations.
The Company is also well placed to survive the
COVID-19 crisis and to help regulated entities
For the year ended 30 June 2020
continue to meet customer needs, while
lowering the cost of business and maintaining
regulatory compliance while they recover.
• Company restructure put the right team
in place for long term success
Customer Revenue
48% increase
$1.000
$0.500
$0
FY19
$0.635
FY20
$0.942
MILLIONS ($AU)
Quarterly Operating Cash Flows
Drivers for change
45% decrease
A single theme unites the regulatory initiatives
driving change for our customers. The need
for more information. Today, different data
formats and the use of multiple systems make it
hard to know you have complete and accurate
information to report.
The onus is on our customers to better identify,
manage and securely share this information.
Or risk increasing financial crime, fines for
non-compliance or even jail time for executives.
Q1
$2.268
Q2
$2.158
Q3
$1.450
Q4
$1.245
MILLIONS ($AU)
$2.500
$2.000
$1.500
$1.000
$0.500
$0
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Identitii Limited
Identitii Limited
Annual Report FY20
Identitii Limited
Annual Report FY20
Annual Report FY20
Chairman’s Letter
A letter from our CEO
A letter from our CEO
In addition to regulatory demand, new
technologies have revolutionised how we
interact, and customers expect a simpler and
more personal experience. This has accelerated
the need for digital transformation, a difficult
and costly undertaking in an industry known for
legacy technology and paper-based processes.
Identitii’s overlay approach solves both
of these challenges. Instead of replacing
complex technology systems, our strategy is to
enhance what is already there. This enables our
customers to quickly provide a seamless,
digital experience for their clients and creates
an auditable record of the data needed to
ensure regulatory compliance and reduce
financial crime.
Identitii Limited
The right team
ABN 83 603 107 044
Identitii has ambitious goals for FY21 and we
are well positioned to deliver on them. We have
the right team in place, led by John Rayment,
whose experience and understanding of how
to drive our business forward are already
Annual Financial Report
yielding significant results for the Company.
John’s focus is on driving customer growth
with new licence sales both here in Australia
For the year ended 30 June 2020
and internationally and in turn, increasing
shareholder value. He was instrumental in
expanding our business development function,
with former executives from Deutsche Bank,
Standard Chartered Bank and Travelex bringing
30 years of experience to the team.
You may also have seen that following year-end
we announced a Master Services Agreement
with Mastercard. This clearly indicates that
the work done to restructure and refocus the
business in FY20 has us on the right track for
success in FY21.
Thank you all for your continued support.
Steve James
Independent Chairman
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Identitii Limited
Identitii Limited
Annual Report FY20
Identitii Limited
Annual Report FY20
Annual Report FY20
A letter from our CEO
A letter from our CEO
A letter from our CEO
A letter from
our CEO
Dear shareholders and friends,
I was appointed CEO and Managing Director
and we welcomed Steve James as our
new Non-Executive Director in mid-March.
Several months later the Board agreed, from an
independence perspective, that it was
appropriate for Steve James to be appointed
Chairman, and for our Co-Founder and largest
shareholder, Nick Armstrong, to remain on the
Board as Non-Executive Director.
Like most Australian companies, FY20 has
been a year of extraordinary change for
Identitii as we’ve watched terrible bushfires
and floods devastate entire communities, and
the global COVID-19 crisis devastate entire
industries. In addition to this, our Company
has faced significant internal challenges this
year, experiencing delays to our business
development agenda which adversely
impacted our ability to raise capital. That said,
ABN 83 603 107 044
I’m very pleased to report that despite these
challenges, we didn’t just survive FY20 – I
believe we’ve finished in a very strong position.
Identitii Limited
The current Board wishes to take this
opportunity to again thank both Mike Aston and
Peter Lloyd for the professionalism and support
they showed the Company whilst in office and
wish them the very best of luck in their future
endeavours. Despite a tumultuous FY20, the
current Board and Executive have settled into
a very positive and supportive rhythm and are
optimistic about the future.
This year was all about next year
Here are the key themes that defined the year
Annual Financial Report
we’ve had as a company.
Transitioning our Board and CEO
For the year ended 30 June 2020
I was introduced to our Co-Founder Nick
Armstrong in September of 2019 by a close
mutual friend, whilst working in London and
planning my family’s return to Sydney at
the end of the year. Nick introduced me to
Identitii and indicated he was thinking about
stepping down as CEO sometime in 2020 as
the business moved into its next growth phase.
He offered me the chance to join Identitii and
I started at the end of December as (Interim)
Chief Operating Officer to help the Leadership
Team execute their immediate goals, freeing
Nick up to focus on the next round of
fundraising.
Following the Board and Executive changes
mid-March, our focus for FY20 quickly
crystallised on preparing for a strong start to
FY21. We set capital, costs, people, technology
and business development objectives – and I’m
proud to say that we hit all of them by year end.
Capital: our objective was to raise enough
capital to extend our runway into 2021, allowing
us to focus firmly on delivering new commercial
deals this side of Christmas. We successfully
raised $1.9m in May and raised another $1.9m
in July.
Costs: our objective was to significantly reduce
operating costs to even further extend our
runway. Q4 FY20 ‘like for like’ operating costs
(excluding one-off restructure costs) were 45%
lower than Q1 FY20 and will hold until new
commercial deals land.
In mid-March this year our then Chairman, Mike
Aston and Non-Executive Director, Peter Lloyd
decided the time was right to resign from their
roles, which created the opportunity for Nick
Armstrong to be appointed Chairman and
resign from the CEO role.
People: our objective was to increase capacity
in sales and technology, whilst reducing costs.
We welcomed three new direct sales
executives, created a new channel sales role,
and expanded our senior engineering ranks, to
increase throughput.
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Identitii Limited
Identitii Limited
Annual Report FY20
Identitii Limited
Annual Report FY20
Annual Report FY20
Technology: our objective was to deploy
Overlay+ with a bank and prepare for ISO-
27001 information security certification. We
successfully commenced user testing with
HSBC Australia in May and are well on the way
to ISO certification, with the audit taking place
in August.
Business Development: our objective was to
build new sales and marketing plans and resell
the technology we’ve already built. We have
an all-new library of marketing content on
existing tech, and strong progress with new
business development meetings.
A letter from our CEO
A letter from our CEO
A letter from our CEO
The future ahead is very bright
One of the primary drivers for me joining
Identitii was the feedback I received about the
company from senior banking executives in
my own personal network. Based on very little
research (a polite yet cursory glance at our old
website and one or two pages from some of
our presentations) all of my connections were
immediately enthusiastic about me joining
a business that helped financial services
businesses reduce regulatory risk, created by
the collision of rising pressure to see more
transaction information, and legacy technology
that can’t do it.
The problem we solve is growing
Identitii Limited
Identitii Limited
Identitii exists to help financial services
businesses, such as banks and money service
ABN 83 603 107 044
businesses, reduce their regulatory risks, by
ABN 83 603 107 044
providing structure and transparency to client
data that is processed and stored on legacy
systems. As technology advances, so do the
Annual Financial Report
expectations of government regulators and
Annual Financial Report
both corporate and consumer customers, to
see much richer information relating to financial
transactions. The (big) problem is, most of
For the year ended 30 June 2020
the technology used to process and report
For the year ended 30 June 2020
transactions in the financial services industry is
not new, and more often than not a collection
of dozens, or even hundreds, of individual
systems inside single organisations.
Eight months into my tenure with Identitii, the
initial enthusiasm from my network is matched
equally by our repeated ability to secure
meetings with senior executives from tier-one
financial services businesses all over the world.
Either we’re all very nice people, or we’re
solving one of the biggest problems facing
the global financial services industry. In reality
the reason is a little from column-a and a lot
from column-b, and whilst we are addressing a
significant global opportunity, I am enormously
proud of the team we’ve assembled, and the
results I’m confident we will deliver in the
future.
Replacing these systems is extremely costly
and risky, so there has to be a better way
of increasing the amount of transaction
level information, without financial services
businesses having to incur the costs and risks
of replacing legacy technology. If the problem
isn’t addressed, financial services businesses
and their executives face increasing fines,
reputational damage and even jail time, as it
can enable financial crime. Identitii’s Overlay+
platform takes structured and unstructured
data from across systems and silos, and creates
a single, transparent and auditable view of
client data, to help financial services businesses
reduce their regulatory risk.
Thank you for taking the time to read our
annual report. On behalf of our Board and
team, I would like to take this opportunity to
thank you for your continued support –
we’re very much looking forward to FY21!
Regards,
John Rayment
Chief Executive Officer
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Contents
Identitii Limited
Annual Report FY20
Identitii Limited
For the year ended 30 June 2020
Directors’ Report
FY20 Highlights
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 2020 and the
auditor’s report thereon.
Directors’ Report
3
2019
Directors
19
20
Loot software
licence acquired
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Jul
The Directors of the Company at any time during the year ended 30 June 2020 and up to the date of this
report are:
Auditor’s Independence Declaration
HSBC Australia
becomes second customer
Aug
Consolidated Statement of Financial Position
Name, qualification and independence
status
Consolidated Statement of Changes in Equity
Sept
Experience, special responsibilities and other
directorships
ACCC testing
announced
Executive
Q1 OpEx is
$2.3M
Sept
Consolidated Statement of Cash Flows
Mr. John Rayment
Dip Proj Mgt, Dip Bus Mgmt, Dip Bus Mktg
R3 Partnership
John brings a wealth of experience to Identitii,
Nov
having supported many early-stage ventures through
Notes to the Consolidated Financial Statements
sharp periods of growth. He has held board and
Dec
executive roles at Travelex across the globe and has
proven success in helping businesses to scale in line
Dec
with rapidly expanding customer demand.
Directors’ Declaration
Appointed 19 March 2020
Auditor's Report
Q2 OpEx is $2.2M,
down 5% from Q1
Executive Director
Symphony
partnership
Additional ASX Information
Corporate Directory
John Rayment
joins as Interim COO
Non-Executive
Mr. Steven James
John Rayment
appointed CEO
M(Fin Serv) Law, NSAA, Dip FM, GAICD
Independent Non-Executive Director
Chairman
1 for 1 non-renounceable
Entitlement Issue announced
Appointed 19 March 2020
Nick Barrett and Andrew
Creighton join BD team
Mr. Nicholas Armstrong
Peter Agnew joins as
Head of BD
B. Sc
Non-Executive Director
FY20 Revenue up
Appointed 16 May 2020 (resigned as CEO
48% from FY19
FY20
15 May 2020)
FY21
63 new sales conversations
in one month
85% of Identitii employees
participate in share offer
Mastercard MSA signed
2020
John is the Chief Executive Officer/Managing
Director of the Company.
Jan
Mar
Q3 OpEx is $1.5M,
down 36% from Q1
Steve has held senior leadership and board
Mar
positions at multiple public and private organisations,
including the Commonwealth Bank of Australia,
Mar
CommSec, Aston Consulting, Motorcycling Australia
and Seer Asset Management. He also played a
Mar
pivotal role in developing the first online stockbroking
Team commences WFH
business for financial planners, which was later sold
Mar
under COVID-19
to CommSec.
Steve James
joins Board
Mar
Chairman of the Nomination and Remuneration
Entitlement Issue
May
Committee and the Audit and Risk Committee.
closes, raising $1.9M
Jun
Nicholas is an entrepreneur, with over 15 years’
Q4 OpEx is $1.2M,
experience in building and scaling technology
Jun
businesses. Nicholas was founder and CEO of
down 45% from Q1
COZero Holdings Ltd, an energy technology
Jun
company, until it was taken over by a Japanese
strategic investor in 2013. Nicholas co-founded
Identitii in 2014 with Eric Knight and was the CEO for
6 years before moving into his new role as Non-
Executive Director in May 2020.
Jul
Additional $1.9M raised via
Jul
Member of the Nomination and Remuneration
Residual Shortfall placement
Committee and the Audit and Risk Committee.
Jul
Gus Garcia joins as
Director, Technology
Jul
Aug
8
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Identitii Limited
Annual Report FY20
Directors’ Report
Directors’ Report
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 2020 and the
auditor’s report thereon.
Directors
The Directors of the Company at any time during the year ended 30 June 2020 and up to the date of this
report are:
Name, qualification and independence
status
Experience, special responsibilities and other
directorships
Executive
Mr. John Rayment
Dip Proj Mgt, Dip Bus Mgmt, Dip Bus Mktg
Executive Director
Appointed 19 March 2020
Non-Executive
Mr. Steven James
M(Fin Serv) Law, NSAA, Dip FM, GAICD
Independent Non-Executive Director
Chairman
Appointed 19 March 2020
Mr. Nicholas Armstrong
B. Sc
Non-Executive Director
Appointed 16 May 2020 (resigned as CEO
15 May 2020)
John brings a wealth of experience to Identitii,
having supported many early-stage ventures through
sharp periods of growth. He has held board and
executive roles at Travelex across the globe and has
proven success in helping businesses to scale in line
with rapidly expanding customer demand.
John is the Chief Executive Officer/Managing
Director of the Company.
Steve has held senior leadership and board
positions at multiple public and private organisations,
including the Commonwealth Bank of Australia,
CommSec, Aston Consulting, Motorcycling Australia
and Seer Asset Management. He also played a
pivotal role in developing the first online stockbroking
business for financial planners, which was later sold
to CommSec.
Chairman of the Nomination and Remuneration
Committee and the Audit and Risk Committee.
Nicholas is an entrepreneur, with over 15 years’
experience in building and scaling technology
businesses. Nicholas was founder and CEO of
COZero Holdings Ltd, an energy technology
company, until it was taken over by a Japanese
strategic investor in 2013. Nicholas co-founded
Identitii in 2014 with Eric Knight and was the CEO for
6 years before moving into his new role as Non-
Executive Director in May 2020.
Member of the Nomination and Remuneration
Committee and the Audit and Risk Committee.
8
Identitii Limited
Annual Report FY20
Directors’ Report
Name, qualification and independence
status
Experience, special responsibilities and other
directorships
Non-Executive
Mr. Michael Philip Aston
B. E. Eng
Independent Non-Executive Director
Chairman
Appointed 29 June 2018 (resigned 17 March
2020)
Mr. Peter Lloyd
MAICD
Independent Non-Executive Director
Appointed 4 September 2018 (resigned 17
March 2020)
Mr. Nathan Lynch
B.J., MAICD
Independent Non-Executive Director
Appointed 8 December 2019 (resigned 3
March 2020)
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.
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.
Nathan is an experienced public speaker, writer,
manager and start-up enthusiast. He specialises in
the fields of Financial Crime Intelligence, Anti-Money
Laundering, Counter-Terrorism Financing and
Regulatory Risk.
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Identitii Limited
Annual Report FY20
Directors’ Report
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 (resigned 8
October 2019)
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.
Member of the Nomination and Remuneration
Committee and the Audit and Risk Committee.
Company secretary
Elissa Hansen is a chartered secretary with nearly 20 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
3
3
25
22
22
6
3
B
3
3
25
21
22
6
3
A
1
-
1
1
1
-
1
B
1
-
1
1
1
-
1
A
1
-
1
-
-
-
-
Steven James
John Rayment
Nicholas Armstrong
Michael Aston
Peter Lloyd
Nathan Lynch
Martin Rogers
A – Eligible to attend
B – Attended
B
1
-
1
-
-
-
-
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Identitii Limited
Annual Report FY20
Principal activities
Directors’ Report
The principal activities of the Group during the financial year were business development, marketing and
research and development activities, as well as further development of Identitii’s Overlay+ platform.
Identitii helps reduce regulatory risk for financial institutions and their executives without replacing legacy
technology. The burden of regulatory compliance continues to increase, and financial institutions and their
executives face increasing fines, reputational damage and even jail time if regulatory reporting is
incomplete or inaccurate.
Identitii’s Overlay+ platform sits on top of existing legacy technology systems to create a single, digital
workflow for the structured and unstructured data financial institutions need to ensure regulatory
compliance.
Operating and financial review
Review of operations
During the year ended 30 June 2020, the Group achieved the following operational milestones:
− On 30 July 2019, the Group announced the signing of a non-exclusive perpetual licence agreement
with Loot Financial Services Limited. The licence delivered time and cost savings to the Group of
approximately four months and $2 million respectively.
− On 20 August 2019, the Group announced it signed a second licence agreement under the Global
Framework Agreement with HSBC Global Services (UK) Limited. The new licence agreement, with
HSBC Australia, is for a four year term and has a minimum contract value of $511,600.
− On 26 September 2019, the Group announced it was selected by the Australian Competition and
Consumer Commission as one of ten companies to test the Consumer Data Right (CDR) ecosystem.
− On 13 November 2019, the Group announced its partnership with Symphony Communications
Services LLC, to integrate its Overlay+ platform with Symphony’s leading global markets collaboration
platform tool. The combined solution enables Symphony’s 450,000 licensed users to securely collect,
store and share data and documents via the Symphony messaging platform.
− On 6 December 2019, the Group and R3 announced they would undertake a global, multi-bank trial of
its Overlay+ platform to R3’s member banks, to explore the benefits of Overlay+ on R3’s Corda
Enterprise blockchain. The CordApp trial was subsequently delayed due to the Coronavirus
(COVID-19) pandemic and is now due to take place in 2021.
− On 3 February 2020, the Company was placed into a trading halt and subsequently suspended from
official quotation pending completion of an equity raise.
−
During March 2020, a Board rejuvenation saw the resignation of Directors Michael Aston, Peter Lloyd
and Nathan Lynch and the appointment of Steven James. Nicholas Armstrong, the CEO and founder,
also resigned to take up a Non-Executive Director role whilst John Rayment was appointed CEO and
Managing Director.
− On 14 May 2020, the Company announced the completion of its shareholder Entitlement Issue and
the reinstatement of its shares to the Australian Securities Exchange (ASX). A total of 27.3 million
shares were issued, raising $1.9 million in capital.
− On 30 June 2020, the Group announced the expansion of its business development team with former
executives from Standard Chartered Bank, Deutsche Bank, Travelex and Western Union Business
Services. Nick Barrett, Andrew Creighton and Peter Agnew joined the team, bringing over 30 years’
experience in selling to and working in financial institutions both in Australia and around the world.
11
Identitii Limited
Annual Report FY20
Review of financial conditions
Directors’ Report
The Group reported revenue from contracts with customers of $941,592 for the year ended 30 June 2020
(30 June 2019: $635,134), an increase of 48% 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
$7,074,479 for the year ended 30 June 2020 (30 June 2019: $8,163,297 ) which was substantially driven
by salary and employee benefit expenses and expenditure on research and development (R&D) related
activities.
The Group held $1,323,748 of loans and borrowings at 30 June 2020 which includes $601,248 of lease
liabilities in relation to the adoption of AASB 16: Leases during the year. The Group had a positive net
current asset balance of $618,558 and positive overall net asset balance of $1,058,127.
The Group had $1,411,309 of cash and cash equivalents on hand at 30 June 2020 and reported a net cash
outflow from operating activities of $4,657,603 during the year ended 30 June 2020.
Significant changes in the state of affairs
In the opinion of the Directors there were no significant changes in the state of affairs of the Group that
occurred during the year ended 30 June 2020.
Dividends
No dividends were declared or paid by the Company during the financial year ended 30 June 2020.
Events subsequent to reporting date
On 10 July 2020, the Group announced the release of a new FX solution, deployed on the existing Overlay+
core platform, allowing the Company to solve more problems for existing customers and prospects and
further expanding its global market opportunities.
On 24 July 2020, the Group confirmed it had successfully raised an additional $1.9 million by placing 27.3
million Residual Shortfall Shares reserved per the Company’s Entitlement Offer prospectus.
On 29 July 2020, the Group settled its R&D finance loan with Radium Capital in full.
On 24 August 2020, the Group announced it had signed a five year Master Services Agreement (MSA)
with Mastercard International Incorporated (Mastercard). The MSA allows the Company to sell to and work
with any Mastercard business globally and is the first step in agreeing specific projects that will see
Identitii’s Overlay+ platform implemented with Mastercard. At the date of this report, the Company is not
able to determine the economic materiality of the agreement, as activity and revenue will be laid out in
subsequent Statements of Work.
The impact of the COVID-19 pandemic is ongoing and it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is rapidly developing and is dependent on
measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
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.
12
Identitii Limited
Annual Report FY20
Likely developments
Directors’ Report
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 focused on sales and marketing activities to bring in new
customer engagements and is evaluating plans to secure additional funding. To continue as a going
concern the Company is reliant on achieving its forecast revenue and research and development tax
incentive income milestones, as well as securing additional customer engagements and funding to meet
its working capital requirements.
Based on the above, the financial report for the year ended 30 June 2020 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.
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:
Steven James
John Rayment
Nicholas Armstrong (1)
Ordinary shares
Options over
ordinary shares
-
-
-
-
9,555,263
1,350,000
(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.
13
Identitii Limited
Annual Report FY20
Share options
Unissued shares under option
At the date of this report, unissued shares of the Group under option are:
Directors’ Report
Expiry date
1 July 2021
1 July 2021
1 July 2021
13 May 2022
2 October 2022
8 October 2022
19 November 2022
1 January 2023
14 January 2023
11 February 2023
6 March 2023
18 March 2023
27 May 2023
1 July 2028
6 July 2028
1 August 2028
Total unissued shares under option
All unissued shares are ordinary shares of the Company.
Exercise price Number of shares
$0.90
$0.98
$1.20
$0.10
$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
5,000,000
2,419,444
50,000
97,169
200,000
25,000
25,000
100,000
50,000
100,000
358,082
1,350,000
578,125
12,302,820
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 are included in
the remuneration report in Table 1.
Shares issued on exercise of options
During or since the end of the financial year, no ordinary shares of the Company were issued by the Group
as a result of the exercise of options.
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.
14
Identitii Limited
Annual Report FY20
Directors’ Report
Indemnification and insurance of officers and auditors (continued)
The Group paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses
insurance contracts for the year ended 30 June 2020 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
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial
year by the auditor are outlined in Note 23 to the financial statements.
The Board are satisfied that the provision of non-audit services during the financial year, by the auditor, 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 issued by the Accounting
Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work,
acting in a management or decision-making capacity for the company, acting as advocate for the
company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of RSM
There are no officers of the Company who are former partners of RSM.
Proceedings on behalf of the Group
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 24 and forms part of the Directors’ report for the year ended 30 June 2020.
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.
15
Identitii Limited
Annual Report FY20
Audited Remuneration Report
Directors’ Report
The Directors present the Remuneration Report (the Report) for the Company and its subsidiary (the
Group) for the year ended 30 June 2020. 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
acceptable to shareholders.
of a high calibre whilst incurring
a cost that is
The ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors
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 Direc tors of comparable companies when
undertaking the annual review process.
shall
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.
16
Identitii Limited
Annual Report FY20
Directors’ Report
Fixed and variable remuneration (continued)
Year ended to
30 June 2020
30 June 2019
Chairman’s Fee
Non-Executive Directors Fee
$
50,000
50,000
$
115,000
50,000
In the prior year, the Board approved an increase in Michael Aston’s remuneration 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. Michael Aston
resigned from the Company on 17 March 2020.
b) Executives and Executive Director remuneration
Remuneration for Executives and Executive Directors consists of fixed and variable remuneration only.
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 may be linked 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 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.
17
Identitii Limited
Annual Report FY20
Directors’ Report
Details of the nature and amount of each major element of remuneration of each Director of the Company, and other KMP of the Group are:
Table 1
Short-term benefits
Post-
employment
Other long-
term benefits
Termination
benefits
Share-based
payments
Total
Year ended 30 June 2020
$
$
$
Salary
Consulting fee Superannuation
(A)
$
Share options
(B)
$
$
$
% share-
based
payments
(variable)
Executive Directors
John Rayment (1)
Non-Executive Directors
Steven James (2)
Nicholas Armstrong (3)
Michael Aston (4)
Peter Lloyd (5)
Nathan Lynch (6)
Martin Rogers (7)
Other KMP
Margarita Claringbold (8)
Total
60,455
12,000
145,935
71,040
32,517
11,060
16,740
165,549
515,296
-
-
5,743
4,650
-
-
-
-
12,000
13,864
21,506
25,000
-
-
-
-
-
6,749
3,089
1,052
-
-
-
-
-
-
-
-
-
-
-
-
-
-
170,634
47,395
-
-
-
-
12,000
30,497
26,156
25,000
218,029
70,848
0%
12,000
388,939
125,184
35,606
12,112
16,740
165,549
826,978
0%
44%
38%
0%
0%
0%
0%
Appointed as CEO on 19 March 2020.
(1)
(2) Remuneration invoiced via Aston Consulting Pty Ltd of which Steven James is a beneficiary. Appointed 19 March 2020.
(3)
Includes remuneration as Executive Director from 1 July 2019 – 15 May 2020 and as Non-Executive Director from 16 May 2020 – 30 June 2020. Share options
held via 275 Invest 2 Pty Ltd of which Nicholas Armstrong is a beneficiary.
Share options held via M&M Funds Management Pty Ltd ATF Savu Superannuation Fund of which Michael Aston is a beneficiary. Resigned 17 March 2020.
(4)
(5) Resigned 17 March 2020.
(6)
(7) Remuneration invoiced via Structure Investments Pty Ltd ATF Rogers Family Trust of which Martin Rogers is a beneficiary. Resigned 8 October 2019.
(8) Remuneration invoiced via Gram Accounting & Advisory Pty Ltd of which Margarita Claringbold is a beneficiary. This includes remuneration for CFO, accounting
Appointed 8 December 2019 (resigned 3 March 2020).
and equity raise related services.
18
Identitii Limited
Annual Report FY20
Short-term
benefits
Year ended 30 June 2019
$
$
Salary
Superannuation
Post employment Other long-term
benefits
(A)
$
Directors’ Report
Share-based
payments
Share options
(B)
$
Total
% share-based
payments
(variable)
$
Executive Directors
Nicholas Armstrong
Non-Executive Directors
Michael Aston
Martin Rogers
Peter Lloyd (1)
Gregory Clark (2)
Other KMP
Margarita Claringbold
Total
148,674
14,970
12,308
486,933
662,885
73%
75,125
50,000
37,862
-
138,625
450,286
7,137
-
3,597
-
-
-
-
-
-
-
65,776
-
-
-
-
148,038
50,000
41,459
-
44%
0%
0%
0%
138,625
0%
25,704
12,308
552,709
1,041,007
(1)
(2)
Appointed 4 September 2018.
Appointed 29 June 2018 (resigned 30 July 2018).
In accordance with AASB 119 Employee Benefits, annual leave is classified as other long-term employee benefits.
(A)
(B) The fair value of share options is calculated at the grant date using the Black Scholes options-pricing model and allocated to each reporting period from grant
date to vesting date depending on the vesting conditions attached to the options. The value disclosed is the portion of the fair value of the options recognised
as an expense in each reporting period.
19
Identitii Limited
Annual Report FY20
3. Service agreements
Directors’ Report
The following is a summary of the current major provisions of the agreement relating to remuneration of
the Executive Director.
John Rayment – Chief Executive Officer
John Rayment is the Chief Executive Officer of the Group and is considered a key member of the Group’s
management team.
John receives a base salary of $210,000 per annum plus superannuation and will receive 8,000,000 share
options, subject to shareholder approval, with attached service and performance vesting conditions.
Employment Conditions
Commencement date: 19 March 2020
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 services of
a remuneration consultant
remuneration
to conduct an
packages negotiated with its Executive Director.
the Group will consider engaging
independent assessment of
the Non-Executive Directors of
the
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
20
Identitii Limited
Annual Report FY20
Directors’ Report
3. Service agreements (continued)
The following is a summary of the current major provisions of the consulting agreement relating to
remuneration of Non-Executive Director, Nicholas Armstrong.
Nicholas Armstrong – Non-Executive Director
During May 2020, Nicholas Armstrong stepped down as CEO and into a Non-Executive Director role. In
addition to this, a consulting agreement was signed effective 18 May 2020 which requires Nicholas to
provide an additional 2.5 days per week to the Company. The agreement covers the provision of business
consulting services to the CEO as well as supporting the CEO to execute on agreed strategic, operational
and commercial business objectives.
Nicholas receives $800 per day (exclusive of GST), with provision for additional days of work as required.
Employment Conditions
Commencement date: 18 May 2020
Term: Until 31 October 2020 after which the agreement may be extended by mutual agreement
Notice period required on termination: 1 month 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).
a) Options over equity instruments granted as compensation
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 share options were granted to KMP as compensation during the year ended 30 June 2020.
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 2019
Forfeited
Number
held at 30
June 2020
Vested
during
the year
Vested at
30 June
2020
Exercisable
at 30 June
2020
Nicholas Armstrong
1,350,000
-
1,350,000
450,000
Michael Aston
400,000
(41,918)
358,082
108,082
450,000
358,082
-
-
21
Identitii Limited
Annual Report FY20
5. KMP transactions
Directors’ Report
a) Loans to / (from) KMP and their related parties
Details regarding loans outstanding at the end of the reporting period to / (from) KMP and their related
parties, where the individual’s aggregate loan balance exceeded $100,000 in the reporting period, are as
follows:
John Rayment
Balance 1
July 2019
Balance 30
June 2020
Interest not
charged
Highest balance in
period
$
-
$
(100,000)
$
-
$
(100,000)
This loan is for a 12 month term, is interest free and may convert to equity at $0.07 per share with
shareholder approval.
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.
c) Movement 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:
Steven James
John Rayment
Nicholas Armstrong
Michael Aston (1)
Peter Lloyd (2)
Nathan Lynch (3)
Martin Rogers (4)
Margarita Claringbold
Held at 1 July
2019
Acquired
Held at 30 June
2020
-
-
9,478,340
252,897
-
-
2,134,003
7,000
-
-
76,923
71,057
-
-
-
-
-
-
9,555,263
323,954
-
-
2,134,003
7,000
(1) Michael Aston ceased as Director on 17 March 2020. The ordinary shares held balance at the end of
the financial period is at date of cessation.
(2) Peter Lloyd ceased as Director on 17 March 2020. The ordinary shares held balance at the end of the
financial period is at date of cessation.
22
Identitii Limited
Annual Report FY20
Directors’ Report
c) Movement in shares (continued)
(3) Nathan Lynch ceased as Director on 3 March 2020. The ordinary shares held balance at the end of the
financial period is at date of cessation.
(4) Martin Rogers ceased as Director on 8 October 2019. The ordinary shares held balance at the end of
the financial period is at date of cessation.
This Directors’ Report is signed in accordance with a resolution of the Board of Directors:
Steven James
Chairman
Sydney
27 August 2020
23
RSM Australia Partners
Level 13, 60 Castlereagh Street Sydney NSW 2000
GPO Box 5138 Sydney NSW 2001
T +61 (0) 2 8226 4500
F +61 (0) 2 8226 4501
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Identitii Limited for the year ended 30 June 2020, I declare
that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
Gary Sherwood
Partner
Sydney NSW
Dated: 27 August 2020
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
24
Identitii Limited
Annual Report FY20
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Revenue from contracts with customers
Research and development tax incentive
Government grants
Interest income
Note
9
10
30 June 2020
$
941,592
30 June 2019
$
635,134
740,381
364,539
14,396
1,184,264
174,210
51,553
Total revenue and other income
2,060,908
2,045,161
Expenses
Salaries and employee benefit expenses
Share based payments
Consultants fees
Advertising and marketing
Depreciation and amortisation
General expenses
Interest expense
Legal expenses
Office expenses
Travel and accommodation
Short-term lease payments
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
2,913,502
1,125,708
1,490,385
238,464
121,759
725,734
70,095
214,104
289,426
184,426
62,050
-
(2,291)
1,702,025
9,135,387
2,050,425
2,728,086
885,731
363,149
33,192
424,161
24,832
283,671
169,463
151,765
99,238
207,067
(1,036)
2,783,714
10,203,458
(7,074,479)
(8,158,297)
11
-
5,000
(7,074,479)
(8,163,297)
-
-
Total comprehensive loss for the year
(7,074,479)
(8,163,297)
Basic loss per share (cents)
Diluted loss per share (cents)
12
12
(12.18)
(12.18)
(16.27)
(16.27)
25
Identitii Limited
Annual Report FY20
Consolidated Statement
of Financial Position
Consolidated Statement of Financial Position
Note
30 June 2020
$
30 June 2019
$
Assets
Current assets
Cash and cash equivalents
Research and development tax incentive receivable
Trade receivables
Other receivables
Contract assets
Total current assets
Non-current assets
Intangible assets
Property, plant and equipment
Other non-current assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee provisions
Contract liabilities
Loans and borrowings
Total current liabilities
Non-current liabilities
Loans and borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share options reserve
Foreign currency translation reserve
Retained losses
Total equity
13
9
9
14
15
16
9
17
17
18
27
1,411,309
740,381
43,702
186,343
66,500
2,448,235
62,112
852,275
-
914,387
4,120,380
1,205,915
218,358
171,036
-
5,715,689
-
407,836
15,992
423,828
3,362,622
6,139,517
267,734
668,468
44,545
848,930
1,829,677
474,818
474,818
394,141
322,064
34,425
30,253
780,883
-
-
2,304,495
780,883
1,058,127
5,358,634
17,930,105
3,710,236
7,124
(20,589,338)
1,058,127
16,261,495
2,584,528
(1,729)
(13,485,660)
5,358,634
26
Identitii Limited
Annual Report FY20
Consolidated Statement
of Changes in Equity
Consolidated Statement of Changes in Equity
Note
Share
capital
Share
option
reserve
$
$
Foreign
currency
translation
reserve
$
Retained
losses
Total equity
$
$
Balance at 1 July 2019
16,261,495
2,584,528
(1,729)
(13,485,660)
5,358,634
Initial application of AASB 16
Adjusted balance at 1 July
2019
Total comprehensive loss
Issue of ordinary share capital
Costs of equity raising
Equity-settled share based
payments
Balance at 30 June 2020
5
18
18
27
-
-
-
(29,199)
(29,199)
16,261,495
2,584,528
(1,729)
(13,514,859)
5,329,435
-
1,908,158
(239,548)
-
-
-
-
1,125,708
8,853
(7,074,479)
(7,065,626)
-
-
-
-
-
-
1,908,158
(239,548)
1,125,708
17,930,105
3,710,236
7,124
(20,589,338)
1,058,127
Balance at 1 July 2018
3,939,439
1,975,966
Initial application of AASB 15
Initial application of AASB 9
Adjusted balance at 1 July
2018
Total comprehensive loss
Issue of ordinary share capital
Costs of equity raising
Share options exercised
Share options forfeited
Equity-settled share based
payments
Balance at 30 June 2019
18
18
27
-
-
-
-
3,939,439
1,975,966
-
10,999,975
(828,713)
-
-
-
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
16,261,495
2,584,528
(1,729)
(13,485,660)
5,358,634
27
Identitii Limited
Annual Report FY20
Consolidated Statement
of Cash Flows
Consolidated Statement of Cash Flows
Cash flows from operating activities
Receipts from customers
Receipts from government grants and tax incentives
Payments to suppliers and employees
Cash flows utilised in operations
Interest received
Interest and other costs of finance paid
Note
30 June 2020
$
30 June 2019
$
1,093,022
1,509,266
(7,269,044)
(4,666,756)
15,019
(5,866)
637,300
989,398
(6,769,681)
(5,142,983)
50,929
(4,387)
Total cash flows from operating activities
20
(4,657,603)
(5,096,441)
Cash flows from investing activities
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and
equipment
Acquisition of intangible assets
Other cash items from investing activities
Total cash flows from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Lease payments
Transaction costs related to borrowings and leases
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
(18,608)
1,840
(62,112)
12,830
(66,050)
(443,912)
2,740
-
45,115
(396,057)
850,000
-
-
(400,000)
(95,710)
(30,913)
-
(20,445)
1,758,158
10,999,975
-
(464,722)
2,016,813
31,270
(1,255,050)
9,355,750
Net (decrease) / increase in cash held
(2,706,840)
3,863,252
Opening cash balance
Effect of movement in exchange rates
Closing cash balance
13
4,120,380
(2,231)
1,411,309
259,995
(2,867)
4,120,380
28
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
Notes to the Consolidated Financial Statements
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 incorporate the assets and liabilities of all subsidiaries of Identitii
Limited as at 30 June 2020 and the results of all subsidiaries for the year then ended. Identitii Limited and
its subsidiaries together are referred to in these financial statements as the Group.
The Group is a for profit entity and is primarily involved in developing and licensing enterprise software for
regulated entities. Its main product Overlay+ is a platform that helps reduce regulatory risk, without
replacing technology systems.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 27
August 2020.
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).
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 16 Leases has 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 Group 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 other comprehensive income for the year ended 30 June 2020 reflects
a loss after income tax of $7,074,479 and total cash outflows from operating activities of $4,657,603. The
ability of the Group to continue as a going concern is dependent on a number of factors, the most significant
of which are achieving its forecast revenue and R&D tax incentive milestones, bringing in new customer
engagements and securing additional funding to meet its working capital requirements.
These factors indicate a material uncertainty which may cast significant doubt as to whether the Company
will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities
in the normal course of business and at the amounts stated in the financial report.
The Directors believe that it is reasonably foreseeable that the Company will continue as a going concern
and that it is appropriate to adopt the going concern basis in the preparation of the financial report after
considering the following:
29
Identitii Limited
Annual Report FY20
Going concern (continued)
Notes to the Consolidated
Financial Statements
•
•
•
the Company successfully raised a further $1.9 million after the end of the reporting period with an
oversubscribed placement of its Residual Shortfall shares;
the Company signed an MSA with Mastercard after the end of the reporting period and has other
potential customer engagements in the pipeline; and
the Company is evaluating plans to secure additional funding.
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 2020
financial report on a going concern basis is appropriate.
The financial report does not include any adjustments relating to the amounts or classification of recorded
assets or liabilities that might be necessary if the Group does not continue as a going concern.
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. Management bases its judgements, estimates and assumptions on historical
experience and on various other factors, including expectations of future events that management believe
to be reasonable under the circumstances. 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:
COVID-19 pandemic – judgement has been exercised in considering the impacts that the COVID-19
pandemic has had, or may have, on the Group based on known information. This consideration extends
to the nature of the services offered, customers, staffing and geographic regions in which the Group
operates.
Note 9 – revenue recognition: whether revenue from licence fees is recognised over time or at a point in
time.
30
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
b) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties at 30 June 2020 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 (d) – 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 17 (ii) – Leases : key assumptions relate to the probability of lease options to extend being exercised
as well as the estimation of the incremental borrowing rate (IBR). The Group has used an IBR of 5.6% and
has assumed the lease period will run for 6 years from inception in August 2018.
Note 21.ii(b) – measurement of expected credit loss (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 27 – 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.
5. Significant accounting policies
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted. The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 16 Leases
The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 Leases and for
lessees eliminates the classifications of operating leases and finance leases. The Group applied AASB 16
using the modified retrospective approach, under which the cumulative effect of initial application is
recognised in retained earnings at 1 July 2019. Accordingly, the comparative information presented for
2019 is not restated. Except for short-term leases and leases of low-value assets, right-of-use assets and
corresponding lease liabilities are recognised in the statement of financial position.
Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-
use assets (included in operating costs) and an interest expense on the recognised lease liabilities
(included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under
AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings
Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now
replaced by interest expense and depreciation in profit or loss.
31
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
AASB 16 Leases (continued)
For classification within the statement of cash flows, the interest and the principal portion of the lease
payments are disclosed in financing activities.
For lessor accounting, the standard does not substantially change how a lessor accounts for leases.
a)
Impact on financial statements
Impact on transition
On transition to AASB 16, the Group recognised additional right-of-use assets and lease liabilities,
recognising the difference in retained losses. The impact on transition is summarised below.
Right-of-use assets: property, plant and equipment
Lease liabilities – AASB 16: loan and borrowings
Lease liabilities – reversal of previous property lease incentive liability
Retained losses
1 July 2019
$
656,227
(715,679)
30,253
29,199
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted
lease payments using the interest rate implicit in the lease at 1 July 2019. The weighted average rate
applied is 5.6%.
Operating lease commitments at 30 June 2019 as disclosed under AASB 17 in the
Group’s consolidated financial statements
- exemption for leases with less than 12 months of lease term at transition
Discounted using the interest rate implicit in the lease at 1 July 2019
Lease liabilities recognised at 1 July 2019
b) Right-of-use assets
1 July 2019
$
851,469
(24,416)
827,053
715,679
715,679
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is
measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any
lease payments made at or before the commencement date net of any lease incentives received, any initial
direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the
estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership
of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of
use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
32
Identitii Limited
Annual Report FY20
c) Lease liabilities
Notes to the Consolidated
Financial Statements
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised
as the present value of the lease payments to be made over the term of the lease, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental
borrowing rate.
Lease payments comprise of
− fixed payments less any lease incentive receivables;
− variable lease payments that depend on an index or a rate;
− amounts expected to be paid under residual value guarantees; and
− the exercise price of a purchase option when the exercise of the option is reasonably certain to occur,
and any anticipated termination penalties.
The variable lease payments that do not depend on an index or a rate are expensed in the period in which
they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts
are remeasured if there is a change in the following: future lease payments arising from a change in an
index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination
penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use
asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
d) Short-term leases and low-value assets
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets
are expensed on a straight line basis to profit or loss over the lease term.
6. Significant accounting policies
a) Principals of consolidation
Subsidiaries are those entities over which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are de-consolidated from the
date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
b)
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.
33
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
b) Foreign currency transactions (continued)
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.
c) Revenue from contracts with customers
The Group 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.
d) Research and development tax incentive
The 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.
e) Government grants
The Group recognises an unconditional government grant in profit or loss when the grant becomes
receivable. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a
systematic basis in the periods in which the expenses are recognised. The grants are recognised on a
gross basis in income and are not netted off against the expenditure to which it relates.
Refer to Note 10 for further details.
f)
Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for
sharing plans if the Group has a
the amount expected to be paid under short
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
‑
The Group’s net obligation in respect of long
term employee benefits is the amount of future benefit 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.
‑
34
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
f) Employee benefits (continued)
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, they are discounted.
Share based payment arrangements
Equity-settled share based compensation benefits are provided to employees. Equity-settled transactions
are awards of shares, or options over shares, that are provided to employees in exchange for the rendering
of services.
The cost is measured at fair value on grant date using the Black Scholes option pricing model. The grant
date fair value of equity settled share based payment arrangements is 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. Market conditions are taken into consideration in determining fair value.
Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not
that market condition has been met, provided all other conditions are satisfied.
g)
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.
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.
35
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
g)
Income tax (continued)
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.
h) Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or
consumed in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected
to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless
restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.
All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group’s normal operating
cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting
period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after
the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
36
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
i) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other
short-term, highly liquid investments with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
j) Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less any allowance for expected credit losses. Trade receivables are
generally due for settlement within 45 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped
based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
k) Contract assets
Contract assets are recognised when the Group has transferred goods or services to the customer but
where the Group is yet to establish an unconditional right to consideration. Contract assets are treated as
financial assets for impairment purposes.
l) 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.
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.
37
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
l) Property, plant and equipment (continued)
The estimated useful lives of property, plant and equipment for current and comparative periods are as
follows:
Right-of-use asset
Office fit out
Computer equipment
Office equipment
2020
6 years
6 years
3 years
5 years
2019
-
6 years
3 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted
if appropriate.
m)
Intangible assets
Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are
not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in
profit or loss arising from the derecognition of intangible assets are measured as the difference between
net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite
life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life
are accounted for prospectively by changing the amortisation method or period.
n) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost
and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
o) Contract liabilities
Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its
unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or
services to the customer.
p) Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of
transaction costs. They are subsequently measured at amortised cost using the effective interest method.
q) Leases
The Group initially applied AASB 16 Leases from 1 July 2019. Information about the Group’s accounting
policies relating to leases is provided in Note 5.
38
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
r) 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.
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:
contingent events that would change the amount or timing of cash flows;
-
terms that may adjust the contractual coupon rate;
-
- prepayment and extension features; and
-
terms that limit the Group’s claim to cash flows from specified assets.
39
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
r) Financial instruments (continued)
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
These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income, are recognised in profit or loss.
Financial assets at
amortised cost
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.
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 offset the amounts
and it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously.
40
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
s)
Impairment
A. Non-derivative financial assets
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
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.
41
Identitii Limited
Annual Report FY20
s)
Impairment (continued)
Measurement of ECLs
Notes to the Consolidated
Financial Statements
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.
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.
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 cash
generating units (CGUs).
42
Identitii Limited
Annual Report FY20
s)
Impairment (continued)
Notes to the Consolidated
Financial Statements
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.
t) Share capital
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.
u) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other
payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the tax authority, are presented as
operating cash flows.
v) Comparative figures
Comparative figures have been adjusted to conform to changes in presentation for the current financial
year where required by Accounting Standards or as a result of changes in Accounting Policy.
w) 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.
43
Identitii Limited
Annual Report FY20
w) Fair value (continued)
Notes to the Consolidated
Financial Statements
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 the
new or amended standards in preparing these consolidated financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the
Group’s consolidated financial statements:
- Amendments to References to Conceptual Framework in IFRS Standards;
- Definition of a Business (Amendments to IFRS 3);
- Definition of Material (Amendments to IAS 1 and IAS 8); and
- IFRS 17 Insurance Contracts.
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 currently has one reportable segment, which develops and licenses enterprise software for
regulated entities. The revenues and profits generated by the Group’s operating segment and segment
assets are summarised below:
For the year ended 30 June
Sales to external customers
Other revenue
Total segment revenue
Unallocated revenue:
Interest revenue
Total revenue
Enterprise Software Development and
Licensing
2020
$
941,592
1,104,920
2019
$
635,134
1,358,474
2,046,512
1,993,608
14,396
2,060,908
51,553
2,045,161
44
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
8. Operating segments (continued)
For the year ended 30 June
EBITDA
Depreciation and amortisation
Interest revenue
Interest expense
Loss before income tax
Income tax expense
Loss for the period
Segment assets
Segment liabilities
Geographic information
Enterprise Software Development and
Licensing
2020
$
2019
$
(6,897,021)
(121,759)
14,396
(70,095)
(7,074,479)
-
(7,074,479)
(8,151,826)
(33,192)
51,553
(24,832)
(8,158,297)
(5,000)
(8,163,297)
3,362,622
6,139,517
(2,304,495)
(780,883)
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
Australia
Other
30 June 2020
$
578,592
363,000
-
30 June 2019
$
614,773
-
20,361
941,592
635,134
Revenue is based on the location of the customer. Refer to Note 9 for further detail on major customers,
products and services.
Location of non-current assets
Australia
Other
30 June 2020
$
914,387
-
30 June 2019
$
418,684
5,144
914,387
423,828
Non-current assets include intangible assets, property, plant and equipment, leased assets and rental
security deposits.
45
Identitii Limited
Annual Report FY20
9. Revenue
Notes to the Consolidated
Financial Statements
The Group generates revenue primarily from the licensing of enterprise software and the provision of
professional and maintenance services to its customers.
i. Performance obligations and revenue recognition policies
Under its contracts, the Group grants a licence to the customer for the use of its software. The contract will
specify the term of the licence, the jurisdictions in which the licence may be utilised and protocols to be
followed to extend the licence beyond the agreed licence term.
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,
usage 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 the 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 are to be mutually agreed in writing.
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 contracts require the Group to undertake maintenance and software enhancement
activities throughout the licence period that significantly affects the intellectual property
(IP) to which the customers have 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 licence fee revenue over time.
Licence fee revenue is recognised in equal monthly instalments from the date the
licence is first transferred and for the term of the contract. The licence fee is a fixed
annual fee as specified in the contract.
There remains $341,238 in relation to contracted licence fees for which no revenue or
deferred revenue has been recognised as the performance obligations have not been
met as at 30 June 2020.
46
Identitii Limited
Annual Report FY20
9. Revenue (continued)
Notes to the Consolidated
Financial Statements
Product and
services
Maintenance
fees
Nature and timing of satisfaction of performance obligations
Maintenance (software, equipment and hosted services maintenance) is to be provided
to customers on an ongoing basis from the date the licence is first transferred and
throughout the term of the contract.
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 maintenance fee revenue to be billed under the contract is recognised in equal
monthly instalments over time from the date the licence is first transferred.
There remains $13,896 in relation to contracted maintenance fees for which no revenue
or deferred revenue has been recognised as the performance obligations have not
been met as at 30 June 2020.
Usage fees
Usage fee revenue is determined by the number of successful transactions (as defined
in the contract) and is based on information provided to the Group by the customer.
Usage fees are recognised only when the later of the usage occurs and the licence fee
obligation has been satisfied. Usage fees are variable fees and may be subject to an
annual cap as specified in the contract.
The Group recognises usage fee revenue over time based on when the usage occurs.
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 its customers 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.
There remains $408,296 in relation to contracted professional services for which no
revenue or deferred revenue has been recognised as the performance obligations have
not been met as at 30 June 2020.
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 will run from the licence start date and over a specified period of time. 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.
47
Identitii Limited
Annual Report FY20
9. Revenue (continued)
Notes to the Consolidated
Financial Statements
In the event of an unresolved third party intellectual property rights claim, customers 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 claims during the current and prior period, no adjustment has been made to revenue recognised
during the period for expected returns.
Customers may terminate or partially terminate the contract by written notice to the Group. Customers 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 notices to the Group during the current
and prior period, 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 and usage fees
Maintenance fees
Professional services
Revenue from contracts with customers
iii. Contract balances
Enterprise Software Development and
Licensing
2020
2019
$
$
207,553
21,069
712,970
941,592
181,675
17,845
435,614
635,134
The following table provides information about trade receivables, contract assets and contract liabilities
from contracts with customers.
Trade receivables
Contract assets
Contract liabilities
30 June 2020
30 June 2019
$
43,702
66,500
(44,545)
$
218,358
-
(34,425)
Reconciliation of the written down values of contract assets and contract liabilities at the beginning and
end of the current and prior financial year are set out below:
48
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
9. Revenue (continued)
Contract assets
Opening balance 1 July
Initial application of AASB 15
Additions
Transfer to trade receivables
Closing balance 30 June
Contract liabilities
Opening balance 1 July
Payments received in advance
Transfer to revenue – in opening balance
Transfer to revenue – other balances
Closing balance 30 June
30 June 2020
30 June 2019
$
-
-
66,500
-
66,500
$
-
1,487
-
(1,487)
-
30 June 2020
30 June 2019
$
34,425
87,941
(34,425)
(43,396)
44,545
$
-
67,996
-
(33,571)
34,425
No information has been provided about remaining performance obligations at 30 June 2020 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
COVID-19 related grants
30 June 2020
30 June 2019
$
-
150,000
214,539
364,539
$
50,000
124,210
-
174,210
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 final amount owing under the AC grant was received in
the prior year.
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.
49
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
10. Government grants (continued)
COVID-19 related grants are temporary subsidies for businesses affected by COVID-19 and consist of the
JobKeeper and Cash Flow Boost payment schemes.
− Under the JobKeeper scheme, eligible employers can apply to receive $1,500 per eligible employee per
fortnight. The Group recognises the JobKeeper payment in profit or loss when the related salaries have
been paid to eligible employees.
− Under the Cash Flow Boost payment scheme, eligible businesses who employ staff will receive a cash
flow boost in the form of a credit when lodging their activity statement. This is to cover the tax withheld
from salaries paid to employees for the period covered by the activity statement. The Group recognises
the Cash Flow Boost in profit or loss when the activity statement is lodged.
11. Income tax expense
i. Amounts recognised in profit or loss
Current tax expense
Current year
Tax expense
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 AC grant income
Tax expense
30 June 2020
30 June 2019
$
-
-
$
5,000
5,000
30 June 2020
30 June 2019
$
$
(7,074,479)
(8,158,297)
2,477,939
(740,381)
(5,336,921)
-
-
6,000,572
(1,184,264)
(3,341,989)
5,000
5,000
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 AC 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.
50
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
11. Income tax expense (continued)
Tax losses
9,370,574
2,422,019
4,033,653
1,073,338
30 June 2020
30 June 2019
Gross
amount
$
Tax effect
$
Gross
amount
$
Tax effect
$
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.
30 June 2020
30 June 2019
$
$
Loss for the year attributable to owners of the Group
(7,074,479)
(8,163,297)
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
54,518,799
-
3,575,003
58,093,802
34,202,371
5,092,525
10,889,497
50,184,393
Basic loss per share (cents)
(12.18)
(16.27)
ii.
Diluted loss per share
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 2020
30 June 2019
$
$
Loss for the year attributable to owners of the Group
(7,074,479)
(8,163,297)
Weighted-average number of ordinary shares
Weighted average number of ordinary shares (basic)
Effect of share options on issue (1)
58,093,802
50,184,393
-
-
Weighted-average number of ordinary shares (diluted)
58,093,802
50,184,393
Diluted loss per share (cents)
(12.18)
(16.27)
51
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
12. Loss per share (continued)
(1) At 30 June 2020 12,302,820 share based payment options (30 June 2019: 8,558,334) and nil Series A
options (30 June 2019: 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
14. Property, plant and equipment
i. Reconciliation of carrying amount
30 June 2020
30 June 2019
$
1,337,464
73,845
1,411,309
$
1,102,988
3,017,392
4,120,380
Cost
Balance at 1 July 2018
Additions
Disposals
Balance at 30 June 2019
Balance at 1 July 2019
Initial application of AASB
16
Adjusted balance at 1
July 2019
Additions
Disposals
Right-of-use
asset
Office fit out
Computer
equipment
Office
equipment
Total
$
-
-
-
-
-
$
-
351,024
-
351,024
$
$
$
31,181
55,270
(2,990)
83,461
4,317
35,498
37,618
443,912
-
(2,990)
41,935
476,420
351,024
83,461
41,935
476,420
774,563
-
-
-
774,563
774,563
351,024
-
-
-
-
83,461
18,608
(1,879)
41,935
1,250,983
-
(2,636)
18,608
(4,515)
Balance at 30 June 2020
774,563
351,024
100,190
39,299
1,265,076
52
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
14. Property, plant and equipment (continued)
Right-of-use
asset
Office fit out
Computer
equipment
Office
equipment
Total
Accumulated depreciation
Balance at 1 July 2018
Depreciation
Disposals
Balance at 30 June 2019
Balance at 1 July 2019
Initial application of AASB
16
Adjusted balance at 1
July 2019
Depreciation
Disposals
$
-
-
-
-
-
118,336
118,336
129,080
-
Balance at 30 June 2020
247,416
97,269
Carrying amounts
At 1 July 2018
Balance at 30 June 2019
-
-
Balance at 30 June 2020
527,147
-
312,259
253,755
$
-
38,765
-
38,765
$
$
$
2,054
23,662
(663)
25,053
808
3,958
-
2,862
66,385
(663)
4,766
68,584
38,765
25,053
4,766
68,584
-
-
-
118,336
38,765
58,504
-
25,053
31,291
(568)
55,776
29,127
58,408
44,414
4,766
186,920
8,100
(526)
226,975
(1,094)
12,340
412,801
3,509
32,636
37,169
407,836
26,959
852,275
Additions to the right-of-use assets during the year were $774,563. The Group leases office space in
Australia over an initial term of 3 years with an option to extend. The lease has an escalation clause to
account for inflation over time and, on renewal, the terms of the lease will be renegotiated. It has been
assumed that the option to extend will be exercised making the lease term 6 years for the purposes of
estimating the lease in accordance with the requirements of AASB16 Leases.
The premises has continued to be occupied as at, and subsequent to, the financial year end. The right-of-
use asset is expected to be realised through use. This is further confirmed as indicated in the assumptions
that the option to extend the lease term will be exercised. The value of the right-of-use asset is further
supported by the fair value of the business. Consequently, the right-of-use asset is not considered to be
impaired at 30 June 2020.
The Group also leased office space in Hong Kong during the year under agreement for 6 months with an
option to extend. As this lease is short-term and of low value, it has been expensed as incurred during the
year and not capitalised to right-of-use assets. This lease agreement ended on 31 May 2020 and was not
extended.
53
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
15. Trade and other payables
Trade payables
Other payables and accruals
16. Employee provisions
Provision for annual leave
Superannuation payable
Employee taxes withheld
ATO debt payable
Mandatory provident fund contributions payable
30 June 2020
30 June 2019
$
142,519
125,215
267,734
$
147,389
246,752
394,141
30 June 2020
30 June 2019
$
146,631
64,244
132,007
325,586
-
668,468
$
140,295
83,758
87,174
-
10,837
322,064
Amounts not expected to be settled within the next 12 months
The provision for annual leave includes all unconditional entitlements where employees have completed
the required period of service and also where employees are entitled to pro-rata payments in certain
circumstances. The entire amount is presented as current, since the Group does not have an unconditional
right to defer settlement. However, based on past experience, the Group does not expect all employees to
take the full amount of accrued leave or require payment within the next 12 months.
17. Loans and borrowings
Current liabilities
Loans and borrowings (i)
Lease liabilities (ii)
Non-current liabilities
Lease liabilities (ii)
30 June 2020
30 June 2019
$
722,500
126,430
848,930
474,818
$
-
30,253
30,253
-
1,323,748
30,253
54
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
17. Loans and borrowings (continued)
i. Loans and borrowings
Loan and borrowings at the year ended 30 June were as follows:
Director loan - John Rayment
R&D finance loan
30 June 2020
30 June 2019
$
100,000
622,500
722,500
$
-
-
-
On 17 March 2020 the Group received a loan of $100,000 from John Rayment. This loan is for a 12 month
term, is interest free and may convert to equity with shareholder approval based on a conversion price of
$0.07 per share or 1,428,571 shares.
On 1 April 2020 the Group received a $600,000 loan facility with Radium Capital that is secured against
the R&D tax incentive cash refund expected to be received in relation to eligible R&D expenditure incurred
during the current financial year. The interest rate on the loan principal is 1.25% per month with a minimum
loan term of 91 days and maturity date of 30 September 2020. This loan was settled in full after the end of
the reporting period.
ii. Lease liabilities
Lease liabilities are recognised on transition to AASB 16 Leases (Refer to Note 5). Lease liabilities are
payable as follows:
For the year ended 30 June ($)
Less than one year
Between one and five years
Future minimum
lease payments
2020
156,823
518,709
675,532
Interest
2020
30,393
43,891
74,284
Present value of
future minimum
lease payments
2020
126,430
474,818
601,248
iii. Terms and repayment schedule
The terms and conditions of outstanding loans and borrowings are as follows:
Nominal
interest
rate p.a
0%
15%
6%
Year of
maturity
2020
2020
2024
30 June 2020
30 June 2019
Face
value
$
100,000
Carrying
amount
$
100,000
600,000
622,500
Face
value
$
-
-
Carrying
amount
$
-
-
774,563
601,248
36,703
30,253
1,474,563 1,323,748
36,703
30,253
Director loan - unsecured
R&D finance loan - secured
Lease liabilities
Total liabilities
55
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
17. Loans and borrowings (continued)
iv. Reconciliation of movements in loans and borrowings to cash flows arising from financing
activities
Balance at 1 July
Initial application of AASB 16
Restated balance at 1 July
Changes from financing cash flows
Proceeds from borrowings
Repayment of borrowings
Lease payments
Transaction costs related to borrowings and leases
Total changes from financing cash flows
Other changes
New leases
Finance costs
Conversion of borrowings to equity
Movements in lease liability not yet paid
Balance at 30 June
18. Share capital
2020
$
30,253
685,426
715,679
2019
$
400,000
-
400,000
850,000
-
-
(400,000)
(95,710)
(30,913)
723,377
-
22,500
(150,000)
12,192
1,323,748
-
(20,445)
(420,445)
30,253
20,445
-
-
30,253
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 2020
30 June 2019
$
16,261,495
Number of
shares
54,518,799
$
Number of
shares
3,939,439 34,202,371
1,668,610
27,259,399
10,171,262 14,666,666
-
-
2,150,794
5,649,762
17,930,105
81,778,198
16,261,495 54,518,799
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.
56
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
18. Share capital (continued)
Issue of ordinary shares
On 14 May 2020, as part of the entitlement issue, the Board approved the issue of 27,259,399 ordinary
shares in the Company at a price of $0.07 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 27.
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 net debt to equity
ratio at 30 June was as follows:
Total liabilities
Less: Cash and cash equivalents
Net debt / (assets)
30 June 2020
30 June 2019
$
2,304,495
1,411,309
893,186
$
780,883
4,120,380
(3,339,497)
Equity
1,058,127
5,358,634
Net debt to equity ratio
0.84
n/a
57
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
20. Reconciliation of cash flows from operating activities
30 June 2020
30 June 2019
$
$
Total comprehensive loss for the year
(7,074,479)
(8,163,297)
Adjustments for:
Equity settled share based payment transactions
Depreciation and amortisation
Gain on disposal of asset
Bank revaluation and unrealised FX gains and losses
Interest expense and other finance costs
IPO listing and entitlement issue transaction costs
Initial application of AASB 15
Initial application of AASB 9
Non-cash lease movements
Bad and doubtful debts
Related party loans written off
Other non-cash generating expenses
Changes in:
Trade and other receivables
R&D tax receivable
Contract assets
Trade and other payables
Employee provisions
Contract liabilities
1,125,708
226,975
(919)
8,128
59,589
236,392
-
-
(24,897)
(2,291)
10,320
(309)
2,728,086
66,385
(413)
1,305
20,445
426,338
1,487
(3,371)
30,253
-
-
(36,871)
(5,435,783)
(4,929,653)
149,029
465,534
(66,500)
(126,407)
346,404
10,120
(177,300)
(322,588)
-
178,968
119,707
34,425
Net cash from operating activities
(4,657,603)
(5,096,441)
21. Financial instruments – fair values and risk management
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.
58
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
21. Financial instruments – fair values and risk management (continued)
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 amount of financial assets and contract assets represents the maximum credit exposure.
Impairment losses on financial assets and contract assets recognised in profit or loss are as follows:
Reversal of impairment loss on trade receivables and
contract assets arising from contracts with customers
Trade receivables and contract assets
30 June 2020
30 June 2019
$
$
(2,291)
(1,036)
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.
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.
59
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
21. Financial instruments – fair values and risk management (continued)
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 2020.
30 June 2020 ($)
Not past due
External
credit rating
(Fitch)
BBB- to AAA
Weighted
average loss
rate
0.1%
Credit
impaired
No
30 June 2019 ($)
Not past due
External
credit rating
(Fitch)
BBB- to AAA
Weighted
average loss
rate
0.1%
181-360 days past due
BB- to BB+
10.0%
Credit
impaired
No
No
Gross
carrying
amount
43,746
43,476
Gross
carrying
amount
199,336
21,357
220,693
Impairment
loss
allowance
44
44
Impairment
loss
allowance
199
2,136
2,335
Cash and cash equivalents and other receivables
The Group held cash and cash equivalents of $1,411,309 at 30 June 2020 (30 June 2019: $4,120,380).
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 $186,343 at 30 June 2020 (30 June 2019: $171,036). 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.
The Group did not recognise an impairment allowance for cash and cash equivalents and other receivables
during the current and prior 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.
Balance at 1 July
Net remeasurement of loss allowance
Balance at 30 June
2020
$
2,335
(2,291)
44
2019
$
3,371
(1,036)
2,335
60
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
21. Financial instruments – fair values and risk management (continued)
c) Liquidity risk
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 2020 ($)
Loans and borrowings
Carrying
amount
1,323,748
Total 2 months or
less
(20,216)
(1,323,748)
2-12
months
(828,714)
12 months
or more
(474,818)
Trade payables
142,519
(142,519)
(142,519)
-
-
1,466,267
(1,466,267)
(162,735)
(828,714)
(474,818)
Contractual cash flows
At 30 June 2019 ($)
Trade payables
Carrying
amount
147,389
Total 2 months or
less
(147,389)
(147,389)
2-12
months
-
12 months
or more
-
Contractual cash flows
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:
30 June 2020
30 June 2019
Trade receivables
Trade payables
Net statement of financial position exposure
USD
30,000
(30,000)
-
USD
125,000
(1,875)
123,125
61
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
21. Financial instruments – fair values and risk management (continued)
Sensitivity analysis
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 2020
30 June 2019
$
-
-
$
17,531
(15,937)
There has been no change in assumptions or method used to determine foreign currency sensitivity from
the prior year.
22. Commitments
The Group has no commitments or contingencies other than those described in Leases Note 17.
23. Auditors’ remuneration
During the financial year the following fees were paid or payable for services provided by RSM (2019:
KPMG), the auditor of the Company, its network firms and unrelated firms:
Audit and review services
Auditors of the Group
Audit and review of financial statements - KPMG
Audit and review of financial statements – RSM
Other services
Auditors of the Group
30 June 2020
30 June 2019
$
-
44,000
44,000
$
60,030
-
60,030
Investigating accountants report for the IPO – KPMG
-
79,250
24. Related parties
A.
Parent and ultimate controlling party
Identitii Limited is the parent and ultimate controlling party of the Group.
62
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
24. Related parties (continued)
B.
Transactions with Key Management Personnel (KMP)
a) KMP compensation
KMP compensation comprised the following:
Compensation by category
Short-term employment benefits
Post-employment benefits
Other long-term employment benefits
Termination benefits
Share-based payments
30 June 2020
30 June 2019
$
527,296
30,497
26,156
25,000
218,029
826,978
$
450,286
25,704
12,308
-
552,709
1,041,007
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) KMP transactions
Directors of the Company control approximately 12% of the voting shares of the Company as at 30 June
2020.
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 ($)
Transaction values for
year ended 30 June
Note
2020
2019
Balance outstanding as
at 30 June
2020
2019
Loan to Director – Nicholas Armstrong
Loan from Director – John Rayment
(i)
(ii)
-
(100,000)
-
-
-
10,320
(100,000)
-
63
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
24. Related parties (continued)
(i) An unsecured loan with no interest and no fixed terms of repayment was advanced to Nicholas
Armstrong. This loan was written off during the current financial year as part of Nicholas Armstrong’s
resignation as CEO. This loan was included in other receivables in the statement of financial position in
the prior year.
(ii) An unsecured loan with no interest and a 12 month repayment term was advanced from John Rayment
to the Company in March 2020. Refer to Note 17 for further details.
25. 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 $548,600 (30 June 2019: $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.
26. Parent entity disclosures
As at, and throughout, the financial year ended 30 June 2020, the parent entity of the Group was Identitii
Limited.
Results of parent entity
Total comprehensive loss for the year
(7,074,479)
(8,163,297)
30 June 2020
30 June 2019
$
$
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
2,448,235
3,362,622
1,829,677
2,304,495
5,715,689
6,139,517
780,883
780,883
17,930,105
3,717,360
16,261,495
2,582,799
(20,589,338)
(13,485,660)
1,058,127
5,358,634
64
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
26. Parent entity disclosures (continued)
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and
30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 6.
27. Share based payment arrangements
For the year ended 30 June 2020, the Group recognised a share based payment expense of $1,125,708
in the statement of profit or loss (30 June 2019: $2,728,086) under the following share based payment
arrangements.
Share option programme
Director options
Canaccord options
Gleneagle options
Equity incentive plan
(i)
(ii)
(iii)
(iii)
(iv)
Share options
30 June 2020
30 June 2019
$
-
157,022
992,485
165,740
Number of
options
-
358,082
1,950,000
5,000,000
$
4,996
109,627
620,303
-
Number of
options
-
400,000
1,950,000
-
2,394,989
4,994,738
1,849,602
6,208,334
In issue at end of year
3,710,236
12,302,820
2,584,528
8,558,334
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. 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. A final share based payment
expense reversal of ($4,996) in relation to these options has been recognised in the statement of profit
or loss for the year ended 30 June 2020.
65
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
27. 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% to vest in equal annual tranches over two years. On termination of his employment
with the Company in March 2020, 41,918 share options were forfeited with the remaining options
vesting immediately.
The fair value of share options granted to Michael Aston have been measured using the Black-Scholes
model. A share based payment expense of $47,395 in relation to these options has been recognised
in the statement of profit or loss for the year ended 30 June 2020.
(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 $372,182 in relation to these options has been recognised in the statement
of profit or loss for the year ended 30 June 2020.
Gleneagle Securities (Aust) Pty Ltd (equity settled)
On 13 May 2020, the Company issued 5,000,000 share options at an exercise price of $0.10 per share
to Gleneagle Securities (Aust) Pty Ltd (Gleneagle) in consideration for underwriting services provided
in connection with the Group’s entitlement issue. The options vested immediately and expire on 13
May 2022.
The fair value of share options granted have been measured using the Black-Scholes model. A share
based payment expense of $165,740 in relation to these options has been recognised in the statement
of profit or loss for the year ended 30 June 2020.
(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.
66
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
27. Share based payment arrangements (continued)
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 $545,387 in relation to these options has been recognised in the statement
of profit or loss for the year ended 30 June 2020.
The terms and conditions of share options granted under the EIP during the year ended 30 June 2020
are as follows.
Grant date
Nicholas Armstrong
(6 July 2018)
Key management
(1 August 2018)
Number of
instruments
Vesting
conditions
Contractual life
of options
1,350,000
3 years (1)
10 years
1,250,000
10% upfront,
3 years (2)
10 years
Key management
(2 October 2018 – 31 December 2019)
3,250,000
3 years (1)
4 years
Consultant
(1 January 2019)
Key management
(18 March 2019)
Share options issued
Forfeited
Share options on issue as at 30
June 2020
200,000
2 years (3)
200,000
4 years (4)
4 years
5 years
6,250,000
(1,255,262)
4,994,738
(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.
67
Identitii Limited
Annual Report FY20
Notes to the Consolidated
Financial Statements
27. Share based payment arrangements (continued)
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:
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)
Gleneagle
$0.03
$0.07
$0.10
108%
2
Nil
0.25%
(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
2020
8,558,334
(1,255,514)
Weighted-
average
exercise price
2020
$0.78
$0.75
Number of
options
2019
6,486,711
(848,615)
-
-
(5,649,762)
5,000,000
12,302,820
$0.10
$0.53
8,570,000
8,558,334
Weighted-
average
exercise price
2019
$0.11
$0.20
$0.06
$0.79
$0.81
Exercisable at 30 June
8,728,071
$0.44
2,083,334
$1.01
28. Fair value measurements
The carrying amount of the Group’s financial assets and financial liabilities is a reasonable approximation
of fair value.
68
Identitii Limited
Annual Report FY20
29. Subsequent events
Notes to the Consolidated
Financial Statements
On 10 July 2020, the Group announced the release of a new FX solution, deployed on the existing Overlay+
core platform, allowing the Company to solve more problems for existing customers and prospects and
further expanding its global market opportunities.
On 24 July 2020, the Group confirmed it had successfully raised an additional $1.9 million by placing 27.3
million Residual Shortfall Shares reserved per the Company’s Entitlement Offer prospectus.
On 29 July 2020, the Group settled its R&D finance loan with Radium Capital in full.
On 24 August 2020, the Group announced it had signed a five year Master Services Agreement (MSA)
with Mastercard International Incorporated (Mastercard). The MSA allows the Company to sell to and work
with any Mastercard business globally and is the first step in agreeing specific projects that will see
Identitii’s Overlay+ platform implemented with Mastercard. At the date of this report, the Company is not
able to determine the economic materiality of the agreement, as activity and revenue will be laid out in
subsequent Statements of Work.
The impact of the COVID-19 pandemic is ongoing and it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is rapidly developing and is dependent on
measures imposed by the Australian Government and other countries, such as maintaining social
distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
69
Identitii Limited
Annual Report FY20
Directors’ Declaration
Directors’ Declaration
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 25 to 69 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 2020 and of its
performance for the financial year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
ii.
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 2020.
Signed in accordance with a resolution of the Board of Directors:
Steven James
Chairman
Sydney
27 August 2020
70
INDEPENDENT AUDITOR’S REPORT
To the Members of Identitii Limited
Opinion
RSM Australia Partners
Level 13, 60 Castlereagh Street Sydney NSW 2000
GPO Box 5138 Sydney NSW 2001
T +61 (0) 2 8226 4500
F +61 (0) 2 8226 4501
www.rsm.com.au
We have audited the financial report of Identitii Limited (the Company) and its controlled entity (the Group), which
comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit
or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the financial report, which indicates that the Group incurred a net loss of $7,074,479
and had net operating cashflow of $4,657,603 for the year ended 30 June 2020. As stated in Note 2, these events
or conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may
cast significant doubt on the Group’s ability to continue as going concern. Our opinion is not modified in respect
of this matter.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
71
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report.
Key Audit Matter
How our audit addressed this matter
Share-based payments
Refer to Note 27 in the financial statements
Accounting for share-based payments and share
option reserve are considered as key audit matters
due to the following:
Our audit procedures in relation to the share-based
payments included:
The complexity of accounting for the
performance-based share option plan,
which increases the risk of interpretational
differences
principles-based
criteria contained in accounting standards.
against
Significant judgement is involved in terms
of the volatility and risk-free rate inputs
used by the Group under the Black-
Scholes valuation model.
Manual share-based payment expense
calculation included various inputs, such
as share options granted, vested,
exercised and forfeited across different
share-based compensation plans.
Assessment of the terms of the share option
plan and evaluating the appropriateness of
the accounting
treatment under criteria
contained in accounting standard AASB 2
Share-based payments with focus on the
interpretation of grant date,
Group’s
performance start date, vesting dates and
vesting conditions.
Review share options granted in FY20 to
underlying
including
documentation
employee option certificates and General
Meeting minutes.
Perform recalculation of current year share-
based compensation expense for a sample
of employees using underlying offer letters,
including relevant terms and conditions.
and
sufficient
Ensure
appropriate
disclosures as required by AASB 2 for
share-based payments, reflect underlying
agreements in place.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2020, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
72
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair
view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf
This description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 16 to 23 of the directors' report for the year ended
30 June 2020.
In our opinion, the Remuneration Report of Identitii Limited, for the year ended 30 June 2020, complies with
section 300A of the Corporations Act 2001.
73
Responsibilities
The directors of the Group are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
G N Sherwood
Partner
Sydney, NSW
Dated: 27 August 2020
74
Identitii Limited
Annual Report FY20
Additional ASX Information
Additional ASX Information
In accordance with corporate governance statement ASX 4.10.3, the Directors provide the following
information as at 13 August 2020.
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
31
192
194
342
130
889
16,350
593,003
1,448,613
11,647,993
95,331,639
109,037,598
0.010
0.540
1.330
10.680
87.430
100.000
There are 166 shareholders holding less than a marketable parcel of 3,571 shares each (i.e. less than $500
per parcel of shares) based on the closing price of AUD 0.14 on 13 August 2020 representing a total of
348,651 shares.
b) Twenty largest shareholders
Shareholder
275 Invest 2 Pty Ltd
KTM Ventures Innovation Fund LP
Citicorp Nominees Pty Limited
Holywell Ford Pty Limited
HSBC Custody Nominees (Australia) Limited
Gleneagle Securities Nominees
Bannaby Investments Pty Limited
Jamber Investments Pty Ltd
Link Traders (Aust) Pty Ltd
1
2
3
4
5
6
7
8
9
10 Wodi Wodi Pty Limited
11
KTM Ventures Co-Investment Services Pty Ltd
Structure Investments Pty Limited
Structure Investments Pty Ltd
J P Morgan Nominees Australia Pty Limited
ComSec Nominees Pty Limited
Pat Property Pty Ltd
Creighton & Co Investments Pty Ltd
12
13
14 Oxleigh Pty Ltd
15
16
17
18
19 Mr Elliot Shepherd
20 Mr Benjamin Buckingham
Total Securities of Top 20 Holdings
Total Securities
Number of
shares held
9,398,340
7,388,134
5,884,650
4,633,953
3,860,115
3,792,667
3,356,630
3,000,000
3,000,000
2,856,755
2,356,872
2,126,670
2,121,129
1,731,562
1,680,829
1,560,029
1,428,571
1,428,571
1,326,538
1,245,499
64,177,514
109,037,598
% of
issued
capital
8.619%
6.776%
5.397%
4.250%
3.540%
3.478%
3.078%
2.751%
2.751%
2.620%
2.162%
1.950%
1.945%
1.588%
1.542%
1.431%
1.310%
1.310%
1.217%
1.142%
58.858%
75
Identitii Limited
Annual Report FY20
c) Substantial shareholders
Additional ASX Information
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
KTM Ventures Innovation Fund LP
Citicorp Nominees Pty Limited
d) Voting rights
Number of
shares
9,398,340
7,388,134
5,884,650
% of issued
capital
8.619%
6.776%
5.397%
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:
Shares ASX Escrowed for 24 Months to 17 October 2020
Shares Voluntary 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
81,044,203
109,037,598
Holders
19
15
34
855
889
76
Corporate Directory
Share Registry
Boardroom Pty Limited
Level 12
225 George Street
Sydney
NSW 2000
Telephone: (02) 9290 9600
Identitii Limited
Annual Report FY20
Corporate Directory
Directors
Steven James, Chair
John Rayment
Nicholas Armstrong
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
RSM Australia Pty Ltd
Level 13
60 Castlereagh Street
Sydney
NSW 2000
Solicitors
Law Squared
Level 13
50 Carrington St
Sydney
NSW 2000
Securities Exchange Listing
Identitii Limited shares are
Listed on the Australian
Securities Exchange.
ASX Code: ID8
77