LINIUS TECHNOLOGIES LIMITED
ACN 149 796 332
ANNUAL REPORT
2017
ANNUAL REPORT
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CONTENTS PAGE
CORPORATE DIRECTORY…………………………………………………………………….……………………….……………….………2
CHAIRMAN'S LETTER TO SHAREHOLDERS ………………………………………….……………………………………….……...3
CHIEF EXECUTIVE OFFICER'S REVIEW OF OPERATIONS………………………………………………………………………4-9
DIRECTORS' REPORT…………………………………………………………………………………………………………………...10-22
CORPORATE GOVERNANCE STATEMENT..…………………………………………………………………………………………..22
AUDITOR'S INDEPENDENCE DECLARATION……………………………………………………………………………..……….…23
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME…………..…..….24
CONSOLIDATED STATEMENT OF FINANCIAL POSITION………………………….…………………………………………....25
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY………………………………………………………………….…..…26
CONSOLIDATED STATEMENT OF CASH FLOWS………………………………………………………………………….……..…27
NOTES TO THE FINANCIAL REPORT………………………………………………………………………………………..……..28-58
DIRECTORS' DECLARATION………………………………………………………………………………………………………………..59
INDEPENDENT AUDITOR'S REPORT…………………………………………………………………………………………….…60-64
ADDITIONAL INFORMATION FOR LISTED COMPANIES……………………………………………………………….…...65-67
PAGE 1
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CORPORATE DIRECTORY
This annual report covers Linius Technologies Limited and its controlled entities (the “Group” or “Group”)
during the year ended 30 June 2017. The functional and presentation currency of the Group is Australian
dollars.
OFFICERS
Gerard Bongiorno
Stephen McGovern
Christopher Richardson
Stephen Kerr
(Non-Executive Chairman)
(Non-Executive Director)
(Director and CEO)
(Company Secretary and CFO)
REGISTERED OFFICE
Level 18, 101 Collins Street
MELBOURNE VIC 3000
SOLICITORS
AUDITORS
SHARE REGISTRY
PRINCIPAL PLACE OF BUSINESS
Milcor Legal
Lawyers
Level 1, 6 Thelma Street
WEST PERTH WA 6872
KPMG
Tower 2, Collins Square
727 Collins Street
MELBOURNE VIC 3000
Advanced Share Registry Ltd
110 Stirling Highway
NEDLANDS WA 6009
Telephone: (08) 9389 8033
Facsimile: (08) 9262 3723
Level 18, 101 Collins Street
MELBOURNE VIC 3000
Telephone: (03) 8680 2317
Facsimile: (03) 8680 2380
Email: info@linius.com
WEBSITE
ASX CODE
www.linius.com
LNU
PAGE 2
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHAIRMAN’S LETTER TO SHAREHOLDERS
Dear Shareholders,
On behalf of your board of directors, I am pleased to enclose the Annual Report of Linius Technologies
Limited for the financial year ended 30 June 2017.
During the year the Company has built on the foundations laid in the 2016 financial period, when the
Company was transformed into a technology company and relisted on the ASX as Linius Technologies
Limited. The directors, executives, staff and consultants engaged by the Company have continued to
develop and enhance our patented technology and your board is delighted that the business is now moving
into its commercialisation phase.
In the first half of the 2017 financial year the company completed the final two milestones of the four
milestones it set itself in the Prospectus dated 3 March 2016. In addition to achievement of these key
management objectives, the Company received substantial, public 3rd-party validation; continued to invest
in R&D and was granted 2 additional patents.
As the Company completed development of its core product, the company laid out its central
commercialization strategy, which included a divisional approach to tackling global markets. Consistent with
this, the Company is now pursuing its commercialisation goals with an expanded management team and a
wider geographical footprint. Your directors are pleased with the progress to date and look forward to
providing further business updates as we move towards execution of our commercial objectives and
generating positive returns for shareholders.
During the year and subsequent to year end we were pleased to receive investment support from Village
Roadshow Ltd and Kirby family interests, leaders in the Australian film and video industry, raising $500,000
in additional capital in September 2016 and $1,500,000 in July 2017 through private placements at 5
cents per share. In addition to this, the company raised a further $260,000 at 4 cents per share from
investors exercising their listed options prior to the expiry date of 31 December 2016.
Thank you
On behalf of your Directors I would like to sincerely thank all shareholders that have supported us through
this exciting stage of the Company’s development. I hope you will continue to support us as we move into
the full commercialisation of our patented technology and pursue our business plans.
I present to you the report on the Company and its controlled entities for the financial year ended 30 June
2017.
Gerard Bongiorno
CHAIRMAN
28 September 2017
PAGE 3
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
HIGHLIGHTS
Completion of Prospectus Milestones
The Company’s 2016 prospectus outlined four milestones, the achievement of which would underpin the value
of the Linius’ technology in the marketplace and the Company as a whole. These milestones were Showcase
Deployments that were critical to demonstrating the capability and value of the Linius software as the company
developed its products in-line with its core patent.
Milestone 1: Enter into a Showcase Agreement with the objective of demonstrating personalization of
video stream
Milestone 2: Complete an Alpha release of the Linius technology
Milestone 3: Enter into a Showcase Agreement with the objective of demonstrating removal of
requirements for transcoding and reduction in storage
Milestone 4: Complete a Showcase, and have the 3rd party issue a public report that the Linius’
technology reduces the need for transcoding and storage
The first two milestones were completed in 2016, and represented significant technical progress and validation
for the Company and its technology. An alpha release is a major milestone in any software company’s
development, and in the case of Linius provided the first public validation that the claims of the core patent were
actually achievable.
The other three milestones — the Showcase Agreements — culminated with the completion of the fourth and final
milestone when Village Roadshow released the results of their testing. This represented not only the completion
of the Company’s initial goals, but also one of three very public validations of the technology that occurred in
2017.
Public and 3rd-Party Validation
Linius understands that whenever there’s a new technological breakthrough, customers need to “see and feel”
the technology and to have it validated through more than just the company’s say-so. To that end, Linius
undertook three significant, public demonstrations and validations of its software in fiscal 2017.
Live Personalized Advertising Demo
The Linius and Digisoft partnership which began with our first milestone continued to be a success well into
2017. In conjunction with the beta release of Linius’ Video Virtualization Engine™ software, Linius and Digisoft
showed the world for the first time, at IBC 2016 — the world’s largest international broadcasting conference —
that the kind of personalized advertising which the Internet has known for years is available for cable TV
companies and MSOs (multi-service operators).
Linius went on to publicly demonstrate this joint solution to a live audience in Melbourne and through a global
webinar, which is still available online at http://www.linius.com/advertising-solutions/
The live demonstration and webcast covered:
Different individuals watching the same show on TV from a cable set-top-box, and receiving different ads;
A high-level overview of setting business rules around who sees which ad; and
A discussion of the state of advertising in cable TV, and the global market opportunity.
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LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONT INUED
VVE Play and Virtualizing Instagram
Linius launched VVE Play — a public website to demonstrate the Video Virtualization Engine™ (VVE) and raise
awareness of virtual video. On VVE Play anyone can use, play and interact with virtual videos.
In order both to jump-start the content on VVE Play and to demonstrate the scalability of Linius’ VVE, the
Company indexed and virtualised the entire library of TED talks and over 5 million public Instagram videos —
using a single server, in less than a day. These virtual videos are available to the world where users can search
and edit the video content on the fly. The users can then broadcast their new ‘virtual’ videos.
Anyone who wants to play with virtual video can do so at http://vveplay.com
Village Roadshow Technical Validation
Arguably the most important of the major public validation exercises that Linius completed in 2017 was to have
a credible 3rd party undertake the technical due-diligence to complete the Company’s fourth goal for the year.
Village Roadshow took a high-definition trailer for the Roadshow movie The Fourth Phase, saved as an MPEG-4
video file for HTML5 play-out on a 16:9 aspect ratio device. Utilizing Linius’ VVE™, that same file, without editing
or transcoding, was streamed on the fly to a QuickTime 7 player in 4:3 aspect ratio.
That description may come as obtuse and overly technical to the layman, but for those in the industry this sort of
technical exercise is where the rubber meets the road. The Village Roadshow Showcase was the ultimate
validation that Linius technology delivers as promised.
Expansion of Patent Portfolio
A part of Linius’ strategy from day one has been to extend the Company’s intellectual property protection through
the pursuit of additional patents, copyrights, and trademarks. As the Company develops new applications for its
technology we will continue to assess opportunities for additional patents.
In 2017, Linius was granted two additional US patents to further protect its intellectual property and reinforce
the already existing core patent. These patents are continuations of Linius’ core patent, which was granted on
18 November 2014 and provides extra protection for the client-side (Patent No 9,516,392) and server-side
(Patent No 9,544,657) functions of the core invention.
Client-side functions include playing a virtual video file, and in particular the ability to play out a single stream
from multiple original sources. Server-side functions include indexing, creation of the virtual video file and
inclusion in the virtual video file support for extended features such as billing, customer feedback, interactivity,
or digital rights management (DRM).
Continuation Patents are unique to the US and are for extending useful applications or claiming different
embodiments of the original invention. In this particular case, the patents extend the Linius core invention, which
covers both server-side and client-side functionality, to cover each of those individually.
For the full text of the patents please go to:
Core Patent 8,893,203: https://www.google.com/patents/US8893203
Client-Side Continuation Patent 9,516,392: https://www.google.com/patents/US9516392
Server-Side Continuation Patent 9,544,657: https://www.google.com/patents/US9544657
PAGE 5
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONT INUED
The Team
The key to the success of any company is its people. In 2017 Linius was delighted to add some outstanding
commercial staff to support its already strong technical team adding two global division heads, inline with its
commercialization strategy (described below).
With 10 years’ experience in various roles at Yahoo — including Director,
Stream Ads Solutions, EMEA, and Director, Search Operations, EMEA —
Kevin joined Linius from ListGlobally, where he was COO for the software
start-up that took its product to market in over 60 countries around the
world with over 120 local partners
Kevin Kyer
EVP, Search
Ken Ruck
EVP, Personalized Advertising
Ken joined Linius from Kodak where he served as Chief Innovation Officer
working on new digital products with a focus on advanced development of
video image recognition and artificial intelligence systems. Prior to Kodak,
Ken worked at scaling both start-up and large media company products
and held positions of VP of Video Monetization for Flash Networks, Co-
Founder of Hemisphere Interactive, as well as executive roles with Turner
Broadcasting, MTV, Virgin Mobile, and ACNielsen.
While new business operations are focussed in the US and larger international markets, the local pipeline is
buoyant. In support of the Company’s growing pipeline in this region Linius has appointed a commercial Country
Manager for Australia and New Zealand.
Supporting the division heads and ANZ country manager are two Chief Solution Architects, whose core
responsibility is to help clients understand how technology can transform their business, provide guidance on
third party products that can provide additional value and to deliver a technical architecture that enables clients
to implement a technology, including the integration of the Linius’ technology with the client’s existing
infrastructure and workflow practices.
Looking Ahead
Linius’ over-riding business objective is to scale the commercial business quickly, focussed on both large clients
and use-cases of virtual video.
Looking towards 2018, Linius has set some ambitious commercial goals for the near term.
Engage with a global movie studio to develop proof of value (POV) in anti-piracy
Engage with a global movie studio to develop a mass content distribution POV
Deliver POV of Search in a global Cloud environment
Deliver the integration of VVE with at least one world leading OTT platform
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LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONT INUED
Deliver the integration of VVE with a major ad server
Generate first commercial outcome resulting from its IBM collaboration
Have a 3rd Party System Integrator make VVE available in IBM Bluemix
Deliver the integration of VVE into one additional cloud platform
Deliver the integration of VVE with at least one cognitive Artificial Intelligence (AI) provider
Deliver blockchain strategy and solution design
In addition to these tangible commercialization points, Linius expects to begin reporting on key commercial
metrics in 2018, particularly against the Company’s SaaS strategy (see below).
PRODUCT AND STRATEGY
Product
Linius’ core product is its Video Virtualization Engine™. In 2017 the VVE™ went through beta testing and
extensive public, 3rd party validation as already described. Going into 2018, it is ready for commercialization. The
base product is designed with state-of-the-art engineering standards, practices and toolsets, resulting in a high-
scalable, enterprise grade software product.
The Video Virtualization Engine™ cracks open the code of traditionally sealed and static video files to create a
virtual video file. Within that new lighter and more agile file, you can access the video DNA data to index, tag,
parse, splice, manage and manipulate any video stream on the fly, in transit between source and screen —
transforming static video into what we call intelligent content.
Our APIs integrates seamlessly into existing software and workflows, adding the innovation anyone needs to
redefine and disrupt any industry based upon, or leveraging video streaming.
No matter the industry or how our Video Virtualization Engine is applied, the underlying process revolves around
3 relatively simple steps.
Step 1: Automatically unlock, reveal and index the data within a legacy video file, and
create a virtual video
Step 2: Programmatically extract, splice, merge and manipulate video content in
transit to its destination
Step 3: Reassemble the new video file instantaneously at the device
The resulting virtual “ghost file” is a tiny fraction of the original size, making it a faster, more agile and more
flexible reflection of the original source file. Most importantly it’s malleable – giving you the unparalleled ability to
manipulate its content in numerous ways to disrupt your industry and achieve your business goals.
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LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONT INUED
Video virtualization allows for:
The application of Big Data principles of analysis and manipulation to digital video
The transformation of passive and static digital video into dynamic, smart video experiences
Lighter, more agile and flexible video files that are easily manipulated to deliver enhanced custom
experiences to end users
The insertion of business rules and IT tools to create intelligent content
Commercialization Strategy
In 2017, Linius announced its commercialization strategy. The Company aims to target four multi-billion-dollar
industry segments which it believes the VVE can transform. Each segment will be operated as a division — a
distinct business unit with its own commercial head. The divisional approach allows the Company to hire specific
expertise for each while providing focus and accountability to operations.
The four markets Linius aims to transform are as follows:
1. Personalised advertising on Cable TV and Internet streaming video.
The TV advertising market was worth over $70 billion US in 2016, in the US alone.
Linius transforms this market by allowing every cable TV ad to be personalised to the individual
viewer. Linius demonstrated the capability as described above in Public and 3rd-Party Validation.
2. Anti-Piracy
The best current research indicates that losses to piracy exceed $21 billion.
Linius VVE provides multiple ways of reducing piracy and offers content owners revolutionary control
of their content, measurement methods, plus new revenue generating methodologies.
3. Search
The Search division utilises the VVE to enhance search returns, stitching video together on the fly to
provide enhanced search results and therefore much greater monetisation opportunities for search
engine providers.
There are approximately 30 search engine providers across hundreds of thousands of video
websites, ranging from Google to specific search engines designed for niche interest websites.
4. Security and Defense
This division provides capability that dramatically increases response times for government agencies
and corporations tasked with surveillance and threat management.
The video surveillance market is growing at 16.56% and is expected to reach $71 billion US by 2022.
Each division will go to market slightly differently, but broadly speaking Linius intends to commercialize in each
division with B2B software sales on a recurring, per-unit model, either through direct deployment on customer
premises (enterprise software), or through deployment in the cloud (SaaS). The primary sales channel is
expected to be resellers and partners in each division, supported by Linius account and technical management.
PAGE 8
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONT INUED
Partners
Linius expects to deliver its products both as enterprise software through channel partners and as Software-as-a-
Service from the cloud. In 2017 the Company was pleased to sign IBM as its first commercial partner, with a
collaboration agreement to promote and sell the Linius Video Virtualization Engine™ to IBM’s extensive network
of corporate clients and beyond in Linius’ target market sectors as well as building VVE onto the IBM Bluemix
platform.
This collaboration project, between Linius and IBM, provides for the joint promotion and marketing of the Linius
VVE (including presales support) and submission of proposals for selling the Linius VVE to targeted customers as
a stand- alone or integrated offering with IBM products.
Linius will build and offer the Linius VVE on IBM Bluemix, IBM’s cloud platform. IBM Bluemix weaves together
services, infrastructure and data to help businesses bring their ideas into production quickly.
Christopher Richardson
CHIEF EXECUTIVE OFFICER
28 September 2017
PAGE 9
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT
Your directors present this report on the Linius Technologies Limited (the “Company”) and its controlled entities
(the “Group” or “Group”) for the year ended 30 June 2017.
Directors
The Directors in office during the year were:
Gerard Bongiorno (Non-Executive Chairman) – appointed 21 February 2017
Stephen McGovern (Non-Executive Chairman)
Christopher Richardson (Executive Director & CEO)
Stephen Kerr (Executive Director & CFO) – resigned as a director on 21 February 2017
All Directors have been in office since the start of the financial year to the date of this report, unless stated
otherwise.
Company Secretary
Stephen Kerr
Principal Activities
The principal activities of the entity are those of a technology business, including development of technology
products, software development and the commercialisation and licencing of its computer software, the Linius
Video Virtualization EngineTM, the world’s first video virtualisation engine. The technology transforms large
inflexible video files into small highly flexible data structures.
Operating Results and Review of Operations
The loss for the year ended 30 June 2017 after income tax expense amounted to $4,230,052 (for the period 10
September 2015 to 30 June 2016 loss: $5,564,619). This loss includes non-cash share based payments expense
of $354,570 and non-cash amortisation charges of $540,000. During the year the Company completed
development of its core product and commenced pursuing its commercialisation goals with an expanded
management team and a divisional approach to tackling global markets. For more information on the years
activities please refer to the above Chief Executive’s Review of Operations on pages 4 to 9.
Dividends Paid or Recommended
No dividends were paid or declared for payment.
Financial Position
The net assets of the Group at 30 June 2017 are $5,043,444 ($8,152,986).
Going Concern
For the year ended 30 June 2017, the Group had an operating net loss of $4,230,052 (for the period 10
September 2015 to 30 June 2016: $5,364,619) and net cash outflows from operating activities of $3,037,565
(for the period 10 September 2015 to 30 June 2016: $692,934).
The ability of the Group to continue as a going concern is dependent upon a number of factors, one being the
continuation and availability of funds. The financial statements have been prepared on the basis that the Group
is a going concern, which contemplates the continuity of its business, realisation of assets and the settlement of
liabilities in the normal course of business. Further details on the going concern basis of preparation used to
prepare the annual financial statements are set out in note 1 to the annual financial statements.
PAGE 10
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
After Balance Date Events
On 18 July 2017, the Company announced that it had raised $1,500,000 through the issue of 30,000,000 fully
paid ordinary shares, at 5 cents per share, in a private placement to sophisticated investors.
There has not been any other matter or circumstance that has arisen after balance date that has significantly
affected, or may significantly affect, the operations of the Group, the results of these operations, or the state of
affairs of the Group in future financial periods.
Environmental Issues
There are no environmental regulations or requirements that the Company is subject to.
Information on Directors
Gerard Bongiorno
— Non-Executive Chairman (appointed 21 February 2017)
Experience
— Mr Bongiorno is Principal and Co-CEO of Sapient Capital Partners, a merchant banking
operation and has over 30 years of professional experience in capital raisings and
corporate advisory. Prior to forming Sapient (formerly Otway Capital), Gerard was Head
of Property Funds Management at Challenger Financial Services Group (CFG) and was
Group Special Projects Manager at Village Roadshow. Earlier in his career he worked
at KPMG in insolvency and corporate finance. Gerard received his Bachelor’s Degree
in Economics and Accounting from Monash University and the Program for
Management development at Harvard Business School PMD75.
Interest in Shares and
Options
—
1,000,000 Ordinary shares
Directorships held
in
other listed entities in
the last 3 years
—
In the 3 years immediately before the end of the financial year, Gerard Bongiorno
served as a director of the following listed companies:
Dubber Corporation Limited (ASX:DUB)
PAGE 11
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Stephen McGovern
— Non-Executive Director
Experience
— Mr McGovern has over 25 years’ experience in the fields of telecommunications,
media sales, pay TV and regulatory. Steve has been a senior executive of several
established companies, both domestically and internationally, which have been
primarily associated with new and emerging markets and have required a strong sales
and solutions focus. These include pay TV, telecommunications de-regulation, internet
service providers and media licensing, all of which maintain a strong sales and
solutions focus, both domestically and internationally.
Mr McGovern is formerly a Sales Director of Sky Subscriber Services managing
subscriber acquisition for Sky TV (now BSkyB). Between 1995 and 1998 Steve was an
executive involved in the launch of the pay TV industry in Australia within the
Galaxy/Austar/Foxtel network.
From 1998 Mr McGovern was General Manager of Hotkey Internet Services, an ISP
which was sold to Primus Telecommunications in 2000. From 2000 Steve was a
director of the Australian subsidiary of Affinity Internet Holdings, Europe’s second
largest ISP at the time and listed on the FTSE, having vended in an Australian based
ISP business.
For 11 years Mr McGovern was Chief Executive of the my1300 group of companies
until the sale of the business earlier in 2014. This group comprised businesses which
involved media licensing, telecommunications service providers and partner networks
for Australian telecom companies such as Primus, AAPT, Telstra, Optus and Vodafone.
Mr McGovern is currently the CEO and Managing Director of Dubber Corporation, an
ASX listed provider of a Cloud recording and data capture Platform as a Service aimed
at the telecommunications service provider sector.
Interest in Shares and
Options
— 40,000,000 Ordinary shares
6,000,000 Options (unlisted)
Directorships held
in
other listed entities in
the last 3 years
—
In the 3 years immediately before the end of the financial year, Stephen McGovern
served as a director of the following listed companies:
Dubber Corporation Limited (ASX:DUB)
Christopher
Richardson
Experience
— Director and CEO
— Mr Richardson is a global executive in the internet space who with global technology
sector experience. He has over 20 years experience building organisations and
products that succeed in their markets and provide exceptional shareholder value.
Currently, Mr Richardson sits on the board of directors of:
• Mirovoy Sales, a sales software automation company based in Prague, CZ; and
• The Ibis Network Limited, a content marketing agency based in Hong Kong, CN.
PAGE 12
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Previously, Mr Richardson served as global General Manager of KIT digital’s network-
operator division, and CEO of KIT Germany, where he oversaw growth of video platform
sales to network operators from $12 million US annually to over $100 million US, prior
to KIT’s acquisition by Piksel, Inc. Before KIT digital, Mr Richardson served in executive
roles in marketing and product-management for several Silicon Valley start-ups,
including:
• U4EA Wireless (the world’s first SMB focused Wi-Fi manufacturer, and provider of
embedded wireless software; acquired by GoS Networks); and
• NextHop Technologies (an embedded routing software company; acquired by
Greenhills software), which he co-founded and raised Series A funding from tier-1
Silicon Valley VCs, led by New Enterprise Associates.
Prior to founding NextHop technologies, Mr Richardson was a software engineer at
MERIT Networks, where he helped build the early internet, developing routing
protocols, and consulting with developing countries around the world on deploying the
Internet; lecturing multiple times at ISOC’s Developing Countries workshops in Geneva,
Switzerland, and being the first non-native speaker at Russia’s All Russia Telematiks
conference. Mr Richardson was Visiting Professor of Internet Routing at St. Petersburg
State Technical University in St. Petersburg, Russia. He studied mathematics and
philosophy at the University of Michigan, where he won the William S. Branstrom Prize
for academic excellence and Evelyn O. Bychinsky Award for excellence in mathematics.
—
20,000,000 Options
— Nil
— Company Secretary and CFO (resigned as a director on 21 February 2017)
— Mr 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. He has had exposure to a wide range of markets and industries
including IT, business services, logistics, transport and life-sciences and brings strong
financial, commercial and governance skills to the group. Stephen holds a Bachelor of
Commerce from the University of Melbourne and is a current member of the Institute
of Chartered Accountants in Australia and a Fellow of the Governance institute of
Australia.
— 3,000,000 Options
— Nil
Interest in Shares and
options
Directorships held
in
other listed entities in
the last 3 years
Stephen Kerr
Experience
Interest in Shares and
Options
Directorships held in
other listed entities in
the last 3 years
PAGE 13
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
REMUNERATION REPORT - AUDITED
The information provided in the audited remuneration report includes remuneration disclosures that are required
under the Corporations Act 2001 and other relevant requirements. These disclosures have been audited.
Key management personnel
Names and positions held of Group key management personnel (KMP) in office at any time during the year are:
Key Management Person Position
Gerard Bongiorno
Non-Executive Chairman (appointed 21 February 2017)
Stephen McGovern
Non-Executive Director
Christopher Richardson Director and CEO
Stephen Kerr
Director (resigned 21 February 2017), CFO and Company Secretary
Principles used to determine the nature and amount of remuneration
The Board determines the appropriate nature and amount of remuneration. The board may receive advice from
independent remuneration consultants to ensure remuneration levels are appropriate and in line with the market.
No such advice was sought for the year ended 30 June 2017. The Board ensures that the executive reward
satisfies the following criteria for good reward governance practice:
• competitiveness and reasonableness;
• acceptability to shareholders;
• alignment of executive remuneration to performance;
• transparency; and
• capital management.
The framework provides for a mix of fixed and variable remuneration. There was no target mix of fixed or variable
remuneration set in the current year. The variable remuneration comprises share-based payment compensation
and any discretionary performance bonus payment benefits.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the directors have regard to the
following indices in respect of the current financial year and prior financial period.
2017
2016*
(Loss) attributable to owners of the company
$(4,230,052)
$(5,364,619)
Change in share price
$(0.022)
$0.052
*10 September 2015 until 30 June 2016.
Profit/(loss) amounts have been calculated in accordance with the Australian Accounting Standards (AASBs).
Non-executive Directors and executive Director
Fees and payments to non-executive Directors and the executive Directors reflect the demands, which are made
on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually
by the Board.
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LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Directors’ fees
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum pool limit currently stands at $300,000 per annum.
Key Management Personnel Remuneration Policy
The Board’s policy for determining the nature and amount of remuneration of key management for the Group is
as follows:
The remuneration structure for key management personnel is based on a number of factors, including length of
service, particular experience of the individual concerned, and overall performance of the Group. There is
currently no remuneration related to Group performance. The contracts for service between the Group and key
management personnel are on a continuing basis, the terms of which are detailed below and are not expected to
change in the immediate future.
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LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements as at 30 June 2017 are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Gerard Bongiorno
Non-Executive Chairman
21 February 2017
No fixed term
An annual director fee of $90,000 plus superannuation. The fee paid to Mr Bongiorn
is subject to annual review by the Board. The Company will reimburse Mr Bongiorno f
all reasonable expenses incurred in performing his duties. The agreement includes
non-competition clause.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Stephen McGovern
Non-Executive Director
18 April 2016
No fixed term
An annual director fee of $90,000 plus superannuation. The fee paid to Mr McGove
is subject to annual review by the Board. Under the terms of his agreement, th
Company issued Mr McGovern’s nominee with 6,000,000 Options in April 2016. Th
Company will reimburse Mr McGovern for all reasonable expenses incurred
performing his duties. The agreement includes a non-competition clause.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Christopher Richardson
Director and CEO
1 December 2015
No fixed term
An annual consultancy fee of $150,000, payable at the rate of $12,500 per mon
(exclusive of any GST or withholding taxes). The Consultancy Fee will be reviewe
annually by the Board. Under the terms of the agreement, the Company issued M
Richardson’s nominee with 10,000,000 Options in April 2016 and 10,000,000 option
in November 2016. The agreement can be terminated by the company on one month
notice or by Mr Richardson on three month’s written notice. The Company will reimburs
Mr Richardson for all reasonable expenses incurred in performing his duties. Th
agreement includes a non-competition clause.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Stephen Kerr
Chief Financial Officer and Company Secretary
21 January 2016 (Resigned as a director on 21 February 2017)
No fixed term
An annual consultancy fee of $84,000, payable at the rate of $7,000 per month
(exclusive of any GST or withholding taxes). The Consultancy Fee will be reviewed
annually by the Board. Under the terms of the agreement, the Company issued Mr Kerr’s
nominee with 1,500,000 Options in April 2016 and 1,500,000 options in November
2016. The agreement can be terminated by either party on three month’s written notice.
The Company will reimburse Mr Kerr for all reasonable expenses incurred in performing
his duties. The agreement includes a non-competition clause.
PAGE 16
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Key Management Personnel Remuneration
Details of the nature and amounts of each major element of remuneration of each director of the Company and
other key management personnel of the Group are:
Directors’
fees &
consultancy
fees
$
Super-
annuation
payments
Share-
based
payment
options9
Total
Performance
Related
Share-based
$
$
%
2017
Non-executive
directors:
Gerard Bongiorno
Stephen McGovern
Executive directors:
30,0008
90,0004
2,850
8,325
-
-
32,850
98,325
Christopher Richardson
150,0005
Executives:
Stephen Kerr
84,0006
-
-
310,360
460,360
44,210
128,210
354,000
11,175
354,570
719,745
2016*
%
-
-
67.4
34.5
49.3
-
-
-
-
-
Directors’
fees &
consultancy
fees
$
Super-
annuation
payments
Share-
based
payments9
Total
Performance
Related
Performance
Related
$
$
%
%
Non-executive
directors:
Stephen McGovern
19,9384
Executive directors:
Christopher Richardson
Stephen Kerr
Roger Steinepreis
David Holden
Paul Lloyd
Executives:
Gavin Campion
75,0005
32,6556
19,0001
19,0002
123,3003
15,3657
304,258
* 10 September 2015 until 30 June 2016.
-
-
-
-
-
-
-
-
187,450
207,388
124,966
199,966
21,087
53,742
-
-
-
19,000
19,000
123,300
1,280,907
1,296,272
1,614,410
1,918,668
-
-
-
-
-
-
-
-
90.4
62.5
39.2
-
-
-
98.8
84.1
PAGE 17
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
1. Consultancy fees were paid to Steinepreis Paganin, a related party of Roger Steinepreis, up until 18 April
2016.
2. Consultancy fees were paid to Shackleton Capital Pty Ltd, a related party of David Holden up until 18 April
2016.
3. Consultancy fees were paid to Coral Brook Pty Ltd, a related party of Paul Lloyd up until 18 April 2016.
4. Consultancy fees were paid to SMG Nominees Pty Ltd, a related party of Stephen McGovern, appointed 18
April 2016.
5. Consultancy fees were paid to Mirovoy Sales, s.r.o. , a related party of Christopher Richardson, appointed 1
December 2015.
6. Consultancy fees were paid to SC Kerr & Co, a related party of Stephen Kerr, appointed 21 January 2016.
Stephen Kerr ceased as a director on the 21 February 2017, however remained an executive officer and
Company Secretary of the Group.
7. Consultancy fees were paid to Hydria Plenus Pty Ltd, a related party of Gavin Campion, from 10 September
2015 until 30 March 2016; Gavin Campion continues as a non-KMP consultant with the Group.
8. Consultancy fees were paid to Otway Capital Consulting, a related party of Gerard Bongiorno, appointed 21
February 2017.
9. The fair value of the options is calculated at the date of grant using the binomial option pricing model and
allocated to each reporting period based on forecast estimated vesting dates. The value disclosed is the
portion of the fair value of the options recognised as an expense in each reporting period.
Performance income as a proportion of total remuneration
Executive directors and executives were not paid performance based bonuses.
Options over equity instruments granted as compensation - audited
Details on options over ordinary shares of Linius Technologies Limited that were granted as compensation to
each key management person during the reporting period and details on options vested during the period are
as follows:
Number of
options
granted
2016-17
10,000,000
1,500,000
Grant date
30 Nov
2016
30 Nov
2016
Fair value
per option at
grant date
$
Exercise
price per
option
$
0.022
0.045
0.022
0.045
Expiry date
30 Nov
2019
30 Nov
2019
Options
Christopher
Richardson
Stephen
Kerr
Number of
options
vested
during 2016-
17
1,000,000
150,000
The options granted are subject to vesting conditions and attached milestones being satisfied which include
performance milestones; these are set out in Note 19 and 22 to the annual financial statements. The options
granted are the amounts approved by way of shareholder resolution at the Company’s Annual General
Meeting on 30 November 2016, no further options were approved.
PAGE 18
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
All options expire on the earlier of their expiry date or termination of the individual’s employment.
Exercise of options granted as compensation
During the period, no options were exercised.
Details of equity incentives affecting current and future remuneration – audited
Details of the vesting profiles of the options held by each key management person of the Group are detailed
below.
Instrument
Number of
options
Grant date % vested
during the
year
% forfeited
in year
Christopher
Richardson
Christopher
Richardson
Options
10,000,000
Options
10,000,000
Stephen Kerr
Options
1,500,000
Stephen Kerr
Options
1,500,000
30 Nov
2016
28 April
2016
30 Nov
2016
28 April
2016
10%
60%
10%
55%
-
-
-
-
Financial
years in
which grant
vests
2017-19
2017
2017-19
2017
Analysis of movements in equity instruments – audited
The value of options over ordinary shares in the Company granted and exercised by each key management
person during the reporting period is detailed below:
Christopher Richardson
Stephen Kerr
Granted in year $
Value of options
exercised in year
220,000
33,000
-
-
The value of options granted in the year is the fair value of the options calculated at grant date. The total value of
the options is included in the table above. There are four tranches and amounts are allocated to remuneration
over the vesting period for each tranche (i.e 1 December 2016 to 30 June 2018).
Options over equity instruments – audited
The movement during the reporting period, by number of options over ordinary shares in Linius Technologies
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties,
is as follows:
Balance
1.7.2016
6,000,000
Granted during
the period
to 30.6.2017
-
Total lapsed
or exercised
30.6.2017
-
Held at
30.6.2017
6,000,000
Total Vested
and Exercisable
30.6.2017
6,000,000
Total
Unexercisable
30.6.2017
-
10,000,000
10,000,000
- 20,000,000
11,000,000
9,000,000
Stephen McGovern
Christopher
Richardson
Stephen Kerr
1,500,000
1,500,000
-
3,000,000
1,650,000
1,350,000
Total
17,500,000
11,500,000
- 29,000,000
18,650,000
10,350,000
For details on the valuation of options granted during the period refer Note 19.
PAGE 19
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Movements in shares - audited
The movement during the reporting period in the number of ordinary and performance shares in Linius
Technology Limited, held, directly, indirectly or beneficially, by each key management person, including their
related parties, is as follows:
Balance
1.7.2016
Received as
Compensation
Options
Exercised
Acquired during
the year
Balance
30.6.2017
Gerard Bongiorno
Stephen McGovern
Total
-
20,000,000
20,000,000
-
-
-
-
-
-
1,000,000
1,000,000
20,000,000
40,000,000
21,000,000
41,000,000
Number of Performance Shares held by Key Management Personnel
Stephen McGovern
Total
Balance
1.7.2016
20,000,000
20,000,000
Received as
Compensation
Converted to
ordinary shares
Acquired during
the year
Balance
30.6.2017
-
-
(20,000,000)
(20,000,000)
-
-
-
-
Key management personnel transactions - audited
Group
Transactions with related parties:
Legal fees paid to Steinepreis Paganin, a legal firm in which
Roger Steinepreis has an interest
Amounts owing to related parties (included in trade and other payables)
Entity related to Stephen McGovern
Entity related to Christopher Richardson
Entity related to Stephen Kerr
2017
$
2016*
$
-
159,633
8,193
31,655
7,700
8,193
37,131
7,700
* 10 September 2015 until 30 June 2016.
Transactions between related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
END OF REMUNERATION REPORT
PAGE 20
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Meetings of Directors
During the financial year, ten meetings of Directors were held. Attendance by each director was as follows:
Directors’ Meetings
Number eligible to attend
Number attended
Gerard Bongiorno
Stephen McGovern
Christopher Richardson
Stephen Kerr
5
10
10
5
5
10
10
5
Indemnification and insurance of Directors and Officers
The Company has agreed to indemnify all the directors of the Company for any liabilities to another person (other
than the Company or related body corporate) that may arise from their position as directors of the Company, and
its controlled entities, except where the liability arises out of conduct involving a lack of good faith.
The Company has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred
by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of
the Company, other than conduct involving a wilful breach of duty in relation to the Group.
Options
At the date of this report, the unissued ordinary shares of Linius Technologies Limited under option are as
follows;
Date of Expiry
Exercise Price
Number Under Option
31/03/2019
30/11/2019
unlisted
unlisted
5 cents
4.5 cents
61,500,000
11,500,000
During the year ended 30 June 2017, no ordinary shares of Linius Technologies Limited were issued on the
exercise of options granted under any Employee Option Plan.
No person entitled to exercise the option had or has any right by virtue of the option to participate in any share
issue of any other body corporate.
Proceedings on Behalf of the Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or 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 any part of those proceedings. The Company was not a party to any such proceedings during the period.
PAGE 21
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ REPORT CONT INUED
Future Developments
Other than as referred to in this report, further information as to likely developments in the operations of the Group
and expected results of those operations would, in the opinion of the Directors, be speculative and prejudicial to
the interests of the Group and its shareholders.
Corporate Governance statement
The Company’s Corporate Governance Statement has been lodged with ASX and is available from Company’s
website at www.linius.com/corporate-governance/.
Auditor’s Independence Declaration
The Lead auditor’s independence declaration is set out on page 23 and forms part of the directors’ report for the
financial year ended 30 June 2017.
Non-Audit Services
Other than audit and review of the financial statements, KPMG has not performed any other services.
Signed in accordance with a resolution of the Board of Directors.
Gerard Bongiorno
Director
28 September 2017
Melbourne
PAGE 22
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2017
Note
Group
Revenue
Administrative expenses
Employee benefit expenses
Amortisation expense
Consultant expenses
Depreciation expense
Share-based payments expense
Financial and compliance expenses
Software development expenses
Marketing and promotional expenses
Patent costs
Legal expenses
Travel and accommodation expenses
2
19
2017
$
41,492
(331,850)
(34,462)
(540,000)
(692,055)
(239)
(384,570)
(142,897)
(895,440)
(761,368)
(73,793)
(140,561)
(274,309)
2016*
$
12,027
(141,159)
-
(315,000)
(241,959)
-
(2,498,135)
(32,442)
(272,068)
-
(38,166)
(184,015)
(46,277)
Loss before transaction costs and income tax
(4,230,052)
(3,757,194)
Transaction costs relating to the reverse acquisition
by the accounting acquirer Linius (Aust) Pty Ltd of
Linius Technologies Limited
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive loss
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign
operations
Total comprehensive loss for the year
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
22
4
7
7
-
(1,607,425)
(4,230,052)
(5,364,619)
-
-
(4,230,052)
(5,364,619)
-
-
(4,230,052)
(5,364,619)
(0.7)
(0.7)
(3.7)
(3.7)
* 10 September 2015 until 30 June 2016.
The accompanying notes form part of the financial report.
PAGE 24
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017
CURRENT ASSETS
Cash and cash equivalents
Other receivables
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Intellectual property
Property, plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Employee Provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Share based payments reserve
Accumulated losses
TOTAL EQUITY
Note
Group
2017
$
2016
$
8
9
959,270
3,275,258
77,475
75,506
1,036,745
3,350,764
10
4,545,000
5,085,000
14,124
-
4,559,124
5,085,000
5,595,869
8,435,764
11
550,320
282,778
2,105
552,425
552,425
-
282,778
282,778
5,043,444
8,152,986
12
19
12,575,410
11,809,470
2,062,705
1,708,135
(9,594,671)
(5,364,619)
5,043,444
8,152,986
The accompanying notes form part of the financial report
PAGE 25
-
-
-
-
-
-
-
-
-
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017
Group
Balance at incorporation
Total comprehensive loss
Loss for the period*
Other comprehensive loss
Total comprehensive loss
Issued
Capital
Share Based
Payments
Reserve
Accumulated
Losses
Total
$
$
$
$
-
-
-
-
-
-
(5,364,619)
(5,364,619)
-
-
(5,364,619)
(5,364,619)
Transactions with owners of the
Company
Shares issued on incorporation
Shares issued during the year (net of
capital raising costs)
Reverse acquisition of Linius
Technologies
Conversion Offer
CPS Offer
200
5,000,000
5,684,270
875,000
250,000
Share-based payments*
-
1,708,135
Total transactions with owners of the
Company
11,809,470
1,708,135
Balance at 30 June 2016
11,809,470
1,708,135
(5,364,619)
Balance 1 July 2016
11,809,470
1,708,135
(5,364,619)
8,152,986
(4,230,052)
(4,230,052)
-
-
(4,230,052)
(4,230,052)
Total comprehensive loss
Loss for the year
Other comprehensive loss
Total comprehensive loss
Transactions with owners of the
Company
-
-
-
Shares and options issued during
the year (net of capital raising costs)
765,940
-
-
-
-
Share-based payments
-
354,570
Total transactions with owners of the
Company
765,940
354,570
Balance at 30 June 2017
12,575,410
2,062,705
(9,594,671)
* 10 September 2015 until 30 June 2016.
The accompanying notes form part of the financial report
-
-
-
-
-
-
-
-
-
-
200
5,000,000
5,684,270
875,000
250,000
1,708,135
13,517,605
8,152,986
765,940
354,570
1,120,510
5,043,444
PAGE 26
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017
Note
Group
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers
Interest received
Net cash used in operating activities
13
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of intellectual property
Cash acquired through reverse acquisition
22
Purchase of property, plant & equipment
Net cash provided by /(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of convertible notes
Proceeds from issue of shares
Capital raising costs paid
Net cash inflows from financing activities
2017
$
(3,084,744)
47,179
(3,037,565)
-
-
(14,363)
(14,363)
2016*
$
(699,093)
6,159
(692,934)
(400,000)
4,017,992
-
3,617,992
-
350,000
760,940
(25,000)
735,940
200
-
350,200
Net increase/(decrease) in cash held
Cash at beginning of financial year
(2,315,988)
3,275,258
3,275,258
-
Cash at end of financial year
8
959,270
3,275,258
* 10 September 2015 until 30 June 2016.
The accompanying notes form part of the financial report
PAGE 27
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
These general purpose financial statements comprise the financial report and notes of Linius Technologies Limited
(the “Company”) and its controlled entities (the “ Group” or “Group”), a listed Australian company incorporated in
Australia.
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian
Accounting Standards adopted by the Australian Accounting Standards Board and the Corporations Act 2001.
The financial statements comprise the consolidated financial statements for the Group. For the purposes of
preparing the consolidated financial statements, the Company is a for-profit entity, involved in the development of
technology products, software development and the commercialisation and licencing of computer software.
Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has
concluded would result in a financial report containing relevant and reliable information about transactions, events
and conditions to which they apply. The financial report and notes also comply with International Financial Reporting
Standards adopted by the International Accounting Standards Board. Material accounting policies adopted in the
preparation of this financial report are presented below. They have been consistently applied unless otherwise
stated.
The financial report was authorised for issue by the Board of Directors on 28 September 2017.
Reverse Acquisition Accounting
The acquisition of Linius (Aust) Pty Ltd by the Company, in the prior period to 30 June 2016, is considered to be a
reverse acquisition under Australian Accounting Standards, notwithstanding the Company being the legal parent of
the Group. Consequently, the financial information presented in this Report is the financial information of Linius
(Aust) Pty Ltd. Linius (Aust) Pty Ltd was incorporated on 10 September 2015, hence the prior reporting period is
from this date up to 30 June 2016.
The legal structure of the Group subsequent to the acquisition of Linius (Aust) Pty Ltd is that the Company will remain
as the legal parent entity. However, the principles of reverse acquisition accounting are applicable where the owners
of the acquired entity (in this case, Linius (Aust) Pty Ltd) obtain control of the acquiring entity (in this case, the
Company) as a result of the business combination.
Under reverse acquisition accounting, the consolidated financial statements are issued under the name of the legal
parent (the Company) but are a continuation of the financial statements of the legal subsidiary (Linius (Aust) Pty
Ltd), with the assets and liabilities of the legal subsidiary being recognised and measured at their pre-combination
carrying amounts rather than their fair values at the date of the business combination.
Historical cost convention
The financial statements have been prepared under the historical cost convention.
PAGE 28
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern
For the year ended 30 June 2017, the Group incurred an operating net loss of $4,230,052 (2016: $5,364,619)
and net cash outflows from operating activities of $3,037,565 (2016: $692,934).
The ability of the Group to continue as a going concern is dependent upon a number of factors, one being the
continuation and availability of funds. The financial statements have been prepared on the basis that the Group is
a going concern, which contemplates the continuity of its business, realisation of assets and the settlement of
liabilities in the normal course of business for a period of at least twelve months from the date of approval of these
annual financial statements.
In determining that the going concern assumption is appropriate, the directors have had regard to:
projected cash outflows, which are expected to continue for a period of at least twelve months from
the date of approval of these financial statements;
confidence in achieving expected sales through its commercialisation activities;
prudent management of costs as required including the ability to control expenditures in line with
cash resources available;
being able to raise additional capital funds through conducting a capital raising to enable the
continuation of the development and commercialisation activities as planned (refer to subsequent
events note 21); and
the Directors have prepared cash flow projections for the period from 1 July 2017 until 31 December
2018 that support the Group’s ability to continue as a going concern. These cashflow projections
assume the Group obtains sufficient additional capital funds from shareholders or other parties. If
such funding is not achieved, as stated above, the Group will reduce expenditure to the level of
funding available.
The Directors are confident the Group will be able to secure sufficient capital funds and the Group has a
demonstrated track record of raising capital as required.
The Group’s ability to continue to operate as a going concern is dependent upon the items listed above, where
additional funds and/or alternative financing have yet to be secured. The conditions give rise to a material
uncertainty as to whether the Group will be able to continue as a going concern and therefore should the Group be
unable to continue as a going concern it may be required to realise assets at an amount different to that recorded
in the statement of financial position, settle liabilities other than in the ordinary course of business and make
provisions for other costs which may arise.
a.
Income Tax
The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax
expense/(benefit).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using
applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/(assets)
are therefore measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during
the period as well as unused tax losses.
PAGE 29
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Current and deferred income tax expense/(benefit) is charged or credited directly to equity instead of the profit or
loss when the tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial report. Deferred tax assets also result where
amounts have been fully expensed but future tax deductions are available. No deferred income tax will be
recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no
effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date.
Their measurement also reflects the manner in which management expects to recover or settle the carrying amount
of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be
utilised.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where a legally enforceable right of set-off exists and the deferred tax assets and
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different
taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective
asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are
expected to be recovered or settled.
b.
Financial Instruments
Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Group
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial
assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not
classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value
through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured
as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and
benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either
discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or
transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or
liabilities assumed, is recognised in profit or loss.
PAGE 30
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Classification and Subsequent Measurement
i.
Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of
short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid
an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key
management personnel on a fair value basis in accordance with a documented risk management or investment
strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss
in the period in which they arise.
ii.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market and are subsequently measured at amortised cost using the effective interest rate method.
Held-to-maturity investments
iii.
Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable
payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured
at amortised cost using the effective interest rate method.
Available-for-sale financial assets
iv.
Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are
not classified in any of the other categories. They comprise investments in the equity of other entities where there
is neither a fixed maturity nor fixed or determinable payments and are subsequently measured at fair value and
changes there in, other than impairment losses, are recognised in other comprehensive income and accumulated
in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified
to profit or loss.
v.
Financial Liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost
using the effective interest rate method.
Impairment of financial assets
The Group assesses at each balance date whether a financial asset or Group of financial assets is impaired.
i.
Financial assets measured at amortised costs
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The
carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the
loss is recognised in profit or loss.
PAGE 31
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not individually significant. If it is
determined that no objective evidence of impairment exists for an individually assessed financial asset, whether
significant or not, the asset is included in a Group of financial assets with similar credit risk characteristics and that
Group of financial assets is collectively assessed for impairment. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognised are not included in a collective
assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.
Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value
of the asset does not exceed its amortised cost at the reversal date.
ii.
Available-for-sale financial assets
If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference
between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment
loss previously recognised in profit or loss, is transferred from equity to the statement of comprehensive income.
Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit.
Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase in an
instrument's fair value can be objectively related to an event occurring after the impairment loss was recognised in
profit or loss.
c.
Impairment testing of Tangible and Intangible Assets
At each reporting date, the Directors review the carrying values of the Group’s tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication exists, the
recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is
compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is
expensed to the statement of profit or loss and other comprehensive income.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives and for any assets
when impairment triggers exist.
d.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
PAGE 32
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid
investments with original maturities of 12 months or less, and bank overdrafts. Bank overdrafts are shown within
short-term borrowings in current liabilities in the statement of financial position.
f.
Revenue and Other Income
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade
discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is
discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference
between the amount initially recognised and the amount ultimately received is interest revenue.
Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant
risks and rewards of ownership of the goods and the cessation of all involvement in those goods.
Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is
the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been
established.
All revenue is stated net of the amount of goods and services tax (GST).
Trade and Other Payables
g.
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.
Goods and Services Tax (GST)
h.
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing
and financing activities, which are disclosed as operating cash flows.
Comparative Figures
i.
The acquisition of Linius (Aust) Pty Ltd by the Company, in the prior period to 30 June 2016, is considered to be a
reverse acquisition under Australian Accounting Standards, notwithstanding the Company being the legal parent of
the Group. Consequently, the financial information presented in this Report is the financial information of Linius
(Aust) Pty Ltd. Linius (Aust) Pty Ltd was incorporated on 10 September 2015, hence the prior reporting period is
from this date up to 30 June 2016.
Where required by Accounting standards, comparative figures have been adjusted to conform to changes in the
presentation for the current financial year.
PAGE 33
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Critical Accounting Estimates and Judgments
j.
The Directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future events and
are based on current trends and economic data, obtained both externally and within the Group.
Impairment
The Directors assess impairment at each reporting date by evaluating conditions specific to the Group that may lead
to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined.
Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.
Income tax
Balances disclosed in the financial report and the notes thereto related to taxation are based on the best estimates
of Directors. These estimates take into account both the financial performance and position of the Group as they
pertain to current income taxation legislation, and the Directors’ understanding thereof. No adjustment has been
made for pending or future taxation legislation. The current income tax position represents that Directors’ best
estimate, pending an assessment by the Australian Taxation Office.
Deferred taxation
Potential deferred income tax benefits have not been brought to account at reporting date because the Directors
do not believe that it is appropriate to regard realisations of deferred income tax benefits as probable.
Share based payment transactions
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined using a binomial option
pricing model.
k.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors of Linius Technologies
Limited.
l.
Trade and other receivables
Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised
cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally
due for settlement within periods ranging from 15 days to 30 days.
Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written
off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that
the Group will not be able to collect all amounts due according to the original contractual terms.
PAGE 34
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Factors considered by the Group in making this determination include known significant financial difficulties of the
debtor, review of financial information and significant delinquency in making contractual payments to the Group.
The impairment allowance is set equal to the difference between the carrying amount of the receivable and the
present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables
are short-term discounting is not applied in determining the allowance.
The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive income.
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 statement of profit or loss and other comprehensive income.
Intangible assets
m.
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair
value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite
life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life
intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses
recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference
between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of
finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are
accounted for prospectively by changing the amortisation method or period.
Employee leave benefits
n.
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months of the balance date are recognised in other payables in respect of
employees’ services up to the balance date. They are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are
measured at the rates paid or payable.
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present
value of expected future payments to be made in respect of services provided by employees up to the balance date.
Consideration is given to expected future wage and salary levels, experience of employee departures, and period of
service. Expected future payments are discounted using market yields at the balance date on national government
bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.
o. 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. Incremental costs directly attributable to the
issue of new shares or options for the acquisition of a new business are not included in the cost of acquisition as
part of the purchase consideration.
PAGE 35
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
p.
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) and preference share dividends, divided by the weighted
average number of ordinary shares, adjusted for any bonus element.
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) and preference share 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.
q.
Adoption of new and revised standards
Standards issued but not yet effective
In the year ended 30 June 2017, the Directors have reviewed all of the new and revised Standards and
Interpretations issued by the AASB that are relevant to the Group and effective for the current annual reporting
period and earlier adoptions is permitted; however, the Group has not early adopted the following new or amended
standards in preparing these consolidated financial statements:
AAS15 Revenue from Contracts with Customers;
AASB 9 Financial Instruments;
AASB16 Leases.
As a result of this review, the Directors have determined that there is no material impact of the new and revised
Standards and Interpretations on the Group and, therefore, no material change is necessary to Group accounting
policies.
r.
Foreign currency translation
Both the functional and presentation currency of Linius Technologies Limited is Australian dollars. Each entity in the
Group determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of
differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These
are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or
loss.
PAGE 36
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss.
As at the balance date the assets and liabilities of any foreign subsidiary is translated into the presentation currency
of Linius Technologies Limited at the rate of exchange ruling at the balance date and income and expense items are
translated at the average exchange rate for the period, unless exchange rates fluctuated significantly during that
period, in which case the exchange rates at the dates of the transactions are used.
The exchange differences arising on the translation are taken directly to a separate component of equity, being
recognised in the foreign currency translation reserve. On disposal of a foreign entity, the deferred cumulative
amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.
In addition, in relation to the partial disposal of a subsidiary that does not result in the Group losing control over the
subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling
interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or
jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate
share of the accumulated exchange differences is reclassified to profit or loss.
s.
Share-based payments
The Company has issued options to directors as part of their remuneration arrangements and has issued options
and shares to third parties in consideration for acquisitions, settlement of loans, acquisition fees and for consultancy
services received. The cost of these equity-settled transactions has been measured by reference to the fair value of
the equity instruments granted, namely the market value of the Company’s shares on the dates when agreements
were reached to issue those shares. The grant-date fair value of equity settled share-based payments arrangements
granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the
vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised is based on the number of awards that meet the related service and non-market performance
conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment
is measured to reflect such conditions and there is no true-up for differences between expected and actual
outcomes.
t.
Parent entity financial information
The financial information for the parent entity, Linius Technologies Limited, disclosed in Note 23 has been prepared
on the same basis as the consolidated financial statements, except as set out below.
PAGE 37
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the parent entity’s
financial statements. Dividends received from associates are recognised in the parent entity’s profit or loss, rather
than being deducted from the carrying amount of these investments.
(ii) Share-based payments
The grant by the company of options over its equity instruments to the employees of subsidiary undertakings in the
Group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services
received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to
investment in subsidiary undertakings, with a corresponding credit to equity.
u.
Plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less
accumulated depreciation and any accumulated impairment losses.
If significant parts of property, plant and equipment have different useful lives, then they are accounted for as
separate items of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.
(ii) Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual
values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss.
Leased assets are depreciated over the shorter of the lease term and their useful lovers unless it is reasonably
certain that the group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful loves of the property, plant and equipment for current and comparative periods are as follows:
-
IT equipment 3 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if
appropriate.
PAGE 38
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
v.
Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has ability to affect those returns through its power over
the entity. The financial statements of the subsidiaries are included in the consolidated financial statements from
the date on which control commences until the date on which control ceases.
(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
NOTE 2: REVENUE
Other revenue:
Interest received
Total revenue
NOTE 3: LOSS FOR THE YEAR
Other expenses:
Occupancy costs
* 10 September 2015 until 30 June 2016.
Group
2017
$
41,492
41,492
Group
2017
$
2016*
$
12,027
12,027
2016*
$
31,741
28,807
PAGE 39
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 4: INCOME TAX EXPENSE
Group
2017
2016*
$
-
-
$
-
-
(a) Income tax expense
Current tax
Deferred tax
(b) Reconciliation of income tax expense to prima facie tax payable
The prima facie tax payable on profit/loss from ordinary activities
before income tax is reconciled to the income tax expense as
follows:
Prima facie tax on operating loss at 27.5% (28.5% prior year)
(1,163,264)
(1,528,916)
Add / (Less)
Tax effect of:
Reverse acquisition expenses
Share based payments
Other non-allowable items
Unused tax losses not recognised as deferred assets
-
97,507
15,242
1,050,515
458,116
711,969
2,270
356,561
Income tax attributable to operating loss
-
-
Prior year comparatives were stated using a tax rate of 28%. This has been restated to 28.5% to reflect the
appropriate tax rate.
(c) Unrecognised deferred tax assets
Unused Australian tax losses for which no deferred tax asset has
been recognised
1,223,673
179,453
The comparative unrecognised deferred tax asset has been restated from $350,305 to $179,453 to reflect
assessed balances using the applicable tax rates. Temporary differences for which no deferred tax asset has been
recognised are insignificant.
Potential deferred tax assets attributable to tax losses carried forward have not been brought to account at 30 June
2017 because the Directors do not believe it is appropriate to regard realisation of the deferred tax assets as
probable at this current point in time. These benefits will only be obtained if:
i. The Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from
the deductions for the loss to be realised;
ii. The Group continues to comply with conditions for deductibility imposed by law; and
iii. No changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the
losses.
* 10 September 2015 until 30 June 2016.
PAGE 40
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 5 : KEY MANAGEMENT PERSONNEL
The total of remuneration paid to KMP of the Group during the period are as follows:
Group
Short-term employee benefits
Share-based payments
NOTE 6: AUDITOR’S REMUNERATION
Remuneration of the auditor for services provide to the Group and
the Parent during the year:
— auditing and reviewing of financial statements:
KPMG
HLB Mann Judd
— other services:
HLB Mann Judd –
Prospectus and Investigating Accountant’s Report
compilation and other assurance services
NOTE 7: EARNINGS/LOSS PER SHARE
2017
$
365,175
354,570
719,745
2016*
$
304,258
1,614,410
1,918,668
Group
2017
$
69,000
-
-
69,000
Group
2017
$
2016*
$
-
30,500
25,000
55,500
2016*
$
a.
Reconciliation of earnings to profit or loss
Loss used to calculate basic and diluted EPS
(4,230,052)
(5,364,619)
b.
Weighted average number of ordinary shares outstanding
during the period used in calculating basic and diluted EPS
No.
No.
632,821,305
144,515,330
Potential ordinary shares comprising 73,000,000 options (2016: 76,027,554) were excluded in the calculation of
diluted EPS given they are antidilutive.
* 10 September 2015 until 30 June 2016.
PAGE 41
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 8: CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Group
2017
$
959,270
2016
$
3,275,258
The effective interest rate on short-term bank deposits was varying between 2.05% to 3.28%.
Reconciliation of cash
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement
of financial position as follows:
Cash and cash equivalents
959,270
3,275,258
NOTE 9: OTHER RECEIVABLES
CURRENT
GST receivable
Prepaid expenses and other receivables
Group
2017
$
39,033
38,442
77,475
2016
$
53,007
22,499
75,506
NOTE 10: INTELLECTUAL PROPERTY
During the prior period, the Group acquired the intellectual property associated with the Linius technology from an
unrelated party. The intellectual property includes patents, copyright, confidential information and trademarks. In
accordance with accounting standards and the Group accounting policies this asset is treated as having a finite life
and is being amortised over 10 years.
Intellectual property at cost
Accumulated amortisation
Group
2017
$
5,400,000
(855,000)
4,545,000
2016
$
5,400,000
(315,000)
5,085,000
PAGE 42
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 10: INTELLECTUAL PROPERTY (CONTINUED)
The directors have assessed the value and useful life of the intellectual property at balance date.
The cost of the intellectual property was established upon the purchase of the intellectual property through a third
party transaction during the prior financial period. The value of the intellectual property was further validated through
the reverse takeover process and capital raising undertaken by Linius Technologies Limited (Linius) in April/May
2016. During this process an independent report was commissioned, which gave the directors comfort that the
intellectual property purchased was covered by valid patents, trademarks and copyright.
The directors note that the intellectual property is at an early stage in its commercial life, with the associated
technology approaching commercialisation. The value and lifespan of the owned intellectual property continues to be
enhanced by further patent registrations in new jurisdictions across the world and through continued development of
the technology associated with the intellectual property.
The directors have currently assessed the useful life of the intellectual property as being 10 years. The directors
consider that a 10 year useful life is reasonable and appropriate and have amortised the value of intellectual property
at balance date on that basis.
Impairment testing
As a result of the operating loss incurred, impairment analysis of the intellectual property has been performed using
the following alternative methods:
(i) Market capitalisation approach
Since listing on ASX, the shares of Linius have traded in a ready market, supporting the value of the intellectual
property asset. The assets of the Group at 30 June 2017 consist principally of cash of $959,270 and intellectual
property, after amortisation, of $4,545,000. Net assets are $5,043,444.
Linius shares closed at a price of 5.2 cents per share on 30 June 2017. Total fully paid ordinary shares on issue at 30
June 2017 are 679,190,880. This gives a market capitalisation of Linius of $35,317,926. Given the development
nature of the Group’s operations, the directors believe that the recoverable amount of the intellectual property on the
balance sheet at 30 June 2017 is supported by the market value of Linius.
(ii) Discounted cashflow approach
The recoverable amount of the CGU (being the Group as a whole at this stage of the Group’s lifecycle) was estimated
based on the value in use of the Group, determined by discounting the future cash flows to be generated from the
continuing use of the Group’s intellectual property. The following were key assumptions in the value in use analysis:
Cash flows were forecast for a five year period. The terminal value of the Group was based on the fifth year cash
flow and a long-term growth rate of 3%, which is consistent with market assumptions of the long term growth target
for Australia of between 2% and 3%.
Revenue was based on a staged pipeline of licence income being earned, which is anticipated to grow at a monthly
linear rate up until 2019 financial year and at set step up percentages from 2020 – 2022. Expenses are set based
on the 2018 budget, increasing by anticipated growth required to the support the increase in revenue forecast.
An after tax discount rate of 16% was applied in determining the recoverable amount of the Group. The discount
rate was estimated based on an industry average weighted-average cost of capital and applying a premium to the
industry average due to the Group being in its growth phase and the risks inherent in the cash flow forecast.
The recoverable amount of the CGU was determined to be higher than its carrying amount, indicating that no
impairment was necessary. In addition, reasonably possible changes in key assumptions were considered, such as
changes in revenue and expenses; sufficient headroom exists.
PAGE 43
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 11: TRADE AND OTHER PAYABLES
Trade payables*
Sundry payables and accrued expenses
Group
2017
$
280,455
269,865
550,320
2016
$
144,463
138,315
282,778
*Terms of trade are in line with normal commercial terms (usually 30 to 60 days)
NOTE 12: ISSUED CAPITAL AND RESERVES
Issued Capital
2017
Opening balance 1 July 2016
Issue of shares through private placement (net of costs)
Issue of shares as share based payment to corporate advisor
Conversion of performance shares
Issue of shares on conversion of listed options
At reporting date
Group
Note
$
(Legal subsidiary)
Number
(Legal parent)
11,809,470
562,238,580
475,000
30,000
10,000,000
428,794
-
100,000,000
260,940
6,523,506
12,575,410
679,190,880
The Company has issued share capital amounting to 679,190,880 ordinary shares of no par value.
2016
Opening balance
Issue of shares on incorporation of Linius (Aust) Pty Ltd
Issue of shares to acquire Linius intellectual property
Shares eliminated in legal subsidiary on acquisition
Shares acquired on acquisition of legal parent
Consideration shares
-
200
5,000,000
-
-
-
Deemed consideration of reverse acquisition 22
5,684,270
Conversion Offer
CPS Offer
Conversion of performance shares
At 30 June 2016
-
20,000
50,000
(70,000)
189,738,580
300,000,000
-
17,500,000
5,000,000
50,000,000
875,000
250,000
-
11,809,470
562,238,580
PAGE 44
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
Ordinary shares
Opening balance
Fully paid shares issued during the year
— November 2015 (conversion of listed options)
— December 2015 (Rights issue)
— December 2015 (conversion of listed options)
— February 2016 (conversion of listed options)
— February 2016 (share-based payment of consulting fees)
— April 2016 (Issue of Linius (Aust) Pty Ltd vendor shares)
— April 2016 (conversion of performance shares)
— April 2016 (share issue pursuant to public offer)
— April 2016 (conversion of Linius (Aust) Pty Ltd convertible note)
— April 2016 (share-based payment of Linius (Aust) Pty Ltd acquisition
fees)
— May 2016 (conversion of performance shares)
— May 2016 (share based payment of consulting fees)
— September 2016 (issue of shares via private placement)
— September 2016 (share based payment of consulting fees)
— November 2016 (share based payment of consulting fees)
— November 2016 (conversion of performance shares)
— December 2016 (conversion of performance shares)
— December 2016 (conversion of listed options)
Legal parent entity
2017
No.
2016*
No.
562,238,580
90,499,985
3,134,246
25,536,608
113,200
25,000
202,269
250,000,000
50,000,000
70,000,000
17,500,000
5,000,000
50,000,000
227,272
10,000,000
197,511
231,283
50,000,000
50,000,000
6,523,506
At reporting date
679,190,880
562,238,580
At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder
has one vote on a show of hands. All ordinary shares rank equally with regard to the Company’s residual assets.
* 10 September 2015 until 30 June 2016.
PAGE 45
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
Performance shares on issue
Opening balance
Legal parent entity
2017
No.
100,000,000
2016*
No.
-
Performance shares issued during the year
-
200,000,000
Number converted to ordinary shares during the period
(100,000,000)
(100,000,000)
At reporting date
-
100,000,000
The performance shares were unlisted. The terms of these performance shares are detailed in Note: 22.
* 10 September 2015 until 30 June 2016.
NATURE AND PURPOSE OF RESERVES
Share-Based Payments Reserve
This reserve is used to record the equity value of share based payment expenses incurred as consideration for
employee and consultant services.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it may
continue to provide returns for shareholders and benefits for other stakeholders.
Due to the nature of the Group’s activities, being an early stage technology company, the Group does not have ready
access to credit facilities, with the primary source of funding being equity raisings. Therefore, the focus of the Group’s
capital risk management is the current working capital position against the requirements of the Group to meet research
and development of software, early stage business commercialisation initiatives and corporate overheads. The Group’s
strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to
initiating appropriate capital raisings as required. The working capital position of the Group at 30 June 2017 is as
follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables and other liabilities
Working capital position
Group
2017
$
959,270
77,475
(552,425)
484,320
2016
$
3,275,258
75,506
(282,778)
3,067,986
Subsequent to year end the Company raised $1,500,000 through the issue of new capital through a private
placement. Refer to Note 21 – Events occurring after reporting date
PAGE 46
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 13: CASH FLOW INFORMATION
Loss after income tax
Cash flows excluded from loss attributable to operating activities
Non cash items
- Depreciation
- Amortisation
- Share-based payments expense
- Transaction costs relating to reverse acquisition
Changes in assets and liabilities
- Increase/(decrease) in provisions
- Increase/(decrease) in trade payables and accruals
- (Increase)/decrease in trade receivables and prepayments
Cash flows used in operating activities
* 10 September 2015 until 30 June 2016.
Group
2017
$
2016*
$
(4,230,052)
(5,364,619)
239
540,000
384,570
-
2,105
267,542
(1,969)
-
315,000
2,498,135
1,607,425
-
35,223
215,902
(3,037,565)
(692,934)
PAGE 47
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 14: RELATED PARTY TRANSACTIONS
(i)
Transactions with key management personnel:
Legal fees paid to Steinepreis Paganin, a legal firm in which
Roger Steinepreis has an interest
(ii) Amounts owing to key management personnel (included in trade and
other payables):
Entity related to Stephen McGovern
Entity related to Christopher Richardson
Entity related to Stephen Kerr
Group
2017
$
2016
$
-
159,633
8,193
31,655
7,700
8,193
37,131
7,700
Transactions with related parties are on normal commercial terms and conditions no more favourable than those
available to other parties unless otherwise stated.
NOTE 15: INTERESTS IN CONTROLLED ENTITIES
The parent company had the following controlled entities:
% Held
Name of the subsidiary
Place of incorporation
Class of shares
Firestrike Resources Incorporated (a)
Linius (Aust) Pty Ltd
Linius Solutions Pty Ltd (b)
USA
Australia
Australia
Ordinary
Ordinary
Ordinary
2017
100%
100%
100%
2016
100%
100%
-
(a) Inactive dormant company.
(b) Incorporated in 2017 with a nominal share capital of $1.
Balances and transactions between the parent and its subsidiaries, which are related parties of the parent,
have been eliminated on consolidation and not disclosed in this note.
PAGE 48
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 16: OPERATING SEGMENTS
Segment Information
AASB 8 Operating Segments requires operating segments to be identified on the basis of internal reports about
components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance.
The Group’s operating segments have been determined with reference to the monthly management accounts used
by the Chief Operating Decision Maker to make decisions regarding the Group’s operations and allocation of working
capital. Due to the size and nature of the Group, the Board as a whole has been determined as the Chief Operating
Decision Maker.
Based on the quantitative thresholds included in AASB 8, there is only one reportable segment, being the
Development of computer software in the Australasian region.
The revenues and results of this segment are those of the Group as a whole and are set out in the consolidated
statement of profit or loss and other comprehensive income. The segment assets and liabilities of this segment are
those of the Group and are set out in the consolidated statement of financial position.
NOTE 17: COMMITMENTS
There are no material lease or other commitments as at balance date. The entity operates from premises which are
leased on a short-term tenancy.
NOTE 18: CONTINGENCIES
There are no contingent assets or liabilities as at balance date.
NOTE 19: SHARE-BASED PAYMENTS
Employee share option plan
An employee share option plan (ESOP) has been established by the Group, whereby the Group may, at the
discretion of the Board, grant options over ordinary shares in the company to personnel of the Group. The options
are issued for nil consideration and are granted in accordance with time based and/or performance targets
established by the Board.
As at 30 June 2017 no options had been granted under the ESOP.
As at 30 June 2016 no options had been granted under the ESOP.
PAGE 49
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Share options (equity settled)
The key terms and conditions of share options on issue are as follows; all options are to be settled by the physical
delivery of shares.
Grant date
Options granted to key
management personnel
Number of instruments
Vesting conditions
Contractual life of options
On 30 November 2016
On 29 April 2016
11,500,000
58,500,000
Refer to Note A below
Refer to Note B Below
3 years
3 years
Options granted to
external advisors
On 29 April 2016
3,000,000
Refer to Note B Below
3 years
Note A
During the year 11,500,000 options were granted to Directors and Executives pursuant to a shareholder resolution
passed at the Company’s Annual General Meeting on 30 November 2016:
Name
Position
Vesting Condition
Options
Christopher Richardson
Stephen Kerr
Total
Managing Director
and Chief Executive
Officer
Chief Financial
Officer and Company
Secretary
Vesting Condition 1
Vesting Condition 2
Vesting Condition 3
Vesting Condition 4
Vesting Condition 5
Vesting Condition 1
Vesting Condition 2
Vesting Condition 3
Vesting Condition 4
Vesting Condition 5
2,000,000*
2,000,000
2,000,000
2,000,000
2,000,000
300,000*
300,000
300,000
300,000
300,000
11,500,000
* These Options shall vest in four equal instalments at the end of each calendar quarter
The options are subject to the following vesting conditions:
The Options will not vest and become exercisable into Shares until such time as the conditions to their vesting
(Vesting Conditions) set out below have been satisfied:
Vesting Condition 1 means the date on which all existing and outstanding Performance Shares have been
converted by the Company into Shares;
Vesting Condition 2 means, subject to Vesting Condition 1 having been satisfied, the date at which the VWAP
over 20 consecutive trading days exceeds $0.15;
PAGE 50
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Vesting Condition 3 means, subject to Vesting Condition 2 having been satisfied, the date on which the
Company announces that a first release of the Linius technology in the form of software (Linius Software) is
available for commercial distribution to the market (which succeeds alpha and beta versions of the
software);
Vesting Condition 4 means the date on which the Company (or a subsidiary) first enters into an arm’s length
agreement with a third party for the commercial use of the Linius Software, whether by way of indirect means
(eg via a reseller arrangement) or direct means (eg via a licence to use); and
Vesting Condition 5 means the date on which the Company’s and its subsidiaries’ forecast gross operational
revenue from third party agreements for the following 12-month period is at least $1,000,000.
If the relevant Vesting Condition is not satisfied within the respective time for satisfaction, the relevant number of
Options attached to such Vesting Condition will lapse.
Note B
In the prior year, on 29 April 2016 at a general meeting of shareholders of the Company, and conditional on
completion of the reverse acquisition transaction (“Completion”), it was resolved to issue 10,000,000 options to
Mr Christopher Richardson or his nominees, 6,000,000 options to Mr Stephen McGovern or his nominees,
1,500,000 options to Mr Stephen Kerr or his nominees and 41,000,000 options to Mr Gavin Campion or his
nominees.
During 2016, 3,000,000 options were issued to external advisors for corporate consulting services.
The options issued to Mr Richardson and Mr Kerr were subject to the following vesting conditions. Milestone
references refer to those milestones detailed in Note: 22.
Name
Christopher Richardson
No. New Options
4,000,000
1,500,000
1,500,000
1,500,000
1,500,000
Vesting date
Vesting in equal instalments of 1,000,000 each at
the end of each calendar quarter after Completion
Vesting on the date of satisfaction of Milestone 1
Vesting on the date of satisfaction of Milestone 2
Vesting on the date of satisfaction of Milestone 3
Vesting on the date of satisfaction of Milestone 4
Stephen Kerr
300,000
300,000
300,000
300,000
300,000
Vesting in equal instalments of 75,000 each at the
end of each calendar quarter after Completion
Vesting on the date of satisfaction of Milestone 1
Vesting on the date of satisfaction of Milestone 2
Vesting on the date of satisfaction of Milestone 3
Vesting on the date of satisfaction of Milestone 4
Milestones 1 and 2 had been achieved as at 30 June 2016 and all Milestones had been achieved by 30 June 2017.
PAGE 51
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Share based payments (equity settled) expense recognised in profit or loss
Options
Christopher Richardson
Stephen Kerr
Stephen McGovern
Gavin Campion
External consultants
Shares
Settlement of consulting fees via share issues
shares
Consulting fees
Convertible note fees
* 10 September 2015 until 30 June 2016.
2017
$
2016*
$
310,360
44,210
-
-
-
124,966
21,087
187,450
1,280,907
93,725
354,570
1,708,135
30,000
-
265,000
525,000
384,570
2,498,135
Reconciliation of outstanding share options – equity settled
The number and weighted-average exercise prices of share options under the share option programmes were as
follows:
Options on issue
Outstanding at 1 July
Listed options over ordinary shares
exercised during the year
Listed options – expired during the year
Granted during the year
Outstanding at 30 June
Exercisable at 30 June
Number of
options
2017
76,027,554
(6,523,506)
(8,004,048)
11,500,000
73,000,000
62,650,000
Weighted
average
exercise price
2017
4.8 cents
4 cents
4 cents
4.5 cents
4.9 cents
5 cents
Number of
options
2016
17,800,000
(3,272,446)
-
61,500,000
76,027,554
69,202,554
Weighted
average
exercise price
2016
4 cents
4 cents
5 cents
4.8 cents
4.8 cents
PAGE 52
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
The fair value of the equity-settled share options granted in the current period is estimated as at the date of grant
using an independent valuation, which is based on the binomial model, which considers the terms and conditions
upon which the options were granted:
30 June 2017
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Exercise price (cents)
Grant date share price
Grant date fair value
Grant date
11,500,000
Unlisted options
30 June 2017
61,500,000
Unlisted options
30 June 2016
Nil
86%
1.895%
3.0 yrs
$0.045
$0.042
$0.022
Nil
100%
2.00%
2.9 yrs
$0.05
$0.05
$0.03
30 November 2016
28 April 2016
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price,
particularly over the historical period commensurate with the expected term. The expected term of the
instruments has been based on historical experience and general option holder behaviour.
PAGE 53
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 20: FINANCIAL RISK MANAGEMENT
a.
Financial Risk Management Policies
The Group’s financial instruments consist mainly of deposits with banks. The main purpose of non-derivative
financial instruments is to raise finance for Group operations. The Group does not speculate in the trading of
derivative instruments.
i. Treasury Risk Management
The Board meets on a regular basis to analyse financial risk exposure and to evaluate treasury management
strategies in the context of the most recent economic conditions and forecasts.
The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst
minimising potential adverse effects on financial performance.
Risk management policies are approved and reviewed by the Board on a regular basis.
ii. Financial Risk Exposures and Management
Interest rate risk
The Group’s exposure to financial risk is limited to interest rate risk arising from assets and liabilities bearing
variable interest rates. The weighted average interest rate on cash holdings is 0.6% at 30 June 2017. All other
assets and liabilities are non interest bearing.
The Group holds cash deposits with Australian banking financial institutions, namely the ANZ Bank. The ANZ
Bank has an AA rating with Standard & Poors.
Interest rate sensitivity
Had the interest rate moved by 10 basis points with all other variables held constant, the post tax loss and
equity would have decreased / increased by $959 (2016: $3,275)
Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or
otherwise meeting its obligations related to financial liabilities. The Group manages liquidity risk by
continuously monitoring forecast and actual cash flows and ensuring sufficient cash and marketable
securities are available to meet the current and future commitments of the Group. Due to the nature of the
Group’s activities, the Group does not have ready access to credit facilities, with the primary source of funding
being equity raisings. The Board of Directors constantly monitors the state of equity markets in conjunction
with the Group’s current and future funding requirements, with a view to initiating appropriate capital raisings
as required. The financial liabilities of the Group are confined to trade and other payables which have a
contractual due date of less than two months. The Board manages liquidity risk by monitoring forecast cash
flows against actual liquidity level on a regular basis.
There are no unused borrowing facilities from any financial institution.
PAGE 54
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 20: FINANCIAL RISK MANAGEMENT (CONTINUED)
Credit risk
There are no material amounts of collateral held as security at balance date. Credit risk is reviewed regularly
by the Board. It arises through deposits with financial institutions. The Board monitors credit risk by actively
assessing the rating quality and liquidity of counter parties. Only banks and financial institutions with an ‘A’
rating are utilised.
The Group only invests in listed available-for-sale financial assets that have a minimum ‘A’ credit rating.
Unlisted available-for-sale financial assets are not rated by external credit agencies. These are reviewed
regularly by the Group to ensure that credit exposure is minimised.
The credit risk for counterparties included in trade and other receivables at balance date is nil.
The Group holds cash deposits with Australian banking financial institutions, namely the ANZ Bank. The ANZ
Bank has an AA rating with Standard & Poors.
Price risk
The Group is not exposed to commodity price risk.
b. Financial Instruments
i.
Derivative Financial Instruments
Derivative financial instruments are not used by the Group.
ii.
Financial instrument composition and maturity analysis:
The table below reflects the undiscounted contractual settlement terms for financial instruments of a
fixed period of maturity. The financial instruments are all classified as current.
Weighted Average
Effective Interest Rate
2017
%
0.45
2016
%
2.80
-
-
Financial Assets:
Cash and cash equivalents
Total Financial Assets
Financial Liabilities:
Trade payables
Total Financial Liabilities
iii.
Net Fair Values
Floating Interest Rate
2017
$
959,270
2016
$
3,725,258
959,270
3,725,258
550,320
550,320
282,778
282,778
The net fair values of all financial assets (cash and other receivables) and financial liabilities (trade and other
receivables) are carried at costs which approximates their carrying value.
PAGE 55
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 21: EVENTS AFTER THE REPORTING PERIOD
On 18 July 2017, the Company announced that it had raised $1,500,000 through the issue of 30,000,000 fully paid
ordinary shares, at 5 cents per share, in a private placement to sophisticated investors.
There has not been any other matter or circumstance that has arisen after balance date that has significantly affected,
or may significantly affect, the operations of the Group, the results of these operations, or the state of affairs of the
Group in future financial periods.
NOTE 22: REVERSE ACQUISTION ACCOUNTING
In the prior financial period, on 18 April 2016, Linius Technologies Limited issued 300,000,000 fully paid ordinary
shares to Linius (Aust) Pty Ltd as consideration of 100% of all the rights and title to Linius (Aust) Pty Ltd. As a result
the shareholders of Linius (Aust) Pty Ltd held at the date of acquisition 61.29% of the issued capital of Linius
Technologies Limited. Refer to note 1 for the further information on the reverse acquisition.
The reverse acquisition is treated as an acquisition of assets and liabilities of Linius Technologies Limited as at 18
April 2016.
Net assets acquired $
Cash and cash equivalents
Trade and other receivables
Loan receivable
Trade and other payables
Value of asset acquisition as at 18 April 2016
Loss on acquisition of Linius (Aust) Pty Ltd
Deemed acquisition consideration
Less: net assets acquired
Transaction costs of reverse acquisition on 18 April 2016
4,017,992
41,408
250,000
(232,555)
4,076,845
5,684,270
(4,076,845)
1,607,425
The consideration for the acquisition took the form of the issue of 250,000,000 ordinary shares to the vendors, plus
a further amount of deferred consideration in the form of the issue of 200,000,000 performance shares to the
Vendors. The performance shares have the following rights and are subject to the achievement of four milestones as
listed below.
Rights attaching to the Performance Shares
(i) Each performance share is a share in the capital of Linius Technologies Limited (Linius).
(ii) Each performance share confers on the holder (Holder) the right to receive notices of general meetings and
financial reports and accounts of Linius that are circulated to the holders of fully paid ordinary shares in the capital
of Linius Technologies Limited (Shareholders). Holders have the right to attend general meetings of Shareholders.
(iii) A performance share does not entitle the Holder to vote on any resolutions proposed by Linius except as otherwise
required by law.
(iv) A performance share does not entitle the Holder to any dividends.
(v) A performance share does not entitle the Holder to a return of capital, whether in a winding up, upon a reduction
of capital or otherwise.
PAGE 56
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 22: REVERSE ACQUISTION ACCOUNTING (CONTINUED)
(vi) A performance share does not entitle the Holder to participate in the surplus profits or assets of the company
winding up.
(vii) A performance share is not transferable.
(viii) If at any time the issued capital of the company is reconstructed (including a consolidation, subdivision,
reduction, cancellation or return of issued share capital), all rights of a Holder will be changed to the extent necessary
to comply with the applicable ASX Listing Rules at the time of reorganisation.
(ix) The performance shares will not be quoted on ASX. However, at the time of conversion of the performance shares
into fully paid ordinary shares (Shares), the company must within 10 Business Days apply for the official quotation of
the Shares arising from the conversion on ASX.
(x) A performance share does not entitle a Holder (in their capacity as a holder of a Performance Share) to participate
in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(xi) The terms of the performance shares may be amended as necessary by the directors in order to comply with the
ASX Listing Rules, or any directions of ASX regarding the terms provided that, subject to compliance with the ASX
Listing Rules, following such amendment, the economic and other rights of the Holder are not diminished or
terminated.
(xii) A performance share gives the Holder no rights other than those expressly provided by these terms and those
provided at law where such rights at law cannot be excluded by these terms.
The performance shares are divided into 4 classes (A,B,C and D) of 50,000,000 performance shares per class. A
performance share in the relevant class will convert into one ordinary share upon achievement of:
(A) Class A – Linius (Aust) Pty Ltd enters into an agreement with Digisoft, Cork, Ireland for a limited deployment of its
technology, being the installation and activation by a third party of the Linius technology (Limited Deployment), with
the objective of demonstrating personalisation of video streams, by that date which is 12 months from the issue date
(Milestone 1);
(B) Class B – Linius (Aust) Pty Ltd completes an alpha release of the Linius technology (which means, in line with the
industry standard definition of that term, a first-stage completed version of a program or application, which may be
unstable but is nevertheless useful to show what the program or application can do) that demonstrates publicly that
the Linius technology achieves the Linius core patent claims, namely that the technology is able to (1) take a URL link
to a piece of video content in an unknown location, and (2) play and display the video content on multiple devices
with different video format requirements (and without the need for transcoding), by that date which is 18 months
from the issue date (Milestone 2);
(C) Class C - Linius (Aust) Pty Ltd enters into an agreement with a third party (unrelated to the party under Milestone
1) for a Limited Deployment of its technology with the objective of demonstrating removal of the requirement for
transcoding of video and reduction of storage. This deployment will be in partnership with a an organisation that is
able to take a standard video and transcode it into all standards-based formats and store it at broadcast quality, likely
to be a content delivery network by that date which is 24 months from the issue date (Milestone 3); and
(D) Class D – Completion of a Limited Deployment with a third party (which may or may not be one of the parties under
Milestones 1 and 3) which demonstrates that the Linius technology removes the requirement for transcoding of an
original MPEG-4 video file to play out on devices traditionally requiring differing formats and in doing so reduces
storage requirements, and the issue of a report, either prepared by or verified by the third party, confirming this
(Milestone 4),
At 30 June 2016 Milestone 1 and Milestone 2 had been achieved and 100,000,000 performance shares had
converted to ordinary shares. At 30 June 2017 all Milestones had been achieved and the balance of 100,000,000
performance shares had been converted to ordinary shares.
PAGE 57
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2017
NOTE 23: PARENT ENTITY DISCLOSURES
The following information is related to the legal parent entity Linius Technologies Limited as at 30 June 2017:
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Total liabilities
Equity
Issued Capital
Option premium reserve
Share based payments reserve
Accumulated losses
Total equity
Financial performance
Loss for the year
Total comprehensive loss
* 10 September 2015 until 30 June 2016.
For details on commitments, see Note 17.
2017
$
2016
$
806,996
20,972,465
21,779,461
3,254,775
18,650,000
21,904,775
294,244
294,244
16,805
16,805
28,216,364
27,450,424
36,462
2,062,705
(8,830,314)
21,485,217
2017
$
1,523,264
1,523,264
36,461
1,708,135
(7,307,050)
21,887,970
2016*
$
3,006,405
3,006,405
PAGE 58
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
DIRECTORS’ DECLARATION
1.
In the opinion of the directors of Linius Technologies Limited (“the Company”):
(a) the consolidated financial statements and notes that are set out on pages 24 to 58 and the
Remuneration report on pages 14 to 20 in the Directors’ report, are in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the financial year ended 30 June 2017.
3. The directors draw attention to Note 1 to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of directors.
Gerard Bongiorno
Director
28 September 2017
PAGE 59
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
ADDITIONAL INFORMATION FOR LISTED COMPANIES
1.
Shareholdings as at 20 September 2017
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
Holders
14
6
68
Number
Ordinary
3,414
16,946
624,576
442
20,592,105
330 687,953,839
860 709,190,880
b.
The number of shareholdings held in less than marketable parcels is 88.
c.
The names of the substantial shareholders listed in the holding Group’s register as at
20 September 2017 are:
Shareholder
1 Phoenix Myrrh Technology Pty Ltd
2 Earthrise Holdings Pty Ltd
3 Naley Pty Ltd
4 Steve McGovern Nominees Pty Ltd
Number
Ordinary
250,000,000
90,000,000
40,800,000
40,000,000
%
35.25
12.69
5.75
5.64
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.
PAGE 65
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
ADDITIONAL INFORMATION FOR LISTED COMPANIES (CONTINUED)
e. 20 Largest Shareholders — Ordinary Shares
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Phoenix Myrrh Technology Pty Ltd
Earthrise Holdings Pty Ltd
Steve Mcgovern Nominees Pty Ltd
Naley Pty Ltd
Parlin Investments Pty Ltd
Vr Corporate Services Pty Ltd
One Managed Investment Funds Limited
Clarkirb Nominees Pty Ltd
One Managed Investment Funds Limited
Coral Brook Pty Ltd
Sunshore Holdings Pty Ltd
Sunshore Holdings Pty Ltd
Fastgroup Pty Ltd
Robert Kirby Investments Pty Ltd
Ninkirb Nominees Pty Ltd
Sunset Capital Management Pty Ltd
Viminale Pty Ltd
David Peter Valentino
Fencourt Enterprises Pty Ltd
Juneday Pty Ltd
f.
Largest holders of shares held on escrow until 9 May 2018
Name
1
2
3
4
5
Phoenix Myrrh Technology Pty Ltd
Earthrise Holdings Pty Ltd
Steve Mcgovern Nominees Pty Ltd
David Peter Valentino
CPS Capital Group Pty Ltd
Number of
Ordinary Fully
Paid Shares
Held
250,000,000
90,000,000
40,000,000
40,000,000
30,000,000
20,000,000
% Held
of Issued
Ordinary
Capital
35.25
12.69
5.64
5.64
4.23
2.82
8,840,000
1.25
7,500,000
7,179,500
6,193,182
6,063,637
5,650,000
5,200,000
5,000,000
5,000,000
4,000,000
3,874,873
3,500,000
3,275,000
3,000,000
544,276,192
1.06
1.01
0.87
0.86
0.80
0.73
0.71
0.71
0.56
0.55
0.49
0.46
0.42
76.75
Number of
Shares Held
250,000,000
90,000,000
40,000,000
3,500,000
1,702,269
385,202,269
PAGE 66
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2017
ADDITIONAL INFORMATION FOR LISTED COMPANIES (CONTINUED)
2.
3.
The name of the Company Secretary is Mr Stephen Kerr.
The address of the principal registered office in Australia is:
Level 18, 101 Collins Street
MELBOURNE VIC 3000
Telephone 03 8680 2317
4.
Registers of securities are held at the following addresses:
Advance Share Registry
110 Stirling Hwy
NEDLANDS
WA 6009
Australia
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 Group advises that, since re-listing on 9 May 2016,
it has used its cash in a way consistent with its business objectives.
PAGE 67