LINIUS TECHNOLOGIES LIMITED
ACN 149 796 332
ANNUAL REPORT
2019
ANNUAL REPORT
YEAR ENDED 30 JUNE 2016
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CONTENTS PAGE
CORPORATE DIRECTORY…………………………………………………………………….……………………….……………….………2
CHAIRMAN'S LETTER TO SHAREHOLDERS……………..…………………………….……………………………………….……...3
CHIEF EXECUTIVE OFFICER'S REVIEW OF OPERATIONS………………………………………………………………….……4-7
DIRECTORS' REPORT…………………………………………………………………………………………………………..…….…...8-19
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………………………………………………………………………………………..……..26-59
DIRECTORS' DECLARATION………………………………………………………………………………………………………………..60
INDEPENDENT AUDITOR'S REPORT…………………………………………………………………………………………….…61-65
ADDITIONAL INFORMATION FOR LISTED COMPANIES……………………………………………………………….…...66-69
PAGE 1
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CORPORATE DIRECTORY
This annual report covers Linius Technologies Limited and its controlled entities (the “Group” or “Group”)
during the year ended 30 June 2019. The functional and presentation currency of the Group is Australian
dollars.
OFFICERS
REGISTERED OFFICE
SOLICITORS
AUDITORS
SHARE REGISTRY
PRINCIPAL PLACE OF BUSINESS
WEBSITE
ASX CODE
Gerard Bongiorno
Stephen McGovern
Christopher Richardson (Director and CEO)
Stephen Kerr
(Executive Chairman)
(Non-Executive Director)
(Company Secretary and CFO)
Resigned 3 June 2019
(Company Secretary and CFO)
Appointed 3 June 2019
Giuseppe Rinarelli
Suite 13, Level 3,
299 Toorak Road,
SOUTH YARRA VIC 3141
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:
Facsimile:
(08) 9389 8033
(08) 9262 3723
Suite 13, Level 3,
299 Toorak Road,
SOUTH YARRA VIC 3141
Telephone:
Facsimile:
Email: info@linius.com
www.linius.com
LNU
(03) 8680 2317
(03) 8680 2380
PAGE 2
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
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 2019.
During the year the Company has continued to invest in the development of its core technology, with solutions
productised for deployment to customers, develop strong relationships with channel partners, re-sellers and
systems integrators, as well as launched the SaaS market place. We have also continued to invest in our
technology base lodging further patents as well as demonstrating our Blockchain prototype. These are the building
blocks of our business that we referred to at our 2018 AGM and we are now starting to see this investment deliver
for our shareholders.
Off the back of successful proof of concepts, the team continued to convert our strong pipeline of opportunities
firmly focused on building strong recurring cash inflows. Subsequent to the end of the 2019 financial year we were
very pleased to announce two commercial deals with SportsHero (SHO) and most recently Racing.com. Your
directors are excited by the number of broadcasters and sports organisations we are currently in discussions with,
and believe the commercial validation from these initial deals will provide the proof points to rapidly scale via our
extensive channel partners network and SaaS platform.
While sport — with the deals in soccer and racing — is the focus of the Linius sales team, our channel partners are
advancing on other key commercial markets such as corporate communications, security and defence, news, and
education.
During the year we were pleased to receive continued investment support from existing and new investors. The
Company raised $3.5 million in April 2019 through a private placement at 3.5 cents per share, with directors and
their nominees contributing $1m of this amount (received post year end due to the requirement for shareholder
approval). Post year end, the Company raised a further $4.5 million at 3.3 cents per share, with directors to
contribute $300,000 post approval at the upcoming AGM in November. We were very pleased that the wider
investment community has recognised the opportunity and continued to invest in the Company to fund the
commercialisation of our core product.
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 2019 financial year.
Gerard Bongiorno
CHAIRMAN
30 September 2019
PAGE 3
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
Linius’ patented technology affords it the opportunity to transform the global video market. During FY2019, the
Company continued to invest in and built the assets which are now leading to commercial success. The Company
continues to pursue its vision of making all the world’s video accessible as data.
Linius’ mission is to become the de facto standard for the management and streaming of video.
To deliver Linius’ vision and mission, the Company seeks to take its patented Video Virtualization Engine™ (VVE)
to mass markets in three 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
Focusing on these three paths to market, during FY2019 the Company
invested in and launched the Linius SaaS platform - Linius Video Services (‘LVS’)
established strong relationships with channel partners, including Amazon, Microsoft, and IBM
developed and launched the SaaS marketplace with third parties already investing and launching their
own technology on the Linius backbone
invested in and secured Proofs of Concepts (‘POCs’) and first commercial deals
continued to protect its IP through patents, trademarks, copyrights
These investments put the Company in good position to scale commercially and achieve our vision.
Poised to Scale
Linius Video Services, the cloud-based software-as-a-service (“SaaS”) platform for our core VVE technology, was
built, tested, and launched in FY2019. This development of the SaaS platform is significant for both the Company
and our customers. From our customers’ perspective, the LVS SaaS offering is truly disruptive in the video industry
and enables them to quickly try the Company’s technology, without the burden of upfront capital expenditure, and
then quickly scale their use of Linius’ products as their business needs change (for example, during event-driven
spikes in usage, such as sports finals). From an internal perspective, operating as a SaaS platform affords the
Company tremendously reduced costs and improved time-to-market for new functionality, when compared with
traditional enterprise software development.
In parallel with the development and rollout of LVS, the Company continued to expand our channel partner
relationships, both globally and locally, in FY2019. At the global level, the Company has a collaboration agreement
with IBM, is a Select Technology Partner with Amazon AWS, and is part of the Microsoft Co-Sell program. Locally,
our channel partners include systems integrators, managed service providers, and resellers and referral partners.
Through these channels Linius believes that it has developed a high quality distribution network in terms of both
geographic and market reach, along with world-class capability for innovation with regard to utilising and
developing on top of Linius’ technology. The partners are not only selling the Company’s core technology, they are
building their own products which rely on the Company’s technology and result in additional revenue to Linius as
clients adopt our partners’ solutions. It is for this reason that we also launched the LVS marketplace in FY2019.
The LVS marketplace — where third parties build and promote their tools, plugins, and add-ons to LVS — is a place
where Linius’ clients can go to get a head start on their deployments; integrate with their own, internal systems;
or just generate new ideas.
PAGE 4
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Outlook
Immediately subsequent to the end of financial year, the Company closed two deals which are informative to our
outlook for the next several years. SportsHero (ASX SHO), which is deploying Linius’ hyper-personalization
application in their mobile app, is targeting the 80 million soccer fans across Indonesia. Racing.com represents
another mainstream sports segment into which Linius’ hyper-personalization application is being deployed. These
commercial agreements will both be revenue generating in FY2020, and represent the Company’s first steps
towards penetrating the global soccer market, and then additional sports sectors — providing every sports fan with
their own personalized TV channel over the next few years.
Our mid-term plan is to target specific segments, win initial clients to commercially validate solutions, and then roll
those solutions out with our partners. The Company is well advanced in this plan with the assets and capability
which were delivered in FY2019.
Specifically, we are leading with world soccer where we have already completed or are in progress of completing
POC’s with large broadcasters, in addition to the SportsHero agreement. In parallel we are actively engaged with
the partners for metadata in each of the markets, along with resellers and system integrators — many of whom
are in place already — and the Company is in active conversations with the football leagues themselves.
As stated, this strategy is well advanced in the global soccer market ,and the initiative with Racing.com illustrates
the Company’s endeavours in another sports market on which we are focussed, namely, racing and gaming. It is
envisaged that initially Linius will establish direct agreements with key parties in these sectors after which our
partners will replicate the models across each sector at scale. The Company has identified a number of sports
sectors where there is a significant requirement for the application of its unique technology solutions.
Sport is a high profile sector which we believe has immediate and compelling requirements; however, the Linius
hyper-personalization technology has been developed for broader applications in other global, vertical markets —
for example, education, news, security and defence, and corporate communication. The establishment of the
Company’s partner network, for both productisation and distribution, enables Linius to capitalise on the
opportunities and positive commercial interest already shown by prospective clients.
The Company also has substantial capability and opportunity in several high-value horizontal applications beyond
hyper-personalization: particularly, anti-piracy, personalized advertising, and additional security and defence
applications. Each of these in their own right represent multi-billion-dollar opportunities. On the anti-piracy front,
the Company has been working in conjunction with IBM on a Digital Asset Trust Network, which in September 2019
(subsequent to the close of the fiscal year) we presented on IBM’s stand at the International Broadcasting
Convention (the world’s largest international broadcasting conference) in Amsterdam.
Revenue Model
As mentioned, software-as-a-service is the Company’s primary business model. The model reflects usage on a
recurring revenue basis across three vectors: virtualization of our clients’ content library (both back catalogue and
new content as it becomes available), enrichment of that content with third-party metadata (whether human
generated or created by AI), and, significantly, a fee for every minute of virtual video that is played.
PAGE 5
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Our current list pricing is
1. Virtualization
2. Enrichment
$0.0092 per min
A low cost way to encourage
virtualization of as much content
as possible
With AI $0.3000 per min
without AI$0.1480 per min
Includes third party cost from AI
provider
3. Personalized video delivery
T1: <= 10,000,000pcm
T2: > 10,000,000 & <= 50,000,000pcm
T3: > 50 000 000pcm
$0.0022 per min
$0.0017 per min
$0.0012 per min
The bulk of the fees, in line with
clients’ monetization models
Significantly, while the subscription revenue model is appealing to many potential clients, the Linius model is built
to scale. Our pricing works for subscription-based services, ad-funded services, and even non-profit organizations
(e.g., government or education).
FY2019 Accomplishments
Commercial POCs
During FY2019 Linius’ hyper-personalization application of VVE successfully went through proof-of-concept trials
in the education vertical with Oklahoma State University, and in the media-and-entertainment vertical with Warner
Bros.; and the first commercial deal was closed in the news vertical with Swedish start-up Newstag.
These initial deals and proofs of concept are important to Linius’ success because of their replicability. Each
solution was built by a third-party system integrator, and can be quickly deployed for future clients, reducing friction
in adopting Linius’ VVE technology.
Newstag
Newstag launched a hyper-personalized news search service, powered by Linius, on their site. According to
Nielsen’s Total Audience Report 2016, news consumption is showing significant growth. In the US alone, adults
over 18-years-old watched more than 27 billion minutes of national cable television news programming per week.
The hyper-personalization of news content represents a dramatic shift in people’s ability to get the content they
want, when they want it, delivered in an easy to consume single environment. Newstag began generating revenue
for Linius subsequent to the close of the year.
Warner Bros. POC
In FY18, the Company announced Warner Bros. and Linius had agreed to collaborate on a pilot to demonstrate
the analytics and KPI capabilities of Linius’ virtual video. In November, 2018, the TVOD (Transactional Video-On-
Demand) test platform constructed by Linius’ System Integration partners on IBM Cloud went live. The original
agreement with Warner Bros. was extended to include Village Roadshow as the in-country partner for the test, and
the test was conducted by Qualtrics, a well-known third-party testing agency in Australia. The test involved the
streaming of selected Warner Bros. movies over a VOD OTT (over the top) platform. The video streams were
protected by industry standard DRM (Digital Rights Management). The testing criteria included a range of
quantitative data (machine collected performance data), such as video load times and buffering, and qualitative
data based on perceptions of the quality of the experience. The trial verified that high and standard definition
movies will stream virtually on demand and met standard industry quality metrics.
PAGE 6
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED
Oklahoma State University (OK State) POC
The OK State POC went live, delivered on LVS. The focus of the POC was to provide search capability across
“famous” faces in University videos (famous within the context of the university). The POC was a great success,
with OK State TV staff acting as a reference both internally and externally for commercial prospects.
Channel Partners
The Company has established a strong partner network and continues to invest in these relationships. Partners
are required to roll out replicable solutions, but additionally partners are actively developing their own products
on LVS, and building their sales pipelines.
Linius is partnered with the major cloud providers, and also with local system integrators and software
developers. During FY2019, Linius renewed its collaboration agreement with IBM, the Company’s products
became available on the Amazon Web Services (AWS) and Microsoft Azure marketplaces, and the Company
was admitted to the Microsoft Co-Sell program. The Microsoft Co-Sell program is particularly exciting for the
Company because it means that the Microsoft sales teams around the world will be compensated for selling
Linius solutions to Microsoft’s vast customer base. Their sales representatives and partners are incentivized
and enabled to sell a range of Linius solutions, including hyper-personalization solutions and services via LVS.
In addition to the household names, Linius channel strategy includes local partners that can build on top of
the Company’s technology and deliver bespoke solutions to their clients. In FY2019, Certus Solutions — the
largest and fastest growing IBM systems integration company in Australia and New Zealand — partnered with
Linius, and built the Warner Bros. POC. Additionally, Hemisphere, a leading video-systems integrator based in
Auckland, New Zealand, launched several products built on top of LVS, including their Search & Assembly App,
which allows their clients to deploy hyper-personalized video solutions on their websites incredibly quickly — in
some cases, in under an hour.
Blockchain Proof of Concept
The promise of blockchain is to have a transformative impact on management of digital assets, particularly across
borders. However, this promise is yet to be realized in any significant way for traditional digital assets. The Company
has long believed the its virtual video technology could be the enabling factor to make a video blockchain possible.
To date, the Company has made de minimis investment in blockchain R&D. In March 2019, Linius demonstrated
to the world that the combination of blockchain technology and virtual video makes it possible to store digital video
assets on the blockchain and control those assets via “smart contracts” — an industry term for a set of rules (a
contract) running on a blockchain. The Company is currently working with commercial pilot partners to accelerate
the move from prototype to commercially viable product and to further develop the commercial models.
In summary, FY2019 represented significant advancements in the Company’s ability to deliver its technology
commercially and scale the business in a number of key verticals. We have a multi-year plan in place to own hyper-
personalized TV across sports, news, education, and other verticals; we continue to see opportunity beyond this in
anti-piracy, security and defense, and personalized advertising; and we are optimistic about frontier technologies
such as blockchain, and the impact that Linius’ patented virtualization technology can have in these spaces.
Christopher Richardson
CHIEF EXECUTIVE OFFICER
30 September 2019
PAGE 7
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
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 2019.
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
Giuseppe Rinarelli B.Acc, CA
Mr Rinarelli is the Group’s CFO and company secretary. He is an experienced finance professional having
worked within a chartered environment in excess of 10 years. Appointed as company secretary on 3 June
2019.
Stephen Kerr B.Com, CA, FGIA
Mr Kerr provided 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 and resigned on 3 June 2019.
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 2019 after income tax expense amounted to $11,557,874 (2018 loss:
$10,714,098). This loss includes non-cash share based payments expense of $587,461 (2018: $1,358,869) and
non-cash amortisation charges of $540,000 (2018: $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 7.
Significant changes in the state of affairs
In the opinion of the directors there were no significant changes in the state of affairs of the Group that occurred
during the financial year under review.
Dividends Paid or Recommended
No dividends were paid or declared for payment.
Financial Position
The net assets of the Group at 30 June 2019 are $5,501,534 ($14,101,948).
PAGE 8
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Going Concern
For the year ended 30 June 2019, the Group had an operating net loss of $11,557,874 (30 June 2018:
$10,714,098) and net cash outflows from operating activities of $10,813,530 (30 June 2018: $8,544,365).
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
Subsequent to year end on 5 July 2019, the Group raised additional capital, via a placement to directors or their
nominees, via issue of 28,571,430 fully paid ordinary shares at $0.035 per share, being $1,000,000 and on 27
September 2019, the Group raised additional capital via issue of 136,363,640 fully paid ordinary shares at
$0.033 per share, being $4,500,000 excluding transaction costs.
Other than the matter noted above, 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
Interest in Shares and
Options at 30 June
2019
Loan shares accounted
as options
— 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 2017.
— 28,083,334 Ordinary shares (inclusive of 20,000,000 loan shares)
1,041,667 Options
20,000,000 loan shares 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 9
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Stephen McGovern
— Non-Executive Director
Experience
— Mr McGovern has over 25 years’ experience in the fields of telecommunications,
media sales, pay TV and regulatory. Steve has been a senior executive of several
established companies, both domestically and internationally, which have been
primarily associated with new and emerging markets and have required a strong sales
and solutions focus. These include pay TV, telecommunications de-regulation, internet
service providers and media licensing, all of which maintain a strong sales and
solutions focus, both domestically and internationally.
Mr McGovern is formerly a Sales Director of Sky Subscriber Services managing
subscriber acquisition for Sky TV (now BSkyB). Between 1995 and 1998 Steve was an
executive involved in the launch of the pay TV industry in Australia within the
Galaxy/Austar/Foxtel network.
From 1998 Mr McGovern was General Manager of Hotkey Internet Services, an ISP
which was sold to Primus Telecommunications in 2000. From 2000 Steve was a
director of the Australian subsidiary of Affinity Internet Holdings, Europe’s second
largest ISP at the time and listed on the FTSE, having vended in an Australian based
ISP business.
For 11 years Mr McGovern was Chief Executive of the my1300 group of companies
until the sale of the business earlier in 2014. This group comprised businesses which
involved media licensing, telecommunications service providers and partner networks
for Australian telecom companies such as Primus, AAPT, Telstra, Optus and Vodafone.
Mr McGovern is currently the CEO and Managing Director of Dubber Corporation, an
ASX listed provider of a Cloud recording and data capture Platform as a Service aimed
at the telecommunications service provider sector. Director since 18 April 2016.
Interest in Shares and
Options at 30 June
2019
— 40,000,000 Ordinary shares
in
Directorships held
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 10
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Previously, Mr Richardson served as global General Manager of KIT digital’s network-
operator division, and CEO of KIT Germany, where he oversaw growth of video platform
sales to network operators from $12 million US annually to over $100 million US, prior
to KIT’s acquisition by Piksel, Inc. Before KIT digital, Mr Richardson served in executive
roles in marketing and product-management for several Silicon Valley start-ups,
including:
•U4EA Wireless (the world’s first SMB focused Wi-Fi manufacturer, and provider of
embedded wireless software; acquired by GoS Networks); and
•NextHop Technologies (an embedded routing software company; acquired by
Greenhills software), which he co-founded and raised Series A funding from tier-1
Silicon Valley VCs, led by New Enterprise Associates.
Prior to founding NextHop technologies, Mr Richardson was a software engineer at
MERIT Networks, where he helped build the early internet, developing routing
protocols, and consulting with developing countries around the world on deploying the
Internet; lecturing multiple times at ISOC’s Developing Countries workshops in Geneva,
Switzerland, and being the first non-native speaker at Russia’s All Russia Telematiks
conference. Mr Richardson was Visiting Professor of Internet Routing at St. Petersburg
State Technical University in St. Petersburg, Russia. He studied mathematics and
philosophy at the University of Michigan, where he won the William S. Branstrom Prize
for academic excellence and Evelyn O. Bychinsky Award for excellence in mathematics.
Director since 18 April 2016.
Interest in Shares and
options at 30 June
2019
Directorships held
in
other listed entities in
the last 3 years
—
10,000,000 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
Giuseppe Rinarelli
CFO and Company Secretary (appointed 3rd June 2019)
Stephen Kerr
CFO and Company Secretary (resigned 3rd June 2019)
PAGE 11
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
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 2019. 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.
2019
2018
(Loss) attributable to owners of the company
$(11,557,874)
$(10,714,098)
Change in share price
Closing share price
($0.033)
$0.043
$0.024
$0.076
Profit/(loss) amounts have been calculated in accordance with the Australian Accounting Standards (AASBs).
The operating loss includes significant expenditures incurred on the continued development of the Group’s
proprietary software technology.
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 12
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements as at 30 June 2019 are as follows:
Name:
Title:
Agreement commenced: 21 February 2017
Term of agreement:
Details:
Gerard Bongiorno
Executive Chairman
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
Name:
Title:
Agreement commenced: 18 April 2016
No fixed term
Term of agreement:
An annual director fee of $90,000 plus superannuation. The fee paid to Mr McGovern
Details:
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 of which 10,000,000
lapsed during the year 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 and ended 3 June 2019
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 of which 1,000,000 were exercised and
500,000 lapsed during the year and 1,500,000 options in November 2016. The
agreement was finalised 3rd June 2019 with the appointment of Mr Rinarelli. The
Company will reimburse Mr Kerr for all reasonable expenses incurred in performing his
duties. The agreement includes a non-competition clause.
PAGE 13
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Giuseppe Rinarelli
Chief Financial Officer and Company Secretary
Service agreements (continued)
Name:
Title:
Agreement commenced: 29 May 2019
No fixed term
Term of agreement:
An annual salary fee of $130,000 plus superannuation. Under the terms of the contract,
Details:
the Company granted Mr Rinarelli 1,500,000 Options in May 2019. The agreement can
be terminated by either party on one month’s written notice. The Company will
reimburse Mr Rinarelli for all reasonable expenses incurred in performing his duties.
The agreement includes a non-competition clause.
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:
2019
Non-executive directors:
Stephen McGovern
Executive directors:
Christopher Richardson
Gerard Bongiorno
Executives:
Stephen Kerr
Giuseppe Rinarelli
2018
Non-executive directors:
Stephen McGovern
Executive directors:
Christopher Richardson
Gerard Bongiorno
Executives:
Stephen Kerr
Directors’ fees &
consultancy fees6
Superannuation
payments
Share-based
payments5
$
$
90,0002
8,325
Total7
$
Share-
based
%
98,325
271,200
-
-
$
-
-
271,2003
150,0001
110,0004
13,513
634,713
-
8,544
128,624
287,168
44.8
-
1,173
18,042
-
110,000
-
1,625
16,311
9.9
130,249
783,004
16.6
90,0002
8,325
-
98,325
-
230,8003
90,0001
114,0004
524,800
-
8,544
97,089
349,583
327,889
448,127
29.6
78.0
-
14,563
128,563
16,869
461,235
1,002,904
11.3
46.0
PAGE 14
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
1. Director and consultancy fees were paid to Otway Capital Consulting, a related party of Gerard Bongiorno.
2. Director fees were paid to SMG Nominees Pty Ltd, a related party of Stephen McGovern.
3. Director 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. Payments to Mr Kerr are to 3rd
June 2019, any additional services provided by Mr Kerr post 3rd June 2019 are not included in this table.
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.
6. Includes leave accruals calculated in accordance with AASB 112 Employee benefits.
7. No performance related benefits have been provided during the period.
Performance income as a proportion of total remuneration
Executive directors and executives were not paid performance based bonuses.
Equity instruments granted as compensation
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:
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.
2019
Options
Gerard
Bongiorno
Number of
loan shares
granted
2018
Grant date
Fair value
per loan
share at
grant date
$
Value of loan
granted
under the
loan share
terms
Exercise
price
$
20,000,000 28 Nov 2017
0.026
0.05
$1,000,000
Total number
of options
vested at 30
June 2019
15,000,000
Loan
expiry
date
30 Nov
2022
PAGE 15
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Details of equity incentives affecting current and future remuneration
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
Financial
years in
which grant
vests
Loan shares
20,000,000
28 Nov 2017
25%
-
2018-20
Options
10,000,000
30 Nov 2016
40%
50%
2017-20
Options
Options
1,500,000
30 Nov 2016
40%
1,500,000
29 May 2019
-
17%
-
2017-20
2020-2022
Gerard
Bongiorno
Christopher
Richardson
Stephen Kerr
Giuseppe
Rinarelli
The loan shares are accounted for as options. The value of loan shares granted 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).
Analysis of movements in equity instruments
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:
Stephen Kerr
Giuseppe Rinarelli
Granted in year $
Value exercised in year $
-
33,000
50,000
-
Options over equity instruments
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:
Gerard Bongiorno1
Balance
1.7.2018
3,541,667
Stephen McGovern
6,000,000
Christopher
Richardson
20,000,000
Stephen Kerr2
3,000,000
Granted during
the year
-
-
-
-
Lapsed or
exercised during
the year
(2,500,000)
Held at
30.6.2019
1,041,776
(6,000,000)
-
Vested
during the
year
Total Vested and
Exercisable
30.6.2019
-
-
1,041,776
-
(10,000,000) 10,000,000 4,000,000
8,000,000
(1,500,000)
1,500,000
600,000
1,200,000
Giuseppe Rinarelli
-
1,500,000
-
1,500,000
-
-
Total
32,541,667
1,500,000
(20,000,000) 14,041,776 4,600,000
10,241,776
All options expire on the earlier of their expiry date or termination of the individual’s employment.
1. Options held by Mr Bongiorno are not in respect of his employment.
2. For former Executives, the balance is as at the date they cease being KMP.
PAGE 16
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Exercise of options granted as compensation
During the period, 1,000,000 options were exercised at $0.05 per share .
Movements in shares
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
1.7.2018
Received as
Compensation
Acquired during
the year
Gerard Bongiorno
Stephen McGovern
Stephen Kerr2
Giuseppe Rinarelli
8,083,334
40,000,000
-
-
Total
48,083,334
-
-
-
-
-
Balance2
30.6.2019
8,083,334
40,000,000
-
-
1,000,0001
1,000,000
750,000
750,000
1,750,000
49,833,334
1. Represents options exercised during the period.
2. For former Executives, the balance is as at the date they cease being KMP.
Number of Loan Shares held by Key Management Personnel
Balance
1.7.2018
Received as
Compensation
Balance at
30.6.2019
Vested at
30.6.2019
Not vested at
30.6.2019
Gerard Bongiorno
Total
20,000,000
20,000,000
-
-
20,000,000
15,000,000
20,000,000
15,000,000
5,000,000
5,000,000
Key management personnel transactions
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
Group
2019
$
2018
$
60,000
62,000
11,000
9,013
26,800
-
11,000
9,013
30,379
11,000
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 17
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
Meetings of Directors
During the financial year, eight meetings of Directors were held. Attendance by each director was as follows:
Number eligible to attend
Number attended
Directors’ Meetings
Gerard Bongiorno
Stephen McGovern
Christopher Richardson
8
8
8
8
8
7
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. The directors have not
included details of the nature of the liabilities covered or the amount of the premium paid in respect of directors’
and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of
the contract.
Options
At the date of this report, the unissued ordinary shares of Linius Technologies Limited under option are as
follows:
Date of Expiry
30/11/2019
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
30/06/2020
15/02/2022
31/12/2022
29/11/2019
15/04/2022
29/05/2023
03/06/2023
Exercise Price
Number Under
Option
unlisted
unlisted
unlisted
unlisted
unlisted
listed
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
unlisted
4.5 cents
7 cents
7.5 cents
8 cents
8.5 cents
16 cents
22 cents
4.5 cents
5 cents
17 cents
6 cents
6 cents
6 cents
7.5 cents
5.3 cents
3.53 cents
3.59 cents
11,500,000
3,375,000
3,375,000
3,375,000
3,375,000
62,083,350
10,000,000
1,875,000
2,000,000
1,000,000
2,200,000
2,000,000
5,687,500
44,720,000
2,000,000
1,500,000
300,000
160,365,850
During the year ended 30 June 2019, 1,000,000 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 18
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
DIRECTORS’ REPORT CONT INUED
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 2019.
Non-Audit Services
During the year, KPMG, the Group’s auditor, has performed certain other services in addition to the audit and
review of the financial statements.
The board has considered the non-audit services provided during the year by the auditor and in accordance with
written advice provided by resolution of the audit committee, is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporation Act 2001 for the following reasons:
-
-
all non-audit services were subject to the corporate governance procedures adopted by the Group and
have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of
the auditor; and
the non-audit services provided do not undermine the general principles relating to auditor independence
as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or
auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting
as an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditors of the Group, KPMG, and its network firms for audit and non-audit
services provided during the year are set out below
In dollars
Audit and review of financial statements
Other services
Taxation compliance services
Total paid to KPMG
2019
$
82,000
27,232
109,232
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.
PAGE 19
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
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/.
Signed in accordance with a resolution of the Board of Directors.
Gerard Bongiorno
Director
30 September 2019
Melbourne
PAGE 20
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Linius Technologies Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Linius
Technologies Limited for the financial year ended 30 June 2019 there here have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to
the audit.
KPMG
Tony Batsakis
Partner
Melbourne
30 September 2019
21
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2019
Note
Group
Revenue
Administrative expenses
Employee benefit expenses
Amortisation expense
Consultant expenses
Depreciation expense
Share-based payments expense
Financial and compliance expenses
Software development expenses
Marketing and promotional expenses
Patent costs
Legal expenses
Travel and accommodation expenses
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)
2019
$
164,254
(674,801)
(684,328)
(540,000)
2018
$
91,142
(557,157)
(342,936)
(540,000)
(3,092,616)
(3,239,727)
(9,081)
(587,461)
(282,560)
(4,336,239)
(731,310)
(42,160)
(161,856)
(579,716)
(7,021)
(1,358,869)
(310,154)
(2,991,301)
(713,903)
(60,535)
(108,701)
(574,936)
(11,557,874)
(10,714,098)
-
-
(11,557,874)
(10,714,098)
-
-
(11,557,874)
(10,714,098)
(1.2)
(1.2)
(1.3)
(1.3)
2
19
4
7
7
The accompanying notes form part of the financial report.
PAGE 22
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019
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
2019
$
2018
$
8
9
2,298,200
10,766,028
286,389
265,192
2,584,589
11,031,220
10
3,465,000
4,005,000
34,929
19,713
3,499,929
4,024,713
6,084,518
15,055,933
529,856
53,128
582,984
582,984
928,944
25,041
953,985
953,985
5,501,534
14,101,948
32,381,556
30,047,557
4,986,621
4,363,160
(31,866,643)
(20,308,769)
5,501,534
14,101,948
11
12
19
The accompanying notes form part of the financial report
PAGE 23
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019
Issued
Capital
$
Share Based
Payments Reserve
Accumulated
Losses
$
$
Total
$
12,575,410
2,062,705
(9,594,671)
5,043,444
Group
Balance 1 July 2017
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)
17,472,147
Share-based payments
-
2,300,455
Total transactions with owners of the
Company
Balance at 30 June 2018
17,472,147
30,047,557
2,300,455
4,363,160
-
-
-
-
-
-
-
(10,714,098)
(10,714,098)
-
-
(10,714,098)
(10,714,098)
-
-
-
17,472,147
2,300,455
19,772,602
(20,308,769)
14,101,948
Balance 1 July 2018
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)
30,047,557
4,363,160
(20,308,769)
14,101,948
-
-
-
2,333,999
-
-
-
-
(11,557,874)
(11,557,874)
-
-
(11,557,874)
(11,557,874)
Share-based payments
-
623,461
Total transactions with owners of the
Company
Balance at 30 June 2019
2,333,999
32,381,556
623,461
4,986,621
(31,866,643)
The accompanying notes form part of the financial report
-
-
-
2,333,999
623,461
2,957,460
5,501,534
PAGE 24
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers
Other income received
Interest received
Note
Group
2019
$
2018
$
(10,956,994)
(8,620,815)
36,091
107,373
56,789
19,661
Net cash used in operating activities
13
(10,813,530)
(8,544,365)
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
(24,297)
(24,297)
(12,610)
(12,610)
2,549,999
(180,000)
2,369,999
(8,467,828)
10,766,028
2,298,200
19,343,000
(979,267)
18,363,733
9,806,758
959,270
10,766,028
The accompanying notes form part of the financial report
PAGE 25
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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 30 September 2019.
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 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Going Concern
For the year ended 30 June 2019, the Group incurred an operating net loss of $11,557,874 (2018: $10,714,098)
and net cash outflows from operating activities of $10,813,530 (2018: $8,544,365).
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 2019 until 30 September
2020 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 in addition to raising additional
capital (some of which was raised subsequent to year end).
The Directors note that subsequent to balance date, the Group raised $5,500,000 excluding transaction costs,
which provides the Group with sufficient funding to meet its planned development and commercialisation activities.
The Group’s ability to continue to operate as a going concern is dependent upon the items listed above, the
achievement of which is uncertain at the date of approval of these financial statements. These conditions give rise
to a material uncertainty as to whether the Group will be able to continue as a going concern and, should the Group
be unable to continue as a going concern it may be required to realise assets at an amount different to that recorded
in the statement of financial position, settle liabilities other than in the ordinary course of business and make
provisions for other costs which may arise.
(a)
Income Tax
The income tax expense/(benefit) for the year comprises current income tax expense/(benefit) and deferred tax
expense/(benefit).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using
applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities/(assets)
are therefore measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.
PAGE 27
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Tax (continued)
(a)
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.
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
(i) Recognition and Initial Measurement
Trade receivables and debt securities issued are initially recognised when they are originated. All other financial
assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions
of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is
initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its
acquisition or issue. A trade receivable without a significant financing component is initially measured at the
transaction price.
PAGE 28
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Financial Instruments (continued)
(ii) Classification and Subsequent Measurement
Financial assets – Policy applicable from 1 July 2018
On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI
– equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business
model for managing financial assets, in which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as
at FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at
FVTPL:
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows and
selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
•
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present
subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment
basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at
FVTPL. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly
reduces an accounting mismatch that would otherwise arise.
Financial assets – Subsequent measurement and gains and losses: Policy applicable from 1 July 2018
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend
income, are recognized in profit or loss. There were no financial assets at FVTPL during or at year end.
PAGE 29
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Financial Instruments (continued)
Financial assets – Subsequent measurement and gains and losses: Policy applicable from 1 July 2018 (continued)
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost
is reduced by impairment losses. Interest income, foreign exchange gains and losses are recognized in profit or loss
any gain or loss on derecognition is recognised in profit or loss.
Debt investments at FVOCI
These assets are subsequently measured at fair value. Interest income calculated using the effective interest
method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and
losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or
loss. There were no debt investment at FVOCI during or at year end.
Equity investments at FVOCI
These asset are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless
the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are
recognized in OCI and are never reclassified to profit or loss. There were no equity investment at FVOCI during or at
year end.
(iii) Decognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the
risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor
retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but
retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred
assets are not derecognised.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.
The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified
liability are substantially different, in which case a new financial liability based on the modified terms is recognised
at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the
consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
(iv) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
PAGE 30
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Financial Instruments (continued)
Prior year
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.
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.
PAGE 31
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)
Financial Instruments (continued)
v.
Financial Liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost
using the effective interest rate method.
(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.
(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
The Group has applied AASB 15 from 1 July 2018. Revenue is measured based on the consideration specified in a
contract with a customer. The Group recognises revenue when it transfers control over a good or service to a
customer.
The below provides information about the nature and timing of the satisfaction of performance obligations in
contracts with customers, including significant payment terms, and the related revenue recognition policies.
Services rendered
Nature and timing of satisfaction of performance obligations, including significant payment terms
The Group derives its revenue primarily from ‘software-as-a-service’ subscriptions, where customers subscribe to
access the platform and associated support services. Invoices for providing software-as-a-service and related
support revenue are issued on a monthly basis and are usually payable within 30 days.
Revenue recognition under AASB 15 (applicable from 1 July 2018)
Services are both distinct and capable of being distinct in the context of the contract, representing a series of
recurring services that the Group stands ready to perform over the contract term. Revenue is typically recognised
on services over time as a series of services performed over the contract term.
PAGE 32
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f)
Revenue and Other income (continued)
Prior year
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.
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.
(h)
Goods and Services Tax (GST)
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.
(i)
Comparative Figures
Where required by Accounting standards, comparative figures have been adjusted to conform to changes in the
presentation for the current financial year.
(j)
Critical Accounting Estimates and Judgments
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.
PAGE 33
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j)
Critical Accounting Estimates and Judgements (continued)
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 typically 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.
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.
PAGE 34
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m)
Intangible assets
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.
(n)
Employee leave benefits
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.
(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.
PAGE 35
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q)
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.
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.
(r)
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.
PAGE 36
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s)
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.
(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.
(t)
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.
(u)
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.
PAGE 37
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Impairment
Non-derivative financial assets
Policy applicable from 1 July 2018
Financial instruments and contract assets
The Group recognises loss allowances for ECLs on:
financial assets measured at amortised cost;
debt investments measured at FVOCI. The Group did not have any debt investment of FVOCI during and as
at 31 June 2019; and
contract assets.
The Group measures loss allowances at an amount equal to lifetime ECLs, except for the following, which are
measured at 12-month ECLs:
debt securities that are determined to have low credit risk at the reporting date; and
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime
ECLs.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and qualitative information and analysis,
based on the Group’s historical experience and informed credit assessment and including forward-looking
information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days
past due.
The Group considers a financial asset to be in default when:
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held); or
the financial asset is more than 180 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial
instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after
the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is
exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all
cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the
cash flows that the Group expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
PAGE 38
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Impairment (continued)
Non-derivative financial assets (continued)
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt securities
at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of
the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of
writing off the gross carrying amount when the financial asset is 180 days past due based on historical experience
of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect
to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group
expects no significant recovery from the amount written off. However, financial assets that are written off could still
be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.
Prior year
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 39
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Impairment (continued)
i.
Financial assets measured at amortised cost (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.
(w)
Adoption of new and revised standards
Standards issued but not yet effective
In the year ended 30 June 2019, 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. The Group has not early adopted any standards during the current period in preparing these consolidated
financial statements.
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.
PAGE 40
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 2: REVENUE
Revenue for services rendered
Other revenue:
Government grants
Interest received
Total revenue
NOTE 3: LOSS FOR THE YEAR
Other expenses:
Occupancy costs
Group
2019
$
14,534
40,090
109,630
164,254
Group
2019
$
2018
$
-
56,789
34,353
91,142
2018
$
133,830
98,570
PAGE 41
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 4: INCOME TAX EXPENSE
Group
2019
$
2018
$
(3,007,849)
(2,556,599)
(7,724)
3,015,573
-
(6,307)
2,562,906
-
(a) Income tax expense
Current tax benefit
Deferred tax – origination and reversal of temporary differences
Deferred tax assets not recognised
(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%
(3,178,415)
(2,946,377)
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
(c) Unrecognised deferred tax assets
Unused Australian tax losses for which no deferred tax asset has
been recognised
Temporary differences not recognised
Total
161,552
1,290
3,015,573
-
373,689
9,782
2,562,906
-
6,802,152
3,786,579
14,610
6,816,762
6,886
3,793,465
Potential deferred tax assets attributable to tax losses carried forward have not been brought to account at 30 June
2019 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 42
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 5 : KEY MANAGEMENT PERSONNEL
The total of remuneration paid to KMP of the Group during the period are as follows:
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
Group
2019
$
652,755
130,249
783,004
2018
$
541,669
461,235
1,002,904
Group
2019
$
2018
$
82,000
82,000
27,232
109,232
4,410
86,410
Group
2019
$
2018
$
a.
Reconciliation of earnings to profit or loss
Loss used to calculate basic and diluted EPS
(11,557,874)
(10,714,098)
b.
Weighted average number of ordinary shares outstanding during the
period used in calculating basic and diluted EPS
No.
No.
953,465,552
811,545,392
Potential ordinary shares comprising 115,645,850 options (2018: 229,093,350) were excluded in the calculation of
diluted EPS given they are antidilutive.
PAGE 43
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 8: CASH AND CASH EQUIVALENTS
Group
2019
$
2018
$
Cash at bank and in hand
2,298,200
10,766,028
The effective interest rate on short-term bank deposits was varying between 1.25% to 2.55%.
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
2,298,200
10,766,028
NOTE 9: OTHER RECEIVABLES
CURRENT
Accounts receivable
GST receivable
Prepaid expenses and other receivables
Group
2019
$
14,534
70,323
201,532
286,389
2018
$
-
84,861
180,331
265,192
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
2019
$
5,400,000
(1,935,000)
3,465,000
2018
$
5,400,000
(1,395,000)
4,005,000
PAGE 44
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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
the intellectual property purchased was covered by valid patents, trademarks and copyright.
The directors note that the intellectual property is at an early stage in its commercial life, with the associated technology
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 2019 consist principally of cash of $2,298,200 and intellectual
property, after amortisation, of $3,465,000. Net assets are $5,501,534.
Linius shares closed at a price of 4.3 cents per share on 30 June 2019. Total fully paid ordinary shares on issue at 30
June 2019 are 1,013,026,120. This gives a market capitalisation of Linius of $43,560,123. 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 2019 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 2.5%, which is consistent with market assumptions of the long term growth
target for Australia.
Revenue was based on a staged pipeline of licence income being earned, which is anticipated to grow in FY20 and
FY21 based on the number of customer take-on of the Linius technology. From 2022 to 2024 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% (pre-tax 18.88%) 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.
PAGE 45
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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.
NOTE 11: TRADE AND OTHER PAYABLES
Trade payables*
Sundry payables and accrued expenses
Group
2019
$
431,948
97,908
529,856
2018
$
702,224
226,720
928,944
*Terms of trade are in line with normal commercial terms (usually 30 to 60 days).
NOTE 12: ISSUED CAPITAL AND RESERVES
Issued Capital
2019
Opening balance 1 July 2018
Issue of shares through private placement (net of costs)*
Issue of shares as share based payment to consultants**
Issue of shares on conversion of unlisted options
At reporting date
Note
$
Group
Number
(Legal parent)
30,047,557
935,597,548
2,283,999
71,428,572
-
50,000
5,000,000
1,000,000
32,381,556
1,013,026,120
The Company has issued share capital amounting to 1,013,026,120 ordinary shares of no par value.
2018
Opening balance 1 July 2017
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 2018
12,575,410
16,579,147
50,000
-
843,000
679,190,880
224,166,668
1,000,000
20,000,000
11,240,000
30,047,557
935,597,548
*Net of $36,000 (2018: $941,586) of share based payment transaction costs and $180,000 of other transaction
costs.
**Net of $272,500 of share based payments.
PAGE 46
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
Ordinary shares
Opening balance
Fully paid shares issued during the year
— 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)
— August 2018 (share based payment of consulting fees)
— February 2019 (share based payment of consulting fees)
— March 2019 (issue of shares on exercise of unlisted options)
— April 2019 (issue of shares by private placement)
— June 2019 (share based payment of consulting fees)
Legal parent entity
2019
No.
2018
No.
935,597,548
679,190,880
-
-
-
-
-
-
-
-
-
-
-
-
2,500,000
1,250,000
1,000,000
71,428,572
1,250,000
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
1,013,026,120
935,597,548
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 47
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 12: ISSUED CAPITAL AND RESERVES (CONTINUED)
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 2019 is as
follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables and other liabilities
Working capital position
Group
2019
$
2,298,200
286,389
(582,984)
2,001,605
2018
$
10,766,028
265,192
(953,985)
10,077,235
PAGE 48
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 13: CASH FLOW INFORMATION
Cash flows excluded from loss attributable to operating activities:
Loss after income tax
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
2019
$
2018
$
(11,557,874)
(10,714,098)
9,081
540,000
587,461
-
28,087
(399,088)
(21,197)
7,021
540,000
1,358,869
50,000
22,936
378,624
(187,717)
Cash flows used in operating activities
(10,813,530)
(8,544,365)
Reconciliation of movements of liabilities to cashflows from financing activities
There were no changes in liabilities arising from financing activities (2018: nil).
PAGE 49
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 14: RELATED PARTY TRANSACTIONS
Group
2019
$
2018
$
(i) Transactions with key management personnel:
Advisory fees paid to Otway Capital Consulting, a consulting firm in which
Gerard Bongiorno has an interest
60,000
62,000
(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
11,000
9,013
26,800
-
11,000
9,013
30,379
11,000
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:
Name of the subsidiary
Linius (Aust) Pty Ltd
Linius Solutions Pty Ltd
Linius UK Ltd
Linius Inc.
Place of incorporation
Class of shares
Australia
Australia
UK
USA
Ordinary
Ordinary
Ordinary
Ordinary
% Held
2019
100%
100%
100%
100%
2018
100%
100%
-
-
PAGE 50
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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 51
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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
Number of
instruments
Exercise
price
Vesting conditions
Contractual
life of options
Options granted to key management
personnel and employees:
Employees
On 15 January 2018
1,875,000
4.5 cents 33% vesting on each of 1st, 2nd and
3rd anniversary of employment date
On 13-21 December 2018
5,687,500
6 cents 33% vesting in 6 months, 33%
vesting in 18 months and 33%
vesting in 30 months
3.3 years
4 years
On 3 June 2019
300,000 3.59 cents 33% vesting on each of 1st, 2nd and
3rd anniversary of employment date
4 years
7,862,500
Key Management Personnel
On 30 November 2016*
On 29 May 2019
Loan shares granted to key
management personnel
On 28 November 2017
Options granted to consultants:
On 15 February 2018
On 15 February 2018
On 15 February 2018
On 15 February 2018
On 22 February 2018
On 28 February 2018
On 28 February 2018
On 28 May 2018
On 27 April 2018
On 30 October 2018
On 1 September 2019
On 11 September 2019
On 25 January 2019
On 15 February 2019
On 26 March 2019
11,500,000
4.5 cents Refer to Note A below
1,500,000 3.53 cents 33% vesting on each of 1st, 2nd and
3rd anniversary of employment date
3 years
4 years
13,000,000
20,000,000
5.0 cents 50% vesting on issue, 25% vesting
5 years
in 12 months, 25% vesting in 24
months
7 cents Vested on issue
7.5 cents Vested on issue
8 cents Vested on issue
8.5 cents Vested on issue
5.0 cents 33% vesting on each of 1st, 2nd and
3rd anniversary of engagement date
22 cents Vested on issue
16 cents Vested on issue
17 cents Vested on issue
6 cents Vested on issue
6 cents Vested on issue
6 cents Vested on issue
6 cents Vested on issue
6 cents Vested on issue
6 cents Vested on issue
5.3 cents Vested on issue
3,375,000
3,375,000
3,375,000
3,375,000
2,000,000
10,000,000
10,000,000
1,000,000
300,000
300,000
300,000
300,000
1,000,000
2,000,000
2,000,000
62,700,000
22 months
22 months
22 months
22 months
3.3 years
19 months
19 months
21 months
27 months
20 months
22 months
22 months
17 months
3 years
3 years
PAGE 52
*Include options issued to former Key Management Personnel.
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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
(e.g. 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 53
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Share based payments (equity settled) expense recognised in profit or loss
Options
Options issued to KMPs:
- Christopher Richardson
- Stephen Kerr
- Giuseppe Rinarelli
Options issued under the ESOP
Options issued to consultants
Cost of options issued to consultants for capital
raising services, applied against equity
Shares
Shares issued to KMPs:
- Gerard Bongiorno – Loan funded shares
2019
$
2018
$
-
-
1,625
114,589
378,623
97,089
14,563
-
360,361
1,478,546
(36,000)
458,837
(941,273)
1,009,286
128,624
587,461
349,583
1,358,869
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 issued during the year
Options expired during the year
Options exercised during the year
ESOP options granted during the year
Options issued during the year
Options issued during the year
Options issued during the year
Options issued during the year
Outstanding at 30 June
Exercisable at 30 June
Number of
options
2019
229,093,350
(126,635,000)
(1,000,000)
7,987,500
4,200,000
2,000,000
Weighted
average
exercise
price
2019
9.6 cents
6.3 cents
5 cents
5.45 cents
6 cents
5.3 cents
115,645,850
98,266,683
12.8 cents
14.2 cents
Number of
options
2018
Weighted
average
exercise price
2018
73,000,000
62,083,350
4.9 cents
16.0 cents
(11,240,000)
5,750,000
75,000,000
13,500,000
10,000,000
1,000,000
229,093,350
218,360,017
7.5 cents
4.7 cents
7.5 cents
7.75 cents
22.0 cents
17.0 cents
9.6 cents
9.8 cents
PAGE 54
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 19: SHARE-BASED PAYMENTS (CONTINUED)
Loan shares on issue*
Outstanding at 1 July
Loan shares granted during the year
Number of loan
shares
2019
20,000,000
-
Weighted
average price
2019
5.0 cents
-
Number of
loan shares
2018
-
20,000,000
Weighted
average price
2018
-
5.0 cents
Outstanding at 30 June
Vested at 30 June
20,000,000
15,000,000
5.0 cents
5.0 cents
20,000,000
10,000,000
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 and Black-Scholes model, which
considers the terms and conditions upon which the options were granted:
30 June 2019
5,687,500
Unlisted
ESOP options
1,500,000
Unlisted ESOP
options
300,000
Unlisted
ESOP options
300,000
Unlisted
300,000
Unlisted
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%
2.045%
4
$0.06
$0.054
$0.028
Nil
80%
1.29%
4
$0.0353
$0.040
$0.22
Nil
80%
1.20%
4
$0.0359
$0.0350
$0.18
Nil
95%
2.08%
2.2
$0.060
$0.092
$0.058
Nil
90%
1.95%
1.7
$0.060
$0.058
$0.025
Grant date
13 Dec 2018 29 May 2019
3 Jun 2019 27 Apr 2018 30 Oct 2018
300,000
Unlisted
300,000
Unlisted
1,000,000
Unlisted
2,000,000
Unlisted
2,000,000
Unlisted
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
95%
1.955%
1.8
$0.060
$0.066
$0.034
Nil
95%
1.985%
1.8
$0.060
$0.069
$0.36
Nil
90%
1.87%
1.5
$0.060
$0.05
$0.018
Nil
90%
1.665%
3
$0.060
$0.039
$0.019
Nil
80%
1.43%
3
$0.053
$0.040
$0.018
Grant date
1 Sep 2018
11 Sep 2018 25 Jan 2019 15 Feb 2019 26 Mar 2019
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 55
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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 1.63% at 30 June 2019. 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 $6,532 (2018: $5,863)
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 56
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
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). The NAB has an AA rating with Standard & Poors.
Price risk
The Group is not exposed to commodity price risk.
b. Financial Instruments
i.
ii.
Derivative Financial Instruments:
Derivative financial instruments are not used by the Group.
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 (within 12 months).
Financial Assets at amortised cost:
Weighted Average
Effective Interest Rate
2019
%
2018
%
2019
$
2018
$
Cash and cash equivalents1.
1.63
1.96
2,298,200
10,766,028
Accounts receivable
Total Financial Assets
Financial Liabilities at amortised cost:
Trade and other payables
Total Financial Liabilities
1. Variable rate instruments
iii.
Net Fair Values
14,534
-
2,312,734
10,766,028
529,856
529,856
928,944
928,944
Financial assets (cash and other receivables) and financial liabilities (trade and other receivables) are carried
at amortised cost which approximates their fair values.
PAGE 57
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 21: EVENTS AFTER THE REPORTING PERIOD
Subsequent to year end on 5 July 2019, the Group raised additional capital, via a placement to directors or their
nominees, via issue of 28,571,430 fully paid ordinary shares at $0.035 per share, being $1,000,000 and on 27
September 2019, the Group raised additional capital via issue of 136,363,640 fully paid ordinary shares at
$0.033 per share, being $4,500,000 excluding transaction costs.
Other than the matter noted above, 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 2019:
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.
2019
$
2018
$
2,175,132
10,522,465
37,139,948
28,081,250
39,315,080
38,603,715
111,167
111,167
144,223
144,223
48,022,511
45,688,511
36,462
36,462
4,986,621
4,363,160
(13,841,681)
(11,628,641)
39,203,913
38,459,492
2019
$
2,213,040
2,213,040
2018
$
2,798,327
2,798,327
PAGE 58
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
NOTES TO THE FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2019
NOTE 23: CHANGES IN ACCOUNTING POLICY
Except for the change below, the Group has consistently applied the accounting policies set out in Note 1 to all
periods presented in these consolidated financial statements.
The Group has initially applied AASB 9 from 1 July 2018. A number of other new standards, including AASB 15 are
also effective from 1 July 2018 but they do not have a material effect on the Group’s financial statements.
Due to the transition methods chosen by the Group in applying these standards, comparative information
throughout these financial statements has not been restated to reflect the requirements of the new standards.
(b) AASB 9 Financial Instruments
AASB 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some
contracts to buy or sell non-financial items. This standard replaces AABS 139 Financial Instruments: Recognition
and Measurement.
As a result of the adoption of AASB 9, the Group has adopted consequential amendments to AASB 101
Presentation of Financial Statements, which require impairment of financial assets to be presented in a separate
line item in the statement of profit or loss and OCI. Previously, the Group’s approach was to include the impairment
of trade receivables in other expenses. There has been no material impact as a result of adoption AASB 9.
Additionally, the Group has adopted consequential amendments to AASB 7 Financial Instruments: Disclosures that
are applied to disclosures about 2019 but have not been generally applied to comparative information.
(i) Classification and measurement of financial assets and financial liabilities
AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, FVOCI
and FVTPL. The classification of financial assets under AASB 9 is generally based on the business model in which
a financial asset is managed and its contractual cash flow characteristics. AASB 9 eliminates the previous AASB
139 categories of held to maturity, loans and receivables and available for sale. Under AASB 9, derivatives
embedded in contracts where the host is a financial asset in the scope of the standard are never separated.
Instead, the hybrid financial instrument as a whole is assessed for classification.
AASB 9 largely retains the existing requirements in AASB 139 for the classification and measurement of financial
liabilities.
The adoption of AASB 9 has not had a significant effect on the Group’s accounting policies related to financial
liabilities and derivative financial instruments (for derivatives that are used as hedging instruments).
For an explanation of how the Group classifies and measures financial instruments and accounts for related gains
and losses under AASB 9, see Note 1 (b).
(ii)
Impairment of financial assets
AASB 9 replaced the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (ELC) model. The new
impairment model applies to financial assets measured at amortised cost, contract assets and debt investments
at FVOCI, but not to investments in equity instruments. Under AASB 9, credit losses are recognised earlier than
under AASB 139.
For assets in the scope of the AASB 9 impairment model, impairment losses are generally expected to increase
and become more volatile. The Group has determined that the application of AASB 9’s impairment requirements
at 1 July 2018 has had no impact
PAGE 59
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
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 59 and the
Remuneration report on pages 12 to 17 in the Directors’ report, are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
performance, for the financial year ended on that date; and
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.
3.
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 2019.
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
30 September 2019
PAGE 60
Independent Auditor’s Report
To the shareholders of Linius Technologies Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Linius Technologies Limited (the
Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
• giving a true and fair view of the
Group's financial position as at 30
June 2019 and of its financial
performance for the year ended on
that date; and
• complying with Australian
Accounting Standards and the
Corporations Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2019.
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of cash
flows for the year then ended.
• Notes including a summary of significant accounting
policies.
• Directors' Declaration.
The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
61
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Material uncertainty related to going concern
We draw attention to Note 1, “Going Concern” in the financial report. The conditions disclosed in Note 1,
indicate a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as
a going concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal
course of business, and at the amounts stated in the financial report. Our opinion is not modified in
respect of this matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of
uncertainty regarding events or conditions casting significant doubt in the Group’s assessment of going
concern. This included:
Analysing the cash flow projections by:
Evaluating the underlying data used to generate the projections for consistency with other
information tested by us, our understanding of the Group’s intentions, and past results and
practices;
Assessing the planned levels of operating and capital expenditures for consistency of
relationships and trends to the Group’s historical results, results since year end, and our
understanding of the business, industry and economic conditions of the Group;
Assessing significant forecast cash inflows and outflows for feasibility, quantum and timing. We
used our knowledge of the client, its industry and financial position to assess the level of associated
uncertainty; and
Evaluating the Group’s going concern disclosures in the financial report by comparing them to our
understanding of the matter, the events or conditions incorporated into the cash flow projection
assessment, the Group’s plans to address those events or conditions, and accounting standard
requirements. We specifically focused on the principal matters giving rise to the material
uncertainty.
Reading Directors minutes and assessing other relevant information to understand the Group’s ability
to raise additional shareholder funds, including assessing the level of associated uncertainty.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we have
determined the matter described below to be the Key Audit Matter.
62
Recoverable amount of intellectual property ($3,465,000)
Refer to Note 10 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Recoverable amount of intellectual
property is a Key Audit Matter due to:
the size of the balance (being 56.9%
of total assets);
the Group has a history of operating
losses. This increases the possibility
of the intellectual property being
impaired; and
the level of judgement required by
us in evaluating the Group’s
assessment of recoverability as
contained in their value in use
model.
The judgements included forecast cash
flows, discount rates applied, forecast
growth rates and long term growth
rates applied as incorporated in the
value in use model.
The model uses forward looking
estimations which can be inherently
difficult to determine with precision and
to audit. This is particularly challenging
given the early product
commercialisation stage of the Group
and further steps, such as
organisational support structure,
required to be undertaken to prepare
the Group for sales readiness and
growth.
In assessing this Key Audit Matter, we
involved senior audit team members,
including valuation specialists, who
collectively understand the Group’s
business and the market it operates in.
Our procedures included:
We compared forecast cash flows, forecast growth rates
and long term growth rates used in the value in use model,
for consistency with the Group’s board approved plans.
We challenged these, including the feasibility of their
commercialisation activities, plans for the form of sales
model to be implemented, the organisational support
structure and the nature of costs to facilitate the forecast
growth. We used our knowledge of the Group’s past
performance, business and our industry experience.
We assessed the Group’s estimate of the remaining useful
life of the intellectual property by reference to the external
report on intellectual property ownership previously
obtained by the Group considering changes to the Group
since the date of the report.
Working with our valuation specialists we used our
knowledge of the Group and market to assess the key
assumptions used in the Group’s value in use model. To do
this we:
-
-
-
assessed the appropriateness of the value in use
model used against the requirements of the
accounting standards. We assessed the accuracy of
the underlying calculation formulas;
considered the sensitivity of the model by varying key
assumptions, such as forecast growth rates, long term
growth rates and discount rates, within reasonably
possible range, to identify those assumptions at higher
risk of bias or inconsistency in application and to focus
our further procedures; and
analysed the Group’s discount rate against publicly
available data of a group of comparable entities. We
independently developed a discount rate range
considered comparable using publicly available data for
comparable entities, adjusted by risk factors specific to
the Group and the industry it operates in.
We compared the Group’s alternative recoverability testing
analysis, which included the market capitalisation approach
based on the recent quoted share price on the ASX and the
share price for capital raised during the year and
subsequent to year end, to the value in use model
prepared.
63
Assessed the adequacy of financial report disclosures in
respect of the carrying value of intellectual property against
the requirements of the accounting standards.
Other Information
Other Information is financial and non-financial information in Linius Technologies Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001;
• implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern assumption is appropriate. This includes disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
• to issue an Auditor’s Report that includes our opinion.
64
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Linius Technologies Limited for the
year ended 30 June 2019, complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included on
pages 12 to 17 of the Directors’ report for the year
ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Tony Batsakis
Partner
Melbourne
30 September 2019
65
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
ADDITIONAL INFORMATION FOR LISTED COMPANIES
1.
Shareholdings as at 9 September 2019
a.
Distribution of Shareholders
Category (size of holding)
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Above 100,001
Number
Holders
40
125
230
Number
Ordinary
6,054
477,258
1,902,859
1122
47,807,739
843
991,403,640
2360 1,041,597,550
b.
The number of shareholdings held in less than marketable parcels is 611.
c.
The names of the substantial shareholders listed in the holding Group’s register as at
9 September 2019 is:
Shareholder
Earthrise Holdings Pty Ltd /
Archaea Pty Ltd
Number
Ordinary
110,258,926
%
10.58
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 66
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
ADDITIONAL INFORMATION FOR LISTED COMPANIES (CONTINUED)
e.
20 Largest Shareholders — Ordinary Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
Earthrise Holdings Pty Ltd
Steve McGovern Nominees Pty Ltd
Anbaume Pty Ltd
Parlin Investments Pty Ltd
Naley Pty Ltd
One Managed Investment Funds Ltd
HSBC Custody Nominees (Australia) Ltd
VR Corporate Services Pty Ltd
Mr Anthony Finbar O’Hanlon
Stephen Wayne Velik
Bogan River Investments Pty Ltd
Archaea Pty Ltd
Phoenix Myrrh Technology Pty Ltd
One Managed Investment Funds Ltd
Clarkirb Nominees Pty Ltd
Sunshore Holdings Pty Ltd
Riversdale Capital Funding Pty Ltd
Unrandom Pty Ltd
Mr Gregory Paul Yeatman
One Managed Investment Funds Ltd
Total number of ordinary fully paid shares held
Number of
Ordinary Fully
Paid Shares
Held
% Held of
Issued
Ordinary
Capital
90,000,000
40,000,000
35,654,764
30,000,000
28,850,000
27,833,334
22,257,285
20,000,000
17,454,746
15,865,005
15,000,000
14,285,716
13,147,330
10,640,000
10,000,000
9,242,689
9,000,000
8,783,674
8,714,284
8,379,500
435,108,327
1,041,597,550
8.64%
3.84%
3.42%
2.88%
2.77%
2.67%
2.14%
1.92%
1.68%
1.52%
1.44%
1.37%
1.26%
1.02%
0.96%
0.89%
0.86%
0.84%
0.84%
0.80%
41.76%
PAGE 67
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
ADDITIONAL INFORMATION FOR LISTED COMPANIES (CONTINUED)
f.
20 Largest holders – Listed Options (ASX:LNUOA)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Name
One Managed Investment Funds Ltd
Celtic Capital Pty Ltd
CPS Capital Investments Pty Ltd
Bogan River Investments Pty Ltd
HSBC Custody Nominees (Australia) Ltd
Unrandom Pty Ltd
Wilberforce Pty Ltd
Morgan Stanley Australia Securities (Nominee) Pty Ltd
Sunshore Holdings Pty Ltd
MR David Peter Valentino
Anbaume Pty Ltd
Riversdale Capital Funding Pty Ltd
Mr PHILIP JOHN ROY
Wilberforce Pty Ltd
Ninkirb Nominees Pty Ltd
Beck Corporation Pty Ltd
Mrs Bernadette Justine Jackson
One Managed Investment Funds Ltd
Celtic Capital Pty Ltd
CPS Capital Investments Pty Ltd
Total number of options held
Number of
Options Held
10,416,667
3,500,000
3,000,000
2,995,834
2,500,000
2,208,333
1,879,401
1,666,666
1,250,000
1,194,163
1,041,667
1,041,667
1,000,000
900,000
833,333
833,333
754,312
720,484
700,000
690,000
39,125,860
62,083,350
%
Held
16.78%
5.64%
4.83%
4.83%
4.03%
3.56%
3.03%
2.68%
2.01%
1.92%
1.68%
1.68%
1.61%
1.45%
1.34%
1.34%
1.21%
1.16%
1.13%
1.11%
63.02%
PAGE 68
LINIUS TECHNOLOGIES LIMITED
ANNUAL REPORT 2019
2.
The name of the Company Secretary is Mr Giuseppe Rinarelli appointed 3 June 2019, previously Mr
Stephen Kerr resigned 3 June 2019.
3.
The address of the principal registered office in Australia is:
Suite 13, Level 3,
299 Toorak Road,
SOUTH YARRA VIC 3141
4.
Registers of securities are held at the following addresses:
Advance Share Registry
110 Stirling Hwy
NEDLANDS WA 6009
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 69