LINIUS TECHNOLOGIES LIMITED
ACN 149 796 332
ANNUAL REPORT
2018
ANNUAL REPORT
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CONTENTS PAGE
CORPORATE DIRECTORY…………………………………………………………………….……………………….……………….………2
CHAIRMAN'S LETTER TO SHAREHOLDERS ………………………………………….……………………………………….……...3
CHIEF EXECUTIVE OFFICER'S REVIEW OF OPERATIONS………………………………………………………………….……4-8
DIRECTORS' REPORT…………………………………………………………………………………………………………..…….…...9-20
CORPORATE GOVERNANCE STATEMENT..…………………………………………………………………………………………..20
AUDITOR'S INDEPENDENCE DECLARATION……………………………………………………………………………..……….…21
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME…………..…..….22
CONSOLIDATED STATEMENT OF FINANCIAL POSITION………………………….…………………………………………....23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY………………………………………………………………….…..…24
CONSOLIDATED STATEMENT OF CASH FLOWS………………………………………………………………………….……..…25
NOTES TO THE FINANCIAL REPORT………………………………………………………………………………………..……..26-54
DIRECTORS' DECLARATION………………………………………………………………………………………………………………..55
INDEPENDENT AUDITOR'S REPORT…………………………………………………………………………………………….…56-60
ADDITIONAL INFORMATION FOR LISTED COMPANIES……………………………………………………………….…...61-64
PAGE 1
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CORPORATE DIRECTORY
This annual report covers Linius Technologies Limited and its controlled entities (the “Group” or “Group”)
during the year ended 30 June 2018. The functional and presentation currency of the Group is Australian
dollars.
OFFICERS
Gerard Bongiorno
Stephen McGovern
Christopher Richardson
Stephen Kerr
(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 2018
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 2018.
During the year the Company pursued its commercialisation plans with an expanded management team and a
wider geographical footprint. We have brought on experienced resources with expertise in the video and film
industry, hiring senior personnel with strong marketing, sales and technical skills.
The team is now highly focussed on converting our commercialisation activities into a strong pipeline of
opportunities and creating sustainable business revenue streams. Subsequent to the end of the 2018 financial
year we were very pleased to announce a commercial deal with Newstag. Your directors are pleased with the
progress to date and encouraged by the opportunities that exist with a growing deal pipeline with tier one global
companies and sports organisations. The key now is execution and our team is very focused to this end.
The Company has continued to develop, enhance and adapt its patented technology to meet the identified needs
of the market. During the year the team has been refining the product offering, completing proof of concepts and
providing relevant use cases for its target markets. Linius Video Virtualization Engine™ technology is now designed
to be available as a SaaS platform as well as being deployed directly into customers’ systems and video workflows.
During the year we were pleased to receive investment support from existing and new investors. The Company
raised $1.5 million in July 2017 through a private placement at 5 cents per share to Village Roadshow Ltd and
Kirby family interests, leaders in the Australian film and video industry. The company raised a further $4.25 million
at 5 cents per share through a private placement in October 2017, $0.25 million at 5 cents per share through a
private placement in December 2017, $9.75 million at 12 cents per share through a private placement in February
2018 and $2.75 million at 12 cents per share through private placements in May and June 2018. The Company
also received additional capital of $0.8m during the year from option holders exercising their right to acquire
shares at 7.5cents per share. We were very pleased that the wider investment community has recognised the
opportunity and invested in the Company to fund our commercialisation phase.
Thank you
On behalf of your Directors I would like to thank all shareholders who have supported us through this ongoing
commercialisation phase. I look forward to seeing success from our commercialisation efforts and I hope you will
continue to support us as we pursue our business plans.
I present to you the report on the Company and its controlled entities for the June 2018 financial year.
Gerard Bongiorno
CHAIRMAN
26 September 2018
PAGE 3
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
Highlights
Leveraging global investments in cloud infrastructure to scale the Company rapidly
Linius on track to deliver global solutions in key market sectors
The Company is well capitalised to fulfil its business objectives
•
•
•
• Commercial deal signed with Newstag
• Successful Proof of Concepts (POCs) across core Education and Media & Entertainment industries
• Channel expansion: New resource investments and advanced partner discussions
• Building scalable processes and capability within sales, marketing and product teams
The Company’s patented technology affords it opportunities in multiple high value markets on a global scale and,
during FY2018, the Company has been able to establish a position from which it can exploit these opportunities.
The Company continues to pursue its vision of making all the world’s video accessible as data.
The company’s mission is to become the de facto standard for the management and broadcast of video.
Commercialization: to deliver Linius’ vision and mission, the Company seeks to take its patented Video
Virtualization Engine™ (VVE) to mass markets in 3 ways:
Industry specific divisions and solution sets built around VVE
•
• Mass distribution through partners, such as IBM
• Self-service to global markets through a SaaS model
Mass Distribution through Partners
Linius is setting up the business to scale rapidly and globally. Microsoft, Amazon, and IBM are all investing
heavily in artificial intelligence and micro-services. Currently, these rely on data being wrapped around the video
file as the video file itself is an impenetrable object. With Linius the video file data is exposed, making video as
flexible as all other forms of data. In FY2018 the Company invested in leveraging the investment these cloud
providers are making in order to facilitate rapid scale. Linius’ products are now available on IBM Cloud, Amazon
AWS, and Microsoft Azure.
Industry specific divisions and solution sets built around VVE
VVE is an engine — it can power many solutions across the video space. In order to scale the business, in
FY2018 the Company decided to invest in developing industry-specific, complete solutions built on top of its core
VVE technology. These solutions help to scale the business, because they are easily replicated and sold by
system-integration and managed service channel partners. The Company explicitly decided to focus on solutions
based in its Search Division, targeting education, news, sports, and corporate communication.
In FY2018 the Company announced Proofs of Concept with Oklahoma State University and MediaAmp in the U.S.
Upon successful completion, these POCs will serve as an education-based solution which can be taken to the
nearly 5,000 higher-education institutions, in the U.S. alone. Subsequent to the close of the year, MediaAmp
signed an agreement to become a reseller of this solution in the U.S. education market.
PAGE 4
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Also subsequent to the close of the year, the Company announced a commercial agreement with Stockholm-
based video news service, Newstag, which will deliver hyper-personalized news content for both consumers and
broadcasters. According to Deloitte Global, by the end of 2018, at least 50 per cent of adults in developed
countries will have at least two online-only media subscriptions. This is expected to double by the end of 2020.1
The Company continues to develop specific solutions targeting sports and corporate communication, and
intends for all four of these solutions to be delivered globally by the Company’s growing network of channel
partners.
Achievement of Near Term Goals (NTGs)
In FY18 the Company moved to a communication methodology of outlining Near Term Goals (NTGs) to the
market, which would be indicative of scaling the business opportunity and moving towards revenue generation.
An initial set of NTGs was issued in September, 2017, and a follow-on update to that was issued in April, 2018.
Initial NTGs:
Early in the FY18 fiscal year (in September, 2017), the Company announced a series of NTGs. Of the original 11
NTGs outlined, eight have been achieved and one replaced with a new NTG to better align with the Company’s
evolving strategy:
Integration VVE into IBM’s Cloud (Oct. 2017)
Integration VVE with at least one world leading Over The Top (OTT) platform (Oct. 2017)
Engage with a global movie studio to develop Proof of Value (POV) in anti-piracy (Oct. 2017)
Deliver the integration of VVE into Microsoft Azure (Dec. 2017)
Deliver blockchain strategy and solution design (Dec. 2017)
Integrate VVE with at least one cognitive Artificial Intelligence (AI) provider (Dec. 2017)
Engage global movie studio to develop mass content distribution Proof of Value (Feb. 2018)
Deliver POC for Linius’ Video Search Solution in a global cloud environment (Dec. 2017)
Deliver an end-to-end piracy solution with a movie studio
Convert initial deal flow with IBM
Deliver the integration of VVE with Major OTT ad servers (replaced with new NTG)
Note - Linius deprioritised the OTT ad-server integration, as previously communicated and focused on the AI
driven search capability.
1https://www2.deloitte.com/content/dam/Deloitte/global/Images/infographics/technologymediatelecommunications/
gx-deloitte-tmt-2018-digital-media-report.pdf
PAGE 5
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
NTG Highlights:
Warner Bros. and Linius sign collaboration agreement: In February 2018, Linius announced the signing of a
collaboration agreement in the U.S. with Warner Bros. Entertainment Inc. to conduct a technical pilot test in
Australia of the Linius VVE in a transactional video on demand (“TVOD”) streaming and content platform, which
provides content protection through distribution to an end-user. This agreement met the Company’s NTG to
engage with a global movie studio to develop POV in anti-piracy.
Linius integrates with Microsoft AI: In December 2017, Linius successfully integrated with Microsoft’s suite of
Cognitive AI Services for video with its core VVE offering. In line with Linius’ strategy of integrating with Microsoft,
AWS and IBM cloud providers, the Company is fast-tracking its integration with global leaders in AI.
Expanded NTGs:
To accelerate the commercialization process, Linius augmented the Company’s initial set of NTGs in April 2018.
This second set of NTGs were designed to further Linius’ rapid business-scaling efforts, lay crucial foundations
for generating revenue and support the long-term goals of increasing the penetration of virtual video globally.
Launch VVE as a SaaS platform (strong current developer, partner and channel-use SaaS environment)
Sign an education-sector reseller
Close two revenue-generating deals in the education sector
Close two revenue-generating deals in the news or sports sector
Close two revenue-generating deals in addition to those cited directly above
Sign a second agreement with a globally significant cloud services platform (beyond IBM)
Deliver an end-to-end piracy solution with a movie studio
Deliver POC for Linius’ Video Search Solution in a global cloud environment
Convert initial deal flow with IBM
Integrate IBM search capability
NTG achievements:
Linius signs commercial deal with Newstag, deploying Linius Video Search technology: Linius and innovative
Stockholm-based video news service, Newstag, signed a commercial agreement, which will deliver hyper-
personalized news content for both consumers and broadcasters. The signed agreement means Newstag will be
a direct user of Linius’ software at a price point of US$1 per video virtualized and US$40 per thousand videos
assembled (discounted to US$10 per thousand until future commercial deals are signed). This represents one of
the two revenue-generating deals in the news or sports sector. Looking forward, the Company anticipates that
Newstag will become a reseller of Linius’ software into the global news market.
Newstag is currently deploying the Linius Search Solution across the Newstag site, allowing users to search news
archives and generate their own personalized news experience. Linius and Newstag are finalizing a joint go-to-
market strategy to sell the capability to the thousands of news broadcasters and news content providers around
the world, including but not limited to existing Newstag clients. Newstag is an award-winning news platform that
aggregates content for more than 20 broadcasters and agencies around the world, including leading news
producers such as AP, AFP, CNN and Bloomberg. Newstag is a world leader in the use of data to learn and tailor
content experiences for users in more than 150 countries.
PAGE 6
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Chairperson of Newstag, Ph.D Camilla Dahlin-Andersson, commented: “Newstag is excited about working with
Linius to rapidly scale our personalised video news content offering helping users to find relevant content more
efficiently. Linius’ technology will allow us to gain market share in this rapidly evolving market.”
The commercial deal with Newstag was featured on Sky News Business show, Coincast TV, Friday 10 August.
Coincast, the world’s first Blockchain TV news program on mainstream television, is broadcast to a global
audience of over 170 million people.
MediaAMP partners with Linius to deliver Cognitive Video Search to US education market: The recently
announced execution of the MediaAMP Partnership Agreement met the NTG of an agreement with a reseller in
the education sector. Under the agreement, MediaAMP will integrate Linius’ patented Video Virtualization
Engine™ (VVE) with its video-first digital media asset management platform. MediaAMP will provide Linius’ video
virtualization technology to its current and future education clients throughout the US. MediaAMP’s customers
include the University of Washington, the University of California and Arizona State University.
NTG progress update:
Delivery of a piracy solution with a movie studio: The Warner Bros. POC is nearing completion of deployment,
with the focus on a technical trial to demonstrate the analytics and KPI capabilities of virtual video.
VVE as a SaaS platform: The company’s technology is available on Amazon AWS, Microsoft Azure, and IBM
Cloud. In January 2018 the Company entered closed beta trial with a software-as-a-service (SaaS) version of its
core Video Virtualization Engine™ — Linius Video Services (LVS). During the year, this beta was made available to
developers, and select partners and channels. LVS serves as the foundation for the OK State POC and the
Newstag solution. The commercial launch of LVS is expected shortly, in-line with the Company’s strategy to scale
the availability of Linius’ VVE rapidly and drive pervasive usage of video virtualization worldwide. As the solution
rolls out, users will be able to log-on and pay to virtualize their videos themselves, and build new products and
businesses on top of VVE, through a suite of API’s built for global scale, without the requirement for Linius
resources. The global SaaS market grew from US$5bn in 2005 to US$105bn in 20172.
Converting initial deal flow with IBM: Linius is now in final proposal stage with IBM technology partners and
managed service providers.
Oklahoma State University (OK State) to satisfy multiple NTGs: As the OK State POC rapidly approaches a
successful close, it is expected to imminently achieve multiple NTGs, including: Search in a global cloud
environment, revenue-generating deals in the education sector and a reseller agreement in the education sector
(completed September 2018).
In addition to the April 2018 NTGs already stated, the Company is confident of signing additional global and
regional distribution agreements with reseller partners and Managed Service Providers, to support rapid
commercialization moving into the 2018 December quarter and beyond.
New NTGs will be announced in the December 2018 quarter for the December 2018 to March 19 quarters.
2 https://www.statista.com/statistics/510333/worldwide-public-cloud-software-as-a-service/
PAGE 7
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Outlook
During FY18, the Company focused on completing key activities to directly support its NTGs, including executing
high-profile POCs to support its future direct sales pipeline, investing in channel development, as well as hiring
world-class talent across its sales, marketing, product and management functions. The execution of these
measures is intended to both drive revenue and increase the penetration of virtual video within the Company’s
chosen markets.
As the Company began to grow its direct sales force in FY2018, a strong pipeline began to fill. Based on the size
and strength of the pipeline, and the reaction by prospects to the Company’s technology, we believe more than
ever that we have the key that unlocks the massive value of the video market.
Moving forward, the Company intends to complete its NTGs as well as other commercial initiatives. To
accomplish this, the Company’s strategy remains to complete announced POCs, deliver direct sales, and drive
those results through channels as solutions..
Whilst proving use cases in the market for Linius’ Security and Defence, Personalized Ads and Anti-Piracy
solutions remain priorities for the business, the Company has decided that the fastest way to progress with
commercialization in order to achieve revenue-generating deals is to continuing aggressively pursuing POCs for
its Search solutions in sports, news, education, and corporate communications. In accordance with this focus,
the Company is already working with Newstag and MediaAMP to rapidly pursue the news and education markets
respectively with Linius’ Video Search Solution.
Actively working on first video blockchain: Linius plans to launch the world’s first video blockchain, and is
actively working to deliver on that strategy in conjunction with its global partners. The Company continues to
believe that virtual video remains the only mechanism by which blockchain can be used to fulfil its purpose
of protecting ownership rights of video as a digital asset.
Bolstering channel network and capabilities: As the Company completes its previously announced strategic
POCs and POVs, it anticipates these to be repurposed as replicable, commercial solutions that can be sold
either by the Company directly or by resellers in the relevant verticals. The Company is working with multiple
channel partners around the world and continues to leverage the investments being made by the leading
cloud providers in cloud infrastructure and artificial intelligence.
Building scalable processes and capability within sales, marketing and product teams:
• Key hires: Expansion of the Company’s sales, marketing and product development teams continues
• Linius has focused on building its internal delivery resources; which will be crucial for execution as
Linius anticipates rapid progress through the Company’s commercialization milestones
Christopher Richardson
CHIEF EXECUTIVE OFFICER
26 September 2018
PAGE 8
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
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 2018.
Directors
The Directors in office during the year were:
Gerard Bongiorno (Executive Chairman)
Stephen McGovern (Non-Executive Director)
Christopher Richardson (Executive Director & CEO)
All Directors have been in office since the start of the financial year to the date of this report.
Company Secretary
Stephen Kerr B.Com, CA, FGIA
Mr Kerr provides company secretarial and CFO services to the Company, through his consultancy business. 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. Appointed as company
secretary on 1 February 2016.
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 2018 after income tax expense amounted to $10,714,098 (30 June 2017
loss: $4,230,052). This loss includes non-cash share based payments expense of $1,358,869 and non-cash
amortisation charges of $540,000. During the year the Company proceeded with its commercialisation activities,
expanded its management and operational teams to tackle global market opportunities and continued to develop
and refine its core technology and product offerings. For more information on the years activities please refer to
the above Chief Executive’s Review of Operations on pages 4 to 8.
Dividends Paid or Recommended
No dividends were paid or declared for payment.
Financial Position
The net assets of the Group at 30 June 2018 are $14,101,948 ($5,043,444).
Going Concern
For the year ended 30 June 2018, the Group had an operating net loss of $10,714,098 (30 June 2017:
$4,230,052) and net cash outflows from operating activities of $8,544,365 (30 June 2017: $3,037,565).
PAGE 9
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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.
After Balance Date Events
There has not been any 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
— Executive Chairman
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 completed the Program for
Management Development at Harvard Business School PMD75.
Director since 21 February 2018.
Interest in Shares and
Options
—
28,083,334 Ordinary shares
3,541,667 Options
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 10
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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. Director since 18 April 2016.
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 11
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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.
Director since 18 April 2016.
Interest in Shares and
options
in
Directorships held
other listed entities in
the last 3 years
—
20,000,000 Options
— Nil
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
Executive Chairman
Stephen McGovern
Non-Executive Director
Christopher Richardson Director and CEO
Stephen Kerr
CFO and Company Secretary
PAGE 12
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT - AUDITED
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 2018. 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.
2018
2017
(Loss) attributable to owners of the company
$(10,714,098)
$(4,230,052)
Change in share price
$0.024
$(0.022)
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.
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.
PAGE 13
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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 2018 are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Gerard Bongiorno
Executive Chairman
21 February 2017
No fixed term
An annual director fee of $90,000 plus superannuation. The fee paid to Mr Bongiorno
is subject to annual review by the Board. Under the terms of his agreement and as
approved by shareholders at general meeting, the Company issued Mr Bongiorno with
20,000,000 loan shares in November 2017. The Company will reimburse Mr
Bongiorno for all reasonable expenses incurred in performing his duties and will pay
Mr Bongiorno additional fees where he is required to perform additional consulting
tasks related to the commercialisation of the Linius technology. The agreement
includes a non-competition clause.
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 McGovern
is subject to annual review by the Board. Under the terms of his agreement, the
Company issued Mr McGovern’s nominee with 6,000,000 Options in April 2016. The
Company will reimburse Mr McGovern for all reasonable expenses incurred in
performing his duties. The agreement includes a non-competition clause.
Name:
Title:
Agreement commenced: 1 December 2015
Term of agreement:
Details:
Christopher Richardson
Director and CEO
No fixed term
An annual consultancy fee of $271,200, payable at the rate of $22,600 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
Richardson’s nominee with 10,000,000 Options in April 2016 and 10,000,000
options in November 2016. The agreement can be terminated by the company on one
months’ notice or by Mr Richardson on three month’s written notice. The Company
will reimburse Mr Richardson for all reasonable expenses incurred in performing his
duties. The agreement includes a non-competition clause.
Name:
Title:
Agreement commenced: 21 January 2016
Term of agreement:
Details:
Stephen Kerr
Chief Financial Officer and Company Secretary
No fixed term
An annual consultancy fee of $120,000, payable at the rate of $10,000 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 14
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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:
2018
Non-executive
directors:
Directors’
fees &
consultancy
fees
$
Super-
annuation
payments
Share-
based
payments5
Total
Performance
Related
Share-based
$
$
%
Stephen McGovern
90,0002
8,325
-
98,325
Executive directors:
Christopher Richardson
230,8003
-
97,089
327,889
Gerard Bongiorno
90,0001
8,544
349,583
448,127
114,0004
-
14,563
128,563
524,800
16,869
461,235
1,002,904
Directors’
fees &
consultancy
fees
$
Super-
annuation
payments
Share-
based
payments5
Total
Performance
Related
Performance
Related
$
$
%
Executives:
Stephen Kerr
2017
Non-executive
directors:
Gerard Bongiorno
Stephen McGovern
Executive directors:
30,0001
90,0002
2,850
8,325
-
-
32,850
98,325
Christopher Richardson
150,0003
Executives:
Stephen Kerr
84,0004
-
-
310,360
460,360
44,210
128,210
354,000
11,175
354,570
719,745
-
-
-
-
-
-
-
-
-
-
%
-
29.6
78.0
11.3
46.0
%
-
-
67.4
34.5
49.3
PAGE 15
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
1. Consultancy fees were paid to Otway Capital Consulting, a related party of Gerard Bongiorno.
2. Consultancy fees were paid to SMG Nominees Pty Ltd, a related party of Stephen McGovern.
3. Consultancy fees were paid to Mirovoy Sales, s.r.o. , a related party of Christopher Richardson.
4. Consultancy fees were paid to SC Kerr & Co, a related party of Stephen Kerr.
5. The fair value of the share based payments is calculated at the date of grant of the option or loan share
using the binomial pricing model and allocated to each reporting period based on forecast estimated vesting
dates. The value disclosed is the portion of the fair value 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.
Equity instruments granted as compensation - audited
Details on equity instruments that were granted as compensation to each key management person during the
year and details on equity instruments vested during the year are as follows:
Number of
loan shares
granted
2018
Grant date
Exercise
price
$
Fair
value
per loan
share at
grant
date
$
Value of
loan
granted
under the
loan share
terms
20,000,000
28 Nov 2017
0.026
0.05 $1,000,000
2018
Options
Gerard
Bongiorno
Number of
options
vested
during 2018
10,000,000
Loan
expiry
date
30 Nov
2022
The loan shares granted are the amounts approved by way of shareholder resolution at the Company’s Annual
General Meeting on 28 November 2017, no further loan shares were approved or issued.
PAGE 16
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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
shares or
options
Grant date % vested
during the
year
% forfeited
in year
Gerard
Bongiorno
Christopher
Richardson
Loan shares
20,000,000
Options
10,000,000
Stephen Kerr
Options
1,500,000
28 Nov
2017
30 Nov
2016
30 Nov
2016
50%
30%
30%
-
-
-
Financial
years in
which grant
vests
2018-20
2017-19
2017-19
Analysis of movements in equity instruments – audited
The value of options and loan shares in the Company granted to and exercised by each key management person
during the year is detailed below:
Gerard Bongiorno
Granted in year $
Value exercised
in year
510,000
-
The loan shares are accounted for as options. The value of loan shares granted in the year is the fair value of the
loan shares calculated at grant date. The total value of the loan shares is included in the table above. There are
three tranches and amounts are allocated to remuneration over the vesting period for each tranche (i.e.
November 2017 to November 2019).
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
1.7.2017
Stephen McGovern
6,000,000
Granted during
the year
-
Lapsed or
exercised
during the year
-
Held at
30.6.2018
6,000,000
Vested
during
the year
-
Total Vested
and Exercisable
30.6.2018
6,000,000
Christopher
Richardson
Stephen Kerr
Total
20,000,000
3,000,000
29,000,000
-
-
-
-
-
-
20,000,000
3,000,000 14,000,000
3,000,000
450,000 2,100,000
29,000,000
3,450,000 22,100,000
All options expire on the earlier of their expiry date or termination of the individual’s employment.
PAGE 17
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
Exercise of options granted as compensation
During the period, no options were exercised.
Movements in shares - audited
The movement during the reporting period in the number of ordinary shares in Linius Technology Limited, held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Balance
1.7.2017
Received as
Compensation
Acquired during
the year
Balance
30.6.2018
Gerard Bongiorno
Stephen McGovern
Total
1,000,000
40,000,000
41,000,000
-
-
-
7,083,334
8,083,334
-
40,000,000
7,083,334
48,083,334
Number of Loan Shares held by Key Management Personnel
Balance
1.7.2017
Received as
Compensation
Balance at
30.6.2018
Vested at
30.6.2018
Not vested at
30.6.2018
Gerard Bongiorno
Total
-
-
20,000,000
20,000,000
10,000,000
10,000,000
20,000,000
20,000,000
10,000,000
10,000,000
Key management personnel transactions - audited
Group
Transactions with related parties:
Advisory fees paid to Otway Capital Consulting a consulting firm in which
Gerard Bongiorno has an interest.
Amounts owing to related parties (included in trade and other payables)
Entity related to Gerard Bongiorno
Entity related to Stephen McGovern
Entity related to Christopher Richardson
Entity related to Stephen Kerr
2018
$
62,000
11,000
9,013
30,379
11,000
2017
$
-
8,193
31,655
7,700
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 18
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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
9
9
9
9
7
9
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
30/5/2019
31/12/2019
31/12/2019
31/12/2019
31/12/2019
30/09/2019
30/09/2019
30/06/2021
30/06/2021
08/02/2020
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
listed
unlisted
unlisted
unlisted
unlisted
5 cents
4.5 cents
7.5 cents
7 cents
7.5 cents
8 cents
8.5 cents
16 cents
22 cents
4.5 cents
5 cents
17 cents
61,500,000
11,500,000
63,760,000
3,375,000
3,375,000
3,375,000
3,375,000
62,083,350
10,000,000
3,750,000
2,000,000
1,000,000
229,093,350
During the year ended 30 June 2018, 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.
PAGE 19
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
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.
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 21 and forms part of the directors’ report for the
financial year ended 30 June 2018.
Non-Audit Services
KPMG provided taxation advisory services during the year.
Signed in accordance with a resolution of the Board of Directors.
Gerard Bongiorno
Director
26 September 2018
Melbourne
PAGE 20
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2018
Note
Group
2018
$
2017
$
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
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive loss
Total comprehensive loss for the year
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
2
19
4
7
7
91,142
(557,157)
(342,936)
(540,000)
(3,239,727)
(7,021)
(1,358,869)
(310,154)
(2,991,301)
(713,903)
(60,535)
(108,701)
(574,936)
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)
(10,714,098)
(4,230,052)
-
-
(10,714,098)
(4,230,052)
-
-
(10,714,098)
(4,230,052)
(1.3)
(1.3)
(0.7)
(0.7)
The accompanying notes form part of the financial report.
PAGE 22
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
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
2018
$
2017
$
8
9
10,766,028
265,192
959,270
77,475
11,031,220
1,036,745
10
4,005,000
4,545,000
19,713
14,124
4,024,713
4,559,124
15,055,933
5,595,869
928,944
25,041
953,985
953,985
550,320
2,105
552,425
552,425
14,101,948
5,043,444
30,047,557
12,575,410
4,363,160
2,062,705
(20,308,769)
(9,594,671)
14,101,948
5,043,444
11
12
19
The accompanying notes form part of the financial report
PAGE 23
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
Group
Issued
Capital
$
Share Based Payments
Reserve
Accumulated
Losses
$
$
Total
$
Balance at 1 July 2016
11,809,470
1,708,135
(5,364,619)
8,152,986
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)
Share-based payments
Total transactions with
owners of the Company
-
-
-
765,940
-
-
-
-
-
354,570
765,940
354,570
(4,230,052)
(4,230,052)
-
-
(4,230,052)
(4,230,052)
-
-
-
765,940
354,570
1,120,510
5,043,444
Balance at 30 June 2017
12,575,410
2,062,705
(9,594,671)
Balance 1 July 2017
12,575,410
2,062,705
(9,594,671)
5,043,444
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)
Share-based payments
Total transactions with
owners of the Company
-
-
-
17,472,147
-
-
-
-
-
2,300,455
Balance at 30 June 2018
30,047,557
17,472,147
2,300,455
4,363,160
(10,714,098)
(10,714,098)
-
-
(10,714,098)
(10,714,098)
-
-
-
(20,308,769)
17,472,147
2,300,455
19,772,602
14,101,948
The accompanying notes form part of the financial report
PAGE 24
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018
Note
Group
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers
Other income received
Interest received
2018
$
2017
$
(8,620,815)
(3,084,744)
56,789
19,661
-
47,179
Net cash used in operating activities
13
(8,544,365)
(3,037,565)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant & equipment
Net cash provided by /(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Capital raising costs paid
Net cash inflows from financing activities
Net increase/(decrease) in cash held
Cash at beginning of financial year
Cash at end of financial year
8
(12,610)
(12,610)
19,343,000
(979,267)
18,363,733
9,806,758
959,270
10,766,028
(14,363)
(14,363)
760,940
(25,000)
735,940
(2,315,988)
3,275,258
959,270
The accompanying notes form part of the financial report
PAGE 25
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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”), 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 26 September 2018.
Reverse Acquisition Accounting
The acquisition of Linius (Aust) Pty Ltd by the Company, in the period ended 30 June 2016, is considered to be a
reverse acquisition under Australian Accounting Standards, notwithstanding Linius Technologies Limited (“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.
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 businesses’ 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.
Historical cost convention
The financial statements have been prepared under the historical cost convention.
PAGE 26
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern
For the year ended 30 June 2018, the Group incurred an operating net loss of $10,714,098 (2017: $4,230,052)
and net cash outflows from operating activities of $8,544,365 (2017: $3,037,565 ).
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; and
•
the Directors have prepared cash flow projections for the period from 1 July 2018 until 30 September
2019 that support the Group’s ability to continue as a going concern. These cashflow projections
assume the Group’s ability to control expenditures 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.
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.
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.
PAGE 27
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 28
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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.
iii.
Held-to-maturity investments
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.
iv.
Available-for-sale financial assets
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 cost
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 29
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 30
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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.
Government grant revenue is recognised on receipt.
All revenue is stated net of the amount of goods and services tax (GST).
g.
Trade and Other Payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services
received by the Group during the reporting period, which remains unpaid. The balance is recognised as a current
liability with the amount being normally paid within 30 days of recognition of the liability.
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.
Where required by Accounting standards, comparative figures have been adjusted to conform to changes in the
presentation for the current financial year.
PAGE 31
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 32
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 33
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 2018, 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’s financial statements.
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 34
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 and shares to directors and employees 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 22 has been prepared
on the same basis as the consolidated financial statements, except as set out below.
PAGE 35
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 36
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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:
Government grants – Export market development grant
Interest received
Total revenue
NOTE 3: LOSS FOR THE YEAR
Other expenses:
Occupancy costs
Group
2018
$
56,789
34,353
91,142
2017
$
-
41,492
41,492
Group
2018
$
2017
$
98,570
31,741
PAGE 37
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 4: INCOME TAX EXPENSE
Group
2018
$
2017
$
(a) Income tax expense
Current tax benefit
(2,556,599) (1,050,515)
Deferred tax – origination and reversal of temporary differences
(6,307)
-
Deferred tax assets not recognised
2,562,906
1,050,515
-
-
(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%
(2,946,377)
(1,163,264)
Add / (Less)
Tax effect of:
Share based payments
Other non-allowable items
Unused tax losses not recognised as deferred assets
Income tax attributable to operating loss
373,689
9,782
2,562,906
97,507
15,242
1,050,515
-
-
(c) Unrecognised deferred tax assets
Unused Australian tax losses for which no deferred tax asset has
been recognised
Temporary differences not recognised
Total
3,786,579
1,223,673
6,886
579
3,793,465
1,224,252
Potential deferred tax assets attributable to tax losses carried forward have not been brought to account at 30 June
2018 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.
PAGE 38
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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
- taxation advisory
KPMG
NOTE 7: EARNINGS/LOSS PER SHARE
2018
$
541,669
461,235
1,002,904
Group
2018
$
82,000
4,410
86,410
2017
$
365,175
354,570
719,745
2017
$
69,000
-
69,000
Group
2018
$
2017
$
a.
Reconciliation of earnings to profit or loss
Loss used to calculate basic and diluted EPS
(10,714,098)
(4,230,052)
b.
Weighted average number of ordinary shares outstanding
during the period used in calculating basic and diluted EPS
No.
No.
811,545,392
632,821,305
Potential ordinary shares comprising 229,093,350 options (2017: 73,000,000) were excluded in the calculation of
diluted EPS given they are antidilutive.
PAGE 39
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 8: CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Group
2018
$
10,766,028
2017
$
959,270
The effective interest rate on short-term bank deposits was varying between 2.15% to 2.57%.
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
10,766,028
959,270
NOTE 9: OTHER RECEIVABLES
CURRENT
GST receivable
Prepaid expenses and other receivables
Group
2018
$
84,861
180,331
265,192
2017
$
39,033
38,442
77,475
NOTE 10: INTELLECTUAL PROPERTY
The Group acquired the intellectual property associated with the Linius technology from an unrelated party in the
financial period ended 30 June 2016. 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
2018
$
5,400,000
(1,395,000)
4,005,000
2017
$
5,400,000
(855,000)
4,545,000
PAGE 40
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 financial period ended 30 June 2016. 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
copyright.
covered by
the
intellectual property purchased was
trademarks and
valid patents,
The directors note that the intellectual property is at an early stage in its commercial life, with the associated technology
recently commencing 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 2018 consist principally of cash of $10,766,028 and intellectual
property, after amortisation, of $4,005,000. Net assets are $14,101,948.
Linius shares closed at a price of 7.6 cents per share on 30 June 2018. Total fully paid ordinary shares on issue at 30
June 2018 are 935,597,548. This gives a market capitalisation of Linius of $71,105,413. 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 2018 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 in FY19 and
FY20 based on the number of customer take-on of the Linius technology. From 2021 to 2023 it is based on a
compounded growth. Expenses are set based on the 2019 budget, increasing by anticipated growth required to the
support the increase in revenue forecast.
• An after tax discount rate of 15% 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 41
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 11: TRADE AND OTHER PAYABLES
Trade payables*
Sundry payables and accrued expenses
Group
2018
$
702,224
226,720
928,944
2017
$
280,455
269,865
550,320
*Terms of trade are in line with normal commercial terms (usually 30 to 60 days).
NOTE 12: ISSUED CAPITAL AND RESERVES
Issued Capital
2018
Opening balance 1 July 2017
Issue of shares through private placement (net of costs)*
Issue of shares as share based payment to consultant
Issue of loan funded shares
Issue of shares on conversion of unlisted options
At reporting date
Note
$
Group
Number
(Legal parent)
12,575,410
679,190,880
16,579,147
224,166,668
50,000
-
843,000
1,000,000
20,000,000
11,240,000
30,047,557
935,597,548
The Company has issued share capital amounting to 935,597,548 ordinary shares of no par value.
* Net of $941,586 of share based payment transaction costs and $979,267 in cash incurred transaction costs.
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 30 June 2017
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
PAGE 42
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
Ordinary shares
Opening balance
Fully paid shares issued during the year
— 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 (issue of shares on exercise of unlisted options)
— July 2017 (issue of shares by private placement)
— October 2017 (issue of shares by private placement)
— December 2017 (issue of shares by private placement)
— December 2017 (share based payment to director)
— December 2017 (issue of shares on exercise of unlisted options)
— January 2018 (issue of shares on exercise of unlisted options)
— February 2018 (issue of shares on exercise of unlisted options)
— February 2018 (issue of shares by private placement)
— March 2018 (issue of shares on exercise of unlisted options)
— March 2018 (share based payment of consulting fees)
— May 2018 (issue of shares by private placement)
— June 2018 issue of shares by private placement)
Legal parent entity
2018
No.
2017
No.
679,190,880
562,238,580
10,000,000
197,511
231,283
50,000,000
50,000,000
6,523,506
30,000,000
85,000,000
5,000,000
20,000,000
3,500,000
6,340,000
500,000
81,250,000
900,000
1,000,000
2,083,334
20,833,334
At reporting date
935,597,548
679,190,880
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.
PAGE 43
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
Performance shares on issue
Opening balance
Performance shares issued during the year
Number converted to ordinary shares during the period
At reporting date
Legal parent entity
2018
No.
-
-
-
-
2017
No.
100,000,000
-
(100,000,000)
-
The performance shares were unlisted and were divided into 4 classes (A, B, C and D) of 50,000,000 performance
shares per class where performance shares in the relevant class converted into ordinary shares upon achievement of
certain milestones. 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.
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 2018 is as
follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables and other liabilities
Working capital position
Group
2018
$
10,766,028
265,192
(953,985)
10,077,235
2017
$
959,270
77,475
(552,425)
484,320
PAGE 44
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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
- Shares issued for payment of trade payable
Changes in assets and liabilities
- Increase/(decrease) in provisions
- Increase/(decrease) in trade payables and accruals
- (Increase)/decrease in trade receivables and prepayments
Group
2018
$
2017
$
(10,714,098)
(4,230,052)
7,021
540,000
1,358,869
50,000
22,936
378,624
(187,717)
239
540,000
384,570
-
2,105
267,542
(1,969)
Cash flows used in operating activities
(8,544,365)
(3,037,565)
Changes in liabilities arising from financing activities
There were no changes in liabilities arising from financing activities (2017: nil).
PAGE 45
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 14: RELATED PARTY TRANSACTIONS
(i)
Transactions with key management personnel:
Advisory fees paid to Otway Capital Consulting, a consulting firm in which
Gerard Bongiorno has an interest
(ii) Amounts owing to key management personnel (included in trade and
other payables):
Entity related to Gerard Bongiorno
Entity related to Stephen McGovern
Entity related to Christopher Richardson
Entity related to Stephen Kerr
Group
2018
$
62,000
11,000
9,013
30,379
11,000
2017
$
-
-
8,193
31,655
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
2018
Firestrike Resources Incorporated (a)
Linius (Aust) Pty Ltd
Linius Solutions Pty Ltd
(a) Deregistered in 2018.
USA
Australia
Australia
Ordinary
Ordinary
Ordinary
-
100%
100%
2017
100%
100%
100%
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 46
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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
Share option and loan share schemes
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.
Loan funded share plan
A loan funded share plan (LFSP) has been established by the Group, pursuant to which, at the discretion of the
Board, fully paid ordinary shares in the Company may be acquired by certain key personnel and Directors using
financial assistance given by the Company. Participants will acquire or be issued loan funded shares at market
value as at the grant date using a loan provided by the Company. The loan is interest-free and limited recourse in
accordance with the loan terms and the LFSP rules. The LFSP rules require the loan to be repaid before a
participant can sell their shares. The shares are granted in accordance with time based and/or performance targets
established by the Board.
PAGE 47
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Share options and loan shares (equity settled)
The key terms and conditions of share options and loan shares 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
and employees:
Employees
On 11/15 January 2018
Key Management Personnel
On 30 November 2016
On 29 April 2016*
Loan shares granted to key
management personnel:
Number of
instruments
Exercise
price
Vesting conditions
Contractual
life of options
3,750,000
4.5 cents
33% vesting on each of 1st, 2nd and 3rd
anniversary of employment date
3.3 years
11,500,000
58,500,000
4.5 cents
5 cents
Refer to Note A below
Vested
3 years
3 years
On 28 November 2017
20,000,000
5.0 cents
50% vesting on issue, 25% vesting in
12 months, 25% vesting in 24 months
5 years
Options granted to
consultants:
On 28 May 2018
On 22 February 2018
On 28 February 2018
On 28 February 2018
On 15 February 2018
On 15 February 2018
On 15 February 2018
On 15 February 2018
On 28 November 2017
On 29 April 2016
1,000,000
2,000,000
17 cents
5.0 cents
10,000,000
10,000,000
3,375,000
3,375,000
3,375,000
3,375,000
10,000,000
3,000,000
22 cents
16 cents
7 cents
7.5 cents
8 cents
8.5 cents
7.5 cents
5 cents
Vested on issue
33% vesting on each of 1st, 2nd and 3rd
anniversary of engagement date
Vested on issue
Vested on issue
Vested on issue
Vested on issue
Vested on issue
Vested on issue
Vested on issue
Vested
21 months
3.3 years
19 months
19 months
22 months
22 months
22 months
22 months
18 months
3 years
*Include options issued to former employees.
PAGE 48
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Note A
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;
• 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 (e.g. 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.
PAGE 49
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Share based payments (equity settled) expense recognised in profit or loss
Options
Christopher Richardson
Stephen Kerr
Options issued under the ESOP
Options issued to consultants
Cost of options issued to consultants for capital
raising services, applied against equity
Shares
Consulting fees settled via share issue
Gerard Bongiorno – Loan funded shares
2018
$
2017
$
97,089
14,563
360,361
1,478,546
(941,273)
310,360
44,210
-
-
-
1,009,286
354,570
-
30,000
349,583
-
1,358,869
384,570
Reconciliation of outstanding share options and loan shares – 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
Options issued during the year
Options exercised during the year
Listed options issued during the year
Options issued during the year
Options issued during the year
ESOP options granted during the year
Options issued during the year
Outstanding at 30 June
Exercisable at 30 June
Number of
options
2018
73,000,000
Weighted
average
exercise price
2018
4.9 cents
75,000,000
(11,240,000)
62,083,350
13,500,000
10,000,000
5,750,000
1,000,000
229,093,350
218,360,017
7.5 cents
7.5 cents
16.0 cents
7.75 cents
22.0 cents
4.7 cents
17.0 cents
9.6 cents
9.8 cents
Number of
options
2017
76,027,554
(6,523,506)
(8,004,048)
11,500,000
Weighted
average
exercise price
2017
4.8 cents
4 cents
4 cents
4.5 cents
73,000,000
62,650,000
4.9 cents
5.0 cents
PAGE 50
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Loan shares on issue*
Outstanding at 1 July
Loan shares granted during the year
Outstanding at 30 June
Vested at 30 June
Number of loan
shares
2018
-
20,000,000
20,000,000
10,000,000
Weighted
average price
2018
Number of
loan shares
2017
Weighted
average price
2017
-
5.0 cents
5.0 cents
5.0 cents
-
-
-
-
-
-
* Loan shares are accounted for as options in the financial accounts.
The fair value of the equity-settled share options and loan shares granted in the current year 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 2018
2,000,000
Unlisted
ESOP options
1,875,000
Unlisted ESOP
options
1,875,000
Unlisted
ESOP options
20,000,000
Loan shares
13,500,000
Unlisted
options
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Exercise price (cents)
Grant date share price
Grant date fair value
Nil
90%
2.15%
3
$0.05
$0.122
$0.082
Nil
90%
2.18%
3
$0.045
$0.179
$0.143
Nil
90%
2.19%
3
$0.045
$0.189
$0.152
Nil
90%
2.13%
5
$0.050
$0.049
$0.0255
Nil
95%
1.83%
2
$0.0775
$0.055
$0.082
Grant date
22 Feb 2018
11 Jan 2018 15 Jan 2018 28 Nov 2017 15 Feb 2018
10,000,000
Unlisted
options
1,000,000
Unlisted
options
10,000,000
Listed
options
10,000,000
Unlisted
options
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Exercise price (cents)
Grant date share price
Grant date fair value
Nil
90%
1.68%
1.5
$0.075
$0.049
$0.014
Nil
90%
2.005%
2
$0.170
$0.110
$0.050
Nil
90%
1.87%
1.5
$0.160
$0.130
$0.045
Nil
90%
1.87%
1.5
$0.220
$0.130
$0.035
Grant date
28 Nov 2017 28 May 2018 28 Feb 2018 28 Feb 2018
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 51
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 1.96% at 30 June 2018. All
other assets and liabilities are non-interest bearing.
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 $5,863 (2017: $959)
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 52
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
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 National Australia
Bank (NAB) and ANZ Bank. The NAB and ANZ Bank have 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
2018
%
1.96
2017
%
0.45
-
-
Financial Assets:
Cash and cash equivalents
Total Financial Assets
Financial Liabilities:
Trade and other payables
Total Financial Liabilities
iii.
Net Fair Values
Floating Interest Rate
2018
$
10,766,028
2017
$
959,270
10,766,028
959,270
928,944
928,944
550,320
550,320
Financial assets (cash and other receivables) and financial liabilities (trade and other receivables) are carried
at amortised cost which approximates their fair values.
PAGE 53
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
NOTE 21: EVENTS AFTER THE REPORTING PERIOD
There has not been any 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: PARENT ENTITY DISCLOSURES
The following information is related to the legal parent entity Linius Technologies Limited as at 30 June 2018:
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
For details on commitments, see Note 17.
2018
$
2017
$
10,522,465
806,996
28,081,250
20,972,465
38,603,715
21,779,461
144,223
144,223
294,244
294,244
45,688,511
28,216,364
36,462
36,462
4,363,160
2,062,705
(11,628,641)
(8,830,314)
38,459,492
21,485,217
2018
$
2,798,327
2,798,327
2017
$
1,523,264
1,523,264
PAGE 54
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
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 22 to 54 and the
Remuneration report on pages 13 to 18 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 2018 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 2018.
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
26 September 2018
PAGE 55
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
ADDITIONAL INFORMATION FOR LISTED COMPAN IES
1.
Shareholdings as at 31 August 2018
a.
Distribution of Shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Above 100,001
Number
Number
Holders
Ordinary
36
140
272
5,539
548,587
2,219,451
1,200 52,736,905
783 882,587,066
2,431 938,097,548
b.
The number of shareholdings held in less than marketable parcels is 252.
c.
The names of the substantial shareholders listed in the holding Group’s register as at
31 August 2018 are:
Shareholder
1 Phoenix Myrrh Technology Pty Ltd / Anthony Finbar O’Hanlon
2 Earthrise Holdings Pty Ltd
3 Technical Investing Pty Ltd
Number
Ordinary
91,305,054
90,000,000
50,602,833
%
9.76
9.59
5.39
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 61
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
ADDITIONAL INFORMATION FOR LISTED COMPAN IES (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
Earthrise Holdings Pty Ltd
Steve McGovern Nominees Pty Ltd
Phoenix Myrrh Technology Pty Ltd
Naley Pty Ltd
Parlin Investments Pty Ltd
One Managed Investment Funds Limited
Anbaume Pty Ltd
Mr Anthony Finbar O'Hanlon
HSBC Custody Nominees (Australia) Limited
VR Corporate Services Pty Ltd
Stephen Wayne Velik
Mr Anthony Finbar O'Hanlon
One Managed Investment Funds Limited
Clarkirb Nominees Pty Ltd
Boscombe Holdings Limited
Unrandom Pty Ltd
One Managed Investment Funds Limited
Riversdale Capital Funding Pty Ltd
Ninkirb Nominees Pty Ltd
Caerlaverock Investments Pty Ltd
Number of
Ordinary Fully
Paid Shares
Held
% Held
of Issued
Ordinary
Capital
90,000,000
40,000,000
36,532,768
32,500,000
30,000,000
27,833,334
22,083,334
20,605,375
20,229,515
20,000,000
15,865,005
13,800,000
10,640,000
10,000,000
9,759,584
8,533,674
8,379,500
7,783,740
7,500,000
6,831,465
438,877,294
9.59
4.26
3.89
3.46
3.20
2.97
2.35
2.20
2.16
2.13
1.69
1.47
1.13
1.07
1.04
0.91
0.89
0.83
0.80
0.73
46.77
PAGE 62
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
ADDITIONAL INFORMATION FOR LISTED COMPAN IES (CONTINUED)
f.
20 Largest holders – Listed Options (ASX:LNUOA)
Name
One Managed Investment Funds Limited
Celtic Capital Pty Ltd
Mr David Peter Valentino
CPS Capital Investments Pty Ltd
HSBC Custody Nominees (Australia) Limited
Morgan Stanley Australia Securities (Nominee) Pty Limited
Mr Anthony Julian Bongiorno
Sunshore Holdings Pty Ltd
Riversdale Capital Funding Pty Ltd
Anbaume Pty Ltd
Sunset Capital Management Pty Ltd
Gazump Resources Pty Ltd
Beck Corporation Pty Ltd
Ninkirb Nominees Pty Ltd
Seven Bob Investments Pty Ltd
EMBR Capital LLC
Jurrah Investments Pty Ltd
Wilberforce Pty Ltd
Robert Kirby Investments Pty Ltd
GW Burke Investments Pty Ltd
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Number of
Options Held
%
Held
10,416,667
3,500,000
3,500,000
3,000,000
2,500,000
1,666,666
1,500,000
1,250,000
1,041,667
1,041,667
1,000,000
984,548
833,333
833,333
720,484
625,000
625,000
550,000
520,834
520,834
36,630,033
16.78
5.64
5.64
4.83
4.03
2.68
2.42
2.01
1.68
1.68
1.61
1.59
1.34
1.34
1.16
1.01
1.01
0.89
0.84
0.84
59.04
PAGE 63
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2018
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 64