Knosys Limited
ABN 96 604 777 862
Annual Report
30 June 2019
Knosys Limited
Chairman’s letter to shareholders
30 June 2019
Dear Shareholders,
I have pleasure in presenting to you the 2019 Annual Report of Knosys Limited and I am pleased to report that the Company
has had another successful year during 2019, with strong year-on-year growth in recurring revenues and in total licences on
issue.
In August 2018 the Company completed a 7 for 19 Rights Issue, raising $2.65m (before costs). This completed the $4 million
capital raising which occurred over the period May 2018 to August 2018, including an oversubscribed share placement to
sophisticated investors. Your board appreciates and recognises the support provided from existing and new shareholders.
The raising of these funds has enabled the company to confidently pursue its business development goals, with increased
investment in its sales, marketing, product development and customer success teams.
In September 2018 our CEO, John Thompson, was appointed to the board of directors and we welcome his continued
contribution to the Company as our Managing Director. Under the leadership of the Board and John Thompson, the Company
has cemented its relationship with key major customers and has continued its focus as a sales-driven technology business,
while also continuing to develop and evolve its core product.
During the year our core product, Knowledge IQ, was expanded to include a new Software-as-a-Service product, KIQ Cloud,
which was launched in the second half of the year. Our market feedback confirms that we have a relevant and robust
knowledge management solution to offer the market at the enterprise level as well as an attractive mid-market offering through
KIQ Cloud. The Board is confident that John Thompson and his team will deliver further success for Knosys and its
shareholders as we continue to expand our recurring revenue base, improve our operating profitability through scale, and
diversify into new products and geographic regions.
Richard (Dick) Levy, one of the founders of the Knosys business, resigned his directorship of Knosys Limited in September
2018 in order to pursue his other business activities and other personal interests. The Board acknowledges Dick’s contribution
to the success of Knosys over this period and wishes him the very best for the future.
On behalf of the Directors I would like to again thank all investors who supported the Company’s fund raising initiative early
in the financial year. The capital raising supported the Company’s product development and geographic expansion initiatives
in the 2019 financial year and we are well funded to continue building our recurring revenue base. We believe that Knosys is
well placed to achieve further sales success in the coming year.
I present to you the report on the Company and its controlled entities for the financial period ended 30 June 2019.
Hon. Alan Stockdale AO
CHAIRMAN
28 August 2019
Knosys Limited
Managing Director’s Operations Report
30 June 2019
Financial Highlights
The 2019 financial year has been another positive year for Knosys with improvement in all of the Company’s key financial
metrics:
•
•
•
•
•
•
Total operating revenue for the consolidated entity increased by 11% to $2,909,228 (2018 revenue: $2,625,906);
Licence and support fee revenues, increased by 71% to $2,477,848 (2018: $1,450,544);
The licensed user base of the Knosys product had increased by 35% to over 40,430 by the end of 2019;
The loss for the consolidated entity after providing for income tax reduced by 4.2% to a loss of $771,912 (2018 loss:
$806,067);
Net cash outflow from operating activities improved by 72% to $441,006 (2018 outflow: $1,597,873); and
The consolidated entity had net assets of $3,413,808 at 30 June 2019 (2018: $1,614,549) and held cash and cash
equivalents of $2,911,318 (2018: $1,065,266).
Subsequent to year end, total cash balances were over $4.1 million on 31 July 2019, after the collection of annual licence
fees and other June 2019 receivables.
Annual Recurring Revenue
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
s
e
c
n
e
c
i
L
o
N
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
FY16
FY17
FY18
FY19
Jul'19
annual run
rate
Knosys Licensed Users
FY 19
FY18
FY17
FY16
Financial Year
1
Knosys Limited
Managing Director’s Operations Report
30 June 2019
Overview of Knosys
Knosys is a fast-growing Australian SaaS software company that is simplifying omni-channel knowledge management to
improve the productivity of employees and drive better customer experiences. Our mission is to deliver knowledge
management solutions to enable organizations to strengthen customer loyalty, retention and lifetime value. Our market
leading enterprise solution, KnowledgeIQ, is designed to provide personalised information to staff and customers that will
transform business productivity and engagement.
The solution is designed to be the core application for an information worker, available on their desktop, tablet or smartphone.
This app 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 and self-service kiosks can consume relevant
information and interact with end customers in a consistent manner. The Knosys solution can be deployed across many
areas of a business including, but not limited to, contact centres, distributed frontline offices, sales teams, compliance and
administration.
KIQ Cloud
In April 2019, Knosys launched its new Software-as-a-Service product, KIQ Cloud. KiQ Cloud is a cloud-based, omni-channel
knowledge management solution designed to simplify and centralise the organising and sharing of knowledge. KIQ Cloud
makes it easy for teams and individuals to find the right information, exactly when they need it, and provides direction for
work flows, processes and compliance. The cloud service is perfect for businesses that operate customer contact centres,
service desks, frontline offices or online self-service channels.
The cloud service offers mid-market customers an easier onboarding process, lower total cost of ownership and faster
implementation by comparison to our enterprise customers. We have onboarded our first mid-market customer to this new
offering and expect more signings during the next 12-month period as we build awareness and adoption in this space. KIQ
Cloud complements our enterprise offering and will assist in smoothing out the sales and revenue profile of the company.
Positioned for growth
Following the successful capital raising, which concluded in early August 2018, Knosys has progressively increased its
investment in the sales, marketing, product development and customer success teams in order to pursue customer and
revenue growth in Australia and New Zealand and in selected Asian and Pacific markets. Our strategy is to leverage off the
successful contract announcements with Singtel and Optus and recruit additional business development and marketing
employees. These additional employees have and will focus primarily on making sales of the Company’s leading enterprise
software platform, KnowledgeIQ, and the new KIQ Cloud service. The Company also undertook a broader digital marketing
campaign and sponsored a number of industry conferences to build the brand awareness of Knosys. The Company has also
continued to invest in ongoing product development and innovation, focusing on integrations and enhancements to simplify
usage and drive adoption.
There has been an increase in inbound interest in KIQ Cloud service and we have seen the number of customer
demonstrations increase towards the end of the last quarter, which positions the business well for further success in FY20.
Our recurring revenue base increased by over 70% in the 2019 financial year and we expect that it will continue to grow
through the acquisition of new customers and licenses.
Expansion into Asia Pacific region
Growth activities in 2019 included the expansion into Singapore with the opening of a local office to facilitate better
engagement with customers, prospects and partners. This is the first step in our plan to grow our sales footprint in the APAC
region. The set-up of the Singapore office has been finalised and sales initiatives in the Asia Pacific region have now
commenced. Knosys now has sales offices in Sydney, Melbourne and Singapore, giving the business the ability to access
the wider APAC market, in order to support its growth strategy and service its customers. The Singapore office will expand
our relationship with Singtel in the region and the strategy is to secure additional new customers in Singapore and
surrounding countries.
2
Knosys Limited
Managing Director’s Operations Report
30 June 2019
Enterprise opportunity
The Company continued to invest in sales and marketing capability in the year to June 2019 in order to pursue multiple
enterprise opportunities. Knosys has been shortlisted for a number of these enterprise customers and we expect additional
tender opportunities in FY20.
We continue to have a positive relationship with our enterprise customers including ANZ Bank, Optus and Singtel and these
existing customers continue to be a source of revenue growth as we experience demand for additional licences and services.
Our market feedback confirms that we have a relevant and robust enterprise level knowledge management solution for the
market. Our sales effort in FY20 will remain focused on building upon this solid base through direct sales initiatives and
partner relationships.
Outlook
We enter the 2020 financial year in a strong position with a growing recurring revenue base and increased operating leverage.
The Company believes FY20 will bring the following:
1. Continued growth in the recurring revenue base through new customers and an increase in user numbers;
2. Diversification of customer base into new market sectors including energy and public service organisations;
3.
Increased customer adoption of our new KIQ cloud product and services;
4. Organic growth in revenues from existing customers; and
5.
Improved operating leverage through revenue growth and a stable cost base leading towards operating EBITDA
profitability.
In addition, the Company will continue to look at synergist acquisitions to expand its solution portfolio with related cloud
services focused on engagement, risk and information management.
I would like to thank our dedicated staff for executing on our growth strategy of new product development, revenue
diversification and geographic expansion in the 2019 financial year. Our business is very well positioned to keep growing
our recurring revenue and we are moving towards an EBITDA positive position. We are looking forward to an exciting year
ahead.
John Thompson
MANAGING DIRECTOR
28 August 2019
3
Knosys Limited
Directors' report
30 June 2019
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 2019.
Directors
The following persons were directors of Knosys Limited during the period from 1 July 2018 to the date of this report, unless
otherwise stated:
Hon. Alan Stockdale (Non-executive Chairman)
Mr John Thompson (Managing Director) – Appointed as a director on 26 September 2018. CEO since July 2016.
Richard Levy (Non-executive Director) – Retired 26 September 2018
Peter Pawlowitsch (Non-executive Director)
Review of operations
Refer Managing Director’s Operations Report.
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.
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
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
Knosys expects a continued expansion of the market and the adoption of knowledge management and business process
technology and the Company is again well placed to expand its customer base and add to our offerings through internal
developments and acquisition of technologies. The consolidated entity continues to have a significant sales pipeline in the
APAC markets. The Company will continue to invest in sales and marketing capability in the year to June 2020 in order to
enable the Company’s Melbourne, Sydney and Singapore based sales team to pursue the multiple enterprise and mid-
market opportunities in its sales pipeline, with the aim of converting them into subscription based contracts. In addition, the
Company will assess any complimentary acquisitions.
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.
4
Knosys Limited
Directors' report
30 June 2019
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 a consultant to Metro
Trains and previously was a consultant to Maddocks Lawyers, a member of the
Advisory Board of 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 was 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
Nil Options (500,000 options lapsed 1 July 2019)
Name:
Title:
Richard Levy (retired 26 September 2018)
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 was a director from 30 April 2015 until 26 September 2018.
Directorships held in other listed
entities in the last 3 years
Nil
Interests in shares
Interests in options
10,437,260 ordinary shares
Nil Options (1,000,000 options lapsed 1 July 2019)
5
Knosys Limited
Directors' report
30 June 2019
Information on directors (cont.)
Name:
Title:
Peter Pawlowitsch
Non-Executive Director
Experience and expertise:
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), VRX Silica Ltd (appointed 12 February 2010) and Novatti
Group Limited (appointed 19 June 2015) and he was a non-executive director of
Rewardle Holdings Limited (30 May 2017 to 2 January 2019), all ASX-listed companies.
Peter holds a Bachelor of Commerce from the University of Western Australia, is a
current member of CPA Australia, a Fellow of Governance Institute of 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)
VRX Silica Limited (ASX:VRX)
Novatti Group Limited (ASX:NOV)
Rewardle Holdings Limited (ASX:RXH)
Interests in shares
Interests in options
1,231,578 ordinary shares
Nil Options (500,000 options lapsed 1 July 2019)
Name:
Title:
John Thompson (appointed as a director on 26 September 2018)
Managing Director
Experience and expertise:
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 and a Master of Business Administration from
the City University Business School in London. Mr. Thompson has a strong record of
driving sales and revenue and has extensive 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.
Mr Thompson has been a director since 26 September 2018.
Directorships held in other listed
entities in the last 3 years
Nil
Interests in shares
Interests in options
2,342,857 ordinary shares
Nil
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.
6
Knosys Limited
Directors' report
30 June 2019
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held from 1 July 2018 to the year ended 30 June
2019, and the number of meetings attended by each director were:
Hon. Alan Stockdale
Richard Levy (retired Sept 2018)
Peter Pawlowitsch
John Thompson (appointed a director Sept 2018)
Full board
Attended
10
3
10
7
Held
10
3
10
7
Held: represents the number of meetings held during the time the director held office.
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 2019. 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.
7
Knosys Limited
Directors' report
30 June 2019
Remuneration report (cont.)
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.
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
2019
$
(771,912)
-
10.8%
4.2%
25%
(31%)
2018
$
(806,067)
-
224.7%
61.3%
(57%)
(69%)
2017
$
(2,085,018)
-
9.9%
(47.8%)
(40%)
(80%)
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.
8
Knosys Limited
Directors' report
30 June 2019
Remuneration report (cont.)
The key management personnel of the consolidated entity during the year to 30 June 2019 consisted of the following directors
of Knosys Limited:
● Alan Stockdale - Non-Executive Chairman
● Peter Pawlowitsch - Non-Executive Director
● John Thompson – Managing Director (appointed a director 26 September 2018)
● Richard Levy - Non-Executive Director (retired 26 September 2018)
And the following persons:
● Stephen Kerr - Company Secretary and Chief Financial Officer
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2019
$
$
$
$
Cash salary Cash
and fees bonus
Non-
Super-
monetary annuation
Long service Equity-
settled
$
leave
$
Total
$
Non-Executive Directors:
Alan Stockdale
Peter Pawlowitsch
Richard Levy
54,795
36,530
-
-
-
-
-
-
-
5,205
3,470
10,000
-
-
-
-
-
-
60,000
40,000
10,000
Executive Director:
John Thompson
Other Key Management
Personnel:
Stephen Kerr
305,595
10,000
9,746
24,000
-
15,250
364,591
142,150
16,000
10,583
24,921
539,070
26,000
20,329
67,596
-
-
24,483
218,137
39,733
692,728
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2018
Cash salary
and fees
$
Non-Executive Directors:
Cash
bonus monetary annuation
Super-
Non-
$
$
$
Long service Equity-
settled
$
leave
$
Total
$
Alan Stockdale
Peter Pawlowitsch
Richard Levy
54,795
36,530
20,000
-
-
-
-
-
-
5,205
3,470
20,000
-
-
-
1,200
1,200
2,401
61,200
41,200
42,401
Other Key
Management
Personnel:
John Thompson
Stephen Kerr
281,715
150,868
88,000
83,000*
22,559
9,629
24,885
24,332
- 27,900
48,882
-
445,059
316,711
543,908
171,000
32,188
77,892
- 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.
9
Knosys Limited
Directors' report
30 June 2019
For the financial year, the actual proportions of fixed remuneration and of remuneration linked to performance are as follows:
Fixed remuneration
2019
At risk - STI
2019
At risk - LTI
2019
Name
Non-Executive Directors:
Alan Stockdale (Chairman)
Peter Pawlowitsch
Richard Levy
Managing Director:
John Thompson
Other Key Management
Personnel:
Stephen Kerr
100%
100%
100%
93%
82%
-%
-%
-%
3%
(21% available)
7%
(24% available)
Fixed remuneration
At risk - STI
Name
2018
Non-Executive Directors:
Alan Stockdale (Chairman)
Peter Pawlowitsch
Richard Levy
Other Key Management
Personnel:
John Thompson
Stephen Kerr
98%
97%
94%
74%
58%
2018
-%
-%
-%
20%
26%
-%
-%
-%
4%
11%
At risk - LTI
2018
2%
3%
6%
6%
15%
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 2019 of $329,595 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 $10,000 relating to
performance in the 2019 year was assessed as a bonus entitlement for the 2019
financial year.
10
Knosys Limited
Directors' report
30 June 2019
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 2019 of $188,340 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
$16,000 relating to performance in the 2019 year was assessed as a bonus entitlement
in the 2019 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
November 2018
December 2018
Number of shares
Expiry date
Issue price at issue date
1,200,000
500,000
1,000,000
500,000
November 2022
February 2023
November 2023
December 2023
6 cents
10 cents
8 cents
8 cents
2.33 cents
5.85 cents
1.53 cents
1.10 cents
1,200,000 loan shares were granted to John Thompson in November 2017 and were fully vested at 30 June 2018, with
500,000 loan shares vesting on grant date and the balance vesting in equal portions each month from grant date to 30 June
2018. These loan funded shares were subject to time based vesting hurdles only.
500,000 loan shares were granted to Stephen Kerr in January 2018 and were 100% 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. These loan funded
shares were subject to time based vesting hurdles only.
1,000,000 loan shares were granted to John Thompson in November 2018 and were 25% vested at 30 June 2019. 75% of
the loan shares remained unvested at 30 June 2019 because vesting hurdles, based on the market price of Knosys shares
at 30 June 2019, had not been achieved.
500,000 loan shares were granted to Stephen Kerr in December 2018 and were 25% vested at 30 June 2019. 75% of the
loan shares remained unvested at 30 June 2019 because vesting hurdles, based on the market price of Knosys shares at
30 June 2019, had not been achieved.
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 21 in the notes to the financial statements, for further general terms of the loan funded shares.
11
Knosys Limited
Directors' report
30 June 2019
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
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 options 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 2019 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 2019 are set out below:
Number of options % of options Number of options % of options
vesting and
exercisable
during the
year
2019
vesting and
exercisable
during the
year
2019
forfeited
during
the
year
2019
forfeited
during
the
year
2019
Name
Stephen Kerr
166,666
18%
-
-
2018
Name
Number of options % of options Number of options % of options
vesting and
exercisable
during the
year
2018
vesting and
exercisable
during the
year
2018
forfeited
during
the
year
2018
Alan Stockdale
Peter Pawlowitsch
Richard Levy
Stephen Kerr
166,667
166,667
333,334
320,667
33%
33%
33%
35%
12
-
-
-
-
forfeited
during
the
year
2018
-
-
-
-
Knosys Limited
Directors' report
30 June 2019
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
1,200,000
600,000
12,992,260
-
-
-
1,000,0001
500,0001
1,500,000
250,000
331,578
145,000
142,857
521,759
1,391,194
-
-
-
-
-
-
250,000
1,231,578
10,437,260
2,342,857
1,621,759
15,883,454
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
758,333
2,758,333
-
-
-
166,667
166,667
500,000
500,000
1,000,000
925,000
2,925,000
Other transactions with key management personnel and their related parties
Nil.
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 2020
1 Oct 2020
1 Oct 2020
24 Dec 2021
unlisted
unlisted
unlisted
unlisted
Exercise price
$0.29
$0.25
$0.25
$0.12
Number under option
300,000
500,000
750,000
2,000,000
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.
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.
13
Knosys Limited
Directors' report
30 June 2019
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
28 August 2019
Melbourne
14
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF KNOSYS LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2019
there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the
audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
A. A. Finnis
Director
Dated this 28th day of August 2019
Knosys Limited
Contents
30 June 2019
Contents
17
Statement of profit or loss and other comprehensive income
18
Statement of financial position
19
Statement of changes in equity
20
Statement of cash flows
21
Notes to the financial statements
40
Directors' declaration
Independent auditor's report to the members of Knosys Limited
41
Additional information for listed companies 46
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
Part Level 8
31 Queen Street
Melbourne VIC 3000
Principal place of business
Part Level 8
31 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 28 August 2019, in accordance with a resolution of directors. The
directors have the power to amend and reissue the financial statements.
16
Knosys Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Research and development tax refund
Other income
Expenses
Licence fee and support expense
Payments to suppliers for research and development activities
Employee benefits expense
Depreciation and amortisation expense
Legal and accounting expense
Travel and accommodation expense
Finance costs
Administration and corporate expense
Loss before income tax
Income tax (expense) credit
Note
Consolidated
2019
$
2018
$
3
2,909,228
2,625,906
583,233
68,010
474,867
78,132
(358,613)
(57,470)
(2,858,366)
(45,527)
(144,405)
(120,705)
-
(747,297)
(154,179)
(385,337)
(2,314,468)
(28,338)
(69,760)
(147,720)
(323,036)
(562,134)
(771,912)
(806,067)
-
-
4
4
5
Loss after income tax expense for the year attributable to owners of the parent
(771,912)
(806,067)
Other comprehensive income
Other comprehensive income for the year, net of tax
-
-
Total comprehensive loss for the year attributable to owners of the parent
(771,912)
(806,067)
Loss per share for loss attributable to the owners of the parent
Basic and diluted loss per share
23
Cents
(0.56)
Cents
(0.99)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
17
Knosys Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade receivables
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
Revenue billed in advance
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share based payments reserve
Accumulated losses
Total equity
Note
Consolidated
2019
$
2018
$
6
7
8
9
2,911,318
1,729,553
-
420,247
48,887
5,110,005
1,065,266
668,215
40,345
361,073
21,680
2,156,579
176,883
176,883
57,432
57,432
5,286,888
2,214,011
375,751
167,414
1,329,915
1,873,080
392,028
142,383
65,051
599,462
1,873,080
599,462
3,413,808
1,614,549
10
21
8,312,409
695,229
(5,593,830)
5,901,852
534,615
(4,821,918)
3,413,808
1,614,549
The above statement of financial position should be read in conjunction with the accompanying notes
18
Knosys Limited
Statement of changes in equity
For the year ended 30 June 2019
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 10)
1,498,087
-
-
1,498,087
Retirement of convertible note reserve to accumulated
losses
Vesting of share based payments (Note 21)
-
-
(174,958)
174,958
-
195,940
-
195,940
Balance at 30 June 2018
5,901,852
534,615
(4,821,918)
1,614,549
Consolidated
Issued
capital
$
Reserves Accumulated
$
losses
$
Total
equity
$
Balance at 1 July 2018
5,901,852
534,615
(4,821,918)
1,614,549
Loss after income tax expense for the year
Total comprehensive loss for the year
-
-
-
(771,912)
(771,912)
-
(771,912)
(771,912)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (Note 10)
2,410,557
-
-
2,410,557
Vesting of share based payments (Note 21)
-
160,614
-
160,614
Balance at 30 June 2019
8,312,409
695,229
(5,593,830)
3,413,808
The above statement of changes in equity should be read in conjunction with the accompanying notes
19
Knosys Limited
Statement of cash flows
For the year ended 30 June 2019
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
2019
$
2018
$
3,332,585
(4,362,247)
524,059
37,780
-
26,817
1,433,257
(3,283,688)
341,865
36,967
(167,439)
41,165
Net cash used in operating activities
20
(441,006)
(1,597,873)
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 of convertible notes
Share issue transaction costs
Net cash from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
(164,978)
(48,841)
(164,978)
(48,841)
2,654,857
-
(202,821)
1,371,101
(1,410,044)
(90,493)
2,452,036
(129,436)
1,846,052
1,065,266
(1,776,150)
2,841,416
2,911,318
1,065,266
The above statement of cash flows should be read in conjunction with the accompanying notes
20
Knosys Limited
Notes to the financial statements
30 June 2019
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.
AASB 15 Revenue (“AASB 15”)
The consolidated entity has adopted AASB 15 with the date of initial application being 1 July 2018. In accordance with the
transition provisions in AASB 15 the standard has been applied using the modified retrospective approach. On this basis
there were no restatements of prior comparative balances. At 30 June 2019, all material contracts were assessed by the
consolidated entity and it was determined that the adoption of AASB 15 had no significant impact on the consolidated entity.
AASB 9 Financial Instruments (“AASB 9”)
The consolidated entity has adopted AASB 9 as issued in July 2014 with the date of initial application being 1 July 2018. In
accordance with the transitional provisions in AASB 9, comparative figures have not been restated. AASB 9 replaces AASB
139 Financial Instruments: Recognition and Measurement (“AASB 139”), bringing together all three aspects of the accounting
for financial instruments: classification and measurement; impairment; and hedge accounting. The accounting policies have
been updated to reflect the application of AASB 9 below.
Measurement and classification
At the date of initial application, existing financial assets and liabilities of the consolidated entity were assessed in terms of
the requirements of AASB 9. The assessment was conducted on instruments that had not been de-recognised as at 1 July
2018. In this regard, the consolidated entity has determined that the adoption of AASB 9 has impacted the classification of
financial instruments at 1 July 2018 as follows:
Class of financial instrument presented
in the statement of financial position
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Original measurement category under
AASB 139 (i.e. prior to 1 July 2018)
Loans and receivables
Loans and receivables
Financial liability at amortised cost
New Measurement category under
AASB 9 (i.e. from 1 July 2018)
Financial asset at amortised cost
Financial asset at amortised cost
Financial liability at amortised cost
The change in classification has not resulted in any re-measurement adjustments at 30 June 2019.
Impairment of financial assets
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied as
opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires the consolidated entity
to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes
in credit risk since initial recognition of the financial asset. AASB 9 requires the consolidated entity to measure the loss
allowance at an amount equal to lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased
significantly since initial recognition. If the credit risk on the financial instrument has not increased significantly since initial
recognition the consolidated entity is required to measure the loss allowance for that financial instrument at an amount equal
to the ECL within the next 12 months.
At 1 July 2018, the consolidated entity reviewed and assessed the existing financial assets for impairment using reasonable
and supportable information. In accordance with AASB 9, where the consolidated entity concluded that it would require
undue cost and effort to determine the credit risk of a financial asset on initial recognition, the consolidated entity recognises
lifetime ECL. The result of the assessment is set out below:
21
Knosys Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Items existing at 1 July 2018 that are subject
to the impairment provisions of AASB 9
Cash and cash equivalents
Trade receivables
Credit risk attributes
All bank balances are assessed to have
low credit risk at each reporting date as
they are held with reputable financial
institutions.
The consolidated entity applied the
simplified approach and concluded that
the lifetime ECL would be negligible on
receivable balances not already provided
for and therefore no loss allowance was
required at 1 July 2018.
Cumulative additional loss
allowance required on 1 July 2018
-
-
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 17.
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.
22
Knosys Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated
entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money; allocates the
transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a
manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable
consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate
refund liability
Rendering of services
Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed
price or an hourly rate.
The consolidated entity earns revenues from its software services. Of these, a portion relates to licensing and support of its
software, which is performed over a period of time and for which revenue is recognised over a period of time due to the
customer only having a right of access over the software throughout the contract period . For software implementation
services provided to the customer, which is specified in the customer contract, revenue is recognised over time as that
implementation is performed.
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.
Refer to Note 22 segment note for a disaggregation of revenue per geographical location.
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.
23
Knosys Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provisions for impairment, doubtful debts and rebates. Trade receivables are generally due for
settlement within 30 days.
In relation to the financial assets carried at amortised cost, AASB 9 requires an expected credit loss model to be applied as
opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires the Group to account
for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk
since initial recognition of the financial asset. AASB 9 requires the Group to measure the loss allowance at an amount equal
to lifetime expected credit loss (“ECL”) if the credit risk on the instrument has increased significantly since initial recognition.
If the credit risk on the financial instrument has not increased significantly since initial recognition the Group is required to
measure the loss allowance for that financial instrument at an amount equal to the ECL within the next 12 months.
The amount of the impairment loss is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive
Income within other expenses.
When a trade receivable, for which an impairment allowance had been recognised, becomes uncollectible in a subsequent
period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited
against other expenses in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Plant and equipment
Recognition and measurement
Items of plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment loss. If
significant parts of an item of plant and equipment have different useful lives, then they are accounted for as separate items
of plant and equipment. Any gain or loss on disposal of an item of plant and equipment is recognised in profit or loss.
Depreciation
Depreciation is calculated to write off the costs of the items of 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 plant and equipment for current and comparative periods is 3 years.
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.
24
Knosys Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
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.
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.
Revenue billed in advance
Revenue billed in advance represents contract liabilities that the consolidated entity is obliged to transfer services to a
customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable
to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods
or services to the customer.
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.
25
Knosys Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
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.
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 and have been adopted by
the consolidated entity for the annual reporting period ended 30 June 2019. The consolidated entity's assessment of the
impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set
out below.
26
Knosys Limited
Notes to the financial statements
30 June 2019
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 assessed that the standard AASB 16: Leases will have a material effect on the financial statements
impacting through the capitalisation of right to use leased assets and the corresponding lease liability connected with the
current rental arrangement. A right of use asset of approximately $0.5 million has been recorded as at 1 July 2019.
Refer to Note 16 for the Group’s current lease commitments.
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 2018 the consolidated entity had accrued $361,073 in accrued research and development tax refund credits
in-respect of the 2018 tax return. The directors of the consolidated entity engaged an industry expert to prepare and lodge
this return. This amount plus an additional $163,233 was receipted into the bank in May 2019 in regard to the 2018 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 $420,247 for the 2019 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.
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.
27
Knosys Limited
Notes to the financial statements
30 June 2019
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
2019
$
2018
$
2,477,848
431,380
1,450,544
1,175,362
2,909,228
2,625,906
Consolidated
2019
$
2018
$
95,262
92,666
206,788
142,532
96,614
195,940
28
Knosys Limited
Notes to the financial statements
30 June 2019
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
2019
$
2018
$
(78,668)
(6,884)
85,552
(63,876)
(13,376)
77,252
-
-
Unrecognised deferred tax assets
Unused tax losses for which no deferred tax asset has been recognised
821,738
736,186
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 - trade and other receivables
Trade receivables
As at 30 June 2019, the aging analysis of trade receivables is as follows:
(771,912)
(806,067)
(212,276)
(221,668)
3,877
256,667
26,569
(160,389)
464
220,656
53,884
(130,588)
(85,552)
85,552
(77,252)
77,252
-
-
Consolidated
2019
$
2018
$
1,729,553
668,215
Total
$
1,729,553
668,215
Neither past
due nor impaired
$
138,915
-
Past due but not impaired
< 30 days
$
1,556,442
597,197
30-60 days
$
-
56,412
61-90 days
$
34,196
-
90+ days
$
-
14,606
2019
2018
As at 30 June 2019 no trade receivables were impaired (2018: Nil).
Refer Note 1 – Trade and other receivables, which explains how the consolidated entity manages and
accounts for trade receivables.
29
Knosys Limited
Notes to the financial statements
30 June 2019
Note 7. Plant and equipment
Reconciliations of the carrying values of each class of property, plant and equipment at the beginning and end of the current
and previous financial years, for the consolidated entity, are as follows:
Carrying value at 1 July 2017
Additions
Depreciation
Carrying value at 30 June 2018
Cost as at 30 June 2018
Accumulated depreciation at 30 June 2018
Carrying value at 30 June 2018 / 1 July 2018
Additions
Depreciation
Carrying value at 30 June 2019
Cost as at 30 June 2019
Accumulated depreciation at 30 June 2019
Carrying value at 30 June 2019
Note 8. Current liabilities - trade and other payables
Trade payables
Other payables
Furniture &
fittings
$
Office
equipment
$
1,390
2,971
(1,591)
2,770
4,682
(1,912)
2,770
130,496
(12,747)
120,519
135,178
(14,659)
120,519
35,539
45,870
(26,747)
54,662
99,467
(44,805)
54,662
34,482
(32,780)
56,364
133,949
(77,585)
56,364
Consolidated
Total
$
36,929
48,841
(28,338)
57,432
104,149
(46,717)
57,432
164,978
(45,527)
176,883
269,127
(92,244)
176,883
Consolidated
2019
$
2018
$
79,933
295,818
77,571
314,457
375,751
392,028
The table below summarises the maturity profile of the consolidated entities current trade and other payables.
2019
2018
Total
$
79,933
77,571
On demand
$
-
-
< 3 months
$
79,933
77,571
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. Current liabilities – Revenue billed in advance
Revenue billed in advance
Reconciliation of the values at the beginning and end of the current and previous financial
year are set out below:
Opening balance
Amounts billed in advance during the year
Transfer to revenue – performance obligations satisfied
30
Consolidated
2019
$
2018
$
1,329,915
65,051
65,051
3,006,552
(1,741,688)
1,006,714
153,336
(1,094,999)
1,329,915
65,051
Knosys Limited
Notes to the financial statements
30 June 2019
Note 10. Equity - issued capital
Ordinary shares - fully paid
Movements in ordinary share capital
Details
Legal parent
Balance start of year
Consolidated
2019
$
2018
$
8,312,409
5,901,852
Date
No. of shares
Legal Parent
2019
No. of shares
Legal Parent
2018
102,936,733
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
Issue of share capital to shareholders pursuant to rights issue
Issue of loan funded shares to executives and staff
06 Feb 2018
19 Feb 2018
20 Mar 2018
31 May 2018
07 Aug 2018
24 Dec 2018
-
-
-
-
37,923,843
2,375,000
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
143,235,576
102,936,733
Date
$
$
5,901,852
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
Issue of share capital to shareholders pursuant to rights issue
06 Feb 2018
20 Mar 2018
31 May 2018
07 Aug 2018
-
-
-
2,654,857
120,000
120,000
1,371,101
-
Costs of issuing shares
Balance as at end of the financial year
(244,300)
(113,014)
8,312,409
5,901,852
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.
31
Knosys Limited
Notes to the financial statements
30 June 2019
Note 10. Equity - issued capital (continued)
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
2019
No. of options
Legal Parent
2018
Legal parent
Balance start of year
06 Feb 2018
Options issued on conversion of convertible notes
Options issued on conversion of convertible notes
20 Mar 2018
Expiry of options issued on conversion of convertible notes 31 May 2018
25 Oct 2016
Options issued under the employee share option plan
24 Dec 2018
Options issued to consultant for lead manager services
Options expired / lapsed
Balance at end of year
7,658,334
-
-
-
-
2,000,000
7,758,334
120,000
120,000
(240,000)
-
-
(150,000)
(100,000)
9,508,334
7,658,334
5,758,334 options (all of which are vested at 30 June 2019) are exercisable at $0.25 and expire on 1 July 2019.
200,000 options (all of which are vested at 30 June 2019) are exercisable at $0.29 and expire on 1 July 2019.
300,000 options (all of which are vested at 30 June 2019) are exercisable at $0.29 and expire on 1 July 2020.
1,250,000 options (833,333 of which are vested at 30 June 2019) are exercisable at $0.25 and expire on 1 October 2020.
2,000,000 options (all of which vested on issue) are exercisable at $0.12 and expire 24 December 2021.
All options are unlisted and are subject to a range of vesting conditions.
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 11. 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.
32
Knosys Limited
Notes to the financial statements
30 June 2019
Note 11. Financial instruments (continued)
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 (2018: 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 12. 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
Note 13. Remuneration of auditors
Consolidated
2019
$
2018
$
585,399
39,733
67,596
747,096
81,583
77,892
692,728
906,571
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
2019
$
2018
$
31,600
32,969
31,600
32,969
Note 14. Contingent liabilities
At reporting date there is a bank guarantee of $113,712 in place, which relates to the rental of the Melbourne premises.
At reporting date there is a bank guarantee of SGD20,814 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.
33
Knosys Limited
Notes to the financial statements
30 June 2019
Note 15. 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
2019
$
2018
$
127,615
363,605
-
55,080
-
-
491,220
55,080
Operating lease commitments includes contracted amounts for the head office premises under a non-cancellable operating
lease, the term of which expires on 29 February 2023.
Note 16. Related party transactions
Legal parent entity
Knosys Limited is the legal parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 18.
Key management personnel
Disclosures relating to key management personnel are set out in note 12 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
Consolidated
2019
$
2018
$
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
34
Knosys Limited
Notes to the financial statements
30 June 2019
Note 17. 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
Share based payments reserve
Accumulated losses
Total equity
Legal Parent
2019
$
2018
$
204,776
(6,464,286)
204,776
(6,464,286)
Legal Parent
2019
$
2018
$
3,131,717
1,410,329
9,413,756
6,654,592
49,858
66,642
49,858
66,642
15,447,531 13,036,974
534,615
(6,983,639)
695,229
(6,778,862)
9,363,898
6,587,950
Contingent liabilities
The legal parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The legal parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the 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.
35
Knosys Limited
Notes to the financial statements
30 June 2019
Note 18. 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,
resources, Knosys Platform
employees,
research, development and support.
sales
Australia
Knosys Products Pty Ltd
Principal activity – Holder of the Knosys Platform
intellectual property.
Australia
Ownership interest
2018
2019
%
%
100%
100%
100%
100%
Note 19. Events after the reporting period
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Note 20. 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:
(Increase) in trade and other receivables
(Decrease)/increase in revenue billed in advance
(Increase) in accrued research and development tax refund receivable
Decrease/(Increase) in prepayments and other debtors
Increase in trade and other payables
Increase in provision for employee benefits
Net cash used in operating activities
Consolidated
2019
$
2018
$
(771,912)
(806,067)
45,527
-
96,614
28,338
155,597
195,940
(1,020,993)
1,264,864
(59,174)
(27,207)
6,244
25,031
(323,408)
(941,663)
(133,002)
8,419
169,330
48,643
(441,006) (1,597,873)
36
Knosys Limited
Notes to the financial statements
30 June 2019
Note 21. 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, the consolidated entity or the share price) 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 2019 the following loan funded shares had been granted:
Grant date
Issue
date
Loan Expiry
date
Issue
price
Balance at
30 June
2018
Number
Issued
during the
period
Number
Sold during
the period
Number
Forfeited
during the
period
Number
Balance at
30 June
2019
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
26/11/2018 24/12/2018 26/11/2023
24/12/2018 24/12/2018 24/12/2023
Total
Weighted average issue price
$0.06 1,200,000
$0.10 2,050,000
-
$0.08
-
$0.08
3,250,000
$0.085
-
-
1,000,000
1,375,000
2,375,000
$0.080
-
-
-
-
-
-
-
-
-
-
1,200,000
1,200,000
2,050,000 2,050,000
250,000
1,000,000
1,375,000
250,000
5,625,000 3,750,000
$0.084
$0.083
For the loan funded shares issued during the 2019 financial year, the valuation model inputs 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
26/11/2018 26/11/2023
24/12/2018 24/12/2023
$0.08
$0.07
$0.08
$0.08
0.00%
0.00%
75%
75%
0.00%
0.00%
2.340%
2.450%
$0.015
$0.016
As at 30 June 2018 the following loan funded shares had been granted:
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 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%
$0.023
$0.059
The fair value at issue date is an average of graded tranches.
37
Knosys Limited
Notes to the financial statements
30 June 2019
Note 21. 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 2019 the following options had been granted under the ESOP:
Option
Issue date
Option
Expiry date
Exercise
price
Balance at
30 June
2018
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
-
-
-
-
150,000
150,000
1,250,000
1,250,000
$0.25
833,333
833,333
$0.25
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
Options issued to Directors and senior management
As at 30 June 2019 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:
2019
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
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
38
Knosys Limited
Notes to the financial statements
30 June 2019
Note 21. Share-based payments (continued)
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.
2018
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
Note 22. Segment information
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
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 2019 year was as follows:
• A major customer in Australia in the finance sector represented 41.4% of operating revenue
• A major customer in Australia in the Telecommunications sector represented 35.9% of operating revenue
• A major customer in Singapore in the telecommunications sector represented 16.7% of operating revenue
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
Note 23. Loss per share
Consolidated
2019
$
2018
$
Loss after income tax attributable to the owners the parent
(771,912)
(806,067)
Weighted average number of ordinary shares used in calculating basic and diluted
earnings per share
138,135,628
81,549,716
Number
Number
Basic loss per share
The 9,508,334 (2018: 7,658,334) 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
(0.56)
(0.99)
39
Knosys Limited
Directors' declaration
30 June 2019
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 2019 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.
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
28 August 2019
Melbourne
40
Knosys Limited
Independent auditor’s report to members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Knosys Limited (the Company) and its controlled
entities (the Group), which comprises the consolidated statement of financial position as at
30 June 2019, the consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial statements, including a summary of significant
accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that we have complied with the independence requirements of the
Corporations Act 2001.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. We have determined the matters described below to be the key audit matters to
be communicated in our report.
RECOGNITION OF REVENUE UNDER SERVICE CONTRACTS
How our audit addressed it
Our audit procedures included:
— Examining management’s revenue
recognition model to insure compliance with
AASB 15;
— Testing of customer invoicing under the
contract; and
— Tracing through to new service contracts to
understand material terms and conditions,
including any particular seller warranties or
indemnities given and their potential impact
upon the revenue recognition model.
We have also assessed the adequacy of
disclosures in the notes to the financial
statements.
Area of focus
Refer also to notes 1, 3, 9 and 22
The Group has service contracts with several major
customers. These service contracts have invoicing
and payment milestones included within their terms,
which may or may not be directly aligned with the
performance of services under the contract.
In order to accrue revenue appropriately in the
correct accounting period, management have
developed a model to recognise revenue when the
performance obligation is satisfied in each contract.
There is requirement for judgment in determining
which period to which the revenue should be
attributed. In designing the model management has
considered:
— The impact of the implementation of AASB 15 –
Revenue from contracts with customers;
— When the performance obligation is identified
and satisfied in respect to each component of
each contract; and
— The potential for any post-contract servicing work
to be performed at the conclusion of the contract
and whether an additional performance obligation
exists.
SHARE BASED PAYMENTS
Area of focus
Refer also to notes 1 and 21 and the Remuneration
Report
The Group has equity incentive plans for its key
management personnel, including share options
and employee share loans. Both plans include
service-based vesting periods.
Each of the arrangements which form part of the
plan required significant judgments and
estimations by management, including the
following:
— Determination of the grant date of each
arrangement, and the evaluation of the fair
value of the underlying share price of the
company as at that grant date;
— The evaluation of the vesting charge taken to
the profit and loss in-respect of the accrual of
service conditions attached to those share-
based payment arrangements; and
— The evaluation of key inputs into the Black-
Scholes option pricing model or binomial
model, including the significant judgment of
the forecast volatility of the share option over
its exercise period.
The results of these share-based payment
arrangements materially affect the disclosures of
these financial statements, including the vesting
charge that affects disclosures of key
management personnel remuneration.
Other Information
How our audit addressed it
Our audit procedures included:
— Determining the grant dates and evaluating
what were the most appropriate dates based on
the terms and conditions of the share-based
payment arrangements;
— Evaluating the fair values of share-based
payment arrangements by agreeing
assumptions to third party evidence. In
determining the grant dates, we evaluated what
were the most appropriate dates based on the
terms and conditions of the share-based
payment arrangements;
— Evaluating the progress of the vesting of share-
based payments within the service period; and
— For the specific application of the Black-
Scholes option pricing model and the binomial
model, we assessed the experience of the
expert used to advise the value of the
arrangement. We retested some of the
assumptions used in the model and
recalculated those fair values.
We have also assessed the adequacy of
disclosures in the notes to the financial statements.
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2019 but does not include the financial
report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to fraud
or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted
in accordance with the Australian Auditing Standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of this financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our independent auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of Knosys Limited, for the year ended 30 June 2019, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
William Buck Audit (Vic) Pty Ltd
ABN: 59 116 151 136
A. A. Finnis
Director
Melbourne, 28 August 2019
Knosys Limited
Additional information for listed companies
1.
Shareholdings as at 26 August 2019
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
20
35
75
5,289
131,498
669,798
304 12,746,254
168 129,682,737
602 143,235,576
b.
c.
The number of shareholdings held in less than marketable parcels is 62, with a total of
177,461 ordinary shares, amounting to 0.12% of issued capital.
The names of the substantial shareholders listed in the holding Consolidated Group’s
register as at 26 August 2019 are:
Shareholder
Number
Ordinary
shares
%
1 Earthrise Holdings Pty Ltd
19,135,000
13.36
2 Vabake Pty Ltd and Vabake Pty Ltd
10,437,260
7.29
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.
46
Number of
Ordinary
Fully Paid
Shares Held
19,135,000
10,066,130
7,000,270
6,414,286
6,140,000
5,185,000
4,418,000
3,376,834
2,250,000
2,142,850
2,064,409
1,759,116
1,651,295
1,618,473
1,500,000
1,440,151
1,342,857
1,300,000
1,250,000
1,187,799
81,242,470
% Held of
Issued
Ordinary
Capital
13.36
7.03
4.89
4.48
4.29
3.62
3.08
2.36
1.57
1.50
1.44
1.23
1.15
1.13
1.05
1.01
0.94
0.91
0.87
0.83
56.72
Knosys Limited
Additional information for listed companies
20 Largest Shareholders — Ordinary Shares
e.
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
2.
3.
Earthrise Holdings Pty Ltd
Vabake Pty Ltd
Mrs Tracey Lee Cunningham
Moat Investments Pty Ltd
National Nominees Limited
Panchito Services Pty Ltd
Jet Invest Pty Ltd
Gale Enterprises (Aust) Pty Ltd
TDF Properties Pty Ltd
Mrs Denise Jane Campbell
Vonetta Pty Ltd
Mrs Emma Jane Gracey
ADC (Investing) Pty Ltd
Parry Segregated Portfolio Company
BNP Paribas Nominees Pty Ltd
Helen Thompson
Shandora One Pty Ltd
Huntingdale Management Pty Ltd
Alocasia Pty Limited
The name of the Company Secretary is Mr Stephen Kerr.
The address of the principal registered office in Australia is:
Part Level 8, 31 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.
47