Knosys Limited
ABN 96 604 777 862
Annual Report
30 June 2018
Knosys Limited
Chairman’s letter to shareholders
30 June 2018
Dear Shareholders,
I have pleasure in presenting to you the 2018 Annual Report of Knosys Limited.
I am very pleased to report that the Company has had a successful year during 2018. The initiatives and changes effected
by our CEO Mr John Thompson, following his comprehensive review of all aspects of the Company’s business during the
prior year, have enabled the Company to progress well in 2018.
Under the leadership of the Board and John Thompson, the Company has transformed into a sales-focused technology
business. The establishment of a national sales team and the refinement of our sales proposition has resulted in strong
sales growth in 2018. This more focused sales strategy, targeting Tier 1 and Tier 2 customers in the Banking,
Legal/Government and Telecommunication sectors has resulted in increased use of the Knosys technology by existing
customers and has delivered customers of similar scale to the ANZ Bank and in the 200-500 user range during the year. We
believe that Knosys is well placed to continue this sales success.
The Knosys product offering, Knowledge IQ, has been further refined and developed in 2018 by the Company’s in-house
development team to ensure it is a relevant, easy to use and marketable product. This is another key strategic response to
feedback from customers and prospective customers that has enabled sales growth and the retention of major customers.
The Board is confident that John Thompson and his team will deliver further success for Knosys and its shareholders as we
continue to grow and evolve the Company in the years ahead.
In May 2018 the Company announced a $4 million capital raising. Knosys completed an oversubscribed share placement to
sophisticated investors in May 2018, raising $1.37m (before costs), and followed this with a 7 for 19 Rights Issue, which
completed subsequent to year end, on 2 August 2018, raising $2.65m (before costs). The raising of these funds enabled the
company to repay the holders of convertible notes maturing on 31 May 2018 and has ensured the Company is well funded to
progressively increase investment in the Company’s sales, marketing, product development and customer success teams in
order to drive APAC customer and revenue growth.
On behalf of the Directors I would like to thank all investors who supported this fund raising initiative and I thank all stakeholders
who have taken an interest in the Company and that have continued to support us. The Board also congratulates and thanks
John Thompson, Stephen Kerr and Nic Passmore and their team of committed employees on a successful 2018 and looks
forward to further success ahead
I present to you the report on the Company and its controlled entities for the financial period ended 30 June 2018.
Hon. Alan Stockdale AO
CHAIRMAN
30 August 2018
Knosys Limited
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Knosys Limited (referred to hereafter as the 'company' or 'parent entity') and the entities
it controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of Knosys Limited during the period from 1 July 2017 to the date of this report, unless
otherwise stated:
Hon. Alan Stockdale (Non-executive Chairman)
Richard Levy (Non-executive Director)
Peter Pawlowitsch (Non-executive Director)
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of:
● Computer software sales, licencing and development.
Dividends
No dividends were paid or declared during the financial year.
Review of operations
The 2018 financial year has been a very positive year for Knosys. Key financial metrics have been significantly improved in
line with the Board’s plans:
• Operating revenue for the consolidated entity increased by 225% to $2,625,906 (2017 revenue: $808,744);
• The loss for the consolidated entity after providing for income tax reduced by 61% to a loss of $806,067 (2017 loss:
$2,085,018);
• The licensed user base of the Knosys product had increased by over 80% to over 29,900 by the end of 2018; and
• The consolidated entity had net assets of $1,614,550 at 30 June 2018 and cash on hand of $1,065,266.
Subsequent to year end, cash on hand was over $3.0million on 15 August 2018 upon the completion of the non-
renounceable rights issue and payment of associated costs (refer to “Matters subsequent to the end of the
financial year” on page 2 of this report).
The consolidated entity is adequately funded and has the resources to pursue its business objectives and its sales and
marketing initiatives and to continue the development of its product. The addition of several high value customer projects
coming online toward the end of the 2018 financial year improved overall performance and will help to further drive
increased revenue for FY19.
Overview of Knosys
Knosys is a leading provider of knowledge management software that enables companies through a machine learning
approach to discover and deliver personalised information to staff and customers to transform business productivity and
engagement. Knosys software helps our users save money and drive the productivity of staff across many areas of their
business from contact centres, distributed frontline offices, sales teams, communications and marketing and many more.
The solution is designed to be the #1 used app in the life of an information worker being available on their desktop, tablet
or smartphone. It drives productivity and optimizes processes by incorporating process wizards, decision guidance,
collaboration & feedback while at the same time learning based on user behaviours, patterns and profiles. It also acts as
the single knowledge hub from which all digital engagement solutions such as chatbots, web sites, self-service kiosks can
consume relevant information interact with end customers in a consistent manner. Our vision is simple but clear, to be a
leading knowledge management and business process platform, supporting our end customers transformation and
engagement initiatives.
Established Growth Platform
Knosys has established a strong platform to capitalise on growth in the knowledge management and business process
guidance markets. Towards the end of FY17 the consolidated entity commenced a program to expand its Australian based
sales teams and delivery teams to support the expected increase in number of customers going forward. The consolidated
entity has commenced its expansion into Singapore with its first local customer and once the system is deployed will
provide an incredible opportunity to promote further sales in the region.
The consolidated entity continues to have a significant sales pipeline in Australia and New Zealand markets, and is actively
working to prioritise these opportunities to convert them into subscription based contracts. The SaaS based delivery model
is resonating well with the customer base and so is our ability to deploy on-premise which many competitors no longer
support.
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Knosys Limited
Directors' report
30 June 2018
Outlook
As we continue to see the expansion of the market and the adoption of knowledge management and business process
technology, Knosys is well placed to expand its customer base and add to our offerings through internal developments and
acquisition of technologies. Whilst our efforts are focused on direct initiatives, Knosys is also planning further
developments that will allow greater partnership opportunities with global software vendors to address local and
international opportunities going forward.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year, other than those
discussed already in the review of operations.
Matters subsequent to the end of the financial year
The following matters occurred subsequent to the end of the financial year:
• On 31 July 2018 the consolidated entity announced that ANZ Bank had signed a three (3) year contract extension
for the continued use of Knosys’ knowledge management platform. ANZ also has the option to extend the contract
further via two one-year extensions. The potential value of the contract over the entire 5-year life is expected to
exceed $6.5 million; and
• On 2 August 2018 the consolidated entity announced the completion of a 7 for 19 non-renounceable rights issue,
raising $2.65m (before costs of $0.16m).
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
Following the successful capital raising concluded in early August, the consolidated entity intends to progressively increase
investment in the Company’s sales, marketing, product development and customer success teams in order to drive APAC
customer and revenue growth. The consolidated entity intends to exploit its successful contract announcements with Singtel
and Optus by recruiting additional business development and marketing employees. These additional employees will focus
primarily on making sales of the Company’s leading software platform, KnowledgeIQ. The Company also intends to
commence a broader digital marketing campaign and sponsorship of industry conferences to build brand awareness of
Knosys. Growth aspirations include the intention to expand further into Singapore with the opening of a local office to facilitate
better engagement with customers, prospects and partners, with a view to growing Company’s sales footprint in the APAC
region. The Company also intends to continue to invest in ongoing product development and innovation, focusing on
integrations and enhancements to simplify usage and drive adoption of KnowledgeIQ.
Further information on likely developments in the operations of the consolidated entity and the expected results of operations
have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to
the consolidated entity.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
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Knosys Limited
Directors' report
30 June 2018
Information on directors
Name:
Title:
Experience and expertise:
Hon. Alan Stockdale AO
Non-Executive Chairman
Hon. Alan Stockdale AO served as Treasurer in the Victorian Government from 1992
to 1999 and his responsibilities included the Government reform agenda and general
financial management.
Alan was responsible for the privatisation of $A30 billion of Government business
enterprises. He was also Minister for IT and Multimedia from 1996 to 1999, promoting
Victoria as a leader in the application of multimedia and new information technologies.
In the private sector, Alan was employed by Macquarie Bank for a total of six years,
co-leading the Macquarie team that successfully bid to acquire Sydney Airport. Taking
on a number of other corporate advisory roles, he was involved in a wide range of
infrastructure transactions, especially in the power, gas and transport sectors in
Australia and overseas.
Alan has developed a career as a company Chairman and director of a number of ASX-
listed companies and of various unlisted companies and not-for-profit organisations.
He has been Chairman of Axon Instruments Inc (incorporated in the USA and listed on
the ASX), Symex Holdings Limited, Senetas Corporation Limited and a director of
Marriner Financial Limited - all companies listed on the ASX. He is also a consultant to
Maddocks Lawyers, Metro Trains and Lazard Australia and Chairman of the Medical
Research Commercialisation Fund.
He was Federal President of the Liberal Party from 2008 to 2014.
Alan holds a Bachelor of Laws and a Bachelor of Arts, both completed at the University
of Melbourne, is a Barrister of the Supreme Courts of Victoria and NSW and the High
Court of Australia and is a Fellow of the Australian Institute of Company Directors.
Mr Stockdale has been a director since 30 April 2015.
Directorships held in other listed
entities in the last 3 years
Nil.
Interests in shares
Interests in options
250,000 ordinary shares
500,000 options
Name:
Title:
Richard Levy
Non-Executive Director
Experience and expertise:
Richard Levy has had 27 years automotive manufacturer (Nissan/Ford) and supplier
(Air International) experience in sales and marketing management positions including
four years as Director of Sales and Dealer Operations at Nissan. He has also had
investments and participation in several commercial ventures including food, travel and
now internet businesses. Richard has been a partner and was Managing Director
(resigned February 2017) of MMG Interactive for 17 years including involvement with
servicing many blue chip and high value SME customers, and has also published
papers on the internet and the auto industry - both business-to business and business-
to-consumer. He was and continues to be a founding owner of apStream, an internet
streaming services company. and is a director and founding owner of Fourth Mode Pty
Ltd and a significant shareholder in startup company Mesh Assist Pty Ltd.
Richard holds an Economics degree from the ANU.
Mr Levy has been a director since 30 April 2015.
Directorships held in other listed
entities in the last 3 years
Nil
Interests in shares
Interests in options
10,437,260 ordinary shares
1,000,000 options
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Knosys Limited
Directors' report
30 June 2018
Name:
Title:
Experience and expertise:
Peter Pawlowitsch
Non-Executive Director
Peter Pawlowitsch is an accountant by profession with extensive experience as a
director and officer of ASX-listed entities. He brings to the team experience in
operational management, business administration and project evaluation in the IT,
hospitality and mining sectors during the last 15 plus years.
Peter is a non- executive director of Dubber Corporation Limited (appointed a director
on 26 September 2011), Ventnor Resources Ltd (appointed 12 February 2010), Novatti
Group Limited (appointed 19 June 2015) and a non-executive director of Rewardle
Holdings Limited (appointed 30 May 2017) and he was a non-executive director of
Department 13 Ltd (30 January 2010 to 18 December 2015), all ASX-listed companies.
Peter holds a Bachelor of Commerce from the University of Western Australia, is a
current member of CPA Australia and also holds a Masters of Business Administration
from Curtin University.
Mr Pawlowitsch has been a director since 16 March 2015.
Directorships held in other listed
entities in the last 3 years
Dubber Corporation Limited (ASX:DUB)
Ventnor Resources Limited (ASX:VRX)
Novatti Group Limited (ASX:NOV)
Department 13 International Limited (ASX:D13)
Rewardle Holdings Limited (ASX:RXH)
Interests in shares
Interests in options
1,231,578 ordinary shares
500,000 options
Chief Executive Officer
John Thompson (BEng Hons, MBA) has held the role of CEO since 18 July 2016. Mr. Thompson brings a wealth of leadership
experience having worked for more than 20 years at the helm of renowned technology companies. Most recently, Mr.
Thompson spent 11 years as CEO of Sigtec and 5 years as CEO of Wavenet International in addition to 5 years with CS
Communications and Systems in New York and London. Mr. Thompson received a first class honours degree in Engineering
from the Queensland University of Technology in addition to a Master of Business Administration from the City University
Business School in London. Mr. Thompson has a strong record in driving sales and revenue in addition to his ample
experience as a capable CEO providing pivotal leadership expertise across UK, US, Australia and New Zealand markets for
multi-national, listed, IPO and start-up technology companies.
Company Secretary and Chief Financial Officer
Stephen Kerr (BCom, CA, FGIA) has held the role of CFO and Company Secretary since July 2015. Stephen Kerr is a
qualified chartered accountant and chartered company secretary. He is an experienced CFO and governance professional,
having held senior finance positions in private and publicly listed company environments across Australia and New Zealand
for over 20 years. Stephen holds a Bachelor of Commerce from the University of Melbourne and is a current member of
Chartered Accountants Australia and New Zealand and a Fellow of the Governance institute of Australia.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held from 1 July 2017 to the year ended 30 June
2018, and the number of meetings attended by each director were:
Hon. Alan Stockdale
Richard Levy
Peter Pawlowitsch
Full board
Attended
Held
12
12
10
12
12
12
Held: represents the number of meetings held during the time the director held office.
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Knosys Limited
Directors' report
30 June 2018
Remuneration Report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
● Principles used to determine the nature and amount of remuneration
● Details of remuneration
● Service agreements
● Share-based compensation
● Additional information
● Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders. The Board of Directors ('the Board') ensures that executive reward satisfies the
following key criteria for good reward governance practices:
● competitiveness and reasonableness
● acceptability to shareholders
● performance linkage / alignment of executive compensation
● transparency
The performance of the consolidated entity depends on the quality of its directors and executives. The remuneration
philosophy is to attract, motivate and retain high performance and high-quality personnel. The executive remuneration
framework is structured to be market competitive and complementary to the strategy of the consolidated entity.
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors'
fees and payments are reviewed annually by the Board. The Board may, from time to time, receive advice from independent
remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market.
No such advice was sought for the financial year ended 30 June 2018. The chairman's fees are determined independently
to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present
at any discussions relating to the determination of his own remuneration.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The current maximum aggregate remuneration payable to non-executive directors of the consolidated entity in any
financial year is $500,000.
Executive remuneration
The consolidated entity aims to reward executives with a level and mix of remuneration based on their position and
responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
● base pay, superannuation and non-monetary benefits
● short-term performance incentives
● share-based payments
● other remuneration such as long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board, based on individual performance and the overall performance of the consolidated entity and comparable market
remunerations.
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Knosys Limited
Directors' report
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Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the
executive.
The short-term incentives ('STI') program is designed to align the targets of the business with the targets of those executives
responsible for meeting those targets. STI payments are granted to executives based on specific targets and/or key
performance indicators ('KPI's') being achieved. These targets are discussed in further detail in the description of service
agreements which forms part of this Remuneration Report.
The long-term incentives ('LTI') include long service leave and share-based payments. Options are awarded to executives,
vesting over a period of three years based on elapsed time and/or achievement of long-term incentive measures.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus
and incentive payments are dependent on defined revenue and earnings targets being met. The remaining portion of the
cash bonus and incentive payments are at the discretion of the Board.
In considering the performance of the consolidated entity and benefits for shareholder wealth, the remuneration committee
have regard to the following indices in respect of the current financial year and the previous financial years.
Profit / (loss) attributable to owners of the parent entity
Dividends paid
Operating revenue growth
Change in operating income
Change in share price
Return on capital employed
2018
$
(806,067)
-
224.7%
61.3%
(57%)
(69%)
2017
$
(2,085,018)
-
9.9%
(47.8%)
(40%)
(80%)
2016
$
(1,411,015)
-
-
-
-
(48%)
Profit is one of the financial performance targets considered in setting the Short Term Incentive (STI). Profit amounts have
been calculated in accordance with Australian Accounting Standards (AASB’s). Operating income is operating profit as
reported in the statement of profit or loss.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity during the year to 30 June 2018 consisted of the following directors
of Knosys Limited:
● Alan Stockdale - Non-Executive Chairman
● Peter Pawlowitsch - Non-Executive Director
● Richard Levy - Non-Executive Director
And the following persons:
●
●
John Thompson – Chief Executive Officer
Stephen Kerr - Company Secretary and Chief Financial Officer
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Knosys Limited
Directors' report
30 June 2018
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2018
$
$
$
$
Cash salary Cash
and fees bonus
Non-
Super-
monetary annuation
Long service Equity-
settled
$
leave
$
Total
$
Non-Executive Directors:
Alan Stockdale
(Chairman)
Peter Pawlowitsch
Richard Levy
54,795
36,530
20,000
-
-
-
-
-
-
5,205
3,470
20,000
Other Key Management
Personnel:
John Thompson
Stephen Kerr
281,715
150,868
88,000
83,000*
22,559
9,629
24,885
24,332
543,908
171,000
32,188
77,892
-
-
-
-
-
-
1,200
1,200
2,401
61,200
41,200
42,401
27,900
48,882
445,059
316,711
81,583
906,571
* 2018 Cash bonus for Stephen Kerr includes FY18 bonus of $53,000 accrued for in 2018, and FY17 bonus of $30,000,
assessed and paid in FY18.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2017
Cash salary
and fees
$
Non-Executive Directors:
Alan Stockdale
(Chairman)
Peter Pawlowitsch
Richard Levy
54,795
36,530
-
67,548
80,555
Executive Directors:
Ashley Gall (resigned
15 July 2016)
Alistair Wardlaw
(resigned 26 Sept
2016)
Other Key
Management
Personnel:
John Thompson
Stephen Kerr
Gavin Campion
(resigned 21 Nov 2016)
Cash
bonus monetary annuation
Super-
Non-
$
$
$
Long service Equity-
settled
$
leave
$
Total
$
-
-
-
-
-
-
-
-
-
-
5,205
3,470
40,000
-
-
-
3,931
3,931
7,861
63,931
43,931
47,861
6,507
-
15,104
89,159
-
-
524
81,079
263,542
136,758
-
15,000
6,969
704
25,036
34,992
-
-
- 37,083
295,547
224,537
250,333
890,061
-
15,000
-
7,673
-
115,210
1,396
-
251,729
- 69,830 1,097,774
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Knosys Limited
Directors' report
30 June 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Alan Stockdale (Chairman)
Peter Pawlowitsch
Richard Levy
Other Key Management
Personnel:
John Thompson
Stephen Kerr
Name
Non-Executive Directors:
Alan Stockdale (Chairman)
Peter Pawlowitsch
Richard Levy
Executive Directors:
Ashley Gall (resigned 15 July
2016)
Alistair Wardlaw (resigned 26
September 2016)
Other Key Management
Personnel:
John Thompson
Stephen Kerr
Gavin Campion (resigned 21
November 2016)
Fixed remuneration
At risk - STI
2018
2018
At risk - LTI
2018
98%
97%
94%
74%
58%
-%
-%
-%
20%
26%
2%
3%
6%
6%
15%
Fixed remuneration
At risk - STI
2017
2017
At risk - LTI
2017
94%
91%
84%
83%
99%
100%
77%
99%
-%
-%
-%
-%
-%
-%
7%
-%
6%
9%
16%
17%
1%
0%
16%
1%
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
John Thompson
Chief Executive Officer
18 July 2016
No fixed term
Annual base salary for the year ending 30 June 2018 of $306,600 including
superannuation. Remuneration to be reviewed annually by the Board, 6 month
termination notice by either party, STI performance bonus of up to $90,000 (including
statutory superannuation) based on financial and non-financial KPI’s, including
achievement of budget, over achievement of budget, new sales orders, leadership,
customer relations, investor relations, and product development. Non-disclosure, non-
solicitation and non-compete clauses apply. An amount of $88,000 relating to
performance in the 2018 year was assessed as a bonus entitlement for the 2018
financial year.
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Knosys Limited
Directors' report
30 June 2018
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Stephen Kerr
Chief Financial Officer and Company Secretary
9 June 2015
No fixed term
Annual base salary for the year ending 30 June 2018 of $175,200 including
superannuation, employment is for three days per week during normal working hours
on days agreed with the CEO and reasonable additional hours during these days in
order to perform responsibilities and duties. Remuneration to be reviewed annually by
the Board, 3 month termination notice by either party, STI performance bonus of up to
$60,000 (including statutory superannuation) based on financial and non-financial
KPI’s, non-disclosure, non-solicitation and non-compete clauses. An amount of
$30,000 relating to performance in the 2017 financial year was assessed in the 2018
financial year as a bonus entitlement and an amount of $53,000 relating to performance
in the 2018 year was assessed as a bonus entitlement in the 2018 financial year.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
The terms and conditions of each issue of loan funded shares affecting remuneration of directors and other key management
personnel in this financial year or future reporting years are as follows:
Fair value
per loan
share
Grant date
November 2017
January 2018
Number of shares
Expiry date
Issue price at issue date
1,200,000
500,000
November 2022
February 2023
6 cents
10 cents
2.33 cents
5.85 cents
The loan funded shares are subject to time based vesting hurdles only.
The 1,200,000 shares were granted to John Thompson in November 2017 and were fully vested at 30 June 2018, with
500,000 shares vesting on grant date and the balance vesting in equal portions each month from grant date to 30 June 2018.
The 500,000 shares were granted to Stephen Kerr and were 50% vested at 30 June 2018, with 250,000 vesting on grant
date, 25% vesting 6 months after grant date and 25% vesting 12 months after grant date.
Participants acquire loan funded shares using a loan provided by the consolidated entity. The loan is interest-free and limited
recourse in accordance with the loan terms. The loan shares are restricted securities. The loan terms require the loan to be
repaid before a participant can receive any proceeds from the sale of their shares.
Refer Note 20 in the notes to the financial statements, for further general terms of the loan funded shares.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
May 2015
June 2015
October 2016
Number of options
Expiry date
Exercise price at grant date
2,000,000
425,000
500,000
July 2019
July 2019
October 2020
25 cents
25 cents
25 cents
3.14 cents
3.14 cents
14.6 cents
Fair value
per option
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Knosys Limited
Directors' report
30 June 2018
Options granted carry no dividend or voting rights.
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Vesting and Entitlement
For the Directors, the 2,000,000 are fully vested. These options vested over time, in equal amounts (except for slight
adjustments to avoid fractions) every three months, commencing 1 July 2015 with the final vesting date being 1 April 2018.
No performance hurdles were attached to these options. These options are no longer subject to any escrow conditions.
For the 425,000 fully vested options issued to Stephen Kerr, these options vested over time, every three months,
commencing 1 July 2015 with the final vesting date being 1 April 2018. 20,000 Options vested on the first two vesting dates,
and 38,500 Options vested on subsequent vesting dates. No performance hurdles were attached to these options and these
options are not subject to any escrow conditions.
For the 500,000 options issued to Stephen Kerr through the employee share option plan (ESOP), the options are service
based and vest over time in three equal amounts every 12 months, commencing 1 October 2017 with the final vesting date
being 1 October 2019. If the relevant holder is no longer employed or engaged, as the case may be, by the Group on a
vesting date, the Options will not vest to that holder. Options that have previously vested in the holder shall be retained by
the holder. The Options will entitle the holder to subscribe for one Share upon the exercise of each Option that has vested
in the holder. No performance hurdles are attached to these options and these options are not subject to any escrow
conditions.
Shares issued on the exercise of options
No ordinary shares of Knosys Limited were issued during the year ended 30 June 2018 and up to the date of this report on
the exercise of options granted.
The number of options over ordinary shares granted to and vested by directors and other key management personnel as
part of compensation during the year ended 30 June 2018 are set out below:
Name
Alan Stockdale
Peter Pawlowitsch
Richard Levy
Stephen Kerr
2017
Name
Alan Stockdale
Peter Pawlowitsch
Richard Levy
Ashley Gall (resigned 15 July 2016)
Gavin Campion (resigned 21 November 2016)
Alistair Wardlaw (resigned 26 September 2016)
Stephen Kerr
Number of
options
vested and
exercisable
during the
year
2018
% of
options
vested and
exercisable
during the
year
2018
Number of
options
forfeited
during
the
year
2018
% of
options
forfeited
during
the
year
2018
166,667
166,667
333,334
320,667
33%
33%
33%
35%
-
-
-
-
-
-
-
-
Number of
options
vested and
exercisable
during the
year
2017
% of
options
vested and
exercisable
during the
year
2017
Number of
options
forfeited
during
the
year
2017
% of
options
Forfeited
during
the
year
2017
166,667
166,667
333,333
283,334
166,667
83,334
154,000
33%
33%
33%
8%
33%
20%
17%
-
-
-
983,333
500,000
583,333
-
-
-
-
29%
50%
58%
-
10
Knosys Limited
Directors' report
30 June 2018
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Alan Stockdale
Peter Pawlowitsch
Richard Levy
John Thompson
Stephen Kerr
1. Shares issued as loan funded shares in the current year.
Balance at Received
as part of
remuneration
the start of
the year
Disposals/
other
Balance at
the end of
the year
Additions
-
900,000
10,292,260
-
100,000
11,292,260
-
-
-
1,200,0001
500,0001
1,700,000
-
-
-
-
-
-
-
-
-
-
-
-
-
900,000
10,292,260
1,200,000
600,000
12,992,260
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
Alan Stockdale
Peter Pawlowitsch
Richard Levy
Stephen Kerr
Balance at
Granted /
the start of exercised /
the year
expired /
forfeited
Balance at Balance at Balance at
the end of
the end of
the end of
the year
the year
the year
- unvested
- vested
500,000
500,000
1,000,000
925,000
2,925,000
-
-
-
-
500,000
500,000
1,000,000
591,667
2,591,667
-
-
-
333,333
333,333
500,000
500,000
1,000,000
925,000
2,925,000
Other transactions with key management personnel and their related parties
During the financial year, payments for technical infrastructure supplied by MMG Interactive Partnership (director-related
entity of Richard Levy) of $2,000 were made. All transactions were made on normal commercial terms and conditions and
at market rates.
This concludes the remuneration report, which has been audited.
Options
At the date of this report, the unissued ordinary shares of Knosys Limited under option are as follows:
Date of expiry
1 July 2019
1 July 2019
1 July 2019
1 July 2020
1 Oct 2020
1 Oct 2020
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
Exercise price
$0.25
$0.25
$0.29
$0.29
$0.25
$0.25
Number under option
2,425,000
3,333,334
200,000
300,000
500,000
900,000
Each option carries no rights other than the right, once vested, to subscribe for one fully paid ordinary share at the exercise
price. No options were exercised during the period.
11
Knosys Limited
Directors' report
30 June 2018
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Corporate Governance Statement
The company’s corporate governance statement can be found on the company website at
https://knosys.it/investor
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
Non-audit services
During the year no non-audit services were provided.
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
the following page.
Auditor
William Buck Audit (VIC) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
________________________________
Hon. Alan Stockdale AO
Director
30 August 2018
Melbourne
12
Knosys Limited
Contents
30 June 2018
Contents
15
Statement of profit or loss and other comprehensive income
16
Statement of financial position
17
Statement of changes in equity
18
Statement of cash flows
19
Notes to the financial statements
38
Directors' declaration
Independent auditor's report to the members of Knosys Limited
39
Additional information for listed companies 45
General information
The financial statements cover Knosys Limited as a consolidated entity consisting of Knosys Limited and the entities it
controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Knosys
Limited's functional and presentation currency.
Knosys Limited is listed on the Australian Securities Exchange (ASX:KNO) and is incorporated and domiciled in Australia.
Registered office
Suite 9.08 Level 9
2 Queen Street
Melbourne VIC 3000
Principal place of business
Suite 9.08 Level 9
2 Queen Street
Melbourne VIC 3000
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue on 30 August 2018, in accordance with a resolution of directors. The
directors have the power to amend and reissue the financial statements.
14
Knosys Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Research and development tax refund
Other income
Expenses
Licence fee and support expenses
Payments to suppliers for research and development activities
Employee benefits expense
Depreciation and amortisation expense
Legal and accounting expenses
Travel and accommodation
Finance costs
Other expenses
Loss before income tax
Income tax (expense) credit
Note
Consolidated
2018
$
2017
$
3
2,625,906
808,774
474,867
78,132
343,890
33,547
(154,179)
(385,337)
(2,314,468)
(28,338)
(69,760)
(147,720)
(323,036)
(562,134)
(157,887)
-
(2,214,692)
(14,288)
(104,986)
(89,463)
(118,399)
(571,514)
(806,067)
(2,085,018)
-
-
4
4
5
Loss after income tax expense for the year attributable to owners of the parent
(806,067)
(2,085,018)
Other comprehensive income
Other comprehensive income for the year, net of tax
-
-
Total comprehensive loss for the year attributable to owners of the parent
(806,067)
(2,085,018)
Loss per share for loss attributable to the owners of the parent
Basic and diluted loss per share
22
Cents
(0.99)
Cents
(2.67)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
15
Knosys Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Accrued research and development tax refund receivable
Prepayments & sundry debtors
Total current assets
Non-current assets
Plant and equipment
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions for employee benefits
Borrowings – Convertible notes
Revenue billed in advance
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Convertible note equity reserve
Share based payments reserve
Accumulated losses
Total equity
Note
Consolidated
2018
$
2017
$
6
7
1,065,266
708,560
361,073
21,680
2,156,579
2,841,416
385,152
228,071
30,099
3,484,738
57,432
57,432
36,928
36,928
2,214,011
3,521,666
8
23
392,028
142,383
-
65,051
599,462
200,177
93,740
1,494,446
1,006,714
2,795,077
599,462
2,795,077
1,614,549
726,589
9
5,901,852
-
534,615
(4,821,918)
4,403,765
174,958
338,675
(4,190,809)
1,614,549
726,589
The above statement of financial position should be read in conjunction with the accompanying notes
16
Knosys Limited
Statement of changes in equity
For the year ended 30 June 2018
Consolidated
Issued
capital
$
Reserves Accumulated
$
losses
$
Total
equity
$
Balance at 1 July 2016
4,403,765
195,761
(2,105,791)
2,493,735
Loss after income tax expense for the year
Total comprehensive loss for the year
Vesting of share based payments
Equity value attributable to the issue of
convertible notes (Note 23)
-
-
-
-
-
(2,085,018) (2,085,518)
-
(2,085,518) (2,085,518)
142,914
-
142,914
174,958
-
174,958
Balance at 30 June 2017
4,403,765
513,633
(4,190,809)
726,589
Consolidated
Issued
capital
$
Reserves Accumulated
$
losses
$
Total
equity
$
Balance at 1 July 2017
4,403,765
513,633
(4,190,809)
726,589
Loss after income tax expense for the year
Total comprehensive loss for the year
-
-
-
(806,067)
(806,067)
-
(806,067)
(806,067 )
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (Note 9)
1,498,087
-
-
1,498,087
Retirement of convertible note reserve to accumulated
losses
(174,958)
174,958
-
Vesting of share based payments
-
195,940
-
195,940
Balance at 30 June 2018
5,901,852
534,615
(4,821,918)
1,614,549
The above statement of changes in equity should be read in conjunction with the accompanying notes
17
Knosys Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Research and development tax refund
Interest received
Interest paid
Grant revenue
Note
Consolidated
2018
$
2017
$
1,433,257
(3,283,688)
(1,850,431)
790,757
(3,044,244)
(2,253,487)
341,865
36,967
(167,439)
41,165
583,519
44,833
-
-
Net cash used in operating activities
19
(1,597,873) (1,625,135))
Cash flows from investing activities
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
(Repayment) / proceeds from issue of convertible notes
Share issue transaction costs
Convertible note transaction costs
Net cash from financing activities
(48,841)
(31,462)
(48,841)
(31,462)
23
1,371,101
(1,410,044)
(90,493)
-
-
1,650,040
-
(99,002)
(129,436)
1,551,038
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
(1,776,150)
2,841,416
(105,559)
2,946,975
Cash and cash equivalents at the end of the financial year
6
1,065,266
2,841,416
The above statement of cash flows should be read in conjunction with the accompanying notes
18
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the consolidated entity.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Legal Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the legal parent entity is disclosed in note 16.
Principles of consolidation
A controlled entity is any entity controlled by an accounting acquirer. Control exists where an entity has the capacity and
power to govern the decision-making in relation to the financial and operating policies of an investee and also participate in
the variable returns of that investee.
All inter-group balances and transactions between entities in the Consolidated Entity, including any unrealised profits or
losses, have been eliminated on consolidation. Accounting policies of controlled entities have been changed where
necessary to ensure consistencies with those policies adopted by the parent entity.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Knosys Limited's functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can
be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Licence fees and rendering of services
Licence fee revenue and rendering of services revenue from implementation and consulting fees is recognised by reference
to the stage of completion of the contracts.
19
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Stage of completion is measured by reference to the licence fee period and to labour hours incurred to date as a percentage
of total estimated labour hours for each contract. Where the contract outcome cannot be reliably estimated, revenue is only
recognised to the extent of the recoverable costs incurred to date.
Research and development tax refund income
Research and development tax refund income is measured on an accruals basis when the refund can be reliably
determined.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
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.
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 provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment
loss. If significant parts of an item of property plant and equipment have different useful lives, then they are accounted for as
separate items 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.
Depreciation
Depreciation is calculated to write off the costs of the items of property, plant and equipment over their estimated useful lives
and is generally recognised in profit and loss. Depreciation methods and useful lives are reviewed at each reporting period
and adjusted if appropriate.
The estimated useful life of property, plant and equipment for current and comparative periods is as follows:
- Plant and equipment 3 years.
20
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Trade and other payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services
received by the Group during the reporting period, which remains unpaid. The balance is recognised as a current liability
with the amount being normally paid within 30 days of recognition of the liability.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past
event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The
increase in the provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be wholly
settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are
settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the reporting date
are measured as the present value of expected future payments to be made in respect of services provided by employees
up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on national corporate bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
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 of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Black-Scholes option pricing model or the Binomial Option Valuation model each of which takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to
receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
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.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
21
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
Compound financial instruments – Convertible notes
Compound financial instruments issued by the consolidated entity comprise convertible notes and attaching options, as
disclosed in Note 23, that can be converted to ordinary shares at the election of the holder by a certain date and where the
number of shares to be issued is fixed and does not vary with changes in fair value.
The liability component of compound financial instruments is initially recognised at the fair value of a similar liability that does
not have an equity conversion option. The equity component of the financial instrument is initially recognised as the difference
between the fair value of the compound financial instrument as a whole and the fair value of the liability component.
Subsequent to initial recognition, the fair value of the liability component is remeasured at each relevant balance date. The
equity component is not remeasured.
Interest calculated on the liability component of the compound financial instrument is recognised in the statement of profit
and loss. On conversion, the financial liability is reclassified to equity and no gain or loss is recognised.
Revenue billed in advance
Revenue billed in advance is recognised as a current liability in the statement of financial position. The balance of revenue
billed in advance represents the unearned revenue portion of amounts invoiced to customers, in accordance with the terms
of customer contracts, and paid or payable by the customer at reporting date. As the revenue billed in advance is earned by
the consolidated entity, the relevant portion of revenue is relieved from the balance of revenue billed in advance and taken
to the profit and loss in accordance with the consolidated entity’s revenue recognition policy.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end
of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
22
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
Goods and Services Tax ('GST') and other similar taxes
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.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Earnings per share
Basic earnings per share is calculated as net profit/loss attributable to members of the Company, adjusted to exclude any
costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares on issue during
the relevant period.
Diluted earnings per share is calculated as net profit/loss attributable to members of the Company, adjusted for:
• costs of servicing equity (other than dividends);
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses;
• and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares;
• divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element, during the relevant period.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
consolidated entity, are set out below.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be
presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be
satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the
service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied
over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised
as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial
position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's
performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and
any assets recognised from the costs to obtain or fulfil a contract with a customer.
Management has considered the impact of AASB 15 and note, based on the analysis performed, that the impact on the
consolidated entity would not be material. Under AASB 15 the consolidated entity plans to adopt the modified retrospective
approach. The consolidated entity does not anticipate that there will be significant implications of this change in respect of
current contracts. The consolidated entity will consider the application of AASB 15 with respect to new contracts as they are
entered into. The consolidated entity will adopt this standard from 1 July 2018.
23
Knosys Limited
Notes to the financial statements
30 June 2018
Note 1. Significant accounting policies (continued)
AASB 16 Leases
AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities, on a net
present value basis, for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee
is required to recognise a right of use asset representing its right to use the underlying leased asset and a lease liability
representing its obligations to make lease payments. A lessee recognises depreciation of the right of use asset and interest
on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion
and presents them in the statement of cash flows.
Management has considered the impact of AASB 16 and note, based on the analysis performed, that there would be a
material impact on the consolidated entity. It is expected that the operating lease commitments identified in Note 14 to the
financial statements will be required to be included in the consolidated statement of financial position when AASB 16
becomes effective.
24
Knosys Limited
Notes to the financial statements
30 June 2018
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The following key judgements are relevant to these financial statements:
Estimation of accrued research and development tax refund
As at 30 June 2017 the consolidated entity had accrued $228,071 in accrued research and development tax refund credits
in-respect of the 2017 tax return. The directors of the consolidated entity engaged an industry expert to prepare and lodge
this return. This amount plus an additional $113,547 was receipted into the bank in May 2018 in regard to the 2017 tax return
and R&D claim. Based upon the methodology adopted by the industry expert, the consolidated entity has accrued a research
and development tax refund receivable of $361,073 for the 2018 financial year. Key matters considered by the directors in
calculating this accrual included the following:
- The historical success of lodging and receipting such claims;
- The quantum of eligible research and development spend made during the period; and
- A consideration of any potential change in the assessment of eligibility criteria as gazetted by the Federal
government.
Convertible notes
As stated in Note 23, under Australian accounting standards AASB 132, the convertible note is classified as a compound
financial instrument. When the initial carrying amount of a compound financial instrument is allocated to its equity and liability
components, the equity component is assigned the residual amount after deducting from the fair value of the instrument as
a whole the amount separately determined for the liability component. The issuer must first determine the carrying amount
of the instrument’s liability component by measuring the fair value of a similar liability that does not have an associated equity
component. The carrying amount of the equity instrument represented by the option to convert the instrument into ordinary
shares is then determined by deducting the fair value of the financial liability from the fair value of the compound financial
instrument as a whole. Management judgements and estimates are required in referencing market interest rates for such
instruments and in determining the fair value of a similar liability that does not have an associated equity component.
Management has determined that a discount rate of 24% is appropriate, this being derived by referencing required rates of
return for private capital markets.
Share based payments
As stated in Note 1, the consolidated entity has issued options and loans shares to directors, executives and staff as part of
their remuneration arrangements and has issued options and shares to third parties in consideration for consultancy services
received. Management judgements and estimates are required in determining the cost of these equity-settled transactions
which have been measured by taking into account the exercise price, the term of the option, the impact of dilution, the share
price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest
rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity
receives the services that entitle the employees to receive payment.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
25
Knosys Limited
Notes to the financial statements
30 June 2018
Note 3. Revenue
Sales revenue
Licence and support fees
Rendering of services
Revenue
Note 4. Expenses
Loss before income tax includes the following specific expenses:
Rental expense relating to operating leases
Minimum lease payments
Employee benefits expense
Superannuation expense
Accumulation fund Superannuation expense
Share based payments expense
Consolidated
2018
$
2017
$
1,450,544
1,175,362
803,474
5,300
2,625,906
808,774
Consolidated
2018
$
2017
$
92,666
81,881
142,532
178,593
195,940
142,914
26
Knosys Limited
Notes to the financial statements
30 June 2018
Note 5. Income tax expense
Income tax expense
Current Tax benefit
Deferred tax - origination and reversal of temporary differences
Deferred tax assets not recognised
Aggregate income tax expense
Consolidated
2018
$
2017
$
(63,876)
(13,377)
77,252
(481,572)
(5,198)
486,769
-
-
Unrecognised deferred tax assets
Unused tax losses for which no deferred tax asset has been recognised
736,186
658,934
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
Research and development costs
Share based payments expense
Non-assessable R&D refund
Deferred tax assets not recognised
Income tax expense
Note 6. Current assets - cash and cash equivalents
Cash at bank
(806,067)
(2,085,018)
(221,668)
(573,380)
464
220,656
53,884
(130,588)
2,653
139,226
39,301
(94,570)
(77,252)
77,252
(486,769))
486,769
-
-
Consolidated
2018
$
2017
$
1,065,266
2,841,416
27
Knosys Limited
Notes to the financial statements
30 June 2018
Note 7. Current assets - trade and other receivables
Trade receivables
As at 30 June 2018, the aging analysis of trade receivables is as follows:
Consolidated
2018
$
2017
$
668,215
385,152
2018
2017
Neither past
Total due nor impaired
-
$13,896
668,215
385,152
< 30 days
$597,197
$1,544
Past due but not impaired
30-60 days
$56,412
$368,168
61-90 days
-
$1,544
90+ days
$14,606
-
As at 30 June 2018 no trade receivables were impaired (2017: Nil)
Refer Note 1 – Trade and other receivables, which explains how the consolidated entity manages and
accounts for trade receivables.
Note 8. Current liabilities - trade and other payables
Trade payables
Related party payables
Other payables
Consolidated
2018
$
2017
$
77,571
-
314,457
167,071
1,000
32,106
392,028
200,177
The table below summarises the maturity profile of the consolidated entities current trade and other payables.
2018
2017
Total
$77,571
$200,177
On demand
-
-
< 3 months
$77,571
$200,177
3 to 12 months
-
-
Refer Note 1 – Trade and other payables, which explains how the consolidated entity manages and accounts for trade and
other payables.
Note 9. Equity - issued capital
Ordinary shares - fully paid
Consolidated
2018
$
2017
$
5,901,852
4,403,765
28
Knosys Limited
Notes to the financial statements
30 June 2018
Note 9. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Legal parent
Balance start of year
Date
No. of shares
Legal Parent
2018
No. of shares
Legal Parent
2017
78,099,386
78,099,386
Issue of shares on conversion of convertible notes
Issue of loan funded shares to executives and staff
Issue of shares on conversion of convertible notes
Issue of share capital to shareholders
06 Feb 2018
19 Feb 2018
20 Mar 2018
31 May 2018
1,000,000
3,250,000
1,000,000
19,587,347
-
-
-
-
Balance at end of year
Details
Consolidated entity
As at start of the financial year
102,936,733
78,099,386
Date
$
$
4,403,765
4,403,765
Issue of shares on conversion of convertible notes
Issue of shares on conversion of convertible notes
Issue of share capital to shareholders
Costs of issuing shares
06 Feb 2018
20 Mar 2018
31 May 2018
120,000
120,000
1,371,101
(113,014)
-
-
Balance as at end of the financial year
5,901,852
4,403,765
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Movements in options on issue
Details
Date
No. of options
Legal Parent
2018
No. of options
Legal Parent
2017
Legal parent
Balance start of year
06 Feb 2018
Options issued on conversion of convertible notes
20 Mar 2018
Options issued on conversion of convertible notes
Expiry of options issued on conversion of convertible notes 31 May 2018
Options issued under the employee share option plan
25 Oct 2016
Options expired / lapsed
Balance at end of year
7,758,334
120,000
120,000
(240,000)
-
(100,000)
8,625,000
-
-
-
1,400,000
(2,266,666)
7,658,334
7,758,334
5,758,334 options (all of which are vested at 30 June 2018) are exercisable at $0.25 and expire on 1 July 2019.
200,000 options (all of which are vested at 30 June 2018) are exercisable at $0.29 and expire on 1 July 2019.
300,000 options (all of which are vested at 30 June 2018) are exercisable at $0.29 and expire on 1 July 2020.
1,400,000 options (466,667 of which are vested at 30 June 2018) are exercisable at $0.25 and expire on 1 October 2020.
All options are unlisted and are subject to a range of vesting conditions.
29
Knosys Limited
Notes to the financial statements
30 June 2018
Note 9. Equity - issued capital (continued)
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may issue new shares or return capital to
shareholders.
Note 10. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to two financial risks: credit risk and liquidity risk. The consolidated entity's
overall risk management program, which is managed at Board level, focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity
uses different methods to measure different types of risk to which it is exposed. These methods include ageing analysis for
credit risk and cash flow forecasting for liquidity risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a code of credit, including obtaining agency credit information, confirming
references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate
credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount,
net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The consolidated entity does not hold any collateral.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) to be able to pay debts as and when they become due and payable. All amounts payable are within agreed
terms. All third party payment terms are less than 60 days (2017: less than 60 days).
The consolidated entity manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and
forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reasonably approximate their fair value.
Note 11. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Share based payments
Post-employment benefits
30
Consolidated
2018
$
2017
$
747,096
81,583
77,892
912,734
69,830
115,210
906,571
1,097,774
Knosys Limited
Notes to the financial statements
30 June 2018
Note 12. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by William Buck Audit (VIC) Pty Ltd
(“William Buck”), the auditor of the company, its network firms and unrelated firms:
Assurance services – William Buck
Audit or review of the financial statements
Consolidated
2018
$
2017
$
32,969
21,650
32,969
21,650
Note 13. Contingent liabilities
At reporting date there is a bank guarantee in place of $60,663 in place, which relates to a security deposit for the rental of
the Melbourne premises.
At reporting date there is a bank guarantee in place of $21,025 in place, which relates to a documentary letter of credit
issued by the entity’s banker as a performance guarantee for a customer contract.
The consolidated entity has no other contingent liabilities at reporting date.
Note 14. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2018
$
2017
$
55,080
-
-
90,468
52,773
-
55,080
143,241
Operating lease commitments includes contracted amounts for the head office premises under a non-cancellable operating
lease, the term of which expires on 31 January 2019.
Note 15. Related party transactions
Legal Parent entity
Knosys Limited is the legal parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 17.
31
Knosys Limited
Notes to the financial statements
30 June 2018
Note 15. Related party transactions (continued)
Key management personnel
Disclosures relating to key management personnel are set out in note 11 and the remuneration report in the directors' report.
Transactions with related parties
The following transactions occurred with related parties:
In the statement of profit and loss and other comprehensive income for the Consolidated Entity the following related party
transactions took place:
Payment for goods and services:
Payment for services from MMG Interactive (a partnership associated with Richard Levy)
2,000
41,109
Consolidated
2018
$
2017
$
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 16. Legal parent entity information
Set out below is the supplementary information about the legal parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Convertible note equity reserve
Share based payments reserve
Accumulated losses
Total equity
32
Legal Parent
2018
$
2017
$
(6,464,286)
(272,148)
(6,464,286)
(272,148)
Legal Parent
2018
$
2017
$
1,410,329
2,371,359
6,654,592 12,886,958
66,642
1,528,749
66,642
1,528,749
13,036,974 11,538,887
174,958
-
338,675
534,615
(694,311)
(6,983,639)
6,587,950 11,358,209
Knosys Limited
Notes to the financial statements
30 June 2018
Note 16. Legal parent entity information (continued)
Contingent liabilities
The legal parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The legal parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the legal parent entity are consistent with those of the consolidated entity, as disclosed in note 1.
The group does not designate any interests in subsidiaries as being subject to the requirements of accounting standards
specifically applicable to financial statements.
Note 17. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of Knosys Limited and the following
wholly-owned subsidiaries in accordance with the accounting policy described in note 1:
Name
Principal place of business /
Country of incorporation
Knosys Solutions Pty Ltd
Principal activities – Main operating company of the
Knosys group, providing operational infrastructure,
employees,
resources, Knosys Platform
research, development and support.
sales
Australia
Knosys Products Pty Ltd
Principal activity – Holder of the Knosys Platform
intellectual property.
Australia
Ownership interest
2017
2018
%
%
100%
100%
100%
100%
Note 18. Events after the reporting period
The following matters occurred subsequent to the end of the financial year:
• On 31 July 2018 the consolidated entity announced that ANZ Bank had signed a three (3) year contract extension
for the continued use of Knosys’ knowledge management platform. ANZ also has the option to extend the contract
further via two one-year extensions. The potential value of the contract over the entire 5-year life is expected to
exceed $6.5 million; and
• On 2 August 2018 the consolidated entity announced the completion of a 7 for 19 non-renounceable rights issue,
raising $2.65m (before costs of approximately $0.16m).
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
33
Knosys Limited
Notes to the financial statements
30 June 2018
Note 19. Reconciliation of profit after income tax to net cash from operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Finance costs
Share based payments expense
Change in operating assets and liabilities:
Decrease/(Increase) in trade and other receivables
(Decrease)/increase in revenue billed in advance
Increase in prepayments and other debtors
Decrease/(increase) in accrued research and development tax refund receivable
Increase/(decrease) in trade and other payables
Increase in provision for employee benefits
Net cash used in operating activities
Consolidated
2018
$
2017
$
(806,067)
(2,085,018)
28,338
155,597
195,940
14,288
118,367
142,914
(323,408)
(941,663)
8,419
(133,002)
169,330
48,643
(1,597,873)
(385,154)
298,485
35,208
239,630
(22,758)
18,902
(1,625,135)
Note 20. Share-based payments
Loan funded share plan and loan funded shares
A loan funded share plan (LFSP) has been established by the consolidated entity, whereby the consolidated entity may, at
the discretion of the Board, issue loan funded fully paid ordinary shares in the company to personnel of the consolidated
entity. Participants acquire loan funded shares using a loan provided by the consolidated entity. The loan is interest-free and
limited recourse in accordance with the loan terms and the LFSP rules. The LFSP rules require the loan to be repaid before
a participant can receive any proceeds from the sale of their shares. The Board has the discretion to impose such vesting
conditions in relation to the loan funded shares as it deems appropriate. These may include conditions relating to continued
employment or service, performance (of the participant or the consolidated entity) and the occurrence of specific events.
The consolidated entity has also issued loan funded fully paid ordinary shares in the company to executives on the same
terms as the LFSP,
The issuing of these loan funded shares gives rise to an ongoing employment benefit expense each financial period and this
is accounted for in accordance with the accounting policy on employee benefits, as detailed in Note 1. The expense is
included in the share based payment expense amount listed in Note 4.
As at 30 June 2018 the following loan funded shares had been granted under the LFSP:
Grant date
Issue
date
Loan Expiry
date
Issue
price
Balance at
30 June
2017
Number
Issued
during the
period
Number
Sold during
the period
Number
Forfeited
during the
period
Number
Balance at
30 June
2018
Number
Vested at
end of the
period
Number
28/11/2017 19/02/2018 27/11/2022
30/01/2018 19/02/2018 18/02/2023
$0.06
$0.10
Total
Weighted average issue price
-
-
-
-
1,200,000
2,050,000
3,250,000
$0.085
-
-
-
-
-
-
1,200,000
1,200,000
2,050,000 1,025,000
3,250,000 2,225,000
$0.078
$0.085
For the loan funded shares issued during the 2018 financial year, the valuation model inputs to be used to determine the fair
value at each vesting date, were as follows:
Grant date
Loan Expiry Share price
at issue date
date
Issue
price
Marketability Expected Dividend Risk-free
Fair value
Discount
volatility
yield
interest rate at issue date
28/11/2017 27/11/2022
30/01/2018 18/02/2023
$0.052
$0.115
$0.06
$0.10
0.00%
0.00%
68.24%
68.24%
0.00%
0.00%
2.155%
2.500%
$0.0233
$0.0585
The fair value at issue date is an average of graded tranches.
34
Knosys Limited
Notes to the financial statements
30 June 2018
Note 20 Share-based payments (continued)
Employee share option plan
An employee share option plan (ESOP) has been established by the consolidated entity, whereby the consolidated entity
may, at the discretion of the Board, grant options over ordinary shares in the company to personnel of the consolidated entity.
The options are issued for nil consideration and are granted in accordance with time based and/or performance targets
established by the Board. The granting of these options gives rise to an ongoing employment benefit expense each financial
period and this is accounted for in accordance with the accounting policy on employee benefits, as detailed in Note 1. The
expense is included in the share based payment expense amount listed in Note 4.
As at 30 June 2018 the following options had been granted under the ESOP:
Option
Issue date
Option
Expiry date
Exercise
price
Balance at
30 June
2017
Number
Issued
during the
period
Number
Exercised
during the
period
Number
Expired or
forfeited
during the
period
Number
Balance at
30 June
2018
Number
Vested and
exercisable
at end of
the period
Number
25/10/2016 01/10/2020
$0.25
Total
Weighted average exercise price
1,400,000
1,400,000
$0.25
-
-
-
-
-
-
1,400,000
1,400,000
$0.25
466,667
466,667
$0.25
As at 30 June 2017 the following options had been granted under the ESOP:
Option
Issue date
Option
Expiry date
Exercise
price
Balance at
30 June
2016
Number
Issued
during the
period
Number
Exercised
during the
period
Number
Expired or
forfeited
during the
period
Number
Balance at
30 June
2017
Number
Vested and
exercisable
at end of
the period
Number
25/10/2016 01/10/2020
$0.25
Total
Weighted average exercise price
- 1,400,000
- 1,400,000
-
-
-
-
-
1,400,000
1,400,000
$0.25
-
-
-
For the options issued during the 2017 financial year, the valuation model inputs to be used to determine the fair value at
each vesting date, were as follows:
Issue date
Expiry date at issue date
price
Discount
volatility
yield
interest rate at issue date
Share price Exercise Marketability Expected Dividend Risk-free
Fair value
25/10/2016 01/10/2020
$0.235
$0.25
0.00%
87.57%
0.00%
1.83%
$0.14597
35
Knosys Limited
Notes to the financial statements
30 June 2018
Options issued to Directors and senior management
As at 30 June 2018 the following unvested options over ordinary shares in Knosys Limited had been issued to Directors and
senior management (Options). These Options were issued separately to the ESOP.
Set out below are summaries of Options issued to Directors and senior management:
2018
Issue date
Expiry date
price
Exercise
Balance at
the start of
the year(1)
Exercised
Expired/
forfeited
Issued
Balance at
the end of
the year
Number
vested
09/05/2015
29/06/2015
01/07/2019
01/07/2019
$0.25
$0.25
Weighted average exercise price
2,000,000
425,000
2,425,000
$0.25
-
-
-
-
-
-
-
-
2,000,000
425,000
2,425,000
2,000,000
425,000
2,425,000
$0.25
$0.25
(1) The balance at the start of the 2018 year excludes options held by former Directors and former KMP who ceased holding office during the 2017
year (but who still held their options during 2017) and were included in the 2017 table.
Vesting and Entitlement
For the options issued on 9 May 2015, the Options vested over time, in equal amounts (except for slight adjustments to avoid
fractions) every three months, commencing 1 July 2015 with the final vesting date being 1 April 2018. For the Options issued
on 29 June 2015, 20,000 Options vested on the first two vesting dates, and 38,500 Options vested on subsequent vesting
dates. If the relevant holder is no longer employed or engaged, as the case may be, by the Group on a vesting date, the
Options will not vest to that holder. Options that have previously vested in the holder shall be retained by the holder. The
Options will entitle the holder to subscribe for one Share upon the exercise of each Option that has vested in the holder.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1 year.
2017
Issue date
Expiry date
price
Exercise
Balance at
the start of
the year
Exercised
Expired/
forfeited
Issued
Balance at
the end of
the year
Number
vested
09/05/2015
29/06/2015
01/07/2019
01/07/2019
$0.25
$0.25
Weighted average exercise price
7,400,000
425,000
7,825,000
$0.25
-
-
-
-
(2,066,666)
-
(2,066,666)
5,333,334
425,000
5,758,334
4,416,668
271,000
4,687,668
-
$0.25
$0.25
Note 21 Segment information
During the year the consolidated entity operated as a developer and licensor of computer software in the APAC region.
The concentration of customers for the 2018 year was as follows:
• A major customer in Australia in the finance sector represented 40.3% of operating revenue
• A major customer in Australia in the Telecommunications sector represented 32.6% of operating revenue
• A major customer in Singapore in the telecommunications sector represented 18.9% of operating revenue
(In 2017 a major customer in Australia in the finance sector represented 98.5% of operating revenue)
36
Knosys Limited
Notes to the financial statements
30 June 2018
Note 22 Loss per share
Consolidated
2018
$
2017
$
Loss after income tax attributable to the owners the parent
(806,067)
(2,085,018)
Weighted average number of ordinary shares used in calculating basic and diluted
earnings per share
81,549,716
78,099,386
Number
Number
Basic loss per share
The 7,658,334 (2017: 7,758,334) options issued could potentially dilute basic earnings per
share in the future, but were not included in the calculation of diluted earnings per share
because they are anti-dilutive for the periods presented.
Cents
Cents
(0.99)
(2.67)
Note 23 Convertible Note
During the previous financial period the Company raised $1,650,040 through the issue of 13,750,337 convertible notes on
the following terms:
• Face value per note: 12 cents
• Conversion ratio: 1 note = 1 ordinary share
• Attaching option: 1:1 attaching option received on note conversion.
• Maturity date of convertible note: 31 May 2018.
• Conversion date of convertible note: Maturity date or earlier at the option of the noteholder
•
•
• Exercise price of an attaching option: 15 cents
• Expiry date of an attaching option: 31 May 2018
Interest payment date: At the earlier of maturity date or conversion date
Interest rate: 10% per annum
Under Australian accounting standards AASB 132, the Company has classified the convertible note as a compound financial
instrument. The initial carrying amount of the convertible note has been allocated to its equity and liability components. The
equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the
amount separately determined for the liability component.
The Company determined the carrying amount of the liability component by measuring the fair value of a similar liability that
does not have an associated equity component. The carrying amount of the convertible note represented by the option to
convert the instrument into ordinary shares was then determined by deducting the fair value of the financial liability from the
fair value of the compound financial instrument as a whole.
During the year 2,000,000 convertible notes were converted to fully paid ordinary shares, with an issue price of 12 cents per
share. The balance of 11,750,337 convertible notes matured on 31 May 2018 and were repaid in full and accrued interest
was also paid at that time.
37
Knosys Limited
Directors' declaration
30 June 2018
In the directors' opinion:
● the attached financial statements and notes comply with the Corporations Act 2001, the Australian Accounting Standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements;
● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
● the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2018 and of its performance for the financial year ended on that date; and
● there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable; and
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
________________________________
Hon. Alan Stockdale AO
Director
30 August 2018
Melbourne
38
Knosys Limited
Additional information for listed companies
1.
Shareholding as at 24 August 2018
a.
Distribution of Shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Above 100,001
Number Number
Holders Ordinary
Shares
11
39
66
2,991
144,414
583,093
288 11,670,686
162 128,459,392
335 140,860,576
b.
c.
The number of shareholdings held in less than marketable parcels is 63, with a total of
228,522 ordinary shares, amounting to 0.16% of issued capital.
The names of the substantial shareholders listed in the holding Consolidated Group’s
register as at 24 August 2018 are:
Shareholder
Number
Ordinary
shares
%
1 Earthrise Holdings Pty Ltd
19,100,000
13.58
2 Vabake Pty Ltd and Vabake Pty Ltd
10,437,260
7.41
d.
Voting Rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares
—
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.
45
Number of
Ordinary
Fully Paid
Shares Held
19,135,000
10,066,130
7,000,270
6,680,000
5,714,286
4,483,307
% Held of
Issued
Ordinary
Capital
13.58
7.15
4.97
4.74
4.06
3.18
3,140,700
2,250,000
1,993,857
1,954,886
1,759,116
1,714,288
1,692,850
1,618,473
1,500,000
1,425,000
1,368,421
1,342,857
1,260,000
1,257,142
2.23
2.88
1.42
1.39
1.25
1.22
1.20
1.15
1.06
1.01
0.97
0.95
0.89
0.89
77,356,583
54.92
Knosys Limited
Additional information for listed companies
e.
20 Largest Shareholders — Ordinary Shares
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Earthrise Holdings Pty Ltd
Vabake Pty Ltd
Mrs Tracey Lee Cunningham
Panchito Services Pty Ltd
Moat Investments Pty Ltd
Mast Financial Pty Ltd
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Gale Enterprises (Aust) Pty Ltd
National Nominees Limited
Chifley Portfolios Pty Limited
Vonetta Pty Ltd
MR GARRY JAMES COTTERILL
TDF Properties Pty Ltd
ADC (Investing) Pty Ltd
Parry Segregated Portfolio Company
Jet Invest Pty Ltd
Pethol (Vic) Pty Ltd
Helen Thompson
Hardmail Pty Ltd
Baxter Manor Pty Ltd
2.
3.
The name of the Company Secretary is Mr Stephen Kerr.
The address of the principal registered office in Australia is:
Suite 9.08, Level 9, 2 Queen Street
MELBOURNE VIC 3000
Telephone 03 9046 9700
4.
Registers of securities are held at the following addresses:
Automic Registry Services
Suite 310, Level 3, 50 Holt Street
SURRY HILLS NSW 2010
5.
Securities Exchange Listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges
of the Australian Securities Exchange Limited.
6. In accordance with ASX Listing Rule 4.10.19, the Consolidated Group advises that, since listing on
9 September 2015, it has used its cash in a way consistent with its business objectives.
46