ASX:NOV ABN 98 606 556 183
ANNUAL
Report
30 June
2016
Table of
contents
Chairman’s letter
Review of operations
Directors’ Report
Review of 2016 Financial Results
Remuneration report (audited)
Disclosures relating to the directors & senior management
Independent auditor’s declaration
Financial Report
Consolidated Statement of Profit & Loss or other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ declaration
Independent auditor’s report
Additional disclosures
3
4
9
15
17
28
32
33
35
36
37
38
39
76
77
79
Directors
Peter Pawlowitsch
Peter Cook
Brandon Munro
Paul Burton
Kenneth Lai
Company secretary
Ian Hobson
Registered office
Principal place of business
Share register
Auditor
Solicitors
Bankers
Australia
Suite 5
95 Hay Street
Subiaco WA 6000
Australia
1st Floor
Legacy House
293 Swanston Street
Melbourne VIC 3000
+61 3 9011 8490
United Kingdom
153 Stafford Road
Wallington, Surrey
SM6 9BN
United Kingdom
20 Nugent Road
Guilford
GU2 7AF
+44 7733 057233
Automic Registry Services
Suite 1A, Level 1, Ventnor Avenue, West Perth WA 6005,
+61 8 9324 2099
William Buck
Level 20, 181 William Street, Melbourne Vic 3000
Milcor Legal
Level 1, 6 Thelma Street, West Perth WA 6005
National Australia Bank
Level 1, 330 Collins Street, Melbourne VIC 3000
Stock exchange listing
Novatti Group Limited shares are listed on the
Australian Securities Exchange (ASX code: NOV)
Website
www.novatti.com
www.novatti.com/investors/corporate-governance
Australian Financial Services
Licence
AFSL No. 448066
Financial Conduct Authority
FCA No. 900631 as an appointed representative of CFS-ZIPP Ltd
(FCA No. 900027) for issuance of e-money products
2
Annual Report 2016 Chairman’s
Letter
Dear fellow shareholder,
It has been an exciting year for Novatti with the Company’s listing on the ASX in January 2016. Since then,
Novatti has been focused on its growth strategy as detailed in its December 2015 Replacement Prospectus.
A key focus has been on growing our Transaction Services business, in addition to expanding the Novatti
Platform's reach.
For the financial year ended 30 June 2016, Novatti reported revenue of $4.87M, an increase of 56% over
FY15’s revenue of $3.12M. Earnings before interest and tax was a loss of $4.87M which included non-cash
expenses of approximately $0.96M (including options and performance share expenses, deemed equity
consideration on the reverse acquisition of Novatti Pty Ltd and the write-off of Novatti Group’s equity
interest in one of its Joint Ventures, High Impact Ltd).
Highlights for the year included:
•
•
•
•
•
•
•
Received $7m through an Initial Public Offering
Launch of Flexepin into Australia and Canada and the growing number of merchants accepting
Flexepin as a method of payment
Securing access to an e-money licence in the United Kingdom and passporting into Europe;
allowing us to distribute of Flexepin cash vouchers
Commencing transactions (in July 2016) in Malaysia through our 50% owned joint venture
Delivering the project for government-owned telecommunication provider in Tanzania
Securing new SaaS clients in the Asia Pacific region
The appointment of two non-executive directors, Mr Paul Burton and Mr Kenneth Lai, with extensive
global experience within the payments industry
The Board and Management of your Company are focused on ensuring that long-term growth for
shareholders remains paramount with some key objectives over the coming year being:
•
•
•
•
Consolidating our suite of product and service offerings on the back of delivering a telco-based
project in Tanzania
Expanding our footprint with key staff in the European and North American regions for the Flexepin
product
Further expanding our recurring transaction revenues
Expanding our global reach for the Novatti enterprise solution with key people in South Africa and
Latin America
On behalf of the Board, I would like to thank all the staff and contractors for their contribution to the
continuing development of the Group. Also, I would like to extend my appreciation to the shareholders for
their continued support, and we look forward to 2017 being an exciting year for the payments industry and
the Group.
Peter Pawlowitsch
Chairman
3
Annual Report 2016 Review of Operations
OVERVIEW
Novatti Group, founded in 2002 and listed on the ASX in 2016, is an award-winning global financial
transaction software technology and payment services provider. The Novatti Platform, which enables
telecommunication operators and other alternate payment providers drive value from digital financial
transactions, is the catalyst of the Group. The Platform is leveraged in all aspects of the business by providing
digital wallets and new types of payment methods alongside traditional payment options.
NOVATTI DIGITISES CASH BY:
◊ Partnering with global strategic stakeholders or acquisition opportunities
◊ Empowering the global trend towards a cashless society
◊ Giving financial institutions the ability to expand their offering, and acquire new
market segments at a low cost
◊ Providing technologies and products to enable the move to digital cash
◊ Giving non-financial companies new income streams and capabilities
◊ Enabling governments, enterprises & consumers to move to mobile financial
services
◊ Reducing risk of fraud
CORPORATE:
Date
Number of
Shares – Novatti
Group Ltd
Summary
19 June 2015
1,250,000
Incorporation of Novatti Group Ltd.
28 September 2015
40,000,000
31 October 2015
3,125,000
31 October 2015
3,555,206
31 October 2015
2,391,120
Novatti Group Limited acquired all the shares in Novatti Pty
Ltd on a scrip for scrip basis on 28 September 2015.
Loans provided by entities associated with Novatti Group
Limited directors, Peter Cook, Brandon Munro and Peter
Pawlowitsch to Novatti Pty Ltd converted into shares within
Novatti Group Limited at $0.16 per share.
Loan provided by Novatti Pty Ltd shareholder, Brayter Ltd, to
Novatti Pty Ltd converted into shares within Novatti Group
Limited at $0.16 per share.
$250,000 in non-current liabilities and $132,579 in trade
payables to director related Coomar Pty Ltd outstanding
as at 30 June 2015 was assigned to director related
Corangamite Pty Ltd in accordance with a Deed of
Assignment of Debt dated 31 October 2015 between the
two parties and was converted to equity at $0.16 per share.
23 November 2015
2,562,500
Issue of shares at $0.16 per share as pre IPO capital received
by Novatti Group Limited.
4
18 January 2016
35,000,000
Issue of 35 million shares from IPO at $0.20 per share.
Annual Report 2016 Business Operations
FY16 has been a year of transformation for the Group, with the necessary activities to prepare for the Initial
Public Offering (IPO), the expansion of the sales and marketing resources for the Novatti Platform technology
offerings and the commencement of businesses that create financial Transaction Processing revenues. The
Group has deployed the Novatti Platform into its controlled subsidiaries TransferBridge, Flexewallet and Flexe
Payments as well as its Joint Ventures, High Impact and Novatti (Malaysia), where the platform generates
income on a transactional basis. The Group continues to invest in growth and expansion for transaction
service-based products.
Strong growth
in current
revenue >
NOVATTI
PLATFORMS
Provide innovative
client platforms for
mobile banking,
remittances, digital
wallets, etc.
NOVATTI
TRANSACTION
SERVICES
Transaction services
for remittance,
cash vouchers, bill
payments, etc.
>
Growing
blue sky
opportunities
4th Consecutive year of revenue growth
$ 6,000,000
$ 5,000,000
$ 4,000,000
$ 4,000,000
$ 3,000,000
$ 1,000,000
$ -
FY13
FY14
FY15
FY16
Non-recurring
Recurring
R&D rebate
Transaction processing
5
Annual Report 2016 THE NOVATTI PLATFORM
is
the
“The Novatti Platform empowers new
cost-effective payment options.”
The Novatti Platform
technology
foundation of the Group and enables a vast
variety of solutions, which have been developed
and refined over many years. The platform
offers highly scalable transaction processing and stored value account management systems. The Novatti
Platform is deployed with an array of mobile and alternative payment functionality to telecommunication
and financial service companies globally. The platform can be implemented across an expansive range
of internal and external systems such as banks, ATMs, Point of Sale (POS) terminals, mobile phones, web
portals, POS systems, prepaid and post-paid billing systems, and telecommunications infrastructure. Novatti
is focused on increasing financial inclusion to unbanked or underbanked societies in developing nations
with minimal access to traditional bank accounts. The innovative technologies enable new and cost-effective
payment service to solve the needs in emerging marketplaces, where the internet and mobile penetration
is rapidly growing.
The Novatti Platform consists of a variety of software modules. Each module can be delivered as a standalone
solution or integrated with another module (including existing systems) utilising a common backbone
messaging system. The individual modules can be implemented to support the following payment
applications:
• Digital wallets
• Mobile money
•
• Distribution and activation of virtual and physical vouchers such as prepaid gift cards or prepaid debit
Voucher management
cards
Airtime distribution (also known as e-top-up, pin-less top-up, mobile top-up or mobile recharge)
International and domestic bill payments
International and domestic remittances
Agency banking to enable branchless banking in remote or isolated areas
•
•
•
•
TEAM
The Novatti Platform teams has expanded on all fronts. The sales team has extended their reach with additional
representatives in Colombia and South Africa. Development has increased in capacity in Melbourne and
established a new development centre in Vietnam.
CONTRACT FROM LEADING TANZANIAN TELECOM
The Tanzania Telecommunications Company Limited (TTCL) project provides an example of our state-of-the-
art payment and mobile banking platform and shows our strong understanding of building robust mobile
money systems.
In July 2015, Novatti was appointed to supply a mobile money and mobile banking platform for TTCL in
Tanzania. The Novatti Platform will enable TTCL to enter the mobile money marketplace.
NOVATTI SECURES NEW CLIENTS IN ASIA
Establishing a relationship with a top tier aviation company in Hong Kong is a crucial milestone as it allows
Novatti to enter the aviation industry. Novatti is also commissioned by industry payment and distribution
drivers in China and Malaysia to launch the Novatti Platform within the region.
Novatti is especially encouraged by the recurring nature of these contracts which shows a need to use the
Novatti Platform in the day to day operations of their respective businesses.
6
Annual Report 2016 TRANSACTION SERVICES
During the year, the Group successfully launched its Transaction Services division and as shown in the image
below, the percentage of revenue from this division is expected to grow to in FY17.
FY16 REVENUE BREAKDOWN
FY17E REVENUE BREAKDOWN
Non-recurring
Non-recurring
Recurring
Recurring
Transaction processing
Transaction processing
The Transaction Services division operates under a number of different brands.
Novatti™ offering white-label or direct-to-market
services
Transaction Processing services via Flexewallet™
f lex pin
Open-loop cash vouchers for online payments
called Flexepin™
Remittance services via TransferBridge™
7
Annual Report 2016 FLEXEPIN LAUNCHES
Flexepin vouchers provide customers with a secure
and convenient way to make online purchases and
to top up digital wallets and accounts, reducing
the threat of online fraud. Novatti initially launched
Flexepin in Australia with over 4,000 retailers.
“Flexepin successful launch in
Australia provided the Group with a
new scalable revenue source.”
Flexepin entering the Canadian market represented the first region as part of their global rollout. Novatti
signed a distribution agreement with Payment Source Inc to provide Flexepin with a significant and
immediate presence in the Canadian market; where cash vouchers are an attractive proposition to millions
of consumers looking for privacy and security in their online transactions. Payment Source has an extensive
distribution network established with 15,000 retail points of presence throughout Canada.
The Flexepin team has also expanded with additional sales resources in both the UK and Canada. Flexepin’s
support and executive team have increased to help with the ongoing compliance and business operations.
PAYMENTS PILOT FOR PAKISTAN CONSUMERS
Novatti successfully integrated the Novatti Platform with a leading Pakistan banking services provider
and local processor to launch a pilot, which will enable consumers in Pakistan to more easily purchase
products such as Google Play, Netflix, iTunes vouchers and over 50 other products which are not currently
sold domestically.
MALAYSIA JOINT VENTURE
Novatti formed a Joint Venture (JV) with ATX Malaysia Sdn Bhd and has launched a nationwide payment
service in Malaysia. The JV facilitates the uptake of electronic transactions in Malaysia while aiding the growth
of e-commerce and the mobile commerce industry in Southeast Asia.
The JV revolutionises the payments ecosystem by providing multiple top-up and bill payment services to
distributors and their extensive network of retailers, which were previously denied these services.
Novatti’s platform utilises ATX’s existing relationships; aiming to connect with approximately 20,000 retailers
and product suppliers by the end of the 2016 calendar year. The JV enhances the distributor’s retail network
with a comprehensive range of supplier products. White label capabilities of the platform enable distributors
to build their own electronic system with the security and privacy of in-house data and business processes.
First transactions went through the platform in July 2016.
FINANCIAL LICENCES
Flexewallet holds an Australian Financial Services Licence (AFSL No. 448066) for non-cash payments, is
registered with AUSTRAC and is a member of the Financial Ombudsman Scheme in Australia.
Flexe Payments is approved by the Financial Conduct Authority (FCA No. 900631) as an appointed
representative of CFS-ZIPP Ltd (FCA No. 900027) for the issuance of e-money products. CFS-Zipp has
passported the e-money licence it holds into all the states of the European Union, effectively allowing Flexe
Payments (subject to the appropriate notification) to operate in these countries.
8
Annual Report 2016 Directors'
Report
Directors’ Report
DIRECTORS
The following persons were directors of Novatti Group Limited during the whole of the financial year and up
to the date of this report, unless otherwise stated:
PETER PAWLOWITSCH
(Appointed 19 June 2015)
BRANDON MUNRO
(Appointed 12 October 2015)
PAUL BURTON
(Appointed 31 May 2016)
PETER COOK
(Appointed 12 October 2015)
KENNETH LAI
(Appointed 31 May 2016)
The directors present their report, together with the financial statements, on the consolidated entity (referred
to hereafter as the ‘Group’) consisting of Novatti Group Limited (referred to hereafter as the ‘Company’,
‘Novatti’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2016.
INFORMATION ON
DIRECTORS
Name:
Title:
Peter Pawlowitsch
Non-Executive Chairman
Qualifications:
BCom, MBA, CPA
Experience and expertise:
Peter is an accountant by profession, with extensive experience
as a director and officer of ASX-listed entities. He brings to
the team experience in operational management, business
administration and project evaluation in the IT, hospitality and
mining sectors gained during the last 15 years.
Other current directorships:
Chairman of Dubber Corporation Limited, and a non-executive
director of Ventnor Resources Ltd and Knosys Limited.
Former directorships (last 3 years):
Department 13 Ltd (formerly Kunene Resources Ltd)
Special responsibilities:
None.
Interests in shares:
1,875,000 ordinary shares.
Interests in options:
1,000,000
10
Annual Report 2016Directors’ Report Name:
Title:
Paul Burton
Non-Executive
Qualifications:
Chartered Accountant
Experience and expertise:
Paul has over 14 years of leadership experience in the payments
industry and was the CEO of Datacash Group Plc, a payments
gateway company bought by MasterCard. Datacash had a
significant presence in Africa and Paul steered the company’s
expansion in that market.
Other current directorships:
None.
Former directorships (last 3 years):
None.
Special responsibilities:
None.
Interests in shares:
0 ordinary shares.
Interests in options:
5,000,000 vested. 750,000 subject to shareholder approval at
the FY16 AGM.
Name:
Title:
Kenneth Lai
Non-Executive
Qualifications:
Bachelor of Science – Majoring in Computer Science
Experience and expertise:
MD of Hong Kong-based investment firm Prestige Team Limited,
which has interests in payment processing, real estate, digital
marketing and information technology support services.
Other current directorships:
None.
Former directorships (last 3 years):
None.
Special responsibilities:
None.
Interests in shares:
10,335,000 ordinary shares.
Interests in options:
750,000 subject to shareholder approval at the FY16 AGM.
11
Annual Report 2016Directors’ Report Name:
Title:
Qualifications:
Experience and expertise:
Brandon Munro
Non-Executive
BEco & Law, Post-Grad Applied Finance & Investment from the
Securities Institute of Australia, GAICD, F.Fin
Brandon is a corporate lawyer by profession with executive
experience in the private equity, mining, infrastructure and
IT sectors. Brandon brings regulatory, governance, mergers
and acquisitions and capital markets knowledge to the team,
as well as his own experience co-founding start-ups in the IT
and exploration sectors. He commenced his career as a lawyer
working for 7 years at premier Australian commercial law firms,
following which he held executive management and director
positions in the resource and infrastructure sectors, including
private equity and funds management industry.
Other current directorships:
Managing Director of Bannerman Resources Ltd and a non-
executive director of Rewardle Holdings Ltd.
Former directorships (last 3 years):
Department 13 Ltd (formerly Kunene Resources Ltd)
Special responsibilities:
None.
Interests in shares:
1,250,000 ordinary shares.
Interests in options:
1,000,000
12
Annual Report 2016Directors’ Report Name:
Title:
Peter Cook
Managing Director and Chief Executive Officer
Qualifications:
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
Experience and expertise:
Peter has over 25 years of experience as a director and executive
with companies including Coopers & Lybrand (now PWC), Catsco
Pty Ltd and Advanced Network Management Pty Ltd (Telstra joint
venture company) and many start-up technology companies.
Peter’s career has been largely based on founding and leading
multiple telecommunications and payments companies. Unidial
Pty Ltd and Ezipin Canada Inc are such examples and all with
successful exits to private and public companies. Peter was a non-
executive Director and Deputy Chairman of ASX-listed Senetas
Corporation Limited from June 1999 to January 2006.
Other current directorships:
None.
Former directorships (last 3 years):
None.
Special responsibilities:
None.
Interests in shares:
9,835,900 ordinary shares. Subsequent conversion of 872,004
Performance Shares as announced to the ASX on 16 September
2016. Total shares as at the date of this report, 10,707,904.
Interests in options:
5,000,000
Contractual rights to shares:
For the 2015/2016 financial year, Novatti Pty Ltd achieved
invoiced or invoiceable revenue greater than $3.5 million but less
than $4.0 million.
In accordance with the Terms and Conditions relating to
the Performance Shares as disclosed in the Replacement
Prospectus at clause 13.2, the first milestone has been
successfully satisfied, as announced to the ASX on 16 September
2016.
Milestones two, three and four have not been satisfied and the
Performance Shares have been redeemed.
Further information relating to the Performance Shares can be
found in Note 36 of this Financial Report.
‘Other current directorships’ quoted above are current directorships for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities
only and excludes directorships of all other types of entities, unless otherwise stated.
COMPANY
SECRETARY
Ian Hobson was appointed Company Secretary on 12 October 2015 and holds a Bachelor of Business
degree, is a Chartered Accountant and Chartered Secretary. Ian provides secretarial services and corporate,
management and accounting advice to a number of listed companies. Ian’s fees are based on a fee for
service arrangement.
13
Annual Report 2016Directors’ Report MEETINGS
OF DIRECTORS
The number of meetings of the Company’s Board of Directors (the ‘Board’) and of each Board
committee held during the year ended 30 June 2016, and the number of meetings attended by each
director were:
Attended
Held
Peter Pawlowitsch
Peter Cook
Brandon Munro
Paul Burton (Appointed 31 May 2016)
Kenneth Lai (Appointed 31 May 2016)
3
3
3
1
1
3
3
3
1
1
Held: represents the number of meetings held during the time the director held office or was a
member of the relevant committee.
The Company will not have a separate Audit and Risk Committee until such time as the Board is
of a sufficient size and structure, and the Company’s operations are of a sufficient magnitude, for a
separate committee to be of benefit to the Company. In the meantime, the full Board will carry out
the duties that would ordinarily be assigned to that committee under the written terms of reference
for that committee, including but not limited to, monitoring and reviewing any matters of significance
affecting financial reporting and compliance, the integrity of the financial reporting of the Company,
the Company’s internal financial control system and risk management systems and the external audit
functions.
The Board has not established a Nomination and Remuneration Committee as the role of the
committee will be undertaken by the full Board.
14
Annual Report 2016Directors’ Report Review of 2016
financial results
The loss for the Group after providing for income tax and non-controlling interest amounted to
($4,967,720) across all regions to support growth.
The Group’s Net Asset Position as at 30 June 2016 was $4,263,762 with $4,725,649+ held in Cash or
Cash equivalents.
The Group is debt free.
The earnings of the Group for 30 June 2016 is summarised below:
2016
$
2015
$
Sales revenue and
Other income^
4,871,209
3,120,094
EBITDA
(underlying)*
Profit/(Loss)
before Tax
(3,914,331)
(788,502)
The factors that are considered to affect
Total Shareholders Return (‘TSR’) are
(4,871,366)
(872,647)
summarised below:
Tax Expense
(96,354)
(71,526)
Net Profit/(Loss)
after Tax
(4,967,720)
(944,173)
Cash+
Net Cash
Net Cash
Operating
Cash flow
4,725,649
279,284
4,329,344
183,852
(2,740,040)
(513,507)
^ Other income as outlined in Note 5 of the financial statements.
* Underlying EBITDA excludes Option expenses, JV for High Impact
write-off and deemed consideration for reverse acquisition.
+ Includes $396,305 of clients’ funds held on trust under
Flexewallet’s CAPS1 program, (FY15, this was $95,432). These funds
are distributed under instructions within 24 hours.
2016
$
2015
$
0.14
-
-
-
(9.06)
(2.36)
Share price at
financial year
end1
Total dividends
declared (cents
per share)
Basic earnings
per share (cents
per share)
1 The Group was not listed on the ASX in FY15.
Dividends
There were no dividends paid, provided nor declared as at 30 June 2016.
15
Annual Report 2016Directors’ Report Reverse Acquisition that is not a business
Novatti Group Limited was incorporated on 19 June 2015. On 28 September 2015 Novatti Group Limited
entered into a Share Purchase Agreement with the equity holders of Novatti Pty Ltd to acquire, via a share
for share scrip rollover, all the shares in Novatti Pty Ltd. For accounting purposes this transaction is a reverse
acquisition that is not a business. Novatti Group’s listed equity value at the time of incorporation has been
eliminated on consolidation.
During the audit of the annual report of Novatti Group Ltd, the Company discovered that an error had been
made in relation to accounting for the share based transaction whereby Novatti Group Ltd obtained control
of Novatti Pty Ltd in the 31 December 2015 half year financial statements.
The transaction was not originally classified as a reverse acquisition that is not a business; however, it has now
been determined that it was. As such, comparative information for the accounting acquirer (Novatti Pty Ltd)
was not included in the half year financial statements as issued on the 18 February 2016.
The 31 December 2015 half year financial statements were restated to reflect the appropriate accounting
treatment and were subsequently re-issued on 31 August 2016.
The changes to the respective entity’s previous accounting arrangements and their effect on the financial
position of the integrated entity, are set out in more detail in the notes to the accounts.
Significant changes in the state of affairs
Flexe Payments Ltd was incorporated within the UK in April 2016. On 25 May 2016, this entity (FCA No. 900631)
was approved by the Financial Conduct Association (FCA) as an appointed representative of CFS-Zipp (FCA
No. 03925386), a licenced e-money product issuer.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
For the 2015/2016 financial year, Novatti Pty Ltd had invoiced or invoiceable revenue greater than $3.5 million
but less than $4.0 million. In accordance with the Terms and Conditions relating to the Performance Shares
as disclosed in the Replacement Prospectus at clause 13.2, the first milestone has been successfully satisfied,
as announced to the ASX on 16 September 2016.
Novatti Technologies Ltd, a 100% owned subsidiary of Novatti Group Ltd, was incorporated in the UK in
August 2016.
No other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may
significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in
future financial years.
Likely developments and expected results of operations
The Group will continue its principal activity of sales and deploying the Novatti Platform and increase
transaction services.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or
State law.
16
Annual Report 2016Directors’ Report Remuneration report
(audited)
The remuneration report details the key management
for the
remuneration arrangements
personnel
Group, in accordance with the requirements of
the Corporations Act 2001 and the Corporations
Regulations 2001.
Key management personnel are those persons
having authority and responsibility for planning,
directing and controlling the activities of the entity,
directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration
•
• Details of remuneration
Service agreements
•
Share-based compensation
•
Additional information
•
Additional disclosures relating to key management personnel
•
Principles used to determine the nature and amount of
remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive and non-executive rewards with
the achievement of strategic objectives and the creation of value for shareholders, and conforms to the
market best practice for the delivery of reward. The Board of Directors (the ‘Board’) ensures that executive
reward satisfies the following key criteria for good reward governance practices:
Competitiveness and
reasonableness
Acceptability to
shareholders
Performance linkage /
alignment of executive
compensation
Transparency
As there is currently no Nomination and Remuneration Committee, the full Board is responsible for
determining and reviewing remuneration arrangements for its directors and executives. The performance of
the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract,
motivate and retain high performance and high quality personnel.
The full Board has structured an executive remuneration framework that is market competitive and
complementary to the reward strategy of the Group.
17
Annual Report 2016Directors’ Report Alignment of shareholders’ interests:
•
•
•
Rewards capability and experience,
Reflects competitive reward for contribution to growth in shareholder wealth, and
Provides a clear structure for earning rewards.
In accordance with best practice corporate governance, the remuneration structure of non-executive
directors and executives are separate.
Non-executive directors’ remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-
executive directors’ fees and payments are reviewed annually by the Board. The Board may, from time to
time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and
payments are appropriate and in line with the market. The Chairman’s fees are determined independently
to the fees of other non-executive directors based on similar roles in the external market. The Chairman is
not present at any discussions relating to the determination of his remuneration. Non-executive directors do
receive share options.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically
by a general meeting. As the Company has not had a general meeting, the total maximum remuneration of
non-executive directors is initially set by the Constitution and subsequent variation is by ordinary resolution
of Shareholders in general meeting with the Constitution, the Corporations Act and the ASX Listing Rules, as
applicable. The amount has been set at an amount not to exceed $500,000.
Executive remuneration
The Company’s remuneration policy for executive directors and senior management is designed to promote
superior performance and long-term commitment to the Company.
Remuneration policies and arrangements for the Key Executive Members of the Group including the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and the Chief Executive Transaction
Processing Services are reviewed by the Board and ratified each year.
The Group rewards its executives with a level and mix of remuneration based on their position and
responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
•
•
•
•
Fixed remuneration including base pay and non-monetary benefits,
Short-term performance incentives,
Long-term incentives, and
Other remuneration such as long service leave.
The combination of these four components comprises the executive’s total remuneration.
18
Annual Report 2016Directors’ Report The following table illustrates how the Company’s remuneration strategy aligns with the Company’s strategic
direction and links remuneration outcomes to performance:
Novatti Group’s business objective:
To provide telecom operators and financial institutions innovative financial services such as mobile money,
mobile banking, remittances and digital wallets. Novatti’s divisions extend market reach by providing FinTech
solutions that reduce costs to acquire and manage a previously underserved market.
Remuneration Strategy linkages to business objective:
Align the interests of executives with
shareholders
Attract, motivate and retain high performing
individuals
The remuneration strategy incorporates “at-risk”
components, including both short and long-term
elements delivered in equity.
Performance is assessed against a suite of
financial and non-financial measures relevant
to the success of the Company and generating
returns for shareholders.
Remuneration is competitive with companies of
a similar size and complexity.
Deferred and long-term remuneration is
designed to encourage long term consistent
performance and employee retention.
Remuneration
component
Vehicle
Purpose
Link to
Performance
Fixed
Remuneration
Consisting of base salary,
superannuation and
non-monetary benefits.
Executives may receive
their fixed remuneration
in the form of cash or
other fringe benefits (for
example motor vehicle
benefits) where it does
not create any additional
costs to the Group and
provides additional value
to the executive.
Short Term
Incentive
Is paid in cash.
Long Term
Performance
Equity including Options
and Shares and/or rights.
Other
Remuneration
Long service leave.
To provide competitive
fixed remuneration set
with reference to role,
market, experience and
performance.
This is designed to
reward executives for
their contribution to the
achievement of annual
Group, business unit and
individual outcomes.
Reward executives for
their contribution to the
creation of shareholder
value over the longer
term.
Reviewed annually by
the Board, based on
individual and business
unit performance, the
overall performance
of the Group and
comparable market
remunerations.
Directly linked to
pre-agreed KPIs.
Reviewed regularly
with the relevant
executive member.
Final performance is
determined by the
Board.
It aims to align the
targets of the business
units with the targets
of those executives
responsible for meeting
those targets.
19
Annual Report 2016Directors’ Report Details of the incentive plans used
SHORT TERM INCENTIVE PROGRAM (STI):
The STI Program awards a cash bonus based on key members achieving targets from a Group, Business Unit
and individual perspective.
STI awarded to each executive depends on the extent to which specific targets set at the beginning of the
financial year by the Board are met. Targets are set by a cascading process from the Board through the
executive group.
The targets consist of financial and non-financial Key Performance Indicators (KPIs). These may include but
are not limited to:
•
•
•
•
Product management and project platform implementation,
Financial and Business Unit operational targets linked to the achievement of the Group’s growth in
annual sales revenue and controllable financial drivers including cash, market growth (including
geographical market growth), expense management control and capital management improvement,
Corporate development matters including employment, retention, and remuneration of core personnel,
leadership and succession, cultural development and communication activities, and
Establishment of business operational frameworks and procedures as well as Risk Management in
respect of financial and operational issues.
These measures were chosen as they represent the key drivers for the short term success of the business and
provide a framework for delivering long term value.
LONG TERM INCENTIVE PROGRAM (LTI)
LTI awards are issued annually to executives and are provided in order to align the remuneration of Key
Executive Members with the creation of shareholder value. LTI comprise equity instruments including shares
and options, where the incentive involves the time-based vesting of options on the basis that the executive
or employee continues to be employed by the Group and are eligible under the Company’s Employee Share
Plan (ESP) and or Option Plan (ESOP).
The vesting of these awards is dependent on the length of time and service of the executive or employee,
and alternatively, they can also be awarded at the discretion of the Board.
The achievement of the Group’s strategic and financial objectives is the key focus of the efforts of the
Company. As indicated above, over the course of each financial year, the Board reviews the Company’s
executive remuneration policy to ensure that the remuneration framework remains focused on driving
and rewarding executive performance, while being closely aligned to the achievement of Group strategic
objectives and the creation of shareholder value.
LTI are based on participation within Novatti’s ESP and or ESOP. LTI, based on equity remuneration (being
either the issue of securities, issue of performance shares and or rights or the issue of options), are made in
accordance with thresholds as set out in this financial plan. By using the Group’s ESP and or ESOP to offer
shares and options to employees, the interest of employees is aligned with shareholder wealth. A copy of the
ESP and ESOP can be found via the Group’s website.
20
Annual Report 2016Directors’ Report The table below sets out the summary information for key executives of their Options’ vesting and their
lapsing date of options as LTI awards for FY16.
Name
Start date
LTI award no
of Options
No of Options
vested in 2016
Lapsing date
for Options
12 Nov 2015
5,000,000
5,000,000
30 Jun 2019
Peter Cook^
Alan Munday*
12 Nov 2015
750,000
Steven Stamboultgis*
12 Nov 2015
600,000
Paolo Montessori*
3 Feb 2016
5,250,000
-
-
-
30 Jun 2019
30 Jun 2019
30 Jun 2019
Total
11,600,000
5,000,000
^ Total Options issued have vested for the year ended 30 June 2016, however, are in escrow as per the terms of their agreements for a
period of 24 months and may be exercisable after escrow and before 30 June 2019.
*Options are exercisable at $0.20 and vest over three equal tranches on 1 July 2016, 1 July 2017 and 1 July 2018.
In 2015, Novatti did not have an ESOP or ESP. There were also no LTI programs for management.
The results of the STI financial performance measures are listed below. These measurement methods were
selected as they directly reflect whether the STI performance targets have been met or not, as set by the
Board.
Discretionary bonuses were awarded to Peter Cook ($109,500), Alan Munday ($72,000) and Paolo Montessori
($30,000). The bonus therefore vested 53% during the financial year ended 30 June 2016. Peter’s bonus was
awarded for achieving key performance indicators as determined by the Board on an annual basis. The
bonuses for Alan and Paolo were awarded for achieving key performance indicators set on an annual basis
by the Managing Director within pre-determined limits set by the Board.
FY15 Business Unit performance measures:
Executive
Business unit
Performance measure
Peter Cook
Novatti Group
Based on management criteria as evaluated by the Board based
on qualitative and quantitative performance measures and Group
performance.
Details of remuneration
AMOUNTS OF REMUNERATION
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors of Novatti Group Limited:
•
•
•
•
•
Peter Pawlowitsch – Non-Executive Chairman
Peter Cook – Managing Director and Chief Executive Officer
Brandon Munro – Non-Executive Director
Kenneth Lai – Non-Executive Director
Paul Burton – Non-Executive Director
Other key management personnel:
•
•
•
Alan Munday – Group Chief Operating Officer
Steven Stamboultgis – Chief Financial Officer
Paolo Montessori – Chief Executive Transaction Processing Services
21
Annual Report 2016Directors’ Report Cash
salary &
fees
Cash
bonus
Non-
mon-
etary
Long
service
leave
Options
exp in yr
Equity-
settled
Super
annua-
tion
Total
Cash
bonus
paid or
payable
Cash
bonus
forfeited
Fixed
Rem
At risk
STI
At risk
LTI
Options
as a pro-
portion
of total
rem
2016
$
$
$
$
$
$
$
%
%
%
%
%
%
Non-Executive
Directors:
Peter Pawlowitsch
(Chairman)
Kenneth Lai2
Paul Burton3
27,016
-
-
Brandon Munro
16,625
Executive
Directors:
-
-
-
-
-
-
-
-
-
-
-
-
14,570
2,566
44,152
725
73,577
-
-
725
73,577
14,570
1,579
32,774
-
-
-
-
-
-
-
-
67%
-
-
56%
-
-
-
-
33%
33%
100% 100%
100% 100%
44%
44%
Peter Cook4
254,444 109,500
3,709
412
72,851
19,306 460,222
50%
50%
37%
47%
16%
16%
Other Key
Management
Personnel:
Alan Munday
203,957
72,000
Steven
Stamboultgis
158,989
-
Paolo Montessori
104,167 30,000
-
-
-
335
10,927
19,376 306,595
90%
10%
70%
26%
169
8,742
10,411
178,311
-
-
95%
-
4%
5%
4%
5%
-
49,787
-
183,954
30%
70%
19%
54%
27%
27%
765,198 211,5005
3,709
916 245,749
53,238 1,280,310
Cash
salary &
fees
Cash
bonus
Non-
mon-
etary
Long
service
leave
Options
exp
in yr
Equity-
settled
Super
annua-
tion
Total
Cash
bonus
paid or
payable
Cash
bonus
forfeited
Equity
bonus
paid or
payable
Equity
bonus
forfeited
Fixed
Rem
At risk
STI
Options
as a pro-
portion
of total
rem
$
$
$
$
$
$
$
%
%
%
%
%
%
%
2015*
Executive
Directors:
Peter Cook6
193,012 38,500 382,579
-
Other Key
Management
Personnel:
Alan Munday
18,124
-
-
211,136 38,500 382,579
228
228
-
-
- 614,091
10%
5%
73%
12%
35%
65%
1,722 20,074
-
-
-
-
100%
-
1,722 634,165
-
-
* There were no non-executive directors appointed in the prior financial period. FY15 relates to the accounting parent.
In FY15, there was no LTI program established. One hundred percent of Alan Munday’s remuneration package
was Fixed Remuneration.
2 Kenneth Lai’s remuneration is by way of 750,000 options vesting over a 12 and 24 month vesting period. The granting of the options is
subject to shareholder approval at the FY16 AGM.
3 Paul Burton’s remuneration is by way of 750,000 options vesting over a 12 and 24 month vesting period. The granting of the options is
subject to shareholder approval at the FY16 AGM.
4 Peter Cook was rewarded 872,004 Performance Shares, as announced to the ASX on 16 September 2016. See Note 36 for further details.
5 $211,500 was unpaid as at 30 June 2016, however, it had been accrued as at 30 June 2016.
6 Bonuses relating to Peter Cook for the FY14 and FY15 periods were paid out in FY15. $130,000 related to FY14 and $200,000 for FY15 bonuses.
Of the $330,000 paid out as bonuses, $291,500 was converted to equity in the form of shares. An additional $91,079 of Peter’s cash salary
value was converted to equity (2,391,120 ordinary shares at $0.16) and $38,500 was paid out as cash.
22
Annual Report 2016Directors’ Report SERVICE
AGREEMENTS
Remuneration and other terms of employment for key management personnel are formalised in service
agreements. Details of these agreements are as follows:
Name:
Title:
Peter Cook
Managing Director and Chief Executive Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Bonus:
Termination:
Base salary of $273,750 (including superannuation). 5 million
Options each exercisable at $0.20 on or before 30 June 2019 (as
set out in Section 13.3 of the Replacement Prospectus dated 8
December 2015).
The executive bonus structure targets are reviewed annually
with both parties acting in good faith and reflecting the current
needs of the business. The performance bonus can be up to up
to $219,000 (including statutory superannuation).
The agreement may be terminated, (A) by either party without
cause with six months’ notice, or at the election of Novatti,
immediately with payment in lieu of six months’ notice (subject
to the limitation of the Corporations Act and Listing Rules). (B)
by Novatti on one months’ notice, if the executive is unable to
perform his duties due to illness, accident or incapacitation, for
three consecutive months or a period aggregating more than
three months in any 12-month period.
23
Annual Report 2016Directors’ Report Name:
Title:
Alan Munday
Group Chief Operating Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Bonus:
Termination:
Base salary of $220,000 (including statutory superannuation),
750,000 Options, each exercisable at $0.20 on or before 30 June
2019, vesting over three equal tranches on 1 July 2016, 2017 and
2018, if the employment has not terminated by the relevant
date, on the same terms and conditions (as set out in Section
13.3 of the Replacement Prospectus dated 8 December 2015).
The executive bonus structure targets are reviewed annually
with both parties acting in good faith and reflecting the current
needs of the business. The performance bonus can be up to up
to $80,000 (including statutory superannuation).
The agreement may be terminated, (A) without cause, with
three months’ notice from the Company or two months’ from
the executive, or payment in lieu of notice at the Company’s
election (subject to the limitation of the Corporations Act
and Listing Rules). (B) by Novatti on one months’ notice, if the
executive is unable to perform his duties due to illness, accident
or incapacitation, for three consecutive months or a period
aggregating more than three months in any 12-month period or
(C), summarily following material breach or in the case of serious
misconduct.
Name:
Title:
Steven Stamboultgis
Chief Financial Officer
Agreement commenced:
20 November 2015
Term of agreement:
The term is not fixed.
Remuneration:
Base salary of $180,000 (including statutory superannuation)
and 600,000 Options, each exercisable at $0.20 on or before 30
June 2019, vesting over three equal tranches on 1 July 2016, 2017
and 2018, if the employment has not terminated by the relevant
date, on the same terms and conditions (as set out in Section
13.3 of the Replacement Prospectus dated 8 December 2015).
Bonus:
None.
The agreement may be terminated by either party without
cause with three months’ notice, or in the case of Novatti,
immediately with payment in lieu of notice (subject to the
limitation of the Corporations Act and Listing Rules), by Novatti
on one months’ notice, if Steven is unable to perform his duties
due to illness, accident or incapacitation, for three months or a
period aggregating more than three months in any 12 month
period, or summarily following material breach or in case of
serious misconduct.
Termination:
24
Annual Report 2016Directors’ Report Name:
Title:
Paolo Montessori
Chief Executive Transaction Processing Services
Agreement commenced:
27 January 2016
Term of agreement:
The term is not fixed.
Remuneration:
Annual consultancy of $250,000, exclusive of GST, 750,000 Options
issued under the ESOP and 4,500,000 Options issued as Performance
Options, each exercisable at $0.20 on or before 30 June 2019,
vesting over three equal tranches on 1 July 2016, 2017 and 2018, if the
employment has not terminated by the relevant date, on the same
terms and conditions (as set out in Section 13.3 of the Replacement
Prospectus dated 8 December 2015).
Bonus:
The executive bonus structure targets are reviewed annually with
both parties acting in good faith and reflecting the current needs of
the business. The performance bonus can be up to $100,000.
Termination:
The consultancy agreement may be terminated by Novatti at any
time for any reason which reason need not be specified, by giving
three months’ notice, (subject to the limitation of the Corporations
Act and Listing Rules). Where Novatti gives notice, Novatti may pay
Paolo in lieu or may require the Paolo to continue to provide services
during the notice period or part thereof. If Novatti elects to pay Paolo
in lieu, Novatti will immediately pay to Paolo an amount equal to
three months’ worth of the annual consultancy fee component of the
consultancy fees and Paolo will accept that amount in full and final
satisfaction of all claims against Novatti.
If Paolo is unable to perform his duties due to illness, accident or
incapacitation, for three months or a period aggregating more
than three months in any 12 month period, or summarily following
material breach or in case of serious misconduct Novatti may
terminate the agreement on terms it sees fit by giving Paolo six
months’ notice or an amount equal to six months’ worth of the cash
component of his consultancy fee and Paolo will accept that amount
in full and final satisfaction of all claims against Novatti.
At any time, Novatti may immediately terminate the agreement
without notice as the result of an occurrence that gives Novatti a right
of summary dismissal of an employee at common law, including,
wilful breach, gross or wilful disobedience, gross or wilful misconduct,
dishonesty, subordination or neglect, failing to meet performance
targets, having a receiver, receiver and manager, investigator,
administrator, liquidator, provisional liquidator appointed of if
an application is prescribed for the appointment of a provisional
liquidator, being declared bankrupt, being placed under the control
of any committee or officer under a law relating to mental health
such that he is unable to satisfactorily carry out his duties, convicted
of criminal offence involving fraud or dishonesty or any other offence
which is punishable by imprisonment.
Key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
25
Annual Report 2016Directors’ Report SHARE-BASED COMPENSATION
ISSUE OF SHARES
No shares were issued as part of compensation for
the year ended 30 June 2016.
Options were issued to Kenneth Lai and Paul
Burton as their director remuneration. The options
are subject to shareholder approval which will be
determined at the Company’s 2016 Annual General
Meeting (AGM).
Kenneth and Paul have been each offered 750,000
options, vesting 12 months and 24 months equally
after appointment date. Each option has an exercise
price of $0.25. The last day for exercising is 30 June
2019.
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors
and other key management personnel in this financial year or future reporting years include:
20167
Grant date
Grant
number
Fair value
per option
at grant
date
Vest
number
during the
yr
Value ex
during
the yr
Ex price
Expiry
date
First ex
date
Last ex
date
Director
Executive Directors
Peter Cook
12 Nov 15
5,000,000
$0.20 5,000,0008
Other Key Management
Personnel:
Alan Munday
12 Nov 15
250,000
$0.20
Alan Munday
12 Nov 15
250,000
$0.20
Alan Munday
12 Nov 15
250,000
$0.20
Steven Stamboultgis
12 Nov 15
200,000
$0.20
Steven Stamboultgis
12 Nov 15
200,000
$0.20
Steven Stamboultgis
12 Nov 15
200,000
$0.20
Paolo Montessori
3 Feb 16
1,750,000
$0.20
Paolo Montessori
3 Feb 16
1,750,000
$0.20
Paolo Montessori
3 Feb 16
1,750,000
$0.20
Non-Executive Directors
-
-
-
-
-
-
-
-
-
Peter Pawlowitsch
12 Nov 15
1,000,000
$0.20 1,000,0009
Brandon Munro
12 Nov 15
1,000,000
$0.20 1,000,00010
Kenneth Lai
31 May 16
375,00011
$0.25
Kenneth Lai
31 May 16
375,00012
$0.25
-
-
Paul Burton
12 Nov 15
5,000,000
$0.20 5,000,00013
Paul Burton
31 May 16
375,00014
$0.25
Paul Burton
31 May 16
375,00015
$0.25
-
-
Total
20,100,000
12,000,000
$0.20
30 Jun 19
12 Nov 15
30 Jun 19
$0.20
30 Jun 19
1 Jul 16
30 Jun 19
$0.20
30 Jun 19
1 Jul 17
30 Jun 19
$0.20
30 Jun 19
1 Jul 18
30 Jun 19
$0.20
30 Jun 19
1 Jul 16
30 Jun 19
$0.20
30 Jun 19
1 Jul 17
30 Jun 19
$0.20
30 Jun 19
1 Jul 18
30 Jun 19
$0.20
30 Jun 19
27 Jan 17
30 Jun 19
$0.20
30 Jun 19
27 Jan 18
30 Jun 19
$0.20
30 Jun 19
27 Jan 19
30 Jun 19
$0.20
30 Jun 19
12 Nov 15
30 Jun 19
$0.20
30 Jun 19
12 Nov 15
30 Jun 19
$0.25
30 Jun 19
31 May 17
30 Jun 19
$0.25
30 Jun 19
31 May 18
30 Jun 19
$0.20
30 Jun 19
12 Nov 16
30 Jun 19
$0.25
30 Jun 19
31 May 17
30 Jun 19
$0.25
30 Jun 19
31 May 18
30 Jun 19
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7 No Options were issued or granted in FY15 for any Directors or Employees.
8 Peter Cook’s 5,000,000 options are escrowed for 24 months from grant date.
9 Peter Pawlowitsch’s 1,000,000 options are escrowed for 24 months from grant date.
10 Brandon Munro’s 1,000,000 options are escrowed for 24 months from grant date.
11 Kenneth Lai’s 375,000 options are subject to shareholder approval at the FY16 Annual General Meeting.
12 Ibid.
13 Paul Burton’s 5,000,000 options are escrowed for 12 months from grant date.
14 Paul Burton’s 375,000 options are subject to shareholder approval at the FY16 Annual General Meeting.
15 Ibid.
26
Annual Report 2016Directors’ Report Options granted carry no dividend or voting rights.
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management
personnel as part of compensation during the year ended 30 June 2016 are set out below:
Number
of Options
granted during
the yr
Value of
Options
granted during
the yr
Value of
Options ex
during the yr
Value of
Options lapsed
during the yr
Name
$
$
$
Peter Pawlowitsch
1,000,000
58,531
Peter Cook
5,000,000
292,655
Brandon Munro
1,000,000
Kenneth Lai16
Paul Burton17
750,000
750,000
58,531
19,424
19,424
Paul Burton
5,000,000
292,655
Alan Munday
Steve Stamboultgis
750,000
600,000
43,898
35,119
Paolo Montessori
5,250,000
310,016
Total
20,100,000
1,130,253
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The factors that are considered to affect Total Shareholders Return (‘TSR’) are summarised below:
Share price at financial year end
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
2016
2015
0.14
-
(9.06)
unlisted
-
(2.36)
16 Kenneth Lai’s 750,000 Options are subject to shareholder approval at the FY16 Annual General Meeting.
17 Paul Burton’s 750,000 Options are subject to shareholder approval at the FY16 Annual General Meeting.
27
Annual Report 2016Directors’ Report Disclosures relating to the
directors & Senior Management
Additional disclosures relating to key
management personnel
The number of shares in the Company held during the financial year by each director and other members of
key management personnel of the Group, including their personally related parties, is set out below:
Bal at the start
of the yr
Issued as at listing
date
Received as part
of rem
Additions
Disposals/other
Bal at the end of
the year
Ordinary shares
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Alan Munday
Steven Stamboultgis
Paolo Montessori
625,000
-
625,000
-
-
-
-
-
1,250,000
9,835,900
625,000
10,335,000
-
50,000
20,000
-
Total
1,250,000
22,115,900
OPTION HOLDING
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,875,000
9,835,900
1,250,000
10,335,000
-
50,000
20,000
-
23,365,900
The number of options over ordinary shares in the Company held during the financial year by each director
and other members of key management personnel of the Group, including their personally related parties,
is set out below:
Bal at the start
of the yr
Issued as at listing
date
Granted
Exercised
Expired/
forfeited/other
Bal at the end of
the yr
Options over ordinary
shares
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai18
Paul Burton19
Paul Burton
Alan Munday
Steven Stamboultgis
Paolo Montessori
Total
-
-
-
-
-
-
-
-
-
-
1,000,000
5,000,000
1,000,000
-
-
-
-
-
750,000
750,000
5,000,000
750,000
600,000
-
-
-
-
5,250,000
13,350,000
6,750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
5,000,000
1,000,000
750,000
750,000
5,000,000
750,000
600,000
5,250,000
20,100,000
Other transactions with key management personnel and their related parties.
18 Kenneth Lai’s 750,000 Options are subject to shareholder approval at the FY16 Annual General Meeting.
19 Paul Burton’s 750,000 Options are subject to shareholder approval at the FY16 Annual General Meeting.
28
Annual Report 2016Directors’ Report SERVICES
During the financial year, payments for services related to the listing of Novatti Group Ltd were provided by
Gyoen Consulting Pty Ltd, a company associated with Peter Pawlowitsch of $38,500, Caprodite Transaction
Execution Pty Ltd, a company associated with Brandon Munro of $20,600 and Chongwe Limited, a company
associated with Paul Burton of £10,000. All transactions were made on normal commercial terms and
conditions, and at market rates.
LOANS FROM DIRECTORS:
Novatti Pty Ltd entered into $500,000 of convertible loans with Peter Cook, Brandon Munro and Peter
Pawlowitsch. The convertible loans were convertible into ordinary shares in Novatti Group Limited with a
face value conversion at $0.16 per share. On 31 October 2015, the total $500,000 convertible loans on issue
were converted into 3,125,000 ordinary shares.
Date entered
into
Loan value Loan rate
Loan
expense
$
%
$
Details
12 Sep 2015
150,000
14 Sep 2015
200,000
16 Sep 2015
50,000
16 Sep 2015
50,000
8 Oct 2015
50,000
12
6
6
6
12
989 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
1,584 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
379 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
379 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
396 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
500,000
3,727
CURRENT AND NON-CURRENT LIABILITIES TO A DIRECTOR:
$250,000 in non-current liabilities and $132,579 in trade payables within Novatti Pty Ltd to Coomar Pty Ltd,
outstanding as at 30 June 2015, was assigned to Corangamite Pty Ltd in accordance with a Deed of Assignment
of Debt dated 31 October 2015 between the two parties. This debt was subsequently settled through the
issue of 2,391,120 ordinary shares at $0.16 each to Coomar Pty Ltd. Coomar Pty Ltd and Corangamite Pty Ltd
are associated with Peter Cook.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
Unissued ordinary shares of Novatti Group Limited under option at the date of this report are as follows:
Grant date
Expiry date
Ex price
Number
under option
12 Nov 15
12 Nov 15
12 Nov 15
12 Nov 15
8 Jan 16
3 Feb 16
3 Feb 16
3 Feb 16
8 Feb 16
31 May 16
24 Jun 16
Total
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 19
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.20
$0.25
$0.20
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
1,750,000
1,750,000
1,750,000
4,000,000
1,500,00020
3,637,000
34,446,250
No person entitled to exercise the options had or has any right by virtue of the option to participate in any
share issue of the Company or of any other body corporate.
20 Ibid 18 & 19
29
Annual Report 2016Directors’ Report SHARES ISSUED UPON THE EXERCISE OF OPTIONS
No shares were issued by Novatti Group Limited during the year ended 30 June 2016 up to the date of this
report as a result of the exercise of options granted.
INDEMNITY AND INSURANCE OF OFFICERS
The Company has indemnified the directors and executives of the Company for costs incurred, in their
capacity as a director or executive, for which they may be held personally liable, except where there is a lack
of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors
and executives of the Company against liability to the extent permitted by the Corporations Act 2001. The
contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to ensure the auditor
of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party
for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial
year by the auditor are outlined in Note 24 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or
by another person or firm on the auditor’s behalf), is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001 for the following reasons:
•
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity
and objectivity of the auditor; and
• None of the services undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management
or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing
economic risks and rewards.
30
Annual Report 2016Directors’ Report A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act
2001 is set out on the following page.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.
On behalf of the directors
Peter Pawlowitsch
Chairman
29 September 2016
Melbourne
The Board of Directors of Novatti Group Limited (‘Novatti’ or the ‘Company’) is responsible for corporate
governance.
The Board has chosen to prepare the Corporate Governance Statement ('CGS') in accordance with the third
edition of the ASX Corporate Governance Council’s Principles and Recommendations under which the CGS
may be available on the Company’s website.
Accordingly, a copy of the Company’s CGS is available on the Novatti Group website at www.novatti.com
under the Corporate Governance section.
31
Annual Report 2016Directors’ Report Directors’ Report
Independent auditor’s
declaration
6
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
32
Financial
Report
Financial
Report
GENERAL INFORMATION
The financial statements cover Novatti Group Limited as a Group consisting of Novatti Group Limited and the
entities it controlled at the end of, or during, the year. The financial statements are presented in Australian
dollars, which is Novatti Group Limited’s functional and presentation currency.
Novatti Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business are:
Registered office
Level 1
6 Thelma Street
West Perth WA 6005
Principal place of business
Legacy House, Level 1
293 Swanston Street
Melbourne VIC 3000
A description of the nature of the Group’s operations and its principal activities are included in the
Directors’ Report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors.
34
Annual Report 2016Financial Report Consolidated Statement
of Profit or Loss and other
Comprehensive Income
For the year ended 30 June 2016
Revenue
Other income
Total Revenue
Expenses
Cost of Sales
Employee benefits
Depreciation and amortisation expense
Occupancy
Finance charges
Foreign currency translation (losses)/gains
Travel expenses
Marketing expenses
Data management expenses
Share of net profit of joint ventures accounted for using the
equity method
Deemed equity consideration on Reverse Acquisition that is not
a Business
Other expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to
owners
Note
Consolidated
2016
Consolidated
2015
5
5
7
13
7
6
36
8
$
3,873,835
997,374
4,871,209
$
2,398,022
722,072
3,120,094
(2,140,404)
(5,587,115)
(393,802)
(2,976,068)
(19,449)
(100,190)
(34,297)
22,791
(275,352)
(148,035)
(145,666)
(199,338)
(224,875)
(890,645)
(4,871,366)
(79,757)
(99,192)
(4,388)
102,828
(113,023)
(83,595)
(103,398)
(20,594)
-
(221,752)
(872,647)
(96,354)
(71,526)
(4,967,720)
(944,173)
Total comprehensive income for the year attributable to owners
(4,967,720)
(944,173)
Basic earnings per share
Diluted earnings per share
2016
Cents
2015
Cents
35
35
(9.06)
(6.79)
(2.36)
(2.36)
The above statement of Profit or Loss and Other Comprehensive Income (OCI) should be read in conjunction
with the accompanying notes.
35
Annual Report 2016Financial Report
Consolidated Statement of
Financial Position
As at 30 June 2016
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial Assets
Other
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Other non-current assets
Total non-current assets
Note
Consolidated
2016
Consolidated
2015
$
$
9
10
11
12
6, 32
13
6, 32
4,725,649
1,541,958
31,837
52,580
6,352,024
14,901
46,357
-
61,258
279,284
1,065,167
30,925
264,619
1,639,995
24,331
9,293
116,211
149,835
Total assets
6,413,282
1,789,830
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Borrowings
Total current liabilities
Non-current liabilities
Employee benefits
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated Losses
Total equity
15
16
17
16
18
19
20
21
1,878,719
152,232
-
972,548
164,505
359,707
2,030,951
1,496,760
118,569
-
118,569
8,384
250,000
258,384
2,149,520
1,755,144
4,263,762
34,686
11,940,604
714,314
3,458,122
-
(8,391,156)
(3,423,436)
4,263,762
34,686
The above statement of financial position should be read in conjunction with the accompanying notes.
36
Annual Report 2016Financial Report Consolidated Statement of
Changes in Equity
For the year ended 30 June 2016
Issued capital
Option
reserves
Foreign
currency
translation
reserve
Retained
profits
Total equity
$
$
$
$
$
Consolidated
Balance at 1 July 2015
Deemed Consideration on reverse
acquisition that is not a Business
Loss after income tax expense for
the year
3,458,122
225,000
-
3,683,122
Transactions with owners in their
capacity as owners:
Shares issued during the period
8,257,482
Options issued
Foreign Currency Translation Reserve
-
-
713,465
-
-
-
-
-
-
-
-
-
-
-
-
849
(3,423,436)
34,686
-
225,000
(4,967,720)
(4,967,720)
(8,391,156)
(4,708,034)
-
-
-
8,257,482
713,465
849
Balance at 30 June 2016
11,940,604
713,465
849
(8,391,156)
4,263,762
Novatti Group Limited was incorporated on 19 June 2015. On 28 September 2015 Novatti Group Limited
entered into a Share Purchase Agreement with the equity holders of Novatti Pty Ltd to acquire, via a share
for share scrip rollover, all the shares in Novatti Pty Ltd.
For accounting purposes this transaction is a reverse acquisition that is not a business. Novatti Group’s listed
equity value at the time of incorporation has been eliminated on consolidation.
On 16 September 2016 as announced on the ASX, 5,000,000 Performance Shares were issued in accordance
with the terms and conditions as set within clause 13.2 of the 8 December 2015 Replacement Prospectus.
For the year ended 30 June 2015
Consolidated
Balance at 1 July 2014
Comprehensive Income
Loss for the year
Retained losses on Flexewallet at the date of acquisition
Other comprehensive income
Total comprehensive income
Issued capital
$
Retained
profits
$
Total Equity
$
3,458,122
(2,235,160)
1,222,962
-
(944,173)
3,458,122
(3,179,333)
(944,173)
278,789
-
-
(244,103)
(244,103)
-
-
3,458,122
(3,423,436)
34,686
Balance at 30 June 2015
3,458,122
(3,423,436)
34,686
The above statement of changes in equity should be read in conjunction with the accompanying notes.
37
Annual Report 2016Financial Report Consolidated Statement of
Cash Flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Receipt of Research and Development rebate
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2016
Consolidated
2015
$
$
4,085,663
2,144,037
(7,692,426)
(3,294,045)
60,695
936,679
(34,297)
(96,354)
11,054
701,361
(4,388)
(71,526)
Net cash from operating activities
34
(2,740,040)
(513,507)
Cash flows from investing activities
Joint Venture High Impact Corp. - Loan
Joint Venture Novatti (Malaysia) Sdn Bhd - Investment
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares – Pre Initial Public Offering
Proceeds from issue of shares – Initial Public Offering
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(27,571)
(16,457)
(56,513)
(100,541)
1,219,126
7,000,000
(595,264)
-
-
(7,542)
(7,542)
-
-
-
-
359,707
(359,707)
7,264,155
4,423,574
279,284
22,791
-
359,707
(161,342)
440,626
-
Cash and cash equivalents at the end of the financial year
9
4,725,649
279,284
The above statement of cash flows should be read in conjunction with the accompanying notes.
38
Annual Report 2016Financial Report Financial Report | Note 1
Notes to the
Financial Statements
For the year ended 30 June 2016
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
As outlined in Note 2, for accounting purposes
Novatti Pty Ltd was identified as the accounting
acquirer and Novatti Group Ltd was identified as the
accounting subsidiary.
Control is achieved when the Group is exposed, or
has rights, to variable returns from its involvement
with the investee and has the ability to affect
those returns through its power over the investee.
Specifically, the Group controls an investee if and
only if the Group has:
•
•
•
Power over the investee (i.e. existing rights that
give it the current ability to direct the relevant
activities of the investee),
Exposure, or rights, to variable returns from its
involvement with the investee, and
The ability to use its power over the investee to
affect its returns.
When the Group has less than a majority of the voting
or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing
whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other
vote holders of the investee,
Rights arising from other contractual
arrangements, and
The Group’s voting rights and potential voting
rights.
NEW, REVISED OR AMENDING
ACCOUNTING STANDARDS AND
INTERPRETATIONS ADOPTED
The Group has adopted all of the new, revised or
amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board
(‘AASB’) that are mandatory for the current reporting
period.
The adoption of these Accounting Standards and
Interpretations did not have any significant impact
on the financial performance or position of the
Group.
HISTORICAL COST CONVENTION
The financial statements have been prepared under
the historical cost convention.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the financial statements requires
the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the
process of applying the Group’s accounting policies.
The areas involving a higher degree of judgment
or complexity, or areas where assumptions and
estimates are significant to the financial statements,
are disclosed in Note 2.
PARENT ENTITY INFORMATION
In accordance with the Corporations Act 2001, these
financial statements present the results of the Group
only. Supplementary information about the legal
parent entity is disclosed in Note 29.
PRINCIPLES OF CONSOLIDATION
These are the financial statements of Novatti Group
Limited (the ‘Company’ or as the ‘legal parent’) and
its controlled entities (the ‘Group’) as at 30 June 2016.
39
Annual Report 2016 Financial Report | Note 1
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control.
A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where
the difference between the consideration transferred and the book value of the share of the non-controlling
interest acquired is recognised directly in equity attributable to the parent.
If the Group loses control over a subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the subsidiary,
• De-recognises the carrying amount of any non-controlling interests,
• De-recognises the cumulative translation differences recorded in equity,
•
•
•
Recognises the fair value of the consideration received,
Recognises the fair value of any investment retained, and
Recognises any surplus or deficit in profit or loss.
Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or retained earnings,
as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
OPERATING SEGMENTS
Operating segments are presented using the ‘management approach’, where the information presented is on
the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in Australian dollars, which is Novatti Group Limited’s functional and
presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates
at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars
using the average exchange rates, which approximate the rates at the dates of the transactions, for the period.
All resulting foreign exchange differences are recognised in other comprehensive income through the foreign
currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is
disposed of.
REVENUE RECOGNITION
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
The Company derived the following revenue for the provisions of its services::
Platform Sales
Deployment and the support of specialist mobile and alternative payment technology. There are two primary
components, the recognition of revenue on the completion and delivery of agreed milestones and the revenue
recognised for ongoing maintenance and support..
Transaction Sales
Included within transaction sales are:
Fees for software as a service
Fees for the facilitation of top up vouchers
•
•
40
Annual Report 2016 Financial Report | Note 1
Interest
Interest revenue is recognised on a time proportional basis that takes into account the effective yield on the
financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Government grants
Government grants, including Research and Development revenues, are recognised where there is reasonable
assurance that the grant will be received and all attached conditions will be fulfilled.
INCOME TAX
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based
on the income tax expense or benefit for the period is the tax payable on that period’s taxable income based
on the applicable income tax rates that have been enacted by reporting date, adjusted by the changes in
deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment
recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or
substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
41
Annual Report 2016 Financial Report | Note 1
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to
the same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
Novatti Group Limited (the ‘head legal entity’) and its wholly-owned Australian subsidiaries have formed an
income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary
in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax
consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate
amount of taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement
ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group
member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the
subsidiaries to the head entity.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value.
TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less any provision for impairment. Trade receivables are generally due for
settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade
receivables is raised when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in
payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired.
The amount of the impairment allowance is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Joint Ventures
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of
an arrangement, which exists only when decisions about the relevant activities require the unanimous consent
of the parties sharing control.
Investments in Joint Ventures are accounted for using the equity method. Under the equity method, the share
of the profits or losses of the Joint Venture is recognised in profit or loss and the share of the movements in
equity is recognised in other comprehensive income. Investments in Joint Ventures are carried in the statement
of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the Joint Venture.
Dividends received or receivable from Joint Ventures reduce the carrying amount of the investment.
When the Group’s share of losses in a Joint Venture equals or exceeds its interest in the Joint Venture, including
any unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the Joint Venture.
42
Annual Report 2016 REVERSE ACQUISITION THAT IS NOT A BUSINESS
The consideration in a reverse acquisition is deemed to have been incurred by the legal subsidiary (Novatti
Pty Ltd) in the form of equity instruments issued to the shareholders of the legal parent entity (Novatti Group
Ltd). The acquisition-date fair value of the consideration transferred has been determined by reference to the
fair value of the number of shares the legal subsidiary (Novatti Pty Ltd) would have issued to the legal parent
entity (Novatti Group Ltd) to obtain the same ownership interest in the combined entity.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether
equity instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition date fair values of the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of
any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets.
All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for
appropriate classification and designation in accordance with the contractual terms, economic conditions, the
Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest
in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is
recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent
settlement is accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any
pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-
existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to
the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and measurement of the net assets acquired, the
non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held
equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement
period, based on new information obtained about the facts and circumstances that existed at the acquisition-
date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii)
when the acquirer receives all the information possible to determine fair value.
FINANCIAL INSTRUMENTS
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions to the instrument. For financial assets, this is equivalent to the date that the Group commits itself to
either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially
measured at fair value plus transaction costs.
43
Annual Report 2016Financial Report Financial Report | Note 1
Classification and subsequent measurement
Financial instruments are subsequently measured at fair value, amortised cost using the effective interest
method, or cost depending on their classification.
Classification is determined based on the purpose of the acquisition and subsequent reclassification to other
categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired
or have been transferred and the Group has transferred substantially all the risks and rewards of ownership..
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. Gains or losses are recognised in
the statement of profit or loss and other comprehensive income through the amortisation process and when
the financial asset is derecognised.
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised
cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial
liability is derecognised.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial
asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the
issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a
borrower concessions due to economic or legal reasons that the lender would not otherwise do; it becomes
probable that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an
active market for the financial asset; or observable data indicating that there is a measurable decrease in
estimated future cash flows.
The amount of the impairment allowance for financial assets carried at cost is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market
rate of return for similar financial assets.
PLANT AND EQUIPMENT
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation
and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the
estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable
amount and impairment losses are recognised either in profit or loss. A formal assessment of recoverable
amount is made when impairment indicators are present.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of
the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net
cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash
flows have been discounted to their present values in determining recoverable amounts.
The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in
profit or loss during the financial period in which they are incurred.
The depreciable amount of all fixed assets, is depreciated on a straight-line basis over the asset’s useful life to
the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated
over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.
The estimated useful lives for the current period are as follows:
Leasehold improvements – 2 years
Plant and equipment – 2 years
Fixtures and fittings – 10 years
44
Annual Report 2016 Financial Report | Note 1
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic
benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to
the statement of profit or loss and other comprehensive income in the period in which they arise.
LEASES
The determination of whether an arrangement is or contains a lease is based on the substance of the
arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially
all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the
lessor effectively retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or
if lower, the present value of minimum lease payments. Lease payments are allocated between the principal
component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the
remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of
the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership
at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a
straight-line basis over the term of the lease.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are
tested annually for impairment, or more frequently if events or changes in circumstances indicate that they
might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-
use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate
specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent
cash flows are grouped together to form a cash-generating unit.
TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
PROVISIONS
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past
event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties
surrounding the obligation. If the time value of money is material, provisions are discounted using a current
pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised
as a finance cost.
EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be wholly settled within 12 months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled.
45
Annual Report 2016 Financial Report | Note 1
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled wholly within 12 months of
the reporting date are measured as the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date using the projected unit credit method. Consideration
is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the reporting date on corporate bonds with
terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are
incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in
exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-
vesting conditions that do not determine whether the Group receives the services that entitle the employees
to receive payment. No account is taken of any other vesting conditions.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to
market conditions are considered to vest irrespective of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not
been made. An additional expense is recognised, over the remaining vesting period, for any modification that
increases the total fair value of the share-based compensation benefit as at the date of modification.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled
award, the cancelled and new award is treated as if they were a modification.
FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that the
transaction will take place either: in the principal market; or in the absence of a principal market, in the most
advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement
is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, are used, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each
reporting date and transfers between levels are determined based on a reassessment of the lowest level of
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise
is either not available or when the valuation is deemed to be significant. External valuers are selected based on
market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in
the latest valuation and a comparison, where applicable, with external sources of data.
46
Annual Report 2016 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.
DIVIDENDS
Dividends are recognised when declared during the financial year and no longer at the discretion of the
Company.
EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Novatti Group Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
GOODS AND SERVICES TAX ('GST') AND OTHER SIMILAR TAXES
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
statement of financial position.
Cash flows are presented on a gross basis in the statement of cash flows. The GST components of cash flows
arising from investing or financing activities which are recoverable from, or payable to the tax authority, are
presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
tax authority.
47
Annual Report 2016Financial Report Financial Report | Note 1
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR
EARLY ADOPTED
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2016.
The Group’s assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the Group, are set out below::
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace IAS 39 Financial Instruments:
Recognition and Measurement. AASB 9 introduces new classification and measurement models for financial
assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose
objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely
principal and interest. All other financial instrument assets are to be classified and measured at fair value
through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains
and losses on equity instruments (that are not held-for-trading) in OCI. For financial liabilities, the standard
requires the portion of the change in fair value that relates to the entity's own credit risk to be presented
in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are
intended to more closely align the accounting treatment with the risk management activities of the entity.
New impairment requirements will use an Expected Credit Loss (‘ECL’) model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The
standard introduces additional new disclosures. The Group will adopt this standard from 1 July 2018 but the
impact of its adoption is yet to be assessed by the Group.
Based on the Group’s preliminary assessment, there will be no material impact on the transactions and
balances recognised in the financial statements when this standard is first adopted for the year ended 30 June
2018.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
provides a single standard for revenue recognition. The core principle of the standard is that an entity will
recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. The
standard will require: contracts (either written, verbal or implied) to be identified, together with the separate
performance obligations within the contract; determine the transaction price, adjusted for the time value of
money excluding credit risk; allocation of the transaction price to the separate performance obligations on a
basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct
observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will
be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation
would be satisfied when the customer obtains control of the goods. For services, the performance obligation
is satisfied when the service has been provided, typically for promises to transfer services to customers. For
performance obligations satisfied over time, an entity would select an appropriate measure of progress to
determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with
customers will be presented in an entity's statement of financial position as a contract liability, a contract asset,
or a receivable, depending on the relationship between the entity's performance and the customer's payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts
with customers; the significant judgments made in applying the guidance to those contracts; and any assets
recognised from the costs to obtain or fulfil a contract with a customer.
The Group is yet to undertake a detailed assessment of the impact of capital AASB 15. However, based on the
Group’s preliminary assessment, this standard is not expected to have a material impact on the transactions
and balances in the financial statements when it is first adopted for the year 30 June 2019..
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. Earlier application
is permitted for entities that apply AASB 15 Revenue from Contracts with Customers at or before the date of
initial application of this Standard. AASB 16 introduces a single lessee accounting model and requires a lessee
to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset
is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying
leased asset and a lease liability representing its obligations to make lease payments. A lessee measures
right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and lease
48
Annual Report 2016 Financial Report | Note 1-2
liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of the right-
of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a
principal portion and an interest portion and presents them in the statement of cash flows applying AASB 107
Statement of Cash Flows. Assets and liabilities arising from a lease are initially measured on a present value
basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and
also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option
to extend the lease, or not to exercise an option to terminate the lease.
The previous accounting model for leases required lessees and lessors to classify their leases as either finances
leases or operating leases and account for those two types of leases differently. That model was criticised
for failing to meet the needs of users of financial statements because it did not always provide a faithful
representation of leasing transactions. In particular, it did not require lessees to recognise assets and liabilities
arising from operating leases. Accordingly, the International Accounting Standards Board (IASB) and the US
national standard-setter, the Financial Accounting Standards Board (FASB), initiated a joint project to develop
a new approach to lease accounting that requires a lessee to recognise assets and liabilities for the rights and
obligations created by leases. This approach will result in a more faithful representation of a lessee’s assets
and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial
leverage and capital employed.
The Group is yet to undertake a detailed assessment of the impact AASB 16. However, based on the Group’s
preliminary assessment, the standard is not expected to have a material impact on the transactions and
balances recognised in the financial statements when it is first adopted in the year ended 30 June 2020.
ISSUED CAPITAL
BUSINESS COMBINATIONS
Note 2. Critical accounting judgments, estimates and
assumptions
The preparation of the financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts in the financial statements. Management continually
evaluates its judgments and estimates in relation to assets, liabilities, contingent liabilities, revenue and
expenses. Management bases its judgments, estimates and assumptions on historical experience and
on other various factors, including expectations of future events; management believes to be reasonable
under the circumstances. The resulting accounting judgments and estimates will seldom equal the related
actual results. The judgments, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
SHARE-BASED PAYMENT TRANSACTIONS
The Group measures the cost of equity-settled transactions with employees by reference to the fair value The
Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using the Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted.
The accounting estimates and assumptions relating to equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities within the next annual reporting period but may
impact profit or loss and equity.
The value of the Performance Shares are based on their fair value at the time of grant using a share price of
$0.16, with each of the four milestones discounted for the probability of achievement. This value is recognised
within the accounts of the legal parent and upon consolidation, is eliminated.
PROVISION FOR IMPAIRMENT OF RECEIVABLES
The provision for impairment of receivables assessment requires a degree of estimation and judgment. The
level of provision is assessed by taking into account the recent sales experience, the ageing of receivables,
historical collection rates and specific knowledge of the individual debtor’s financial position.
49
Annual Report 2016DIVIDENDSEARNINGSSHARES Financial Report | Note 2-4
REVERSE ACQUISITION OF NOVATTI GROUP LTD BY NOVATTI PTY LTD
Judgements have been applied to the accounting treatment of the transaction whereby Novatti Group Ltd
obtained control of Novatti Pty Ltd. The transaction has been treated as a reverse acquisition that is not a
business in accordance with AASB 2 Share Based Payments.
In accounting for the transaction as a reverse acquisition that is not a business the following significant
judgements were made:
• Novatti Pty Ltd was identified as the acquirer
for accounting purposes using the guidance
contained in AASB 3 Business Combinations and
therefore the financial statements are treated as
a continuation of Novatti Pty Ltd; and
•
to effect
the
The deemed consideration
transaction
for accounting purposes was
determined by assigning a price to the number
of shares that Novatti Pty Ltd would have had to
issue to effect the transaction.
Note 3. Correction of Error in accounting for the Reverse
acquisition of Novatti Group Ltd by Novatti Pty Ltd
Subsequent to the issue of the 31 December 2015 half year financial statements, as part of the audit of the
annual financial statements of Novatti Group Ltd and controlled entities, it was determined that an error had
been made in relation to the accounting treatment applied to the transaction whereby Novatti Group Ltd
obtained control of Novatti Pty Ltd.
The 31 December 2015 half year financial statements issued on 18 February 2016 treated the transaction
as an asset acquisition because the legal parent (Novatti Group Limited) did not meet the definition of a
business under AASB 3 Business Combinations. The transaction, however, should have been treated as a
reverse acquisition that is not a business in accordance with AASB 2 Share Based Payment.
In identifying the transaction as a reverse acquisition that is not a business, and accounting for it in accordance
with AASB 2, the following was required:
•
Identification of Novatti Pty Ltd as the acquirer
for accounting purposes and therefore treating
the financial statements as a continuation of
Novatti Pty Ltd;
• Determining a deemed consideration to effect
the transaction for accounting purposes.
Recognising the difference between the deemed consideration and the fair value of the net assets of the
accounting acquiree as a transaction cost in the statement of profit or loss and other comprehensive income.
The 31 December 2015 financial statements were amended to reflect the above and were re-issued on 31
August 2016.
Note 4. Operating segments
IDENTIFICATION OF REPORTABLE OPERATING SEGMENTS
The Group is organised into three operating business segments: (A) Novatti Platform, incorporating enterprise
sales and Maintenance & Support via the Novatti Platform, (B) Transaction Services incorporating Flexewallet
Pty Ltd, Pty Ltd and Flexe Payments Ltd and (C) Novatti Group Limited is the legal parent that holds the
financial assets for the Group. These operating business segments are based on the internal reports that
are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers
(‘CODM’)) in assessing performance and in determining the allocation of resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting
policies adopted for internal reporting to the CODM are consistent with those adopted in the financial
statements. The information reported to the CODM is on at least a monthly basis.
50
Annual Report 2016 Financial Report | Note 4
TYPES OF PRODUCTS AND SERVICES
The principal products and services of each of these operating segments are as follows:
Novatti Platform
Develops, deploys and supports specialised mobile and alternate payment technology, primarily through
the deployment of the Novatti Platform.
Transaction Services
TransferBridge: Provides a comprehensive global network that interconnects emerging payment platforms,
remittance operators, financial institutions, retailers, utilities and all types of telecommunication operators.
Flexewallet and Flexe Payments: Offers customers an alternative payment method in the form of a prepaid
cash voucher. Vouchers can be used for a multitude of payment methods such as prepaid account top-ups
and for secure online payment of goods and services. Vouchers are available in a variety of currencies and
locations globally.
INTERSEGMENT TRANSACTIONS
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on
consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans are
eliminated on consolidation.
OPERATING SEGMENT INFORMATION
Consolidated – 30 June 2016
$
$
$
$
Novatti
Platform
Transaction
Services
Novatti Group
Limited
Intersegment
eliminations /
unallocated
Total
$
Revenue
Sales to external customers
3,736,608
137,227
Intersegment sales
Total sales revenue
Other revenue
Total revenue
-
-
3,736,608
137,227
938,931
-
4,675,539
137,227
-
-
-
58,443
58,443
-
-
-
-
-
3,873,835
-
3,873,835
997,374
4,871,209
EBITDA
(2,968,657)
(716,235)
(968,548)
(224,875)
(4,878,315)
Depreciation and amortisation
Interest revenue
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(19,449)
60,695
(34,297)
(4,871,366)
(96,354)
(4,967,720)
Segment Assets
Segment Liabilities
1,934,738
1,552,800
473,835
535,240
4,006,106
(1,397)
61,480
Employee Benefits
4,698,976
506,145
381,994
Additions to non-current assets
(other than financial assets, deferred
tax, post-employment benefits
assets, rights under insurance
contracts)
-
-
-
Revenue from Australian customers is $1,085,431 (FY15: $1,112,900).
Revenues from customers in other countries is $2,788,404 (FY15: $1,285,121).
Revenue from a single customer in a country other than Australia is $1,991,439 (FY15: $255,538).
-
-
-
6,413,282
2,149,520
5,587,115
-
51
Annual Report 2016 Financial Report | Note 4-5
Consolidated – 30 June 2015
$
$
$
$
Novatti
Platform
Transaction
Services
Intersegment
eliminations /
unallocated
Total
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
2,392,278
-
2,392,278
722,072
3,144,350
5,744
-
5,744
-
5,744
(797,476)
(2,080)
-
-
-
-
-
-
-
-
-
-
-
-
Segment Assets
Segment Liabilities
1,674,697
1,650,826
115,133
104,318
Employee Benefits
2,969,090
6,978
Additions to non-current assets (other than financial
assets, deferred tax, post-employment benefits
assets, rights under insurance contracts)
-
-
Note 5. Revenue
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,398,022
-
2,398,022
722,072
3,120,094
(799,556)
(79,757)
11,054
(4,388)
(872,647)
(71,526)
(944,173)
1,789,830
1,755,144
2,976,068
-
Sales revenue:
Rendering of services
Transaction Services
Maintenance and Support
Licence income
Other revenue:
Interest
Research and Development
Other
Revenue
52
Consolidated
2016
Consolidated
2015
$
$
-
137,227
936,839
2,799,769
3,873,835
60,695
936,679
-
997,374
67,800
-
965,033
1,365,189
2,398,022
6,222
701,362
14,488
722,072
4,871,209
3,120,094
Annual Report 2016 Financial Report | Note 6-7
Note 6. Share of Joint Venture accounted for using the
equity method
Share of profit/(loss) – High Impact
Share of profit/(loss) – ATX Malaysia
Investment in High Impact
Loan – High Impact
Note 6 a. Investments accounted for using the equity method
Investment in Joint Venture – High Impact
Investment in Joint Venture – ATX Malaysia
Consolidated
2016
Consolidated
2015
$
$
(197,426)
(1,912)
-
-
-
14,901
(20,594)
-
24,331
116,211
-
24,331
In respect of High Impact, Novatti has not incurred
legal or constructive obligations, or made payments
on behalf of the joint venture. The directors are
unable to accurately ascertain the likely returns for
this investment and have resolved to write-off its
share of this investment and the loan to the Joint
Venture.
In accordance with AASB 128 Novatti Group Limited
will periodically review the status of its Joint Venture
in High Impact. Subsequently where the Joint
Venture entity reports a profit, Novatti will resume
recognising its share of those profits only after its
share of the profits equals the share of losses not
recognised.
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Cost of sales
Finance costs
Interest and finance charges paid/payable
Finance costs expensed
Share-based payments expense
Consolidated
2016
Consolidated
2015
$
$
2,140,404
393,802
34,297
34,297
4,388
4,388
Share-based payments expense (Options)
541,684
-
Superannuation expense
Defined contribution superannuation expense
237,330
133,053
53
Annual Report 2016 Financial Report | Note 8
Note 8. Income tax expense
Consolidated
2016
Consolidated
2015
$
$
Reconciliation of Income tax expense to prima facie tax payable
Loss before Income Tax
(4,871,366)
(872,647)
Prima facie income tax on loss at the domestic tax rate of Novatti Group Ltd
of 30%
(1,461,410)
(261,794)
Adjustment for tax rate differences in foreign jurisdictions
3,648
-
Adjustment for tax exempt research and development tax incentive received
(281,004)
(210,409)
Adjustment for non-deductible expenses:
Share based payments expense
Deemed Equity Consideration on Reverse Acquisition that is not a business
Other non-deductible expenses
Current year tax losses not brought to account
Current year temporary differences not brought to account
Adjustments in respect of current income tax of previous year
90,735
67,463
21,642
(1,558,926)
1,553,959
4,966
96,354
-
-
34,313
437,890
475,248
(37,358)
71,526
Income tax expense
96,354
71,526
Deferred tax assets not brought to account:
Unused tax losses for which no deferred tax asset has been recognised
5,179,864
1,584,159
Deductible temporary differences for which no deferred tax asset has been
recognised
911,467
127,871
6,091,331
1,712,030
Potential tax benefit @ 30%
1,827,399
513,609
6
1
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2
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Financial Report | Note 9-10
Note 9. Current assets – cash and cash equivalents
Cash on hand
Bank Balances
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of
the financial year as shown in the statement of cash flows as follows:
Consolidated
2016
Consolidated
2015
$
$
1,714
4,723,935
4,725,649
1,291
277,993
279,284
Cash and Cash Equivalents
Cash and Cash Equivalents held on trust under Flexewallet’s CAPS1
program. These funds are distributed under instructions within 24 hours.
4,329,344
396,305
183,852
95,432
Balance as per statement of cash flows
4,725,649
279,284
Note 10. Current assets - trade and other receivables
Trade receivables
IMPAIRMENT OF RECEIVABLES
Consolidated
2016
Consolidated
2015
$
$
341,262
665,167
The Group’s trade and other receivables have been reviewed for indicators of impairment. Trade receivables
were not found to be impaired and a provision has not been recorded. There are no other impaired trade
receivables in any of the Group’s subsidiaries.
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of
customers based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Current
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Other receivables
Accrued Revenue
Consolidated
2016
Consolidated
2015
$
$
95,928
10,075
235,259
-
341,262
381,714
52,918
96,876
133,659
665,167
1,200,696
400,000
Total Trade and Other Receivables
1,541,958
1,065,167
A
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Financial Report | Note 11-13
Note 11. Financial Assets
Security term deposit
Consolidated
2016
Consolidated
2015
$
$
31,837
30,925
Total Financial Assets
31,837
30,925
Note 12. Other Current Assets
Prepayments
Other
Bank Guarantee
Consolidated
2016
Consolidated
2015
$
$
46,970
5,610
-
52,580
-
4,895
259,724
264,619
Note 13. Non-current assets - property, plant and
equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Leasehold Fixtures and Fittings - at cost
Less: Accumulated depreciation
Fixtures and Fittings
Less: Accumulated depreciation
Consolidated
2016
Consolidated
2015
$
$
431,440
397,799
(402,349)
(388,506)
29,091
9,293
14,922
(5,182)
9,740
26,083
(18,557)
7,526
2,330
(2,330)
-
18,133
(18,133)
-
Total property, plant and equipment
46,357
9,293
56
Annual Report 2016 Financial Report | Note 13
RECONCILIATIONS
Reconciliations of the written down values at the beginning and end of the current and previous financial
year are set out below:
2016
Gross carrying amount
Balance 1 July 2015
Additions
Disposals
Plant &
Equipment at
cost
Fixtures &
Fittings at cost
Leasehold
Fixtures &
Fittings at cost
$
$
$
Total
$
395,469
35,971
-
18,133
7,950
-
2,330
12,592
-
415,932
56,513
-
Balance 30 June 2016
431,440
26,083
14,922
472,445
Accumulated depreciation and impairment
Balance 1 July 2015
Depreciation expense
Balance 30 June 2016
Net book value
As at 1 July 2015
Balance 30 June 2016
2015
Gross carrying amount
Balance 1 July 2014
Additions
Disposals
(386,176)
(16,173)
(402,349)
(18,133)
(424)
(18,557)
9,293
29,091
-
7,526
(2,330)
(2,852)
(5,182)
-
9,740
(406,639)
(19,449)
(426,088)
9,293
46,357
Plant &
Equipment at
cost
Fixtures &
Fittings at cost
Leasehold
Fixtures &
Fittings at cost
$
$
$
Total
$
387,927
7,542
-
18,133
2,330
408,390
-
-
-
-
7,542
-
Balance 30 June 2015
395,469
18,133
2,330
415,932
Accumulated depreciation and impairment
Balance 1 July 2014
Depreciation expense
Balance 30 June 2015
Net book value
As at 1 July 2014
Balance 30 June 2015
(379,295)
(6,881)
(386,176)
(18,133)
(2,330)
(399,758)
-
-
(6,881)
(18,133)
(2,330)
(406,639)
8,632
9,293
-
-
-
-
8,632
9,293
57
Annual Report 2016 Financial Report | Note 14-15
Note 14. Intangibles
Intangible Assets - at cost
Less: Accumulated amortisation
Consolidated
2016
Consolidated
2015
$
$
1,787,110
1,787,110
(1,787,110)
(1,787,110)
-
-
Intangible Assets
Intangible Assets
2016
Gross carrying amount
Balance 1 July 2015
$
2015
$
Gross carrying amount
1,787,110
Balance 1 July 2014
1,787,110
Additions
Disposals
-
-
Additions
Disposals
-
-
Balance 30 June 2016
1,787,110
Balance 30 June 2015
1,787,110
Accumulated amortisation
Accumulated amortisation
Balance 1 July 2015
Amortisation expense
Balance 30 June 2016
Net book value
As at 1 July 2015
Balance 30 June 2016
(1,787,110)
Balance 1 July 2014
-
Amortisation expense
(1,787,110)
Balance 30 June 2015
Net book value
As at 1 July 2014
Balance 30 June 2015
-
-
(1,714,234)
(72,876)
(1,787,110)
72,876
-
Note 15. Current liabilities - trade and other payables
Trade payables
Unearned Income
Accrued Expenses
Consolidated
2016
Consolidated
2015
$
$
463,421
182,646
1,232,652
1,878,719
438,811
125,921
408,516
972,548
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair
value.
58
Annual Report 2016 Financial Report | Note 16-19
Note 16. Provision for employee benefits
Current
Employee benefits
Non-current
Employee benefits
Note 17. Borrowings
Loan from associates
Loan from Shareholder
Total
Consolidated
2016
Consolidated
2015
$
$
152,232
164,505
118,569
8,384
Consolidated
2016
Consolidated
2015
$
$
-
-
-
-
-
100,000
259,707
359,707
Consolidated
2015
$
250,000
250,000
Note 18. Other non-current liabilities
Consolidated
2016
$
Trade payable and other liabilities
Total
Note 19. Equity - issued capital (current)
Consolidated 2016 Consolidated 2015
$
$
87,883,826 Fully paid ordinary shares as at 30 June 2016
11,940,604
20,000,000 Performance shares as at 30 June 2016
338,760 Fully paid ordinary shares as at 30
-
-
-
-
3,458,122
Total
11,940,604
3,458,122
59
Annual Report 2016 Financial Report | Note 19
MOVEMENTS IN ORDINARY SHARE CAPITAL
Details
Date
No of
shares
Issue price
Consolidated
2016
Balance – Novatti Pty Ltd
01 Jul 2014
338,760
Balance 30 June 2015 – Novatti Pty Ltd
30 Jun 2015
338,760
Incorporation of Novatti Group Ltd – Issued capital preacquisition
19 Jun 2015
1,250,000
Novatti Group Ltd acquired all the shares in Novatti Pty Ltd on a
scrip for scrip basis on 28 September 2015
28 Sep 2015 40,000,000
Novatti Pty Ltd shares eliminated on completion of reverse
acquisition that is not a Business
28 Sep 2015
(338,760)
Deemed Consideration on reverse acquisition that is not a Business
28 Sep 2015
-
$
$
-
-
-
-
-
-
3,458,122
3,458,122
-
-
-
225,000
Loans provided by Novatti Group Ltd directors, Peter Cook, Brandon
Munro and Peter Pawlowitsch to Novatti Pty Ltd converted into
shares within Novatti Group Limited at $0.16 per share
31 Oct 2015
3,125,000
0.16
500,000
Loan provided by Novatti Pty Ltd shareholder to Novatti Pty Ltd
converted into shares within Novatti Group Ltd at $0.16 per share
31 Oct 2015
3,555,206
0.16
568,833
$250,000 in non-current liabilities and $132,579 in trade payables to
director related Coomar Pty Ltd outstanding as at 30 June 2015 was
assigned to director related Corangamite Pty Ltd in accordance with
a Deed of Assignment of Debt dated 31 October 2015 between the
two parties and was converted to equity at $0.16 per share
31 Oct 2015
2,391,120
0.16
382,579
Issue of shares at $0.16 per share as Pre IPO capital received by
Novatti Group Ltd
23 Nov 2015
2,562,500
0.16
410,000
Issue of 35 million Shares from IPO at $0.20 per share
18 Jan 2016 35,000,000
0.20
7,000,000
Capital Raising Costs
Capital Raising Costs
Capital Raising Costs
31 Jan 2016
29 Feb 2016
30 Apr 2016
-
-
-
-
-
-
(592,105)
(6,875)
(4,950)
Closing Balance – Novatti Group Ltd
30 Jun 2016 87,883,826
11,940,604
On 16 September 2016 as announced on the ASX, 5,000,000 Performance Shares were issued in accordance
with the Terms and Conditions as set within 13.2 of the 8 December 2015 Replacement Prospectus.
60
Annual Report 2016 ORDINARY SHARES
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary
shares have no par value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each shareholder shall have one vote.
SHARE BUY-BACK
There is no current on-market share buy-back.
OPTIONS AND PERFORMANCE SHARES
Information is set out in Note 36 relating to options and performance shares issued, exercised and lapsed
during the financial year and options outstanding at the end of the financial year.
CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company's share price at the time of the investment.
61
Annual Report 2016 Financial Report | Note 20-21
Note 20. Equity – reserve
Option reserve
Foreign currency reserve
OPTION RESERVE
Consolidated
2016
Consolidated
2015
$
$
713,465
849
714,314
-
-
-
The option reserve is used to record the fair value of options issued to employees and directors as part of their
remuneration. It is also used to record the fair value of options issued. The balance is transferred to Issued
Capital when options are granted and balance is transferred to retained earnings when options lapse.
FOREIGN CURRENCY RESERVE
The reserve is used to recognise exchange differences arising from the translation of the financial statements
of foreign operations to Australian dollars.
Note 21. Equity - retained profits
Consolidated
2016
Consolidated
2015
$
$
Retained losses at the beginning of the financial year
(3,423,436)
(2,235,160)
Losses after income tax expense for the year
Retained losses on Flexewallet Pty Ltd at the date of acquisition
(4,967,720)
-
(944,173)
(244,103)
Retained losses at the end of the financial year
(8,391,156)
(3,423,436)
62
Annual Report 2016 Financial Report | Note 22
Note 22. Financial instruments
FINANCIAL RISK MANAGEMENT OBJECTIVES
The Group is exposed to risks that arise from the use of its financial instruments. This Note describes Novatti
Group’s objectives, policies and processes for managing those risks and the methods used to measure them.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this Note.
The Board assumes the role of the Group’s Audit, Risk & Compliance Committee and oversees how
management monitors compliance with the Group’s risk management policies and procedures and reviews
the adequacy of the risk management framework in relation to the risks faced by the Group.
PRINCIPAL FINANCIAL INSTRUMENTS
The principal financial instruments used by Novatti Group, from which financial instrument risk arises, are as
follows:
•
•
•
•
Cash at bank and on deposit,
Trade receivables,
Trade and other payables, and
Intercompany receivables.
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies and whilst retaining ultimate responsibility for them, has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives and policies to the Group’s
finance function. The Board receives regular reports from the Chief Financial Officer through which it reviews
the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out
below.
Credit risk
Credit risk arises from the Group’s trade receivables, other receivables, receivables from subsidiaries and cash
at bank and on deposit. The maximum amount of credit risk is the statement of financial position carrying
values.
Trade receivables
Clients of the Group range from financial service providers, telecommunication operators to airline companies.
New client contracts may require Customers to pay fees based on ‘Project Milestone arrangements’ in
accordance with agreed upon contract terms. In addition, companies may be charged for on-going service
and maintenance contracts on a monthly or quarterly basis based on the initial contract value and last up
to 5 - 10 years.
The Group undertakes transactions with a large number of customers and regularly monitors payments in
accordance with credit terms, the financial assets that are neither past due nor impaired, are expected to be
received in accordance with the credit terms.
The Group does not have any material credit risk exposure for other receivables or other financial instruments.
Liquidity risk
Liquidity risk arises from the Group’s management of working capital. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it
will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it
seeks to maintain cash balances to meet expected requirements for a period of at least three months.
The Group also seeks to reduce liquidity risk by ensuring that its cash deposits are earning interest at the best
rates. At balance date, these reports indicate that the Group is expected to have sufficient liquid resources to
meet its obligations under all reasonably expected circumstances.
63
Annual Report 2016 Financial Report | Note 22
As at 30 June 2016, financial liabilities have contractual maturities, which are summarised below:
2016
Trade payables
Accrued expenses
Other payables
Total
2015
Trade payables
Accrued expenses
Other payables
Total
Consolidated
Current
Non-current
Within 6 months
$
6 to 12 month
$
1 to 5 years
$
Later than 5 years
$
463,421
1,232,652
-
1,696,073
-
-
-
-
-
-
-
-
Consolidated
Current
Non-current
Within 6 months
$
6 to 12 month
$
1 to 5 years
$
Later than 5 years
$
207,762
534,437
230,349
972,548
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The contractual amounts of financial liabilities in the tables above are equal to their carrying values.
Interest rate risk
The Group invests surplus cash in major Australian and Canadian banks and in doing so is exposed to
fluctuations in interest rates that are inherent in such a market. The Company and Group have no borrowings.
The Group’s interest rate risk arises from:
•
•
Bank balances which give rise to interest at floating rates; and
Cash on term deposit, which are at floating rates.
The amounts subject to cash flow interest rate risk are in the statement of financial position carrying amounts
of these items.
The Group’s policy is to minimise cash flow interest rate risk exposures on surplus funds by ensuring deposits
attract the best available rate.
Cash flow interest rate sensitivity
The following table illustrates the sensitivity of the net result for the year and equity to a reasonable possible
change in interest rates of +/-100 basis points, with effect from the beginning of the year. These changes are
considered reasonably possible based on observation of current market conditions.
The calculations are based on the Group’s financial instruments held at each reporting date.
Consolidated 2016
Consolidated 2015
+ 100 basis points
- 100 basis points
+ 100 basis points
- 100 basis points
Cash and cash equivalents
Net result
43,293
43,293
(43,293)
(43,293)
3,102
3,102
(3,102)
(3,102)
6
1
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2
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Financial Report | Note 22
Currency risk
The Group’s policy is, where possible, to allow group entities to settle liabilities denominated in their functional
currency with the cash generated from their own operations in that currency. Where group entities have
liabilities denominated in a currency (and have insufficient reserves of that currency to settle them), cash
already denominated in that currency will, where possible, be transferred from elsewhere within the Group.
In order to monitor the continuing effectiveness of this policy, the Board receives a monthly forecast, analysed
by the geographical region’s cash balances, commitments and receipts, converted to the Group’s main
functional currency, Australian Dollars (AUD).
The Group is exposed to currency risk on cash at bank and on deposit in Canadian Dollars (CAD) to fund its
Canadian operations and also in US Dollars (USD).
Currency risk sensitivity analysis – Other currencies (CAD)
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s
financial assets and financial liabilities and the CAD and AUD exchange rate. It assumes a +/- 5% change in
the AUD/CAD exchange rate for the year ended at 30 June 2016. This percentage has been determined based
on average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based
on the Group’s foreign currency financial instruments held at each reporting date. This assumes that other
variables, in particular interest rates, remain constant.
If the Australian dollar had strengthened against the
CAD by 5% then this would have had the following
impact on profit and other equity:
If the Australian dollar had weakened against the
CAD by 5% then this would have had the following
impact on profit and other equity:
Consolidated
Profit after tax
Other Equity
2016
$
(210)
-
Consolidated
Profit after tax
Other Equity
2016
$
233
-
Exposures to foreign exchange rates vary during the year depended on the volume of overseas transactions.
Nonetheless, the analysis above is considered to be representative of the Group’s exposure to foreign currency
risk.
Currency risk sensitivity analysis – Other currencies (USD)
Foreign currency denominated financial assets and liabilities, translated into Australian Dollars at the closing
rate, are as follows:
Consolidated
Nominal amounts
2016
USD
Consolidated
Nominal amounts
2016
USD
Cash at bank and on term deposit
254,199
Cash at bank and on term deposit
18,975
Foreign exchange risk arises from future commercial transactions and recognised financial assets and
financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured
using sensitivity analysis and cash flow forecasting.
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1
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Financial Report | Note 22-23
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s
financial assets and financial liabilities and the USD and AUD exchange rate. It assumes a +/- 5% change in
the AUD/USD exchange rate for the year ended at 30 June 2016. This percentage has been determined based
on average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based
on the Group’s foreign currency financial instruments held at each reporting date. This assumes that other
variables, in particular interest rates, remain constant. The analysis is performed for 2016.
If the Australian dollar had strengthened against the USD by 5% then this would have had the following
impact on profit and other equity:
Profit after tax
Other Equity
Consolidated
2016
Consolidated
2015
$
$
(15,999)
-
(4,164)
-
If the Australian dollar had weakened against the USD by 5% then this would have had the following impact
on profit and other equity:
Consolidated
2016
Consolidated
2015
$
$
18,302
-
7,377
-
Profit after tax
Other Equity
Price risk
The Group is not exposed to any significant price risk.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 23. Key management personnel disclosures
COMPENSATION
The aggregate compensation made to directors and other members of key management personnel of the
Group is set out below:
Consolidated
2016
Consolidated
2015
$
$
980,407
53,238
916
245,749
632,215
1,722
228
-
1,280,310
634,165
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
66
Annual Report 2016 Financial Report | Note 24-27
Note 24. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by William Buck, the
auditor of the Company, its network firms and unrelated firms:
Audit services - William Buck
Audit or review of the FY16 financial statements
Review of the 31 December 2015 financial statements
Audit of the FY13, 14 and 15 financial statements
Other services - William Buck
Preparation of the tax return and associated tax services
Investigative Accountant’s Report
Consolidated
2016
Consolidated
2015
$
$
24,000
5,000
-
29,000
-
8,000
37,000
-
-
26,000
26,000
2,600
-
28,600
Note 25. Contingent assets
There are no known contingent assets that the Company is aware of.
Note 26. Contingent liabilities
There are no known contingent liabilities that the Company is aware of.
Note 27. Commitments
Capital commitments - operating
Committed at the reporting date but not recognised as
liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2016
Consolidated
2015
$
$
181,889
751,453
-
933,342
89,532
94,009
-
183,541
Operating lease commitments includes contracted amounts for offices in Melbourne. On renewal, the terms
of the leases are re-negotiated.
67
Annual Report 2016 Financial Report | Note 28
Note 28. Related party transactions
KEY MANAGEMENT PERSONNEL
Disclosures relating to key management personnel are set out in the remuneration report and also within
Note 36.
PARENT AND ULTIMATE CONTROLLING PARTY
Novatti Group Ltd was incorporated on June 19 2015. As outlined in Note 1 of the financial statements, for
accounting purposes, Novatti Pty Ltd was identified as the accounting acquirer and Novatti Group Ltd was
identified as the accounting subsidiary. The shares in Novatti Pty Ltd were acquired by the Novatti Group on
a scrip for scrip basis.
LOANS FROM DIRECTORS
Novatti Pty Ltd entered into $500,000 of convertible loans with Peter Cook, Brandon Munro and Peter
Pawlowitsch. The convertible loans were convertible into ordinary shares in Novatti Group Limited with a
face value conversion at $0.16 per share. On 31 October 2015, the total $500,000 convertible loans on issue
were converted into 3,125,000 ordinary shares.
Date entered
into
Loan value Loan rate
Loan
expense
$
%
$
Details
12 Sep 2015
150,000
14 Sep 2015
200,000
16 Sep 2015
50,000
16 Sep 2015
50,000
8 Oct 2015
50,000
12
6
6
6
12
989 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
1,584 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
379 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
379 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
396 Agreed loan rate, not market rate. Interest paid in cash and calculated daily.
500,000
3,727
CURRENT AND NON-CURRENT LIABILITIES TO A DIRECTOR
$250,000 in non-current liabilities and $132,579 in trade payables within Novatti Pty Ltd to Coomar Pty Ltd,
outstanding as at 30 June 2015, was assigned to Corangamite Pty Ltd in accordance with a Deed of Assignment
of Debt dated 31 October 2015 between the two parties. This debt was subsequently settled through the
issue of 2,391,120 ordinary shares at $0.16 each to Coomar Pty Ltd. Coomar Pty Ltd and Corangamite Pty Ltd
are associated with Peter Cook.
DIRECTOR RELATED SERVICES
Gyoen Pty Ltd, an entity associated with Peter Pawlowitsch, provided services to Novatti Group Limited in
respect of project managing the Group’s Initial Public Offering. The fee for this service was $38,500 GST
inclusive.
In addition, Caprodite Transaction Execution Pty Ltd associated with Brandon Munro provided compliance
services to Novatti Group Ltd in respect of Contract Agreement and Arrangements and services to the Novatti
Group in respect of managing the Group’s Initial Public Offering. The total fees charged were for $3,300 GST
inclusive.
Chongwe Limited, a company associated with Paul Burton provided advisory services with respect to the
Flexepin product. Total fees charged was £10,000.
LOANS TO/FROM RELATED PARTIES
There were no loans to or from related parties at the current and previous reporting date.
TERMS AND CONDITIONS
All transactions were made on normal commercial terms and conditions and at market rates.
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Annual Report 2016 Financial Report | Note 29
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Loss after income tax
Total comprehensive loss
STATEMENT OF FINANCIAL POSITION
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Performance Share Reserve
Reserves
Accumulated losses
Total equity
CONTINGENT LIABILITIES
(910,161)
(910,161)
Parent
201621
$
Parent
2016
$
Parent
2015
$
Parent
2015
$
3,987,990
15,322,391
61,480
61,480
14,657,607
800,000
713,465
(910,161)
15,260,911
-
-
125
125
-
-
125
-
-
-
125
The parent entity had no contingent liabilities as at 30 June 2016.
CAPITAL COMMITMENTS - PROPERTY, PLANT AND EQUIPMENT
The legal parent entity had no capital commitments for property, plant and equipment as at 30 June 2016.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the legal parent entity Novatti Group Ltd are consistent with those of the Group,
as disclosed in Note 1, except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
•
• Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
21 Note 29 displays the summary financial statements of the ‘legal’ parent entity, Novatti Group Ltd. Novatti Group Ltd entered into a Share
Purchase Agreement with the equity holders of Novatti Pty Ltd to acquire all the shares in Novatti Pty Ltd on 28 September 2015.
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Annual Report 2016 Financial Report | Note 30-32
Note 30. AASB 1: First Time Adoption of Australian
Accounting Standards
These are the Group’s first 30 June financial statements prepared in accordance with Australian Accounting
Standards. The Group was not required to prepare general purpose financial statements for periods and up
to and including 30 June 2015.
The accounting policies set out in Note 1 have been applied in preparing the financial report for the Group
for the period ending 30 June 2016; for the comparative period ending 30 June 2015 (statement of financial
position, statement of profit or loss and other comprehensive income, statement of changes in equity and
statement of cash flows).
In preparation for the transition to IFRS the Group has not identified any material adjustments which were
required to the current or comparative periods in order to present Australian Accounting Standard Compliant
financial statements. Consequently, no further disclosure has been provided.
Note 31. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-
owned subsidiaries in accordance with the accounting policy described in Note 1:
Name
Principal place of
business / Country of
incorporation
Ownership interest
2016
Ownership interest
2015
Novatti Group Ltd Subsidiaries
Novatti Pty Limited
Australia
Flexe Payments Limited
United Kingdom
Novatti Technologies Limited
United Kingdom
Novatti Pty Ltd Subsidiaries
Flexewallet Pty Limited
TransferBridge Pty Limited
Australia
Australia
%
100.00%
100.00%
100.00%
100.00%
100.00%
%
-
-
-
100.00%
100.00%
Note 32. Interests in Joint Ventures
Interests in Joint Ventures are accounted for using the equity method of accounting. Information relating to
Joint Ventures that are material to the Group are set out below:
Name
High Impact Joint Venture
ATX Malaysia Joint Venture22
Principal place of
business / Country of
incorporation
Ownership interest
2016
South Africa
Malaysia
%
50.00%
50.00%
22 The Joint Venture between Novatti Group and ATX Malaysia was established on the 1 July 2015.
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Financial Report | Note 32
SUMMARISED FINANCIAL INFORMATION
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Expenses
Loss before income tax
Income tax expense
Loss after income tax
Other comprehensive income
Total comprehensive loss
Reconciliation of the Group’s carrying amount
High
Impact
2016
$
Malaysia ATX
2016
$
High
Impact
2015
$
Malaysia ATX
2015
$
59,400
25,221
48,663
-
59,400
255,516
-
-
25,221
10,320
-
48,663
-
-
(295,931)
255,516
10,320
(295,931)
(196,116)
14,901
(247,269)
(23,855)
(23,855)
-
(1,912)
(1,912)
-
(41,187)
(41,187)
-
(23,855)
(1,912)
(41,187)
-
-
-
-
(1,912)
(41,187)
Opening carrying amount – Equity in Joint Venture
67,168
16,813
-
Prior year losses incurred on behalf of Joint Venture:
Expensed as at 30 June 2014
Expensed as at 30 June 2015
Expenses incurred on behalf of Joint Venture as at 30 June
2016
Losses incurred in excess of Joint Venture Equity interest.
Adjustment entry recognised as at 30 June 2016
Loan balance of Novatti Group recognised by the Joint
Venture as at 30 June 2016
Loan to Joint Venture in excess of Joint Venture Equity
Interest
(84,193)
(20,593)
(12,399)
50,017
235,044
-
Write-off of Loan and Investment in High Impact
(235,044)
-
-
-
-
-
-
-
(84,193)
-
-
-
264,177
116,211
(18,848)
Share of Losses after income tax
(197,426)
(1,912)
(20,593)
Closing carrying amount
-
14,901
24,331
-
Per AASB 128, when the share of losses in a joint venture equals or exceeds its investment, the entity stops
recognising its share of further losses and considers whether there are any long-term interests that in
substance forms part of Novatti’s net investment in the joint venture. In this case there was high uncertainty
by the Board regarding the likelihood of future returns from the Joint Venture and so the High Impact Joint
Venture was written off as at 30 June 2016. Please also refer to Note 6.
In accordance with AASB 128 Novatti Group Limited will periodically review the status of its Joint Venture in
High Impact. Subsequently where the Joint Venture entity reports a profit, Novatti will resume recognising
its share of those profits only after its share of the profits equals the share of losses not recognised.
CONTINGENT LIABILITIES
The Associated entities had no contingent liabilities as at 30 June 2016.
COMMITMENTS
The Associated entities had no commitments as at reporting date, not recognised as liabilities payable.
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-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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Financial Report | Note 33-34
Note 33. Events after the reporting period
At 30 June 2016, 5,000,000 of the 20,000,000 Performance Shares issued (see Note 36) vested and were
converted into 5,000,000 ordinary shares of Novatti Group Limited, as announced on the ASX on 16 September
2016. The remaining performance shares did not vest as the milestones were not met and accordingly they
were redeemed for a total of $3 in accordance with the terms of the initial grant.
There are no other matters or circumstances that have arisen since 30 June 2016 that has significantly
affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s
state of affairs in future financial years.
Note 34. Reconciliation of profit after income tax to
net cash from operating activities
Consolidated
2016
Consolidated
2015
Loss after income tax expense for the year
(4,967,720)
(944,173)
$
$
Adjustments for:
Depreciation and amortisation
Joint Venture – High Impact written off as at 30 June 2016
Non-cash option expense
Deem equity consideration on Reverse Acquisition that is not a
Business
Unrealised Foreign Exchange Gain
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred income
Increase in employee benefits
19,449
197,425
541,684
224,875
(22,791)
(298,145)
1,410,547
56,725
97,911
79,757
-
-
-
-
(200,673)
551,410
-
172
Net cash from operating activities
(2,740,040)
(513,507)
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Financial Report | Note 35-36
Note 35. Earnings per share
Consolidated
2016
Consolidated
2015
$
$
Loss after income tax
4,967,720
944,173
Loss after income tax attributable to the owners of Novatti
Group Limited
4,967,720
944,173
2016
2015
No of ordinary shares
No of ordinary shares
Weighted average number of ordinary shares outstanding
during the year:
Number used in calculating Earnings Per Share
Number used in calculating diluted Earnings Per Share
Basic earnings per share
Diluted earnings per share
Note 36. Share-based payments
SHARE BASED PAYMENT ACQUISITION
54,806,390
73,196,940
40,000,000
40,000,000
2016
Cents
2015
Cents
(9.06)
(6.79)
(2.36)
(2.36)
On 28 September 2015, Novatti Group Ltd completed the acquisition of Novatti Pty Ltd and its subsidiaries,
Flexewallet Pty and TransferBridge Pty Ltd. Under Australian Accounting Standards, Novatti Pty Ltd is
considered the accounting acquirer. The acquisition has been accounted for as a share based payment by
which Novatti Pty Ltd acquires the assets of Novatti Group Ltd.
34 (a) Deemed consideration for Reverse Acquisition:
Under reverse acquisition principals, the consideration deemed to be provided was determined to be
$225,000 based on a combination of the 16 cents post transaction share price of Novatti Group Limited at
which seed capital was issued and the fair value of the performance share issued. The $225,000 represents
the deemed fair value of the 1,250,000 shares owned by existing Novatti Group Limited shareholders.
34 (b) Assets and liabilities acquired:
Trade and Other Receivables
Net identifiable assets acquired
34 (c) Transaction costs:
Deemed consideration
Less: Net identifiable assets acquired
Transaction costs incurred on reverse acquisition
2016
$
125
125
225,000
125
224,875
23 Earnings Per Share for FY15 is calculated as the earnings of the parent entity (for accounting purposes) Novatti Pty Ltd $944,173 divided by
the number of ordinary shares Novatti Group Ltd (acquiree for accounting purposes) issued of 40M, as consideration for the equity in Novatti
Pty Ltd, in the reverse acquisition.
24 Earnings Per Share for FY15 is calculated as the earnings of the parent entity (for accounting purposes) Novatti Pty Ltd $944,173 divided by
the number of ordinary shares Novatti Group Ltd (acquiree for accounting purposes) issued of 40M, as consideration for the equity in Novatti
Pty Ltd, in the reverse acquisition.
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Financial Report | Note 36
Options
A share option plan has been established by the Group and approved by shareholders at a general meeting,
whereby the Group may, at the discretion of the Board, grant options over ordinary shares in the Company
to certain key management personnel and staff of the Group.
The Employee Share Option Plan is designed to provide long term incentives for Senior Management (including
Directors’) and Staff to deliver long term shareholder returns. Options are issued for nil consideration and are
granted in accordance with performance guidelines established by the Board.
The following Share based payment arrangements were in existence during the current financial year and
are supported by the tables below:
• On 12 November 2015, 17,200,000 Options were issued to key management personnel at an issue price
of $0.20 per share option as identified in the remuneration section of the directors' report
• On the 8 January 2016, 2,859,250 Options were issued in consideration for listing fees
•
•
4 million Options were provided on 8 February 2016 for consultancy fees
3 February 2016 5,250,000 Options were issued to a senior manager for the Group of which will vest in
three equal portions, each year from the first year of vesting over 36 months
24 June 2016 3,637,000 Options were issued to staff and contractors
•
Grant date
Vesting
date
Expiry
date
Ex
price
Exp’d
volatility
Risk
free
Rate
Exp’d
dividend
yield
Bal at
Start
Granted
during yr
Ex
during
yr
Forfeited
during yr
Bal at yr
end
12 Nov 15
12 Nov 15
12 Nov 15
12 Nov 15
8 Jan 16
3 Feb 16
3 Feb 16
3 Feb 16
8 Feb 16
24 Jun 16
24 Jun 16
24 Jun 16
Subtotal
31 May 16
31 May 17
Total
12 Nov 15
30 Jun 19
$0.20
53.90% 2.32%
1 Jul 16
30 Jun 19
$0.20
53.90% 2.32%
1 Jul 17
30 Jun 19
$0.20
53.90% 2.32%
1 Jul 18
30 Jun 19
$0.20
53.90% 2.32%
8 Jan 16
30 Jun 19
$0.20
53.90% 2.32%
3 Feb 17
30 Jun 19
$0.20
53.90% 2.32%
3 Feb 18
30 Jun 19
$0.20
53.90% 2.32%
3 Feb 19
30 Jun 19
$0.20
53.90% 2.32%
8 Feb 16
30 Jun 19
$0.20
53.90% 2.32%
24 Jun 17
30 Jun 19
$0.20
57.74%
2.13%
24 Jun 18
30 Jun 19
$0.20
57.74%
2.13%
24 Jun 19
30 Jun 19
$0.20
57.74%
2.13%
31 May 17 30 Jun 19
$0.25
57.74%
2.13%
31 May 18 30 Jun 19
$0.25
57.74%
2.13%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
-
-
-
-
-
-
-
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
1,750,000
1,750,000
1,750,000
- 4,000,000
-
-
-
1,212,328
1,212,328
1,212,344
- 32,946,250
-
-
750,00025
750,00026
- 34,446,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,750,000
1,150,000
1,150,000
1,150,000
2,859,250
1,750,000
1,750,000
1,750,000
- 4,000,000
-
-
-
1,212,328
1,212,328
1,212,344
- 32,946,250
-
-
750,000
750,000
- 34,446,250
Weighted Average
Exercise Price
$0.202
-
- $0.202
Entitlement
The Options will entitle the holder to subscribe for one Share upon the exercise of each Option that has
vested in the holder. If the Options are subject to a vesting period, where the relevant person is no longer
employed or engaged, as the case may be, by the Group on a vesting date, the Options will not vest to that
holder. Options that have previously vested in the holder shall be retained by the holder.
25 750,000 Options subject to shareholder approval at the FY16 Annual General Meeting.
26 750,000 Options subject to shareholder approval at the FY16 Annual General Meeting.
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Financial Report | Note 36
Shares Issued on exercise
Shares issued on exercise of the Options will rank equally with the other issued Shares.
If there is any reconstruction of the issued share capital of the Company, the rights of the Option holder
may be varied to comply with the Listing Rules which apply to the reconstruction at the time of the
reconstruction.
There are no participation rights or entitlements inherent in the Options and the holder will not be entitled
to participate in new issues of capital offered to Shareholders during the currency of the Options.
The fair value of the options is valued at “grant date” using the Black-Scholes model.
Performance Shares
The granting of Performance Shares is not related to the executive’s short term or long term incentives as
an executive of the Novatti Group. Participation in being granted Performance Shares was provided to the
original shareholders of Novatti Pty Ltd as part of the acquisition of Novatti Pty Ltd by Novatti Group Ltd as
an incentive for the original shareholders of Novatti Pty Ltd to further grow the revenue of Novatti Pty Ltd.
Each Performance Share was convertible into one ordinary share, upon the following milestones, as
detailed in the December 2015 Replacement Prospectus, being achieved:
Milestone
Milestone 1:
Upon Novatti Pty Ltd achieving $3.5 million in invoiced customer revenue at any time during the
financial year commencing 1 July 2015 (2015/16), specifically excluding invoiced revenues arising
directly or indirectly from (1) TransferBridge Pty Ltd ACN 168 010 802, (2) Flexewallet Pty Ltd ACN
164 657 032 and (3) the contract (if any) that triggers the achievement of Milestone 4.
Milestone 2:
Upon Novatti Pty Ltd achieving $4 million in invoiced customer revenue at any time during the
financial year commencing 1 July 2015 (2015/16), specifically excluding invoiced revenues arising
directly or indirectly from (1) TransferBridge Pty Ltd ACN 168 010 802, (2) Flexewallet Pty Ltd ACN
164 657 032.
Milestone 3:
Upon Novatti Pty Ltd achieving $5 million in invoiced customer revenue at any time during the
financial year commencing 1 July 2015 (2015/16), specifically excluding invoiced revenues arising
directly or indirectly from (1) TransferBridge Pty Ltd ACN 168 010 802, (2) Flexewallet Pty Ltd ACN
164 657 032.
Milestone 4:
Upon Novatti Pty Ltd achieving $7 million in invoiced customer revenue at any time during the
financial year commencing 1 July 2015 (2015/16), specifically excluding invoiced revenues arising
directly or indirectly from (1) TransferBridge Pty Ltd ACN 168 010 802 and (2) Flexewallet Pty Ltd
ACN 164 657 032 but including net transaction fees arising from those companies.
Possible No of
Performance
Shares
convertible
5,000,000
5,000,000
5,000,000
5,000,000
The Performance Shares were not to convert to ordinary shares until such time as the milestones referred
to above had been satisfied. If the milestones were not achieved, or not achieved within the expiry dates,
the Performance Shares for a particular tranche will be redeemed by the Company for a total nominal sum
of $1.00.
Outcome of milestone events:
For the 2015/2016 financial year, Novatti Pty Ltd achieved invoiced or invoiceable revenue greater than $3.5
million but less than $4.0 million.
In accordance with the Terms and Conditions relating to the Performance Shares as disclosed in the
Replacement Prospectus at clause 13.2, the first milestone has been successfully satisfied, as announced to
the ASX on 16 September 2016.
Milestones two, three and four have not been satisfied and the Performance Shares have been redeemed.
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Directors’
declaration
IN THE DIRECTORS' OPINION:
•
•
•
•
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in Note 1 to the financial
statements;
the attached financial statements and notes give a true and fair view of the Group’s financial position as
at 30 June 2016 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
On behalf of the directors.
Peter Pawlowitsch
Chairman
29 September 2016
Melbourne
Independent
auditor’s report
Additional disclosures
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
No of holders of
ordinary shares
No of ordinary
shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders.
4
49
86
289
60
488
4
861
167,014
810,477
11,967,143
79,938,331
92,883,826
861
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number held
21 Sep. 2016
% of total shares
issued
BRAYTER LIMITED
CORANGAMITE PTY LTD
CHI WAI KENNETH LAI
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
HALF FULL PTY LTD
SQUITCHY LANE HOLDINGS PTY LTD
PACIFIC NOMINEES LIMITED
MOSCH PTY LTD
GOLDFIRE ENTERPRISES PTY LTD
NAMIB NOMINEES PTY LTD
SEQUOI NOMINEES PTY LTD
HAVEN SUPER PTY LTD
ACQUISITIVE PTY LTD
SEAFIELD SUPERANNUATION PTY LTD
MRS RANG XU
HIMSTEDT & CO PTY LTD
P & D WILLIAMSON SUPER PTY LTD
BEZIQUE PTY LIMITED
MR GEORGE ANTHONY VENUTI & MRS CAROLYN ANNE VENUTI
VAULT (WA) PTY LTD
JAEK HOLDINGS PTY LTD
GOLDFIRE ENTERPRISES PTY LTD
MR TERRENCE JOHN JASPER & MRS JESSICA ANNE JASPER
GP SECURITIES PTY LTD
MR GEORGE VENUTI & MRS CAROLYN ANNE VENUTI
MR XIAO YONG ZHANG
CHEBBFUND PTY LTD
MR JAMES MOYE
MR CHRISTOPHER RICHARD BROWN
MS KATHERINE BALLENGER & DR ALAN DAVEY & MR JODI TABALOTNY
VIENNA HOLDINGS PTY LTD
BELLEROPHON INVESTMENTS PTY LTD
37,305,206
10,707,904
10,335,000
2,085,368
1,961,876
1,440,090
1,087,500
937,500
750,000
625,000
625,000
625,000
625,000
600,000
600,000
500,000
419,081
400,000
400,000
312,500
312,500
312,500
300,000
300,000
300,000
260,000
250,000
250,000
250,000
225,000
225,000
217,152
40.16
11.53
11.13
2.25
2.11
1.55
1.17
1.01
0.81
0.67
0.67
0.67
0.67
0.65
0.65
0.54
0.45
0.43
0.43
0.34
0.34
0.34
0.32
0.32
0.32
0.28
0.27
0.27
0.27
0.24
0.24
0.23
79
75,544,177
81.33
Annual Report 2016 UNQUOTED EQUITY SECURITIES
No on issue
No of holders
Options over ordinary shares issued
33,946,250
59
There are no holders of unquoted equity securities holding 20% or greater of the number of unquoted equity
securities on issue.
SUBSTANTIAL HOLDERS
Substantial holders in the Company are set out below:
BRAYTER LIMITED
CORANGAMITE PTY LTD
CHI WAI KENNETH LAI
SECURITIES SUBJECT TO ESCROW
Ordinary shares
Number held
21 Sep 2016
% of total shares issued
37,305,206
10,707,904
10,335,000
40.16
11.53
11.13
Details
No of Shares
Ordinary Shares escrowed 24 months from quotation (NOVAD)
Unlisted options exercisable at 20 cents expiring 30/6/2019 escrowed to 12/11/2016 (NOVAA)
Unlisted options exercisable at 20 cents expiring 30/6/2019 escrowed 24 months from
quotation (NOVAF)
20,774,705
10,200,000
9,859,250
VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon
a poll each share shall have one vote.
There are no other classes of equity securities.
Use of funds
Since admission, the Company has used its cash in a way consistent with its business objectives.
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