Knosys Limited
ABN 96 604 777 862
Annual Report
30 June 2020
Knosys Limited
Chairman’s letter to shareholders
30 June 2020
Dear Shareholders,
I have pleasure in presenting to you the 2020 Annual Report of Knosys Limited. I am pleased to report that the Company has
had another successful year during 2020.
We have had strong year-on-year growth in recurring revenue. We have a solid base of enterprise customers that has strong
potential for growth. We have added clients in the mid-market sector, and there are more potential clients in the pipeline. We
have proven to be resilient despite the COVID-19 pandemic, and because of the nature of our products and services, we may
even benefit from it.
Our revenue figures reflect both stability and growth. Licence and support fee revenue for the year to 30 June 2020 rose by
19 per cent compared to the prior year, to $2.94 million. This revenue is primarily generated by long-term enterprise customers
on multi-year contracts.
Total operating revenue for the consolidated entity rose by eight per cent to $3.14 million.
The consolidated entity reported a net loss of $908,391 for the 2020 financial year (2019 net loss: $771,912). Cash and cash
equivalents amounted to approximately $2.34 million.
We continue to have a solid customer base. The number of licensed users of the Knosys product increased to 41,360 at the
end of the 2020 financial year.
One of the highlights of the 2020 year was the announcement in June of a new substantial professional services contract with
ANZ Bank New Zealand for the deployment of a standalone Knowledge IQ system. The nine-month project commenced in
June is expected to generate revenue of approximately $0.84 million.
Knosys retains a strong core of enterprise customers, which includes ANZ Bank, Optus and Singtel. These customers continue
to be a source of revenue growth amid demand for additional licence and services.
We are well positioned to strengthen our position in both the enterprise and mid-market sectors. In the June quarter, our new
reseller, Stellar, was signed and achieved its first sales. In the last quarter of the financial year, in the mid-market sector, a
local government council and an Asian-based logistics company started using our KIQ Cloud platform. We have witnessed a
general increase in mid-market opportunities and anticipate some potential customers will seek knowledge management
solutions in the current financial year.
Although new business growth during 2020 was slower than expected — partly because potential customers delayed
decisions or put projects on hold in light of the COVID-19 pandemic — the Company is trading well and is well positioned to
benefit from the increasing number of people who are now working from home because of pandemic-related restrictions. We
are developing a new marketing strategy that has a greater digital focus and is more suited to the COVID-19 environment
where traditional in-person marketing activities are limited.
Our growth strategy, based on delivering solutions designed to connect and engage employees and improve customer
engagement, is the right strategy for the current environment and the future.
We are well placed to continue building our recurring revenue base and to achieve further sales success in the 2021 financial
year.
On behalf of the Directors, I would like to again thank all shareholders for their continuing support and wish them, their families,
friends and associates the best during these difficult times across the globe.
Hon. Alan Stockdale AO
CHAIRMAN
26 August 2020
Knosys Limited
Managing Director’s Operations Report
30 June 2020
Financial Highlights
The 2020 financial year has been another step forward for Knosys with continued growth in the Company’s revenue.
•
•
•
•
•
•
Licence and support fee revenues, increased by 19% to $2,945,267 (2019: $2,477,848);
Total operating revenue for the consolidated entity increased by 8% to $3,137,317 (2019 revenue: $2,909,228);
The licensed user base of the Knosys product stood at 41,360 at the end of June 2020;
The loss for the consolidated entity after providing for income tax was $908,391 (2019 loss: $771,912);
Net cash outflow from operating activities was $477,607 (2019 outflow: $441,006); and
The consolidated entity had net assets of $2,591,180 at 30 June 2020 (2019: $3,413,808) and held cash and cash
equivalents of $2,335,909 (2019: $2,911,318).
Subsequent to year-end, total cash balances were $3.7 million at 31 July 2020, after the collection of annual licence fees
and other June 2020 receivables.
Annual Recurring Revenue
$3,500,000
$3,000,000
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$0
FY16
FY17
FY18
FY19
FY20
Jul'20*
annual
run rate
*Jul’20 annual run rate is calculated as contracted licence and support fee revenue
for the month, multiplied by 12
Knosys Licensed Users
s
e
c
n
e
c
i
L
f
o
.
o
N
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
Jun'16
Jun'17
Jun'18
Jun'19
Jun'20
1
Knosys Limited
Managing Director’s Operations Report
30 June 2020
Overview of Knosys
Knosys is an 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 organisations to strengthen customer loyalty, retention and lifetime value. Our market- leading enterprise solution,
KnowledgeIQ, is designed to provide personalised information to customers and their staff that will transform business
productivity and engagement.
The Knosys solution is available to mid-market customers through KIQ Cloud. This cloud-based service offers mid-market
customers an easier onboarding process, lower total cost of ownership and faster implementation by comparison to our
enterprise customers. KIQ Cloud complements our enterprise offering, offers an efficient path to wider sales success and
will assist in broadening the sales and revenue profile of the company.
KIQ Cloud is an 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 Knosys solution is designed to be the core application for an information worker, available on their desktop, tablet or
smartphone. This app drives productivity and optimises processes by incorporating process wizards, decision guidance,
collaboration and feedback. It provides 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.
Business performance and market conditions
Knosys has continued its track record of delivering a stable and growing base of recurring revenue. The Company achieved
a 19% year-on-year increase in licence and support fee revenues for the year to 30 June 2020. Currently the annual run rate
is $3million, principally from long term enterprise customers on multi-year contracts.
In June, Knosys announced the new substantial professional services contract with ANZ Bank New Zealand to deploy a
standalone KnowledgeIQ system in-country. This project commenced in June 2020 and project revenues of approximately
$0.84m are expected to be earned over a nine-month project period.
New business growth for the year was slower than anticipated due, at least in part, to potential customers deferring decisions
or stalling projects in the second half of the year, given the global pandemic. However, the business is well insulated from
the current unprecedented situation, is trading well and anticipates exiting this period as a stronger business.
The Company is well positioned to capitalise on the new paradigm of ‘working from home’ which is expected to continue in
one form or another post-COVID. Knosys believes its vision to be a significant SaaS information management company,
delivering solutions designed to connect and engage employees and improve customer engagement, is the correct growth
strategy during this period and the future. Knosys therefore continues to focus on product innovation to support existing
customers and attract new prospective clients.
Marketing activities
Knosys is investing in two key areas to support what it believes will be an extended COVID business environment that limits
traditional in-person marketing activities.
• Articulating the Knosys brand in a way that makes the brand stronger and its offer more distinctive. In the current
environment, potential clients are scanning the market virtually entirely by digital means. Brand awareness and the
ability to articulate a winning value proposition are even more critical in driving new business.
• Developing a 12-month accountable marketing and content strategy for internal sales, channel partners, advertising
and digital channels. The outcome from this work is to ensure the brand story, elevator pitch and key messages are
communicated with credibility and clarity across all marketing elements.
Other more traditional sales and marketing activities have been reduced or deferred due to COVID restrictions.
2
Knosys Limited
Managing Director’s Operations Report
30 June 2020
Building growth opportunities
The business is well positioned to build on new business opportunities both in the enterprise segment and the mid-market
segment. Knosys’ new reseller, Stellar, was onboarded during the June quarter and achieved its first sales through its sales
channels. In the enterprise space the Company has progressed discussions with two major prospects (banking and financial
services) with pilot programs commenced in the new financial year. These pilots are in use as a means for these prospective
customers to evaluate the KnowledgeIQ platform for potential future deployment.
During the final quarter of the financial year, in the mid-market sector, the Company onboarded a local government council
and an Asia-based logistics company to the KIQ Cloud platform. Interest from potential customers is reasonably active
despite the tendency to delay purchase decisions because of the COVID-19 pandemic. Knosys has witnessed a general
increase in mid-market opportunities and has been advised by several prospective customers that they will go to market in
the 2021 financial year to procure new knowledge management solutions.
Knosys continues to have strong core of existing enterprise customers including ANZ Bank, Optus and Singtel. As evidenced
by the above-mentioned contract with ANZ Bank New Zealand, these enterprise customers continue to be a source of
revenue growth amid demand for additional licences and services. Knosys continues to see strong engagement and remains
confident that it provides an important solution for companies seeking to manage their workforce and workflow more
efficiently.
The extended COVID environment has resulted in a paradigm shift towards remote working. Consequently, demand for
knowledge management has increased markedly. The Company aims to capitalise on this by driving new business initiatives
and investing in the Knosys brand proposition over the coming 12 months.
Knosys has also intensified its scan of the market for additional SaaS businesses to acquire. Potential targets must have
complementary offerings that tie in with Knosys’ vision. Whilst no prospect has yet progressed successfully to completion,
the Company continues to negotiate and evaluate opportunities.
Stable cashflow and financial outlook
The Company has entered the new financial year with a healthy cash balance and a track record of stable and reliable cash
inflows generated by its licensed user base.
Knosys commences the 2021 financial year with an annual recurring revenue run rate of $3 million, the ANZ New Zealand
professional services contract, an expected Research and Development tax rebate in line with prior years and the opportunity
for growth from new and existing customers. Combined with the current operational cost base of the core business, this
places Knosys in a strong position to improve strongly on the financial and cash performance of the 2020 financial year.
3
Knosys Limited
Managing Director’s Operations Report
30 June 2020
Future Focus
The Knosys Board and Management team are focused on continuing to build Knosys’ position as a leading SaaS information
management provider by achieving several important goals over the coming year:
• Grow organic revenue to $5m in next 12 months;
• Achieve a break-even and cash flow positive position by June 2021;
• Complete one or more strategic acquisitions; and
• Transition into a multi-offering SaaS business.
In the current COVID-19 environment, Knosys will continue to prioritise the safety and wellbeing of its staff and customers.
The business is well settled into its remote working operating model. The Company continues to deliver its services to existing
and new customers in a seamless manner without disruption, whilst managing the safety of its dedicated team of employees.
I would like to thank our dedicated staff for pursuing our growth strategy, our product development programs and our
geographic expansion in the 2020 financial year. I particularly thank them for their dedication during the second half of this
financial year. Our business has a strong team, an excellent product offering and is very well positioned to continue growing
its recurring revenue as we move towards an EBITDA-positive position.
We look forward to an exciting year ahead.
John Thompson
MANAGING DIRECTOR
26 August 2020
4
Knosys Limited
Directors' report
30 June 2020
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 2020.
Directors
The following persons were directors of Knosys Limited during the period from 1 July 2019 to the date of this report, unless
otherwise stated:
Hon. Alan Stockdale (Non-executive Chairman)
Mr John Thompson (Managing Director)
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
The impact of the Coronavirus (COVID-19) pandemic is ongoing and, while the impact has not been financially negative for
the consolidated entity up to 30 June 2020 and has created some potential growth opportunities, it is not practicable to
estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is
dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing,
lockdowns, quarantine measures, travel restrictions and any economic stimulus that may be provided.
No other matter or circumstance has arisen since 30 June 2020 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 2021 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.
5
Knosys Limited
Directors' report
30 June 2020
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
1,250,000 ordinary shares
Nil Options
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
2,231,578 ordinary shares
Nil Options
6
Knosys Limited
Directors' report
30 June 2020
Information on directors (cont.)
Name:
Title:
John Thompson
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
4,092,857 ordinary shares
Nil
Company Secretary and Chief Financial Officer
Stephen Kerr (BCom, CA, CS, FGIA) has held the role of CFO and Company Secretary since July 2015. Stephen Kerr is a
qualified chartered accountant and chartered company secretary. He is an experienced CFO and governance professional,
having held senior finance positions in private and publicly listed company environments across Australia and New Zealand
for over 20 years. Stephen holds a Bachelor of Commerce from the University of Melbourne and is a current member of
Chartered Accountants Australia and New Zealand and a Fellow of the Governance institute of Australia.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held from 1 July 2019 to the year ended 30 June
2020, and the number of meetings attended by each director were:
Hon. Alan Stockdale
Peter Pawlowitsch
John Thompson
Full board
Attended
10
10
10
Held
10
10
10
Held: represents the number of meetings held during the time the director held office.
7
Knosys Limited
Directors' report
30 June 2020
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 2020. The chairman's fees are determined independently
to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present
at any discussions relating to the determination of his own remuneration.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The current maximum aggregate remuneration payable to non-executive directors of the consolidated entity in any
financial year is $500,000.
Executive remuneration
The consolidated entity aims to reward executives with a level and mix of remuneration based on their position and
responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
● base pay, superannuation and non-monetary benefits
● short-term performance incentives
● share-based payments
● other remuneration such as long service leave
The combination of these comprises the executive's total remuneration.
8
Knosys Limited
Directors' report
30 June 2020
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 result
Change in share price
Return on capital employed
2020
$
(908,391)
2019
$
(771,912)
2018
$
(806,067)
2017
$
(2,085,018)
2016
$
(1,411,015)
-
7.8%
(17.7%)
(16%)
(30%)
-
10.8%
4.2%
25%
(31%)
-
224.7%
61.3%
(57%)
(69%)
-
9.9%
(47.8%)
(40%)
(80%)
-
-
-
-
(48%)
Profit is one of the financial performance targets considered in setting the Short Term Incentive (STI). Profit amounts have
been calculated in accordance with Australian Accounting Standards (AASB’s). Operating result is operating profit or loss as
reported in the statement of profit or loss.
9
Knosys Limited
Directors' report
30 June 2020
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity during the year to 30 June 2020 consisted of the following
directors of Knosys Limited:
● Alan Stockdale - Non-Executive Chairman
● Peter Pawlowitsch - Non-Executive Director
● John Thompson – Managing Director
And the following persons:
● Stephen Kerr - Company Secretary and Chief Financial Officer
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2020
$
$
$
$
Cash salary Cash
and fees bonus
Non-
Super-
monetary annuation
Long service Equity-
settled
$
leave
$
Total
$
Non-Executive Directors:
Alan Stockdale
Peter Pawlowitsch
54,795
36,530
-
-
-
-
5,205
3,470
-
-
14,789
14,789
74,789
54,789
Executive Director:
John Thompson
Other Key Management
Personnel:
Stephen Kerr
305,595
30,000
9,428
24,000
6,539
36,974
412,536
182,410
18,000
24,483
20,773
7,171
14,789
267,625
579,329
48,000
33,911
53,448
13,710
81,341
809,739
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2019
Cash salary
and fees
$
Non-Executive Directors:
Alan Stockdale
Peter Pawlowitsch
Richard Levy
54,795
36,530
-
Cash
bonus monetary annuation
Super-
Non-
$
$
$
Long service Equity-
settled
$
leave
$
Total
$
-
-
-
-
-
-
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
- 24,483
218,137
539,070
26,000
20,329
67,596
- 39,733
692,728
10
Knosys Limited
Directors' report
30 June 2020
For the financial year, the actual proportions of fixed remuneration and of remuneration linked to performance are as
follows:
2020
Fixed remuneration
At risk - STI
At risk - LTI
Non-Executive Directors:
Alan Stockdale (Chairman)
Peter Pawlowitsch
Managing Director:
John Thompson
Other Key Management
Personnel:
Stephen Kerr
80%
73%
84%
88%
-%
-%
7%
(21% available)
7%
(24% available)
20%
27%
9%
5%
2019
Fixed remuneration
At risk - STI
At risk - LTI
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)
-%
-%
-%
4%
11%
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 2020 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 $30,000 relating to
performance in the 2020 year was assessed as a bonus entitlement for the 2020
financial year.
11
Knosys Limited
Directors' report
30 June 2020
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 2020 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. For a six month period during the year
ended 30 June 2020, Mr Kerr’s employment was increased to four days per week and
his base salary was adjusted accordingly on a pro-rata basis during that period.
Remuneration is 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 $18,000 relating to performance
in the 2020 year was assessed as a bonus entitlement in the 2020 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 2019
Number of shares
Expiry date
Issue price at issue date
5,500,000
November 2024
10.1 cents
2.80 cents
5,500,000 loan shares were granted to directors and key management personnel in November 2019 and were 25% vested
at 30 June 2020. 25% of the loan shares did not vest at 30 June 2020 because vesting hurdles were not achieved and
these loan shares will be forfeited in the next financial year. 50% of the loan shares remain unvested at 30 June 2020
because vesting hurdles, based on time and on the market price of Knosys shares, are yet to be 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 22 in the notes to the financial statements, for further details and general terms of the loan funded shares.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Fair value
per option
Grant date
October 2016
Number of options
Expiry date
Exercise price at grant date
500,000
October 2020
25 cents
14.6 cents
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 500,000 options issued to Stephen Kerr through the employee share option plan (ESOP), the options are service
based and are fully vested. These options vested over time in three equal amounts every 12 months, commencing 1
October 2017 with the final vesting date being 1 October 2019. The Options entitle the holder to subscribe for one Share
upon the exercise of each Option. No performance hurdles were attached to these options and these options are not
subject to any escrow conditions
12
Knosys Limited
Directors' report
30 June 2020
Shares issued on the exercise of options
No ordinary shares of Knosys Limited were issued during the year ended 30 June 2020 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 2020 are set out below:
Number of options % of options Number of options % of options
vesting and
exercisable
during the
year
2020
vesting and
exercisable
during the
year
2020
-
-
166,667
-
-
18%
expired
during
the
year
2020
500,000
500,000
425,000
expired
during
the
year
2020
100%
100%
46%
Number of options % of options Number of options % of options
vesting and
exercisable
during the
year
2019
vesting and
exercisable
during the
year
2019
expired
during
the
year
2019
expired
during
the
year
2019
Name
Alan Stockdale
Peter Pawlowitsch
Stephen Kerr
2019
Name
Stephen Kerr
166,666
18%
-
-
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
John Thompson
Stephen Kerr
Balance at Received
as part of
remuneration
the start of
the year
Additions
Forfeited
Balance at
the end of
the year
250,000
1,231,578
2,342,857
1,621,759
5,446,194
1,000,0001
1,000,0001
2,500,0001
1,000,0001
5,500,000
-
-
-
-
-
-
-
(750,000)1
(375,000)1
(1,125,000)
1,250,000
2,231,578
4,092,857
2,246,759
9,821,194
1. Shares issued or forfeited as loan funded shares in the current year.
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
Stephen Kerr
Balance at Expired
the start of
the year
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
925,000
(500,000)
(500,000)
(425,000)
1,925,000 (1,425,000)
-
-
500,000
500,000
-
-
-
-
-
-
500,000
500,000
There were no other transactions with key management personnel and their related parties
This concludes the remuneration report, which has been audited.
13
Knosys Limited
Directors' report
30 June 2020
Options
At the date of this report, the unissued ordinary shares of Knosys Limited under option are as follows:
Date of expiry
1 Oct 2020
1 Oct 2020
24 Dec 2021
unlisted
unlisted
unlisted
Exercise price
$0.25
$0.25
$0.12
Number under option
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.
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
26 August 2020
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 2020
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
Melbourne, 26 August 2020
Knosys Limited
Contents
30 June 2020
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 26 August 2020, 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 2020
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
2020
$
2019
$
3
3,137,317
2,909,228
649,313
120,621
583,233
68,010
(438,948)
(154,024)
(2,990,229)
(189,905)
(119,672)
(172,517)
(19,119)
(731,228)
(358,613)
(57,470)
(2,858,366)
(45,527)
(144,405)
(120,705)
-
(747,297)
(908,391)
(771,912)
-
-
4
4
5
Loss after income tax expense for the year attributable to owners of the parent
(908,391)
(771,912)
Other comprehensive income
Other comprehensive income for the year, net of tax
-
-
Total comprehensive loss for the year attributable to owners of the parent
(908,391)
(771,912)
Loss per share for loss attributable to the owners of the parent
Basic and diluted loss per share
24
Cents
(0.62)
Cents
(0.56)
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 2020
Assets
Current assets
Cash and cash equivalents
Trade receivables
Accrued research and development tax refund receivable
Prepayments & sundry debtors
Total current assets
Non-current assets
Buildings – Right-of-use asset
Plant and equipment
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions for employee benefits
Lease liability
Revenue billed in advance
Total current liabilities
Non-current liabilities
Provisions for employee benefits
Lease liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share based payments reserve
Accumulated losses
Total equity
Note
Consolidated
2020
$
2019
$
6
7
8
9
10
11
10
2,335,909
1,711,032
495,958
77,452
4,620,351
2,911,318
1,729,553
420,247
48,887
5,110,005
295,986
127,040
423,026
-
176,883
176,883
5,043,377
5,286,888
364,809
223,479
132,401
1,490,640
2,211,329
375,751
167,414
-
1,329,915
1,873,080
35,023
205,845
240,868
-
-
-
2,452,197 1,873,0802
2,591,180
3,413,808
12
22
8,312,409
556,216
(6,277,445)
8,312,409
695,229
(5,593,830)
2,591,180
3,413,808
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 2020
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 12)
2,410,557
-
-
2,410,557
Equity based payments (Note 22)
-
160,614
-
160,614
Balance at 30 June 2019
8,312,409
695,229
(5,593,830)
3,413,808
Consolidated
Issued
capital
$
Reserves Accumulated
$
losses
$
Total
equity
$
Balance at 1 July 2019
8,312,409
695,229
(5,593,830)
3,413,808
Loss after income tax expense for the year
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Equity based payments (Note 22)
Transfer from share-based payments reserve to
accumulated losses on expiry of share-based
remuneration instruments
-
-
-
-
-
(908,391)
(908,391)
-
(908,391)
(908,391)
85,763
-
85,763
(224,776)
224,776
-
Balance at 30 June 2020
8,312,409
556,216
(6,277,445)
2,591,180
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 2020
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
2020
$
2019
$
3,580,406
(4,733,645)
573,355
35,349
(19,119)
86,047
3,332,585
(4,362,247)
524,059
37,780
-
26,817
Net cash used in operating activities
21
(477,607)
(441,006)
Cash flows from investing activities
Payments for plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Repayment of lease liability
Proceeds from issue of shares
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
(29,069)
(164,978)
(29,069)
(164.978)
(68,733)
-
-
-
2,654,857
(202,821)
(68,733)
2,452,036
(575,409)
2,911,318
1,846,052
1,065,266
2,335,909
2,911.318
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 2020
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 or amended 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.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
From 1 July 2019 the following new accounting standards have been adopted by the consolidated entity:
AASB 16 Leases (“AASB 16”)
The consolidated entity has adopted AASB 16 from 1 July 2019. This standard replaces AASB 117 “Leases” and for lessees
eliminates the classification of operating leases and finance leases. Except for short-term leases and leases of low value
assets, right of use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (including
operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier period
of the lease, the expense associated with the lease under AASB 16 will be higher when compared to the lease expense
under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation results improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification with the statement
of cash-flows, the interest portion is disclosed in operating activities and the principle portion of the lease payments are
separately disclosed in the financing activities. For lessor accounting, the standard does not substantially change how a
lessor accounts for leases.
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
The impact of adoption on opening retained profits at 1 July 2019 was as follows:
Operating lease commitments as at 30 June 2019
Operating lease commitments discount based on the weighted
average incremental borrowing rate of 5.25% (AASB 16)
Accumulated depreciation as at 1 July 2019
Right-of-use assets (AASB 16)
Lease liabilities – current (AASB 16)
Lease liabilities – non-current (AASB 16)
1 July 2019
$
450,889
(43,909)
-
406,980
(87,283)
(319,697)
Change in opening accumulated losses as at 1 July 2019
-
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.
21
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
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 18.
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 ch anged where
necessary to ensure consistencies with those policies adopted by the parent entity.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Knosys Limited's functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
profit or loss.
Revenue recognition
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.
22
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
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 23 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.
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.
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 Group has adopted the simplified approach to
recognizing an ECL for trade and other receivables. Based on the nature of the Groups’ business there have been no credit
losses recorded in the previous financial periods and thus no ECL has been recorded.
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.
23
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable; any lease payment made at or before
the commencement date net of any lease incentives received, any initial direct costs incurred, and except where included
in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. When the consolidated entity expects to obtain ownership of the leased asset at
the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment
or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with a term of 12 months or leases of low-value assets. Lease payments on these assets are expenses to profit or
loss as incurred.
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.
24
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be wholly
settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are
settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be wholly settled within 12 months of the reporting date
are measured as the present value of expected future payments to be made in respect of services provided by employees
up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are discounted using market
yields at the reporting date on national corporate bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Black-Scholes option pricing model or the Binomial Option Valuation model each of which takes into account the
exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to
receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
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.
25
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
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.
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payment to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of
fixed payments, less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is
reasonably certain to occur and any anticipated termination penalties. The variable lease payments that do not depend on
an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following; future lease payments arising from a change in an index or a rate used, residual
guarantees, lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the following right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is
fully written down.
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.
26
Knosys Limited
Notes to the financial statements
30 June 2020
Note 1. Significant accounting policies (continued)
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended and that have not been
adopted by the consolidated entity for the annual reporting period ended 30 June 2020 are listed below. The consolidated
entity has assessed that these new or amended Accounting Standards and Interpretations will not have a material effect on
the financial statements of the company for the reporting period commencing 1 July 2020.
Standard
Mandatory date for
annual reporting
periods beginning on
or after
Standard to be
adopted by the
company for the
reporting period
beginning
The revised Conceptual Framework for Financial Reporting
1 January 2020
1 July 2020
AASB 2018-6 Amendments to Australian Accounting Standards
– Definition of a Business
1 January 2020
1 July 2020
AASB 2018-7 Amendments to Australian Accounting Standards
– Definition of Material
1 January 2020
1 July 2020
AASB 2020-1 Amendments to Australian Accounting Standards
– Classification of liabilities as Current or Non-Current
1 January 2023
1 July 2023
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 2019 the consolidated entity had accrued $420,247 in accrued research and development tax refund credits
in-respect of the 2019 tax return. The directors of the consolidated entity engaged an industry expert to prepare and lodge
this return. This amount plus an additional $153,108 was receipted into the bank in April 2020 in regard to the 2019 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 $495,958 for the 2020 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.
27
Knosys Limited
Notes to the financial statements
30 June 2020
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Determination of lease term
In determining the lease term, management considers all facts and circumstances that create an economic incentive
to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination
options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Potential
future cash outflows have not been included in the lease liability because it is not reasonably certain that the leases will be
extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances
occurs which affects this assessment and that is within the control of the lessee.
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.
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:
Employee benefits expense
Superannuation expense - Accumulation fund
Share based payments expense
Consolidated
2020
$
2019
$
2,945,267
192,050
2,477,848
431,380
3,137,317
2,909,228
Consolidated
2020
$
2019
$
227,308
206,788
85,763
96,614
28
Knosys Limited
Notes to the financial statements
30 June 2020
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
Unrecognised deferred tax assets
Unused tax losses for which no deferred tax asset has been recognised
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 2020, the aging analysis of trade receivables is as follows:
Consolidated
2020
$
2019
$
(73,674)
(25,049)
98,723
(78,668)
(6,884)
85,552
-
-
921,461
821,738
(908,391)
(771,912)
(249,807)
(212,276)
2,975
303,085
23,585
(178,561)
3,877
256,667
26,569
(160,389)
(98,723)
98,723
(85,552))
85,552
-
-
Consolidated
2020
$
2019
$
1,711,032
1,729,553
Total
$
1,711,032
1,729,553
Neither past
due nor impaired
$
133,390
138,915
Past due but not impaired
< 30 days
$
1,425,644
1,556,442
30-60 days
$
139,898
-
61-90 days
$
-
34,196
90+ days
$
12,100
-
2020
2019
As at 30 June 2020 no trade receivables were impaired (2019: 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 2020
Note 7. Right of use asset
Buildings – right-of-use
Accumulated depreciation
Consolidated
2020
$
2019
$
406,980
(110,994)
295,986
-
-
-
As required under the adoption of AASB 16 (refer Note 1), additions to the right-of-use assets during the financial year were
$406,978, being the value of the consolidated entity’s main office lease. The consolidated entity leases its Melbourne based
head office under an agreement of four years duration. The lease has an annual 3.75% escalation clause.
The consolidated entity leased two serviced offices under specific agreements. These agreements had short-term month to
month lease arrangements and are of low-value, so have been expensed as incurred and not capitalised as right-of-use
assets.
Note 8. 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:
Furniture &
fittings
$
Office
equipment
$
Carrying value at 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 / 1 July 2019
Additions
Depreciation
Carrying value at 30 June 2020
Cost as at 30 June 2020
Accumulated depreciation at 30 June 2020
Carrying value at 30 June 2020
Note 9. Current liabilities - trade and other payables
Trade payables
Other payables
2,770
130,496
(12,747)
120,519
135,178
(14,659)
120,519
25,835
(47,274)
99,080
161,013
(61,933)
99,080
Consolidated
Total
$
57,432
164,978
(45,527)
176,883
269,127
(92,244)
176,883
29,069
(78,912)
127,040
54,662
34,482
(32,780)
56,364
133,949
(77,585)
56,364
3,234
(31,638)
27,960
137,183
(109,223)
27,960
298,196
(171,156)
127,040
Consolidated
2020
$
2019
$
84,442
280,367
79,933
295,818
364,809
375,751
The table below summarises the maturity profile of the consolidated entities current trade and other payables.
2020
2019
Total
$
84,442
79,933
On demand
$
-
-
< 3 months
$
84,442
79,933
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.
30
Knosys Limited
Notes to the financial statements
30 June 2020
Note 10. Lease liabilities
Lease Liability - current
Lease liability – current
Lease Liability – non-current
Lease liability – non-current
Note 11. 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, where the performance obligations were and will
be satisfied over the FY20 and FY21 years
Transfer to revenue – performance obligations satisfied
Consolidated
2020
$
2019
$
132,401
205,845
-
-
Consolidated
2020
$
2019
$
1,490,640
1,329,915
1,329,915
65,051
1,706,889
(1,546,164)
3,006,552
(1,741,688)
1,490,640
1,329,915
Note 12. Equity - issued capital
Ordinary shares - fully paid
Movements in ordinary share capital
Details
Legal parent
Balance start of year
Consolidated
2020
$
2019
$
8,312,409
8,312,409
Date
No. of shares
Legal Parent
2020
No. of shares
Legal Parent
2019
143,235,576
102,936,733
Issue of share capital to shareholders pursuant to rights issue
Issue of loan funded shares to executives and staff
Issue of loan funded shares to directors, executives and staff
07 Aug 2018
24 Dec 2018
29 Nov 2019
-
-
5,600,000
37,923,843
2,375,000
-
Balance at end of year
148,835,576
143,235,576
31
Knosys Limited
Notes to the financial statements
30 June 2020
Note 12. Equity - issued capital (continued)
Details
Consolidated entity
As at start of the financial year
Date
2020
$
2019
$
8,312,409
5,901,852
Issue of share capital to shareholders pursuant to rights issue
Costs of issuing shares
07 Aug 2018
-
-
2,654,857
(244,300)
Balance as at end of the financial year
8,312,409
8,312,409
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Movements in options on issue
Details
Date
No. of options
Legal Parent
2020
No. of options
Legal Parent
2019
Legal parent
Balance start of year
Options issued to consultant for lead manager services
Options expired / lapsed
24 Dec 2018
Balance at end of year
9,508,334
-
(5,958,334)
7,658,334
2,000,000
(150,000)
3,550,000
9,508,334
300,000 options (all of which are vested) are exercisable at $0.29 and expire on 1 July 2020.
1,250,000 options (all of which are vested) are exercisable at $0.25 and expire on 1 October 2020.
2,000,000 options (all of which vested) are exercisable at $0.12 and expire 24 December 2021.
All options are unlisted and were 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 13. 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.
32
Knosys Limited
Notes to the financial statements
30 June 2020
Note 13. Financial instruments (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has a code of credit, including obtaining agency credit information, confirming
references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate
credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount,
net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The consolidated entity does not hold any collateral.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) to be able to pay debts as and when they become due and payable. All amounts payable are within agreed
terms. All third party payment terms are less than 60 days (2019: 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. All liabilities are to be settled within
12 months except for lease liabilities which are to be settled as per the following categories:
Lease liabilities
Payable at the reporting date:
Within 6 months
6 to 12 months
1 to 5 years
Consolidated
2020
$
2019
$
65,383
67,018
205,845
338,246
-
-
-
-
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reasonably approximate their fair value.
Note 14. 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 15. Remuneration of auditors
Consolidated
2020
$
674,950
81,341
53,448
2019
$
585,399
39,733
67,596
809,739
692,728
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
33
Consolidated
2020
$
2019
$
33,600
31,600
Knosys Limited
Notes to the financial statements
30 June 2020
Note 16. 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.
Note 17. 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.
Note 18. 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
Gain 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
2020
$
2019
$
364,157
204,776
364,157
204,776
Legal Parent
2020
$
2019
$
2,450,960
3,131,717
9,841,627
9,413,756
27,809
49,858
27,809
49,858
15,447,531 15,447,531
695,229
(6,778,862)
556,216
(6,189,929)
9,813,818
9,363,898
Contingent liabilities
The legal parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The legal parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
34
Knosys Limited
Notes to the financial statements
30 June 2020
Note 18. Legal parent entity information (continued)
Significant accounting policies
The accounting policies of the legal parent entity are consistent with those of the consolidated entity, as disclosed in Note 1.
The group does not designate any interests in subsidiaries as being subject to the requirements of accounting standards
specifically applicable to financial statements.
Note 19. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of Knosys Limited and the following
wholly-owned subsidiaries in accordance with the accounting policy described in Note 1:
Name
Principal place of business /
Country of incorporation
Knosys Solutions Pty Ltd
Principal activities – Main operating company of the
Knosys group, providing operational infrastructure,
employees,
resources, Knosys Platform
research, development and support.
sales
Australia
Knosys Products Pty Ltd
Principal activity – Holder of the Knosys Platform
intellectual property.
Australia
Knosys Asia Pte Ltd (incorporated 7 August 2019)
Principal activity – Provider of sales and marketing
resources to sell Knosys Platform in Singapore and
surrounding regions.
Singapore
Note 20. Events after the reporting period
Ownership interest
2019
2020
%
%
100%
100%
100%
100%
100%
-
The impact of the Coronavirus (COVID-19) pandemic is ongoing and, while the impact has not been financially negative for
the consolidated entity up to 30 June 2020 and has created some potential growth opportunities, it is not practicable to
estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is
dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing,
lockdowns, quarantine measures, travel restrictions and any economic stimulus that may be provided
No matter or circumstance has arisen since 30 June 2020 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 21. 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
Share based payments expense
Change in operating assets and liabilities:
Decrease/(Increase) in trade receivables
Increase in revenue billed in advance
(Increase) in accrued research and development tax refund receivable
(Increase) in prepayments and other debtors
(Decrease)/Increase in trade and other payables
Increase in provision for employee benefits
Net cash used in operating activities
35
Consolidated
2020
$
(908,391)
2019
$
(771,912)
189,905
85,763
45,527
96,614
18,521 (1,020,993)
1,264,864
(59,174)
(27,207)
6,244
25,031
(441,006)
160,725
(75,711)
(28,565)
(10,942)
91,088
(477,607)
Knosys Limited
Notes to the financial statements
30 June 2020
Note 22. 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 directors
and 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 2020 the following loan funded shares had been granted:
Grant date
Issue
date
Loan Expiry
date
Issue
price
Balance at
30 June
2019
Number
Issued
during the
period
Number
Sold during
the period
Number
Forfeited
during the
period
Number
Balance at
30 June
2020
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
27/11/2019 29/11/2019 29/11/2024 $0.101
27/11/2019 29/11/2019 29/11/2024 $0.101
Total
Weighted average issue price
$0.06 1,200,000
$0.10 2,050,000
$0.08 1,000,000
$0.08 1,375,000
-
-
5,625,000
$0.083
-
-
-
-
6,500,000
1,125,000
7,625,000
-
-
-
-
-
-
-
-
450,000
750,000
825,000
-
-
2,025,000
1,200,000
1,200,000
1,600,000 1,600,000
250,000
550,000
1,625,000
562,500
11,225,000 5,785,500
$0.089
250,000
550,000
6,500,000
1,125,000
$0.095
The 7,625,000 loan shares issued to participants during the period were sourced from a new issue of 5,600,000 ordinary
shares by the Company and from 2,025,000 of forfeited loan shares, transferred from the relevant participants.
Loan shares issued to Directors and executives
During the period 6,500,000 Loan Shares were issued to Directors and executives. These Loan Shares vest in four equal
tranches, subject to service based and applicable share price performance-based vesting conditions and have been valued
independently at issued date. Details of each tranche are as follows:
Tranche
Number of
Loan Shares
Service based vesting date and applicable conditions
Tranche 1
Tranche 2
1,625,000 Vested on 30 June 2020.
1,625,000 To vest on 30 June 2020, if the 20-day volume
weighted average price of Knosys Limited shares is
$0.12 or more on that date.
Unvested at 30 June 2020 as performance condition
not met. Shares to be forfeited.
Fair value
per share at
issue date
$0.040
Total fair
value at
issue date
$65,000
$0.020
$32,500
Tranche 3
1,625,000 To vest on 30 June 2021, if the 20-day volume
weighted average price of Knosys Limited shares is
$0.16 or more on that date.
$0.028
$45,500
Tranche 4
1,625,000 To vest on 30 June 2021, if the 20-day volume
weighted average price of Knosys Limited shares is
$0.20 or more on that date.
Total
6,500,000
$0.024
$39,000
$182,000
The valuation model inputs used by the independent valuer were as follows:
Loan Expiry Share price
Issue Marketability
Grant date
27/11/2019
date
at issue date price
29/11/2024
$0.087
$0.101
Discount
0.00%
36
Expected Dividend
volatility
yield
0.00%
72%
Risk-free
interest rate
0.76%
Knosys Limited
Notes to the financial statements
30 June 2020
Loan Shares issued to employees
During the period 1,125,000 Loan Shares were issued to employees. These Loan Shares vest in three tranches, subject to
time-based vesting conditions and have been valued independently at issued date. Details of each tranche are as follows:
Tranche
Tranche 1
Tranche 2
Tranche 3
Total
Number of
Loan
Shares
Service based vesting date
562,500 Vested on 30 June 2020.
281,250 To vest on 31 December 2020.
281,250 To vest on 30 June 2021.
1,125,000
The valuation model inputs used by the independent valuer were as follows:
Fair value
per share at
issue date
$0.040
$0.020
$0.028
Total fair
value at
issue date
$22,500
$11,813
$12,656
$46,969
Loan Expiry Share price
Issue Marketability
Grant date
27/11/2019
date
at issue date price
29/11/2024
$0.087
$0.101
Discount
0.00%
Expected Dividend
volatility
yield
0.00%
72%
Risk-free
interest rate
0.76%
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:
Loan Expiry Share price
at issue date
$0.08
$0.07
Grant date
26/11/2018 26/11/2023
24/12/2018 24/12/2023
The fair value at issue date is an average of graded tranches.
Issue
price
$0.08
$0.08
Discount
0.00%
0.00%
date
Marketability Expected Dividend Risk-free
Fair value
volatility
75%
75%
yield
0.00%
0.00%
interest rate at issue date
2.340%
2.450%
$0.015
$0.016
37
Knosys Limited
Notes to the financial statements
30 June 2020
Note 22. 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 2020 the following options had been granted under the ESOP:
Option
Issue date
Option
Expiry date
Exercise
price
Balance at
30 June
2019
Number
Issued
during the
period
Number
Exercised
during the
period
Number
Expired or
forfeited
during the
period
Number
Balance at
30 June
2020
Number
Vested and
exercisable
at end of
the period
Number
25/10/2016 01/10/2020
$0.25
Total
Weighted average exercise price
1,250,000
1,250,000
$0.25
-
-
-
-
-
-
1,250,000
1,250,000
$0.25
1,250,000
1,250,000
$0.25
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
2019
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
Options issued to Directors and senior management
As at 30 June 2020 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:
2020
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
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)
-
-
-
-
-
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
2,000,000
425,000
2,425,000
Weighted average exercise price
$0.25
38
-
-
-
-
-
-
-
-
2,000,000
425,000
2,425,000
2,000,000
425,000
2,425,000
$0.25
$0.25
vested
-
-
-
-
Knosys Limited
Notes to the financial statements
30 June 2020
Note 23. Segment information
During the year the consolidated entity operated in one segment, as a developer and licensor of computer software in the
APAC region.
The concentration of customers for the 2020 year was as follows:
• A major customer in Australia and New Zealand in the finance sector represented 44.4% of operating revenue
• A major customer in Australia in the Telecommunications sector represented 38.2% of operating revenue
• A major customer in Singapore in the telecommunications sector represented 9.8% of operating revenue
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
Note 24. Loss per share
Consolidated
2020
$
2019
$
Loss after income tax attributable to the owners the parent
(908,391)
(771,912)
Weighted average number of ordinary shares used in calculating basic and diluted
earnings per share
146,509,893
138,135,628
Number
Number
Basic loss per share
The 3,550,000 (2019: 9,508,334) 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
(0.62)
(0.56)
39
Knosys Limited
Directors' declaration
30 June 2020
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 2020 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
26 August 2020
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 2020, 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 2020 and of its
financial performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our
responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional
and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) (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 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 judgment, 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.
RECOGNITION OF REVENUE UNDER SERVICE CONTRACTS
How our audit addressed it
Our audit procedures included:
— Examining management’s revenue
recognition model to ensure 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, 11 and 23
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
accordance with AASB 15 Revenue from Contracts
with Customers.
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.
This includes identifying the specific performance
obligations within each customer agreement on
commencement.
There is a requirement for judgement in determining
which period to which the revenue should be
attributed. In designing the model management has
considered:
— Compliance with 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 22 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 judgements 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 judgement 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;
— 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
arrangements. We also assessed the
reasonableness of the assumptions detailed
in their report.
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 2020 but does not include the financial
report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express
any form of assurance conclusion thereon.
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
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
2020.
In our opinion, the Remuneration Report of Knosys Limited, for the year ended 30 June 2020, 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, 26 August 2020
Knosys Limited
Additional information for listed companies
1.
Shareholdings as at 25 August 2020
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
29
71
4,787
111,113
635,510
252 10,149,775
172 137,934,391
544 148,835,576
b.
c.
The number of shareholdings held in less than marketable parcels is 50, with a total of
121,174 ordinary shares, amounting to 0.08% of issued capital.
The names of the substantial shareholders listed in the holding Consolidated Group’s
register as at 25 August 2020 are:
Shareholder
Number
Ordinary
shares
%
1 Earthrise Holdings Pty Ltd
2 Moat Investments Pty Ltd
19,135,000
12.86
7,801,124
5.24
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
7,801,124
7,066,130
7,000,270
5,978,000
5,181,155
3,528,070
3,500,000
2,750,000
2,673,000
2,500,000
2,444,827
2,250,000
2,125,000
2,000,000
2,000,000
1,772,499
1,759,116
1,651,295
1,618,473
84,733,959
% Held of
Issued
Ordinary
Capital
12.86%
5.24%
4.75%
4.70%
4.02%
3.48%
2.37%
2.35%
1.85%
1.80%
1.68%
1.64%
1.51%
1.43%
1.34%
1.34%
1.19%
1.18%
1.11%
1.09%
56.93%
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
Earthrise Holdings Pty Ltd
Moat Investments Pty Ltd
Vabake Pty Ltd
Mrs Tracey Lee Cunningham
Jet Invest Pty Ltd
Mrs Denise Jane Campbell
TDF Properties Pty Ltd
Mast Financial Pty Ltd
John Robert Thompson
Panchito Services Pty Ltd
Huntingdale Management Pty Ltd
Kyriaco Barber Pty Ltd
Gale Enterprises (Aust) Pty Ltd
Shandora One Pty Ltd
DMX Capital Partners Limited
JT Management Co Pty Ltd
Blue Boat Holdings Pty Ltd
Vonetta Pty Ltd
Mrs Emma Jane Gracey
ADC (Investing) Pty Ltd
Total
2.
3.
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 addresse:
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