FY21 PERFORMANCE HIGHLIGHTS
$18.4m
Highest ever
total annual
revenue
+55%
Increase in annual
total revenue
year-on-year
$16.5m
Highest ever
annual sales
revenue
+50%
Increase in annual
sales revenue
year-on-year
$8.8m+
Cash and cash
equivalents available
at end of FY21
Contents
Corporate Directory .......................................................................................................................................................................................... 1
About ..................................................................................................................................................................................................................... 2
Strategy ................................................................................................................................................................................................................. 3
Chairman’s report .............................................................................................................................................................................................. 5
Managing Director’s report ........................................................................................................................................................................... 6
Director profiles ................................................................................................................................................................................................. 7
Review of operations ....................................................................................................................................................................................... 8
Directors’ report .............................................................................................................................................................................................. 15
Auditor’s independence declaration ....................................................................................................................................................... 33
Statement of profit or loss and other comprehensive income ..................................................................................................... 34
Statement of financial position ................................................................................................................................................................. 35
Statement of changes in equity ................................................................................................................................................................ 36
Statement of cash flows ............................................................................................................................................................................... 38
Notes to the financial statements ............................................................................................................................................................ 39
Directors’ declaration .................................................................................................................................................................................... 75
Independent auditor’s report to the members of Novatti Group Limited ............................................................................... 76
Shareholder information ............................................................................................................................................................................. 81
Novatti Group Limited
Corporate directory
30 June 2021
Corporate Directory
Directors
Joint company secretaries
Registered office and principal
place of business
Share register
Auditor
Solicitors
Bankers
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook (Managing Director and Chief Executive Officer)
Kenneth Lai (Non-Executive Director)
Paul Burton (Non-Executive Director)
Steven Zhou (Non-Executive Director)
Ian Hobson
Steven Stamboultgis
Level 3,
461 Bourke Street,
Melbourne VIC 3000
+61 3 9011 8490
Automic Registry Services
267 St Georges Terrace
Perth WA 6000
+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
ANZ
388 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
Corporate Governance Statement
www.novatti.com/corporate-governance
Australian Financial Services
Licence
AFSL No.448066
New Zealand Financial Services
Provider
FSP613789
Financial Conduct Authority
FCA No. 900631 as an appointed representative of CFS-ZIPP Ltd (FCA No. 900027)
for issuance of e-money products
1
Novatti Group Limited
About
30 June 2021
About
Novatti enables businesses to
pay and be paid, from any
device, anywhere.
From corner stores and startups
to global organisations, our
solutions will unlock your ambitions.
2
Novatti Group Limited
Strategy
30 June 2021
Strategy
Novatti’s business covers the complete payments value chain, from issuing payment cards right through to planned banking
services:
We do this not only to offer a unique value proposition to our partners, but to also capture the broad-based growth we are
seeing across the key markets we operate in:
To capture this growth, Novatti leverages its leading B2B ecosystem, which combines:
Technology – digital and mobile platforms
Licences – opening jurisdictions and highlighting trust
Partnerships – providing scale without substantial capital
Team – most importantly, we have leading inhouse expertise
*Licence pending with APRA
3
Novatti Group Limited
Strategy
30 June 2021
This ecosystem is already trusted by a number of leading companies globally, including:
Across FY21, this ecosystem increasingly delivered results as businesses, and particularly fintechs, sought to leverage
Novatti’s capabilities.
Novatti’s partnership with leading fintech, Afterpay, in New Zealand provides a case study of how quickly this ecosystem can
be monetised:
October 2020 – Achieved New Zealand regulatory approval
January 2021 – Awarded licence by Visa to issue prepaid payment cards in that market
April 2021 – Partnered with Afterpay
This case study highlights how in the space of six months since obtaining regulatory approval, Novatti was able to monetise
this ecosystem in a new market.
Our strategy going forward will continue to focus on accelerating the expansion of this ecosystem, seeking to replicate the
success of the Afterpay partnership in other markets.
4
Novatti Group Limited
Chairman’s Report
30 June 2021
Chairman’s Report
I’m delighted to report on Novatti’s performance for FY21, a year that can be considered
transformational for the business.
While COVID-19 led to great disruption across society, it specifically led to multiple years’
worth of technological disruption in the markets that Novatti operates in, but within a much,
much shorter period than would have ever been previously predicted.
For example, in our issuing business, we witnessed the rapid adoption of digital wallets and
virtual payment cards as consumers and merchants shied away from cash following
concerns about the spread of COVID through physical currency. Likewise, the disruption to
bricks and mortar retail following multiple lockdowns saw greater demand for online and
mobile shopping, a trend we expect to continue.
All these disruptive trends are positive news for Novatti. Having spent the past years
investing in the technology and solutions to enable payments from anywhere, we were ready
for this change.
As a result, across the past year the ecosystem that we had built rapidly shifted from a development phase to a
monetisation phase, particularly as both small and large fintechs leveraged our assets to bring new products to market and
to ultimately pay and be paid.
This shift contributed to Novatti’s strongest-ever, annual revenue results. Novatti delivered total annual revenue of $18.4m
and sales revenue of $16.5m - both records.
Importantly, Novatti’s sales revenue has now grown by an average of 45% each year for the past three years. This is a
metric we continue to value as we strive to deliver long-term growth in our business and ultimately for our shareholders.
With this ecosystem now established, we expect its monetisation to accelerate going forward, as more businesses seek to
follow macro-level trends, leveraging technology to pay and be paid.
During FY21, Novatti’s growth was assisted by the $10m capital raising that we undertook at the start of the year. This
enabled Novatti to launch a new strategy, which, among other things, included an accelerated international expansion that
saw the launch of Emersion in the US. Heading into FY22, we have now completed a $40m plus capital raising, which we
will use to increase both our capabilities and ambitions with the aim of delivering even stronger growth going forward.
On behalf of the Board, I particularly want to thank all the Novatti team for their efforts during a challenging year, often
disrupted by lockdowns and working remotely. Despite these challenges, you remained positive and focused on achieving
Novatti’s long-term goals. Novatti’s success is a reflection of your creativity and hard work.
Thank you also to all our shareholders for your continued interest and partnership in our business. I look forward to
continuing to share our growth journey with you.
Peter Pawlowitsch
Chairman
5
Novatti Group Limited
Managing Director’s Report
30 June 2021
Managing Director’s Report
FY21 was a year of tremendous growth for Novatti. Across the year, our business, capabilities,
and team all grew to position us to capture the wave of disruption facing the payments industry,
particularly the shift to digital payments following COVID-19.
The year started with Novatti undertaking a $10m capital raising, with these funds then applied
across the year to deliver a new growth strategy. Achievements flowing from this included:
New tier-one partnerships with Apple Pay, Google Pay, Samsung Pay, and UnionPay
Obtaining regulatory approval in New Zealand and then partnering with Afterpay
Expanding our team, particularly in business development
Launching our new acquiring business, enabling merchants to accept payments
Integrating with Ripple with transactions taking place in the Philippines
Successfully launching Emersion in the US
Securing funding commitments and a strategic partner for the new banking business
These achievements helped strengthen Novatti’s ecosystem, which includes our technology, licences, partnerships, and
team. This ecosystem is central to capturing growth in key markets, as businesses seek a partner to pay and be paid.
Within this ecosystem, I want to particularly highlight the investment we’ve made in our team over the past year, which grew
from 65 to 128. This team enables Novatti to develop new solutions, open new markets, and facilitate our long-term growth.
It is exciting to see the best talent in the fintech industry choosing Novatti to further their career, particularly in such a
competitive market. We welcome all those team members who have joined us!
The Novatti team has no doubt been integral in accelerating the monetisation of Novatti’s ecosystem. In the March quarter
we saw new fintech players, like Lifepay and LITT, leverage this ecosystem to bring their products to market. Fast forward
to the June quarter and we saw a leap forward when leading fintech Afterpay chose Novatti as its partner in New Zealand.
All these achievements flowed into Novatti delivering its strongest-ever annual revenue results, with $18.4m in total
revenue, including $16.5m in sales revenue. Both results were around a 50% increase on the previous financial year.
The strong momentum we carry into FY22 will be furthered by the $40m-plus capital raising we undertook at the start of
FY22. With this capital raising complete, we will also seek to:
Increase our presence in existing markets as well as entering new markets such as the EU and Singapore, replicating the
success of monetising our ecosystem model in New Zealand
Pursue a range of acquisition opportunities
Open new opportunities to explore synergies with Reckon Limited, following the acquisition of our 19.9% strategic stake
Achieve regulatory approval for our new banking business
Obtain acquiring licences from both Visa and Mastercard to extend our services and bring through larger opportunities
I sincerely thank our team and our investors for your ongoing support of Novatti. While we are incredibly proud of our FY21
results, we are equally excited about what Novatti seeks to achieve in the years ahead, starting with FY22.
Peter Cook
Managing Director
6
Novatti Group Limited
Director Profiles
30 June 2021
Director Profiles
Peter Pawlowitsch
Non-Executive Chairman
BCom, CPA, MBA, FGIA
• Extensive experience as a director and officer of ASX-listed entities
• Non-Executive Chairman of Family Zone Cyber Safety (ASX:FZO) and Director of Dubber (ASX:DUB) and VRX Silica
(ASX:VRX)
• Experience in operational management, business administration and project evaluation in the IT, hospitality and mining
sectors across past 15 years
Peter Cook
Managing Director and Chief Executive Officer
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
• Over 25 years’ experience as a director and executive with multiple companies
•
•
Former Non-Executive Director and Deputy Chairman of Senetas Corporation (ASX:SEN)
Founded and led multiple telco and payments companies, including Unidial Pty Ltd and Ezipin Canada Inc
Paul Burton
Non-Executive Director
Chartered Accountant
• Over 14 years of leadership experience in the payments industry
• Previously CEO of Datacash Group Plc, a payments gateway company bought by MasterCard
Kenneth Lai
Non-Executive Director
Bachelor of Science (Computer Science)
• Over 14 years of leadership experience in the payments industry
• Managing Director and owner of Prestige Team Limited, an investment company with a portfolio in Hong Kong and
Southeast Asia
• Prestige Team Limited has interests in real estate, payment processing, digital marketing and information technology
support services
Steven Zhou
Non-Executive Director
• Experienced executive with payments industry experience in both Australia and China
•
Founder of Lifepay Pty Ltd and other fintech startups
7
Novatti Group Limited
Review of Operations
30 June 2021
Review of Operations
Financial results
Revenue
Novatti delivered total annual revenue of $18.4m, including annual sales revenue of $16.5m, both records and both up
around 50% on the previous financial year.
Across the last three financial years, Novatti has now grown sales revenue by an average of 45% each year.
Annual Sales Revenue
+50%
year-on-
year
18
16
14
12
10
8
6
4
2
$m
-
FY18
FY19
FY20
FY21
In a particularly pleasing result, Novatti achieved record sales revenue across each quarter in FY21, highlighting the consistent
growth in the business. This included $4.9m in sales revenue for the June quarter, an increase of 63% year-on-year.
Quarterly Sales Revenue
5
4
3
2
1
$m
-
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
Jun-21
8
Novatti Group Limited
Review of Operations
30 June 2021
Novatti’s core payment processing business continued to support this broad-based growth. This business has now delivered
nine consecutive quarters of record sales revenue, including more than $3.9m in the June quarter, an 87% increase year-
on-year.
In total, Novatti’s processing business generated nearly $11.3m in sales revenue in FY21, a 73% increase on the previous
financial year.
Annual Processing Sales Revenue
12
10
8
6
4
2
$M
-
+73%
year-on-
year
FY18
FY19
FY20
FY21
Cash flow
Consistent with previous years, Novatti prioritised its cashflow for growth in FY21.
Across the year, Novatti invested heavily in the expansion of its ecosystem, including acquiring further regulatory licences,
investing in compliance management, increasing business development resourcing and, most importantly, its team.
The investment in Novatti’s team is particularly important as it enables the development of new solutions, opening of new
markets, maintaining high levels of compliance management and facilitating Novatti’s long-term growth. In FY21, Novatti’s
team grew from 65 to 128, which resulted in employee benefits increasing 41% on the previous financial year to $15.9m.
In addition, investment in security deposits increased by $1.8m to facilitate new lines of business and new market entry.
Expenditure remained targeted in areas that facilitate growth. Elsewhere, Novatti’s management remained firmly focused on
increasing efficiency.
Along with a change in the fair value of an existing convertible note, this increase in growth expenditure was the main
contributor to a 7.8% increase in Novatti’s loss after income tax expense on the previous financial year to $11.8m.
Underlying EBITDA increased by 23% to a loss of $4.3m.
Importantly, these results came at the same time that Novatti’s increased sales revenue by nearly 50%.
Novatti finished FY21 with cash of $8.8m, before taking into account the $40m plus capital raising announced at the
beginning of FY22. This represents a substantial strengthening on the $2.6m in cash held from the end of FY20.
Going forward, Novatti will continue to prioritise its cashflow towards the delivery of its expanded growth strategy.
9
Novatti Group Limited
Review of Operations
30 June 2021
Fundraising
During the financial year, Novatti successfully raised $13m from the issue of shares.
The first capital raising of $10.2m took place at the beginning of FY21, and enabled Novatti to accelerate its then growth
strategy, with a particular focus on:
Increasing business development resources
Acquiring new Visa card issuing programs
Securing new strategic, global partnerships
Fast-tracking Novatti’s integration into other payment networks.
The achievements that flowed from this new strategy are discussed in the Operations section below.
In addition, during the June quarter Novatti secured an investment of $3m through a placement of 6.38m ordinary shares (at
a price of $0.439) to a BC Investment Group Holdings Ltd (BC Invest) led consortium. This followed a $2m investment by
BC Invest into Novatti’s dedicated banking subsidiary, Novatti B Holding Co Pty Ltd, as part of a seed-funding round to
acquire a 19.9% share of that subsidiary.
At the completion of FY21, Novatti had 244.2m ordinary, fully paid shares issued.
Since the end of FY21, Novatti has also completed a $40m plus capital raising. Following the success of the growth strategy
that followed Novatti’s $10m capital raising at the start of FY21, this capital raising will enable the launch of an expanded
growth strategy to:
Increase its presence in existing markets as well as entering new markets such as the EU and Singapore, replicating the
success of our ecosystem model in New Zealand
Pursue a range of acquisition opportunities
Open new opportunities to explore synergies with Reckon Limited, following the acquisition of our 19.9% strategic stake
10
Novatti Group Limited
Review of Operations
30 June 2021
Operations
FY21 was another transformational year for Novatti’s operations, which greatly increased in both scope and global reach.
Highlights across the year included:
Forming new partnerships with global payments leaders including Apple Pay, Google Pay, Samsung Pay, and UnionPay
Obtaining regulatory approval and then partnering with Afterpay to issue Visa prepaid cards in New Zealand
Expanding business development resources
Launching Novatti’s new acquiring business, enabling merchants to accept payments online and through mobile
Integrating with Ripple with transactions taking place in the Philippines
Successfully launching Emersion in the US
Securing funding commitments and a strategic partner to launch and operate its new banking business, once regulatory
approval is obtained
Ecosystem shifts from development to monetisation
Novatti has spent the past years methodically developing an ecosystem that can be leveraged by business to bring new
products to market and for businesses to pay and be paid.
This ecosystem is central to Novatti’s growth strategy and focuses on:
Technology – digital and mobile platforms
Licences – opening jurisdictions and highlighting trust
Partnerships – providing scale without substantial capital
Team – leading inhouse expertise
11
Novatti Group Limited
Review of Operations
30 June 2021
New tier-one partnerships
Across FY21, Novatti secured a number of new partnerships with tier-one, global payments leaders to further its ecosystem,
including:
Apple Pay
Google Pay
Samsung Pay
UnionPay International
Ripple
These partnerships all enable Novatti to provide scale to its ecosystem without the commitment of substantial capital.
International expansion
New Zealand
In January, Novatti announced that it had been licenced by Visa to issue prepaid cards in New Zealand. This followed Novatti
obtaining necessary approvals from New Zealand’s regulators to launch its card issuing business in that market in October
2020.
United States of America
In March, Novatti’s cloud-based subscriber billing, business automation and payments platform, Emersion, successfully
launched in the United States of America (US).
Emersion automates end-to-end business processes, including customer engagement, billing, collections, subscription
management and embedded payments, improving customer cashflow, lowering costs, and freeing-up businesses to focus on
their customers. It is already available across Australia, New Zealand and Singapore, with the US launch marking the next
step in its international expansion.
The global managed services market that Emersion operates in is expected to grow by nearly 50% between 2020 and 2025
to US$329b.1 With the North American market being many times the size of the Australia-New Zealand market, this highlights
the enormous growth opportunity that this US launch presents for Novatti.
Emersion’s customer acquisition in the US will be aided by its launch last year on global business app marketplace, Salesforce
AppExchange. It will also be available through other major customer acquisition platforms, including ConnectWise
Marketplace.
Philippines
In April, Novatti’s partnership with global payment disrupter, Ripple, went live with revenue-generating transactions taking
place.
Ripple uses its decentralised, global financial network, RippleNet, to provide its partners with the ability to process global
payments instantly, as well as providing access to emerging, high-growth capabilities, such as blockchain and the digital asset,
XRP, a top 10 global cryptocurrency currently valued at more than USD$52 billion.2
After targeting cross-border transactions between Australia and the South-East Asia region, Novatti achieved its first
monetisation of the partnership by processing cross-border transactions for a leading remittance provider in the Philippines.
This alone is expected to result in several thousand transactions a month being processed by Novatti through Ripple’s
payments network. Importantly, discussions are also underway to add further clients to this service, including in Thailand.
1 See https://www.marketsandmarkets.com/Market-Reports/managed-services-market-
1141.html?gclid=CjwKCAjwxuuCBhATEiwAIIIz0Qj4A3xzdChcYUrAatEXxNhQ4jW-_mbhd1-Wk_Qwr0qnYsyceJhkBxoCEpMQAvD_BwE
2 See: https://bravenewcoin.com/data-and-charts/assets/XRP/price-summary
12
Novatti Group Limited
Review of Operations
30 June 2021
Growing monetisation
In the March quarter, new fintech players, like Lifepay and LITT, leveraged Novatti’s ecosystem to bring new products to
market. In the June quarter, this progress took a leap forward when Afterpay chose Novatti as its partner to deliver its
payment card program in New Zealand.
Afterpay is listed in the S&P/ASX 20, and has revolutionised the way that consumers pay for goods and services. It has
grown into a leading international player in the Buy Now Pay Later (BNPL) sector, with over 14 million active customers
globally.3
As part of this partnership between Novatti and Afterpay, Novatti will leverage its licence with Visa to enable Afterpay to issue
Visa card solutions in New Zealand. This includes enabling Afterpay’s users to access Afterpay-branded payment cards in
their digital wallet for use at participating merchants across New Zealand.
The initial agreement is for three years and Novatti will receive project setup, monthly recurring and, depending on the take
up of the service, transaction-based fees.
Continued investment in new markets
Novatti’s partnership with Afterpay in New Zealand highlighted that once regulatory approval to operate in a particular
jurisdiction is obtained, Novatti is able to monetise this investment quickly.
This is a model that Novatti believes it can replicate in other jurisdictions, unlocking new addressable markets. Work here is
already underway, with Novatti applying for:
European Union (EU) – E-money Licence: which would enable Novatti to issue a range of financial products in the EU
Singapore - Major Payment Institution Licence: which would enable Novatti to provide payment services without being
subject to specified thresholds
In seeking to capture a share of these new addressable markets, Novatti would leverage its existing customer and contact
network in both regions, including through Emersion, which has operated in Singapore for several years.
Launch of new Digital Payments Accelerator
In the September quarter, Novatti extended the capabilities of its ecosystem with the launch of its Digital Payments
Accelerator.
This initiative enables participants to leverage Novatti’s ecosystem without the need to commit substantial upfront capital for
key assets like technology and licences. It meets the needs of:
Startups and innovators looking to bring their fintech and financial products to market through an affordable, API driven,
Visa card payments program
Established businesses needing access to an affordable, off-the-shelf, Visa payments solution to meet growing market
demand for these facilities
Novatti will receive program development fees and ongoing processing fees based on transaction volumes for access to this
program.
3 See Afterpay - https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02365019-
3A565515?access_token=83ff96335c2d45a094df02a206a39ff4
13
Novatti Group Limited
Review of Operations
30 June 2021
New banking business launch ready
Developing a new banking business remains a key pillar of Novatti’s long-term growth strategy. In addition to presenting an
exciting opportunity in its own right, this new business also presents an opportunity to provide value-add to Novatti’s existing,
established businesses.
The timing to pursue this opportunity strongly aligns with the momentum of fintechs succeeding within Australia’s banking
sector. For example, recent data from the Australian Prudential Regulation Authority (APRA) highlighted that Australians are
voting with their feet in backing new fintech, banking challengers, with the resident deposits of three existing players (Judo,
86 400, Volt) having increased to nearly $3b, up more than 60% since April 2020.4
These challengers are seeing strong backing from the investment community. Judo’s valuation has increased to $1.9b
following its latest capital raise.5 It was also recently announced that 86 400 will be acquired for more than $200m by ‘big four’
bank NAB.6
Furthering the momentum in this sector, APRA recently issued the first new banking licence since December 2019.7 This
follows APRA having put the approval of new licence applications, including Novatti’s, on hold during COVID.
Novatti welcomes this process restarting and will now seek to achieve regulatory approval for this new business before the
end of November 2021.
During the June quarter, Novatti also secured a strategic partnership with BC Investment Group Holdings Limited (BC Invest),
which will enable Novatti’s new banking business to launch and operate once APRA’s approval is obtained. BC Invest brings
not only strong financial services capabilities, which will be invaluable in bringing income-generating products, such as lending
products, to market, but also strong customer acquisition channels.
BC Invest invested $2m into Novatti’s dedicated banking subsidiary, as part of a seed funding round, to acquire a 19.9% share
of this subsidiary. This subsidiary has also received interest for a further $13m in investment as part of a Series A funding
round, at a post-money valuation of $35m. Post the Series A round, Novatti and BC Invest will own 57% and 19% of this
dedicated banking subsidiary.
This strategic partnership marked another major milestone in the development of this new banking business and aligns with
the strong momentum in this sector more broadly.
Successful exit from SendFX investment
During the September quarter, Novatti successfully exited its investment in SendFX, with $900k in further funds unlocked.
SendFX was launched in 2019 as a new cross-border payments platform, targeting individuals and small businesses. Novatti
was a seed investor in SendFX, providing equity and debt funding and technology and compliance services.
This successful exit is an example of Novatti using its strong inhouse expertise to commercialise high-growth ideas.
4 See APRA Monthly Authorised Deposit-taking Institution Statistics - https://www.apra.gov.au/monthly-authorised-deposit-taking-institution-statistics
5 Australian Financial Review – Judo raises fresh capital as valuation surges 19pc – 21 June 2021
6 Australian Financial Review – NAB scoops up neobank 86 400 – 29 January 2021
7 APRA – News – APRA grants new restricted authorised deposit-taking institution licence to Alex Bank – 7 July 2021
14
Novatti Group Limited
Directors' report
30 June 2021
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 2021.
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 (Non-Executive Chairman)
Peter Cook (Managing Director and Chief Executive Officer)
Kenneth Lai (Non-Executive Director)
Paul Burton (Non-Executive Director)
Steven Zhou (Non-Executive Director)
Brandon Munro (Non-Executive Director) (resigned on 5 August 2020)
Principal activities
Novatti Group Limited is a leading fintech that enables businesses to pay and be paid, from any device, anywhere. Solutions
include issuing, acquiring, processing, and billing, while the Group has also applied to APRA for a restricted banking licence.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $11,843,000 (30 June 2020: $10,960,000).
Despite the challenges of COVID-19, the Group's revenue increased by 49.8% to $16,482,000 (30 June 2020:
$11,004,000). The Group’s underlying EBITDA* changed from a $3,467,000 loss in the prior year to a loss of $4,280,000,
reflecting an increase of 23%.
During the financial year, the Group successfully raised $13 million (before costs) through two placements to institutional
and sophisticated investors. The net asset position improved by $9,384,000 to $8,898,000 as at 30 June 2021 (30 June
2020: deficit of $486,000), with $8,798,000 held in cash and cash equivalents.
*Underlying EBITDA is a non-IFRS measure calculated as profit before income tax, and before depreciation and
amortisation, share based payments, net finance costs, due diligence costs, gain on embedded derivative and impairment
of capitalised bank licensing costs. The Company believes this non-IFRS and operational measure is useful in monitoring
and understanding the Group’s business and they should not be considered in isolation nor as a substitute for IFRS
measures.
15
Novatti Group Limited
Directors' report
30 June 2021
Net loss from operations
Add:
Interest
Less:
Depreciation and amortisation
Finance charges
Indirect tax expenses
EBITDA
Add back/(less)
Vesting of share-based payments
Investments at fair value through profit and loss
Loss on embedded derivative
Impairment of capitalised bank licensing costs
Underlying EBITDA*
Cash
Operating cash flow
2021
$'000
2020
$'000
Change
Change
$'000
%
(11,843)
(10,960)
(883)
8%
(35)
(9)
(26)
289%
1,481
1,507
29
(8,861)
2,087
(366)
2,860
-
(4,280)
8,798
(5,399)
906
1,367
157
(8,539)
1,332
-
727
3,013
(3,467)
2,600
(1,236)
575
140
(128)
(322)
755
(366)
2,133
(3,013)
(813)
6,198
(4,163)
63%
10%
(82%)
4%
57%
-
293%
(100%)
23%
238%
337%
In March 2020, the World Health Organisation declared the outbreak of a novel coronavirus (COVID-19) as a pandemic,
which continues to spread globally as well as in Australia. The spread of COVID-19 has caused significant volatility in
Australian and international markets. There is significant uncertainty around the breadth and duration of business disruptions
related to COVID-19 and therefore the Group has taken precautionary measures by temporarily closing the Company’s
offices (for all but essential services) and having arranged for its the employees to work remotely, as well as curtailing travel.
At the date of this report, the impact of these measures is not expected to significantly affect Novatti's business operations.
Significant changes in the state of affairs
On 3 July 2020, the Group issued 875,000 fully paid ordinary shares on conversion of 175,000 Novatti Group Limited
Convertible Notes (4 for 1) and the exercise of 175,000 unlisted options exercisable at $0.25 per share.
On 7 July 2020, the Group issued 40,000,000 ordinary shares at $0.25 per share to institutional and sophisticated investors
in a placement as announced on 29 June 2020, raising $10 million. An additional 800,000 shares totalling $200,000 were
issued to Directors Peter Pawlowitsch and Peter Cook on 15 September 2020 following shareholder approval at the General
Meeting held on 19 August 2020.
On 8 July 2020, the Group announced that it had exited its investment in cross-border payments provider, SendFX, and
ended its provision of ongoing technology and compliance services. Under its exit, the Group received $900,000 in cash
during the year, representing payment for the buy-back of Novatti's shareholding, plus repayment of loan funds from an
aggregate cash investment by Novatti of $400,000.
On 10 July 2020, the Group issued 5,000,000 unquoted options to employees under the Employee Share Options Plan
(ESOP), exercisable at $0.20 (20 cents) with various vesting and expiry dates.
On 15 September 2020, the Group issued the following securities:
●
●
200,000 fully paid ordinary shares at $0.25 per share to service providers in lieu of investor relations and structuring
advice; and
7,000,000 unquoted options in lieu of investor relation service fees, vesting immediately on issue. The options are
exercisable at $0.25.
On 5 November 2020, the Group issued 51,038 fully paid ordinary shares on cashless exercise of 166,667 unquoted options.
16
Novatti Group Limited
Directors' report
30 June 2021
On 3 December 2020, the Group issued 2,500,000 unquoted options to Mr Peter Cook, Managing Director and Chief
Executive Officer. This issuance was approved by shareholder at the Annual General Meeting held on 25 November 2020.
These options will be vest in three tranches subject to achieving market vesting conditions. The options are exercisable at
$0.27, expiring 30 November 2024. These market conditions were subsequently achieved and thus these options were
vested.
On 9 December 2020, the Group issued 20,000 fully paid ordinary shares at $0.20 per share on exercise of unquoted options,
raising $4,000.
On 22 December 2020, the Group issued the following securities under the Group's Employee Share Option Plan (ESOP):
●
●
3,600,000 unquoted options exercisable at $0.275 (27.5 cents), expiring 22 December 2023; and
2,000,000 unquoted options exercisable at $0.30 (30 cents), expiring 14 October 2023.
On 26 February 2021, the Group issued the following securities:
●
●
●
844,811 fully paid ordinary shares on conversion of 207,500 Novatti Group Limited Convertible Notes (4 for 1) and
compound interest of 14,811;
55,000 fully paid ordinary shares on conversion of 55,000 unlisted options exercisable at $0.25 per share, expiring 30
October 2022; and
225,000 fully paid ordinary shares at $0.20 per share on exercise of unquoted options, expiring 19 December 2022,
raising $45,000.
On 19 March 2021, the Group issued the following securities:
●
●
●
●
406,332 fully paid ordinary shares on conversion of 90,000 Novatti Group Limited Convertible Notes (4 for 1) and
compound interest of 46,332;
90,000 fully paid ordinary shares on conversion of 90,000 unlisted options exercisable at $0.25 per share;
25,000 fully paid ordinary shares at $0.20 per share on exercise of unquoted options, raising $5,000; and
115,163 fully paid ordinary shares to service providers in lieu of consulting fees.
On 24 March 2021, the Group issued the following securities:
●
●
1,660,000 fully paid ordinary shares on conversion of 415,000 Novatti Group Limited Convertible Notes (4 for 1); and
250,000 fully paid ordinary shares on conversion of 250,000 unlisted options exercisable at $0.25 per share.
On 23 April 2021, the Group issued the following securities:
●
●
●
1,618,032 fully paid ordinary shares on conversion of 380,000 Novatti Group Limited Convertible Notes (4 for 1) and
compound interest of 98,032;
180,000 fully paid ordinary shares on conversion of 180,000 unlisted options exercisable at $0.25 per share; and
30,000 fully paid ordinary shares at $0.20 per share on exercise of unquoted options raising $6,000.
On 13 May 2021, the Group issued 6,833,713 ordinary shares at $0.439 per share to sophisticated investors in a placement,
as announced on 3 May 2021, raising $3 million.
On 21 May 2021, the Group issued the following securities:
●
●
190,000 fully paid ordinary shares on conversion of 47,500 Novatti Group Limited Convertible Notes (4 for 1); and
55,000 fully paid ordinary shares at $0.20 per share on exercise of unquoted options, raising $11,000.
On 28 May 2021, the Group issued following unquoted options to employees under the Employee Share Options Plan
(ESOP):
●
●
●
●
●
●
100,000 unlisted options exercisable at 75 cents, expiring 5 May 2024;
200,000 unlisted options exercisable at 30 cents, expiring 8 February 2024;
100,000 unlisted options exercisable at 60 cents, expiring 7 April 2024;
300,000 unlisted options exercisable at 30 cents, expiring 5 April 2024;
400,000 unlisted options exercisable at 75 cents, expiring 31 May 2024;
1,000,000 unlisted options exercisable at 30 cents, expiring 26 October 2023.
17
Novatti Group Limited
Directors' report
30 June 2021
On 28 May 2021, the Group issued 500,000 shares on exercise of options at $0.25 per share to raise $125,000.
On 4 June 2021, the Group issued the following securities:
●
●
1,381,084 fully paid ordinary shares on conversion of 300,000 Novatti Group Limited Convertible Notes (4 for 1) and
compound interest of 181,084;
300,000 fully paid ordinary shares on conversion of 300,000 unlisted options exercisable at $0.25 per share.
On 11 June 2021, the Group issued 1,125,153 fully paid ordinary shares on conversion of 267,500 Novatti Group Limited
Convertible Notes (4 for 1) and compound interest of 55,153.
On 18 June 2021, the Group issued 1,162,500 shares on exercise of options at $0.25 per share to raise $290,625.
On 30 June 2021, the Group entered into share purchase agreements for the acquisition, subject to completion of a
capital raising, of an equity interest of at least 15% in ASX-listed Reckon Limited (ASX:RKN) (Strategic Stake).
Under the share purchase agreements, Novatti will acquire the Strategic Stake at a price of $1.00 per Reckon share from
institutional investors for a total amount of approximately $17 million (representing approximately 17 million Reckon shares).
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
The impact of Coronavirus (COVID-19) pandemic is ongoing and while there have been mixed financial and operational
impacts for the Consolidated Entity up to 30 June 2021, it is not practical to estimate the potential impact, positive or negative,
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any
economic stimulus that may be provided.
On 2 July 2021, Novatti launched a $45 million capital raising under a $40 million placement and a $5 million share purchase
plan to expand its presence in existing markets, enter new markets, and acquire a 19.9% interest in Reckon Limited
(ASX:RKN).
On 9 July 2021, Novatti completed Tranche 1 of its capital raising, by issue of 51,120,472 fully paid ordinary shares at $0.55
per share, raising $28,116,260 before costs.
On 13 July 2021, Novatti completed its previously announced acquisition of a 19.9% interest in Reckon Limited (ASX:RKN)
by payment of $22.5 million for acquisition of 22.5 million shares in Reckon and associated costs.
During July 2021, Novatti issued 6,080,000 fully paid ordinary shares upon conversion of 1,520,000 convertible notes (4 for
1). On 4 August 2021, Novatti settled the remaining 97,500 convertible notes by way of repayment or redemption and had
no further convertible notes on issue.
On 6 August 2021, Novatti completed the share purchase plan and issued 452,742 fully paid ordinary shares at $0.55 raising
$249,000 before costs.
On 20 August 2021, Novatti held a General Meeting for the ratification of shares issued prior and for the adoption of the 2021
Novatti Employee Incentive plan, and approval for issue of shares for Tranche 2 of the capital raising. On August 27
2021, Novatti completed Tranche 2 of the capital raising by the issue of 21,606,801 fully paid ordinary shares at $0.55 per
share, raising $11,883,740 before costs.
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
18
Novatti Group Limited
Directors' report
30 June 2021
Likely developments and expected results of operations
The Group will continue its principal activities of enabling businesses to pay and be paid, from any device, anywhere with
solutions including issuing, acquiring, processing, and billing.
The capital raising initiative of over $40 million as announced on 2 July 2021 will enable Novatti to drive additional growth,
including continuing our investment in the bank licence and accessing M&A opportunities.
As part of its expanded growth strategy, Novatti will use the year ahead to seek to:
●
●
●
Achieve regulatory approval for its new banking business before the end of November 2021
Unlock new addressable markets, such as the EU and Singapore, through new licencing, replicating the success of
Novatti’s recent regulatory approvals and partnership with Afterpay in New Zealand
Obtain acquiring licences from both Visa and Mastercard by the end of September 2021, enabling Novatti to extend its
acquiring services and bring through larger business opportunities
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Peter Pawlowitsch
Non-Executive Chairman
BCom, CPA MBA, FGIA
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
Non-Executive Chairman, Family Zone Cyber Safety Ltd (ASX: FZO)
Non-Executive Director, VRX Silica Ltd (ASX: VRX)
Executive Director, Dubber Corporation Ltd (ASX: DUB)
Non-Executive Director, Knosys Ltd (ASX: KNO)
Former directorships (last 3 years): Non-Executive Director, Rewardle Holdings Limited (ASX: RXH)
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee
3,582,662 fully paid ordinary shares
2,166,667 unlisted options
Name:
Title:
Qualifications:
Experience and expertise:
Peter Cook
Managing Director and Chief Executive Officer
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
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:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee
11,507,904 fully paid ordinary shares
6,666,667 unlisted options
19
Novatti Group Limited
Directors' report
30 June 2021
Name:
Title:
Qualifications:
Experience and expertise:
Kenneth Lai
Non-Executive Director
BSc Majoring in Computer Science
Kenneth is the managing director and wholly owner of Prestige Team Limited, an
investment company which, together with its subsidiaries, holds an investment portfolio
in Hong Kong and Southeast Asia. Prestige Team Limited has interests in real estate,
payment processing, digital marketing and information technology support services.
Kenneth has funded and invested in various Silicon Valley technology funds focusing
on business opportunities within Asia. He also co-founded Legend World Development
Technology Limited, a limited liability company incorporated in Hong Kong, which
provides information technology solutions and integrated marketing solutions to
business setups, and in which he is a shareholder and advisor.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee
13,116,118 fully paid ordinary shares
666,667 unlisted options
Name:
Title:
Qualifications:
Experience and expertise:
Paul Burton
Non-Executive Director
B.Com, B. Accounting Science (honours), Chartered Accountant
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.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Chair of Audit, Risk and Compliance Committee
263,158 fully paid ordinary shares
666,667 unlisted options
Name:
Title:
Qualifications:
Experience and expertise:
Steven Zhou
Non-Executive Director
BSc, Grad Dip Computing, Grad Dip Securities, GAICD
Steven is an experienced executive with payments industry experience in both China
and Australia. Steven has recently aided Novatti in a number of deals involving new
business operations between Australia and China.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit, Risk and Compliance Committee
None
666,667 unlisted options
'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 secretaries
Ian Hobson
Ian 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.
20
Novatti Group Limited
Directors' report
30 June 2021
Steven Stamboultgis
Steven was appointed Company Secretary on 15 March 2021 and is the Chief Financial Officer of the group. Steven holds
a Bachelor of Business Degree and Master in Commercial Law. He is a Certified Practicing Accountant.
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 2021, and the number of meetings attended by each director were:
Peter Pawlowitsch
Peter Cook
Kenneth Lai
Paul Burton
Steven Zhou
Full Board
Audit, Risk and Compliance
Committee
Attended
Held
Attended
Held
7
7
6
7
4
7
7
7
7
7
2
2
-
2
-
2
2
2
2
2
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform 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
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy
is to attract, motivate and retain high performance and high quality personnel.
The full Board has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the Group.
21
Novatti Group Limited
Directors' report
30 June 2021
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is 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.
For the FY21 financial period there was no advice from independent remuneration consultants. 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. The total maximum remuneration of non-executive directors was 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 maximum remuneration has been set at an amount not to exceed $500,000. The current level of
fees was approved at the Group’s 27 November 2018 Annual General Meeting.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
Remuneration policies and arrangements for the Key Executive Members of the Group including the Chief Executive
Officer, Chief Operating Officer and the Chief Financial Officer are reviewed by the Board and with the targets outside of
the Chief Executive Officer being set by the Board.
The Group rewards its executives with a level and mix of remuneration based on their position and responsibility, which
may have both fixed and variable components.
The executive remuneration and reward framework can have four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
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 or the Managing Director are met. Targets are set by a cascading process from the Board through the executive
Group.
22
Novatti Group Limited
Directors' report
30 June 2021
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
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.
These measurement methods were selected as they directly reflect whether the STI performance targets have been met or
not, as set by the Board or the Managing Director as the case may be.
Long Term Incentive program (LTI)
LTI awards are reviewed 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 Incentive Plan ('EIP').
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.
In addition, the Managing Director has performance options that are tied to total shareholder return with that being
measured by providing share price targets.
The achievement of the Group’s strategic and financial objectives is the key focus of the efforts of the Group. As indicated
above, over the course of each financial year, the Board reviews the Group’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 EIP. LTI, based on equity remuneration (being either the issue of securities
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 EIP to offer shares and options to employees, the interest of employees is aligned with shareholder wealth. A copy
of the EIP can be found via the Group’s website.
Consolidated entity performance and link to remuneration
The following table illustrates how the Group’s remuneration strategy aligns with the Group’s strategic direction and links
remuneration outcomes to performance:
Novatti Group's business objective:
Novatti Group Limited is a leading fintech that enables businesses to pay and be paid, from any device, anywhere. Solutions
include issuing, acquiring, processing, and billing, while the Group has also applied to APRA for a restricted banking licence.
Align the interest of executives with shareholders
Attract, motivate and retain high performing individuals
- The remuneration strategy incorporates “at-risk”
components, with short-term paid in cash 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
23
Novatti Group Limited
Directors' report
30 June 2021
Remuneration
Component
Fixed Remuneration
Short Term Incentive
To provide competitive fixed
remuneration set with
reference to role, market,
experience and performance.
Vehicle
Purpose
Consisting of base salary,
superannuation and
nonmonetary 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.
Is paid in cash.
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.
Link to
Performance
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.
Long Term Performance
Equity including Options,
Shares and/or Rights.
Voting and comments made at the company's 2020 Annual General Meeting ('AGM')
At the 2020 AGM, 90.4% of the votes received supported the adoption of the remuneration report for the year ended 30 June
2020. The company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity consisted of the following directors of Novatti Group Limited:
●
●
●
●
●
●
Peter Pawlowitsch (Non-Executive Chairman)
Peter Cook (Managing Director and Chief Executive Officer)
Kenneth Lai (Non-Executive Director)
Paul Burton (Non-Executive Director)
Steven Zhou (Non-Executive Director)
Brandon Munro (Non-Executive Director) (resigned on 5 August 2020)
Other key management personnel:
●
●
Alan Munday (Group Chief Operating Officer)
Steven Stamboultgis (Chief Financial Officer and Company Secretary)
24
Novatti Group Limited
Directors' report
30 June 2021
Amounts of remuneration
2021
Non-Executive Directors:
Peter Pawlowitsch
Kenneth Lai
Paul Burton
Steven Zhou
Brandon Munro*
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis**
Short-term benefits
Long-term
benefits
Post-
employment
benefits
Share-
based
payments
Cash salary
and fees monetary
Non-
$
$
Annual
leave
$
Long
service
leave
$
Super-
annuation
$
Equity-
settled
$
Total
$
117,610
50,000
50,000
36,530
15,834
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,172
-
-
3,470
1,504
-
-
-
-
-
128,782
50,000
50,000
40,000
17,338
432,673
35,318
16,894
8,659
20,231
286,917
800,692
313,171
204,267
1,220,085
-
-
35,318
30,520
10,814
58,228
6,158
3,880
18,697
25,000
19,405
80,782
78,175
62,540
453,024
300,906
427,632 1,840,742
*
**
Brandon Munro resigned as a Director on 5 August 2020.
Steven Stamboultgis was also appointed company secretary on 15 March 2021.
Short-term benefits
Long-term
benefits
Post-
employment
benefits
Share-
based
payments**
Cash salary
and fees monetary
Non-
$
$
Annual
leave
$
Long
service
leave
$
Super-
annuation
$
Equity-
settled
$
Total
$
-
-
-
45,662
45,662
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,845
-
-
4,338
4,338
248,322
73,434
85,934
35,934
45,233
259,167
73,434
85,934
85,934
95,233
286,029
37,318
38,613
6,753
17,768
311,500
697,981
250,500
183,691
811,544
-
-
37,318
23,742
13,327
75,682
5,224
3,720
15,697
20,531
17,451
75,271
47,435
37,948
347,432
256,137
885,740 1,901,252
2020
Non-Executive Directors:
Peter Pawlowitsch*
Kenneth Lai*
Paul Burton*
Steven Zhou
Brandon Munro***
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis
*
Director fees for these directors were paid through the issue of shares, see Share Based Payments Section below for
further information.
FY20 share-based payments charge includes $288,368 of equity instruments issued in prior financial years.
**
*** Brandon Munro resigned as a Director on 5 August 2020.
25
Novatti Group Limited
Directors' report
30 June 2021
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Peter Pawlowitsch
Kenneth Lai
Paul Burton
Steven Zhou
Brandon Munro*
Executive Directors:
Peter Cook
Other Key Management
Personnel:
Alan Munday
Steven Stamboultgis
Fixed remuneration
2020
2021
At risk - STI
At risk - LTI
2021
2020
2021
2020
100%
100%
100%
100%
100%
4%
-
58%
58%
53%
64%
55%
83%
79%
86%
85%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96%
100%
42%
42%
47%
36%
45%
17%
21%
14%
15%
*
Brandon Munro resigned as a Director on 5 August 2020.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Peter Cook
Managing Director and Chief Executive Officer
20 November 2015
The term is not fixed.
Base salary of $400,000 (including statutory superannuation). 6.7M incentive options
exercisable at variable dollar values upon the achievement of certain milestones.
Remuneration is subject to an annual review to be conducted by the Board. Factors
to be considered include personal competency progression, achievement of personal
development targets and KPIs, company remuneration policy, its financial position
and current market equivalent positions. KPIs to be agreed each year and may be
varied by mutual agreement.
The agreement may be terminated, (A) by either party without cause with six months’
notice, or at the election of the Group, immediately with payment in lieu of six months’
notice (subject to the limitation of the Corporations Act and Listing Rules). (B) By the
Group 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.
26
Novatti Group Limited
Directors' report
30 June 2021
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Alan Munday
Group Chief Operating Officer
20 November 2015
The term is not fixed.
Base salary of $304,468 (including statutory superannuation).
Remuneration is subject to an annual review to be conducted by the Board. Factors
to be considered include personal competency progression, achievement of personal
development targets and KPIs, company remuneration policy, its financial position
and current market equivalent positions. KPIs to be agreed each year and may be
varied by mutual agreement.
The agreement may be terminated, (A) without cause, with three months’ notice from
the Group or two months from the executive, or payment in lieu of notice at the
Group’s election (subject to the limitation of the Corporations Act and Listing Rules).
(B) by Novatti on one month’s 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:
Agreement commenced:
Term of agreement:
Details:
Steven Stamboultgis
Chief Financial Officer and Company Secretary
20 November 2015
The term is not fixed.
Base salary of $213,368 (including statutory superannuation).
Remuneration is subject to an annual review to be conducted by the Board. Factors
to be considered include personal competency progression, achievement of personal
development targets and KPIs, company remuneration policy, its financial position
and current market equivalent positions. KPIs to be agreed each year and may be
varied by mutual agreement.
The agreement may be terminated, (A) without cause, with three months’ notice from
the Group or two months from the executive, or payment in lieu of notice at the
Group’s election (subject to the limitation of the Corporations Act and Listing Rules).
(B) by Novatti on one month’s 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.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2021.
27
Novatti Group Limited
Directors' report
30 June 2021
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Name
Number of
options
granted
Grant date
Vesting date and
exercisable date
Expiry date
Exercise price at grant date
Fair value
per option
Peter Pawlowitsch
Peter Pawlowitsch
Peter Pawlowitsch
Peter Cook
Peter Cook
Peter Cook
Peter Pawlowitsch
Peter Pawlowitsch
Peter Cook
Peter Cook
Kenneth Lai
Kenneth Lai
Paul Burton
Paul Burton
Steven Zhou
Steven Zhou
Alan Munday
Alan Munday
Alan Munday
Steven Stamboultgis
Steven Stamboultgis
Steven Stamboultgis
Peter Cook
Peter Cook
Peter Cook
Alan Munday
Alan Munday
Steven Stamboultgis
Steven Stamboultgis
166,666 25 November 2019 30 November 2020 30 November 2023
166,666 25 November 2019 30 November 2020 30 November 2023
166,667 25 November 2019 30 November 2020 30 November 2023
833,333 25 November 2019 30 November 2020 30 November 2023
833,333 25 November 2019 30 November 2020 30 November 2023
833,333 25 November 2019 30 November 2020 30 November 2023
30 November 2022
833,333 27 November 2018 22 March 2019
30 November 2022
833,334 27 November 2018 22 March 2019
30 November 2022
833,333 27 November 2018 22 March 2019
30 November 2022
833,334 27 November 2018 22 March 2019
30 November 2022
333,333 27 November 2018 22 March 2019
30 November 2022
333,334 27 November 2018 22 March 2019
30 November 2022
333,333 27 November 2018 22 March 2019
30 November 2022
333,334 27 November 2018 22 March 2019
333,333 27 November 2018 22 March 2019
30 November 2022
30 November 2022
333,334 27 November 2018 22 March 2019
375,000 19 December 2019 31 December 2019 19 December 2022
187,500 19 December 2019 31 December 2020 19 December 2022
187,500 19 December 2019 31 December 2021 19 December 2022
300,000 19 December 2019 31 December 2019 19 December 2022
150,000 19 December 2019 31 December 2020 19 December 2022
150,000 19 December 2019 31 December 2021 19 December 2022
833,334 25 November 2020 01 December 2020 30 November 2024
833,333 25 November 2020 01 December 2020 30 November 2024
833,333 25 November 2020 01 December 2020 30 November 2024
500,000 22 December 2020 22 December 2020 22 December 2023
500,000 22 December 2020 22 December 2020 22 December 2023
400,000 22 December 2020 22 December 2020 22 December 2023
400,000 22 December 2020 22 December 2020 22 December 2023
Options granted carry no dividend or voting rights.
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.195
$0.195
$0.195
$0.195
$0.195
$0.195
$0.195
$0.195
$0.195
$0.195
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.270
$0.270
$0.270
$0.275
$0.275
$0.275
$0.275
$0.106
$0.086
$0.074
$0.106
$0.086
$0.074
$0.106
$0.074
$0.106
$0.074
$0.106
$0.074
$0.106
$0.074
$0.106
$0.074
$0.104
$0.087
$0.063
$0.104
$0.087
$0.063
$0.110
$0.114
$0.119
$0.102
$0.083
$0.102
$0.083
The number of options over ordinary shares granted to and vested by directors and other key management personnel as
part of compensation during the year ended 30 June 2021 are set out below:
Name
Peter Pawlowitsch
Peter Cook
Brandon Munro
Alan Munday
Steven Stamboultgis
Number of
Number of
Number of
Number of
options
granted
options
granted
options
vested
options
vested
during the
during the
during the
during the
year
2021
year
2020
year
2021
year
2020
-
2,500,000
-
1,000,000
800,000
500,000
2,500,000
500,000
750,000
600,000
-
2,500,000
-
687,500
550,000
-
-
-
375,000
300,000
*
Brandon Munro resigned as a Director on 5 August 2020.
28
Novatti Group Limited
Directors' report
30 June 2021
Additional information
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
0.640
-
(5.162)
0.310
-
(6.398)
0.165
-
(3.098)
0.225
-
(1.530)
0.115
-
(5.030)
2021
2020
2019
2018
2017
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at Received Participation Exercise
Ordinary shares
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Alan Munday
Steven Stamboultgis
Steven Zhou*
the start of
as part of
the year
remuneration
of
share
placement
3,182,662
11,107,904
1,669,348
13,116,118
263,158
50,000
20,000
-
29,409,190
-
-
-
-
-
-
-
-
-
400,000
400,000
-
-
-
-
-
-
800,000
of
Balance at
the end of
options
the year
51,038
-
3,582,662
- 11,507,904
1,720,386
- 13,116,118
263,158
-
50,000
-
20,000
-
-
-
51,038 30,260,228
*
Mr Steven Zhou does not hold any fully paid ordinary shares.
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out below:
Options over ordinary shares
Peter Pawlowitsch
Peter Cook
Brandon Munro
Kenneth Lai
Paul Burton
Steven Zhou
Alan Munday
Steven Stamboultgis
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
3,000,000
5,000,000
1,500,000
1,000,000
1,000,000
1,000,000
750,000
600,000
13,850,000
-
2,500,000
-
-
-
-
1,000,000
800,000
4,300,000
-
-
(166,667)
-
-
-
-
-
(166,667)
(833,333)
(833,333)
(1,333,333)
(333,333)
(333,333)
(333,333)
-
-
2,166,667
6,666,667
-
666,667
666,667
666,667
1,750,000
1,400,000
(3,999,998) 13,983,335
Other transactions with key management personnel and their related parties
Services
No other payments were made to Directors outside of their normal duties as Directors for Novatti Group Ltd.
Current and non-current liabilities to a Director
There are no other current or non-current liabilities outstanding to Directors of the Group as at 30 June 2021.
29
Novatti Group Limited
Directors' report
30 June 2021
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
Exercise
price
Number
under option
27 November 2018
15 November 2019
25 November 2019
19 December 2019
10 July 2020
10 July 2020
10 July 2020
10 July 2020
10 July 2020
15 September 2020
26 October 2020
25 November 2020
22 December 2020
22 December 2020
5 May 2021
8 February 2021
7 April 2021
5 April 2021
31 May 2021
30 November 2022
30 October 2022
30 November 2023
19 December 2022
10 July 2023
1 March 2024
1 March 2025
1 March 2026
31 December 2022
31 December 2021
26 October 2023
30 November 2024
22 December 2023
14 October 2023
5 May 2024
8 February 2024
7 April 2024
5 April 2024
31 May 2024
$0.190
$0.250
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.250
$0.300
$0.270
$0.275
$0.300
$0.750
$0.300
$0.600
$0.300
$0.750
5,333,335
2,587,500
3,000,000
4,750,000
850,000
441,667
441,667
66,666
3,200,000
5,200,000
1,000,000
2,500,000
3,600,000
2,000,000
100,000
200,000
100,000
300,000
400,000
36,070,835
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.
Shares issued on the exercise of options
The following ordinary shares of Novatti Group Limited were issued during the year ended 30 June 2021 and up to the date
of this report on the exercise of options granted:
Date options granted
25 November 2019
19 December 2019
15 November 2019
15 September 2020
Exercise
price
Number of
shares issued
$0.200
$0.200
$0.250
$0.250
51,038
355,000
912,500
1,800,000
3,118,538
Shares issued on conversion of convertible notes
On 3 July 2020, the Group issued 700,000 ordinary shares on conversion of 175,000 convertible notes (4 for 1).
On 26 February 2021, the Group issued 844,811 ordinary shares on conversion of 207,500 convertible notes (4 for 1) and
compound interest of 14,811.
On 19 March 2021, the Group issued 406,332 ordinary shares on conversion of 90,000 convertible notes (4 for 1) and
compound interest of 46,332.
30
Novatti Group Limited
Directors' report
30 June 2021
On 24 March 2021, the Group issued 1,660,000 ordinary shares on conversion of 415,000 convertible notes (4 for 1).
On 23 April 2021, the Group issued 1,618,032 ordinary shares on conversion of 380,000 convertible notes (4 for 1) and
compound interest of 98,032.
On 21 May 2021, the Group issued 190,000 fully paid ordinary shares on conversion of 47,500 convertible notes (4 for 1).
On 4 June 2021, the Group issued 1,381,084 fully paid ordinary shares on conversion of 300,000 convertible notes (4 for 1)
and compound interest of 181,084.
On 11 June 2021, the Group issued 1,125,153 fully paid ordinary shares on conversion of 267,500 convertible notes (4 for
1) and compound interest of 55,153.
On 5 July 2021, the Group issued 4,880,000 fully paid ordinary shares on conversion of 1,220,000 convertible notes (4 for
1).
On 30 July 2021, the Group issued 1,200,000 fully paid ordinary shares on conversion of 300,000 convertible notes (4 for
1).
On 4 August 2021, the remaining 97,500 convertible notes have ceased without conversion due to repayment or redemption.
As at the date of this report, the Group has nil convertible notes on issue.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
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.
31
Novatti Group Limited
Directors' report
30 June 2021
The directors are of the opinion that the services as disclosed in note 24 to the financial statements do not compromise the
external auditor's independence requirements of 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 Accounting
Professional and Ethical Standards (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.
●
Officers of the company who are former partners of William Buck
There are no officers of the company who are former partners of William Buck.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
William Buck continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Peter Pawlowitsch
Chairman
31 August 2021
32
Novatti Group Limited
Auditor's independence declaration
Auditor’s independence declaration
33
Novatti Group Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2021
Revenue
Other income
Expenses
Administrative and corporate costs
Client hosting fees and other direct services
Employee benefits
Foreign currency translation (losses)/gains
Marketing and selling expenses
Data management expenses
Gain on investments at fair value through profit or loss
Share based payment on investor and broker options
Share of net profit of joint ventures accounted for using the equity method
Loss on embedded derivative - convertible note facility into Novatti Group Ltd the
parent entity
Impairment of capitalised bank licensing costs
Depreciation and amortisation expense
Finance costs
Note
Consolidated
2021
$'000
2020
$'000
4
5
11
16,482
11,004
1,947
854
(2,227)
(4,979)
(15,888)
(116)
(57)
(454)
366
(1,085)
33
(2,860)
-
(1,481)
(1,507)
(1,904)
(3,137)
(11,234)
(179)
126
(257)
-
(190)
17
(727)
(3,013)
(906)
(1,367)
Loss before income tax expense
Income tax expense
(11,826)
(10,913)
6
(17)
(47)
Loss after income tax expense for the year
(11,843)
(10,960)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Loss for the year is attributable to:
Non-controlling interest
Owners of Novatti Group Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Novatti Group Limited
(43)
(43)
90
90
(11,886)
(10,870)
(31)
(11,812)
-
(10,960)
(11,843)
(10,960)
(31)
(11,855)
-
(10,870)
(11,886)
(10,870)
Basic earnings per share
Diluted earnings per share
Cents
Cents
31
31
(5.162)
(5.162)
(6.398)
(6.398)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
34
Novatti Group Limited
Statement of financial position
As at 30 June 2021
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets - funds in trust
Other investments
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Other investments
Plant and equipment
Right-of-use assets
Intangible assets
Deposits
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Settlement and remittance funds payable
Lease liabilities
Unearned revenue
Convertible note facilities
Employee benefits
Total current liabilities
Non-current liabilities
Lease liabilities
Convertible note facilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Reserves
Accumulated losses
Equity/(deficiency) attributable to the owners of Novatti Group Limited
Non-controlling interest
Total equity/(deficiency)
Note
Consolidated
2021
$'000
2020
$'000
7
8
9
10
11
12
13
14
15
16
17
15
17
18
19
20
8,798
4,138
39,019
-
324
52,279
804
1,030
544
1,933
4,991
2,206
11,508
2,600
2,785
17,452
560
360
23,757
22
300
573
2,244
5,704
239
9,082
63,787
32,839
6,817
38,609
247
876
4,907
1,314
52,770
1,971
-
148
2,119
5,853
17,452
245
861
1,100
922
26,433
2,233
4,545
114
6,892
54,889
33,325
8,898
(486)
44,144
3,803
(41,018)
6,929
1,969
26,685
2,376
(29,547)
(486)
-
8,898
(486)
The above statement of financial position should be read in conjunction with the accompanying notes
35
Novatti Group Limited
Statement of changes in equity
For the year ended 30 June 2021
Consolidated
Issued
capital
$'000
Share-based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Accumulated
losses
$'000
Non-
Controlling
Interests
$'000
Total
deficiency in
equity
$'000
Balance at 1 July 2019
24,074
1,651
530
(20,078)
-
6,177
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Vesting of share-based
payments
Issue of shares as consideration
for acquisition of Emersion
Systems Pty Ltd
Issue of shares to Directors in
lieu of fees
Issue of shares for the
settlement of convertible note
debt
Lapse of expired share options
Issue of options from
convertible notes
Issue of convertible notes
-
-
-
-
-
-
-
90
(10,960)
-
90
(10,960)
143
1,279
2,208
202
58
-
-
-
-
-
(15)
(1,491)
294
38
-
-
-
-
-
-
-
-
-
-
-
1,491
-
-
Balance at 30 June 2020
26,685
1,756
620
(29,547)
-
-
-
-
-
-
-
-
-
-
-
(10,960)
90
(10,870)
1,422
2,208
202
43
-
294
38
(486)
The above statement of changes in equity should be read in conjunction with the accompanying notes
36
Novatti Group Limited
Statement of changes in equity
For the year ended 30 June 2021
Consolidated
Share-based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Accumulated
losses
$'000
Non-
Controlling
Interests
$'000
Total equity
$'000
Balance at 1 July 2020
26,685
1,756
620
(29,547)
-
(486)
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with owners in
their capacity as owners:
Lapse of expired share options
Vesting of share based
payments arrangements
Issue of shares in lieu of
consultancy fees
Issue of shares on exercise of
options
Issue of shares on conversion
of convertible notes and
exercise of bonus options held
by convertible note holders
Issue of equity in Novatti B
Holdings Pty Ltd to BC Invest
(note 20)
Proceeds from issue of shares,
net of transaction costs (note
18)
-
-
-
-
-
79
980
-
-
-
(341)
2,087
-
(18)
4,060
(258)
-
12,340
-
-
-
(11,812)
(31)
(11,843)
(43)
-
-
(43)
(43)
(11,812)
(31)
(11,886)
-
341
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,087
79
962
3,802
2,000
2,000
-
12,340
Balance at 30 June 2021
44,144
3,226
577
(41,018)
1,969
8,898
The above statement of changes in equity should be read in conjunction with the accompanying notes
37
Novatti Group Limited
Statement of cash flows
For the year ended 30 June 2021
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 grant
Receipt of Government Stimulus
Interest and other finance costs paid
Note
Consolidated
2021
$'000
2020
$'000
34,155
(41,102)
38
1,114
798
(402)
28,973
(31,378)
37
1,022
271
(161)
Net cash used in operating activities
30
(5,399)
(1,236)
Cash flows from investing activities
Payment of deferred cash consideration for Emersion acquisition
Payments for plant and equipment
Payments for intangible assets
Payments for security deposits
Proceeds from disposal of investments
Proceeds from disposal of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from loan repaid
Repayment of borrowings
Interest and other finance costs paid on convertible notes
Issue of equity to BC Invest
Proceeds from issue of convertible note facility
Cost of debt - convertible note facilities
Repayment of lease liabilities
Net cash from financing activities
Net increase 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
Cash and cash equivalents at the end of the financial year
9
11
18
20
(810)
(177)
(240)
(1,970)
560
-
(190)
(51)
(1,139)
(147)
-
1
(2,637)
(1,526)
13,054
200
(400)
(244)
2,000
-
-
(260)
134
-
(400)
(3)
-
4,600
(353)
(240)
14,350
3,738
6,314
2,600
(116)
976
1,807
(183)
8,798
2,600
The above statement of cash flows should be read in conjunction with the accompanying notes
38
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the consolidated entity.
Statement of Compliance
The consolidated financial statements are general-purpose financial statements which have been prepared in accordance
with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the
Corporations Act 2001.
The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB). For the purposes of preparing the consolidated financial statements, the
Company is a for-profit entity.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are amortised on a straight-line basis over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the amortised is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend
on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
39
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Basis of preparation
The financial statements have been prepared on an accruals basis and are based on the historical cost convention. Unless
otherwise stated the carrying amounts of financial assets and liabilities reflect their fair value.
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 27.
Principles of consolidation
These are the financial statements of Novatti Group Limited (the ‘Company’) and its controlled entities (the ‘Group’) as at 30
June 2021.
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
The ability to use its power over the investee to affect its returns
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.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. 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.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity.
Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit
balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
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.
40
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
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
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the Consolidated Entity:
identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price
which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to
the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to
be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer of the goods or services promised to the customer.
Technology
Develop, deploy and supports specialised mobile and alternate payment technology. Billing and CIS solution to service
providers in the utilities industry. Yearly licence fees are amortised over the relevant year and professional service revenue
is recognised in the month the service is provided at that point in time.
Business Automation
Provisioning of customer engagement, payment, provisioning, and subscription billing solutions. Monthly fees are charged
at a transactional level. Fees for settling up and deploying the service are charged and recognised when the service is
provided.
Acquiring
A service that enables merchants to get paid. Monthly fees are charged at a transactional level. Fees for settling up and
deploying the service are charged and recognised when the service is provided.
Alternative Payments
Revenue from Alternative Payments is a mixture of:
●
●
●
●
Fees for software as a service
Fees for the facilitation of top up vouchers
Settlement Services of financial transactions
Fees from ‘Prepaid’ reloadable cards
The revenue charges for alternative payment services are based on transactional value. Revenue is therefore recognised
when the service is provided.
Banking Services
On approval as an Authorised Deposit-Taking Institution or its full banking licence by APRA, Banking services will provide a
number of services to Australian customers for which they may charge a transactional fee and/or fee for service where the
revenue is recognised when the service is provided.
41
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Issuing
Issuing of prepaid Visa cards under licence of Visa. Monthly fees are charged at a transactional level. Fees for settling up
and deploying the service are charged and recognised when the service is provided.
Novatti Group Limited
Comprising Acquiring Service Fees, see above.
Interest
Interest revenue is recognised on a time proportional basis that takes into account the effective yield on the financial asset.
Unearned revenue
Unearned revenue includes revenue from clients whereby services are billed in advance of their anniversary dates and have
outstanding services owing for the financial year ended 30 June 2021.
Other revenue
Other revenue is recognised at the time it is received or when the right to receive payment is established.
Accrued revenue
Accrued revenue includes revenue from the sales of services unbilled as at 30 June 2021.
Government grants
Government grants, including Research and Development revenues, are recognised at the point in time 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 applicable
income tax rate for each jurisdiction, 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.
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 allowance for expected credit losses. Trade receivables are generally due for settlement within 30
days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
42
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Financial assets and other investments
Financial assets and other investments are initially measured at fair value. Transaction costs are included as part of the initial
measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on both the business
model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an
accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of
recovering part or all of a financial asset, it's carrying value is written off.
Financial assets at amortised cost
A financial asset is measured at amortised cost only if both of the following conditions are met: (i) it is held within a business
model whose objective is to hold assets in order to collect contractual cash flows; and (ii) the contractual terms of the financial
asset represent contractual cash flows that are solely payments of principal and interest.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost are classified as financial assets at fair value through profit or loss. Typically,
such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term
with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair
value movements are recognised in profit or loss.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost.
The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to
whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and
supportable information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit
loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a
default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is
determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit
losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
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.
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.
43
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
The estimated useful lives for the current period are as follows:
Plant and equipment
Leasehold fixtures and fittings at cost
2 years
10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of 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.
Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The
estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis.
The estimated useful lives for intangibles for the current period are:
Product Development: Technology
Customer lists
Intellectual Property: Technology - Billing Software
Brands
5 years
5 - 10 years
10 years
10 years
Intangible assets acquired in a business combination
Intangible assets, including customer lists, intellectual property and brand acquired in a business combination and recognised
separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost).
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Impairment of tangible and intangible assets
At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-
generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
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.
44
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Convertible note facilities
During the year ended 30 June 2020 the Group issued convertible note tranches with conversion clauses that were both
fixed and variable. For convertible notes with variable conversion terms, at initial recognition an embedded derivative is
recognised on the statement of financial position at fair value and that embedded derivative is subsequently recorded at its
fair value thereafter, with changes in fair value going through to the statement of profit or loss and other comprehensive
income. The difference between the consideration received (net of costs) and the embedded derivative is reflected in the
principal value of the convertible note liability.
For convertible notes with fixed conversion terms, at initial recognition the separate debt component of the note is recorded
at its fair value (net of costs of the note) with the residual difference between the note and equity taken to a convertible note
reserve in equity.
Over the duration of the maturity of the convertible note, the discount applied to the note at initial recognition is unwound
through a finance charge using the effective interest rate up to the face value of the note at maturity. Costs directly attributable
to the issue of the convertible notes are amortised over the life of the underlying note
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
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. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash
is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using
either the Binomial or 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.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous
periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
45
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification.
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.
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.
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.
46
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 1. Significant accounting policies (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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 2021.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, 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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific
notes, there does not currently appear to be either any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or
subsequently as a result of the Coronavirus (COVID-19) pandemic.
Share-based payment transactions
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 either the Black-Scholes or Binomial
models 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.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit
loss rate for each group. These assumptions include recent sales experience and historical collection rates.
Revenue from contracts with customers involving performance milestones
When recognising revenue, the key performance obligation of the consolidated entity is considered to be performance
milestones detailed under each contract. Management estimates the progress against these performance milestones at each
reporting date and recognise revenue and work in progress accounts accordingly.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the
lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in
active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than
quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3:
Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value
and therefore which category the asset or liability is placed in can be subjective.
47
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 2. Critical accounting judgements, estimates and assumptions (continued)
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
The financial asset investments have been classified by the Group in level 3. These investments are in private entities where
obtaining input values is not readily possible. Input values recognised were based on judgement and most recent transaction
values.
Estimation of useful lives of finite life intangible assets
The Group determines the valuation, estimated useful lives and related amortisation charges for its finite life intangible
assets.The useful lives could change significantly as a result of technical innovations or some other event. The amortisation
charge will increase where the useful lives are less than previously estimated lives, or, technically obsolete or non-strategic
assets that have been abandoned or sold will be written off or written down.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences and carry-forward losses only if the Group
considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The
directors have determined that the losses to date do not validate the requirement to book any DTA for carry forward losses
and will consider the recognition of DTAs in future periods.
Management estimates $21,100,000 in tax losses are potentially available to be used to be offset against future
assessable income which have not been recognised. The tax rate applicable to the company for FY 2021 is 26%.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount
future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is
based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain
an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
Assessment of the conversion features of the convertible notes
During prior financial year the Group issued convertible note tranches with conversion clauses that were both fixed and
variable. For the convertible note tranches with variable conversion terms, at initial recognition an embedded derivative is
recognised on the statement of financial position at fair value and that embedded derivative is subsequently recorded at its
fair value thereafter, with changes in fair value going through to the statement of profit or loss and other comprehensive
income. The difference between the consideration received (net of costs) and the embedded derivative is reflected in the
principal value of the convertible note liability.
The fixed component of the convertible note tranches in accordance with AASB 132 Financial instruments, are classified
as equity.
Note 3. Operating segments
Identification of reportable operating segments
The Group is organised into seven operating business segments:
(1) Technology, incorporating enterprise sales, Maintenance & Support via the Novatti Platform and Basis2 operating under
Novatti Incorporated
(2) Business Automation, incorporating Emersion Systems Pty Ltd and Novatti Emersion Inc.
(3) Acquiring, incorporating Novatti Acquiring Holdings Pty Ltd and Novatti Acquiring Services (AUS) Pty Ltd
(4) Alternative Payments, incorporating Flexewallet Pty Ltd, Flexe Payments (South Africa) Pty Ltd and Flexe Payments
Ltd
(5) Banking Services, incorporating the banking services under Novatti B Holding Company Pty Ltd
(6) Issuing, incorporating Flexewallet (NZ) Limited and Vasco Pay Pty Ltd
(7) Novatti Group Limited, the legal parent that holds the financial assets for the Group and captures the corporate, public
running costs and the investment in all its subsidiaries
48
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 3. Operating segments (continued)
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.
Types of products and services
The principal products and services of each of these operating segments are as follows:
Technology
Platform: Develops, deploys and supports specialised mobile and alternate payment
technology, primarily through the deployment of the Novatti Platform.
Billing Solutions: Basis2 trading under Novatti Inc. provides a technologically advanced
billing and CIS solution to service providers in the utilities industry.
Business Automation
Emersion: Automates business processes including customer engagement, billing,
collections, subscription management and embedded payments.
Acquiring
Novatti Acquiring: Enables businesses to accept payments online for e-commerce with a
strong focus on mobile point-of-sales as key growth area.
Alternative Payments
TransferBridge: Provides a comprehensive global network that interconnects emerging
payment platforms, remittance operators, financial institutions, retailers, utilities and other
types of cross border payment settlement offerings.
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.
Banking Services
Novatti B Holding Company Pty Ltd, on approval as a Restricted Authorised Deposit-Taking
Institution ('RADI') or its banking licence by APRA, Novatti B Holding Company Pty Ltd will
offer new banking services to Australian customers with a focus on the migrant
demographic.
Issuing
Vasco Pay Pty Ltd and Novatti Group Ltd: Provides a payment system centred around
reloadable prepaid cards that meets the needs and wants of international and local
university and college students.
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.
49
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 3. Operating segments (continued)
Operating segment information
Business
Alternative Banking
Technology Automation Acquiring Payments Services
Issuing
Novatti
Group
Limited
Total
Consolidated -
2021
Revenue
Sales to external
customers
Other revenue
Total revenue
EBITDA
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Profit/(loss)
before income
tax expense
Income tax
expense
Loss after
income tax
expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Employee
Benefits
Additions to
non-current
assets (Other
than financial
assets, deferred
tax, post
employment
benefits assets,
rights under
insurance
contracts)
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
4,956
467
5,423
2,229
3
2,232
-
-
-
8,362
10
8,372
-
77
77
935
150
1,085
-
1,205
1,205
16,482
1,912
18,394
(964)
(1,305)
(118)
1,690
(1,553)
(362)
(6,248)
(8,860)
(502)
1
(172)
(13)
(715)
-
(8)
-
-
-
-
-
(35)
2
(212)
-
(15)
-
-
-
(2)
-
(3)
-
(212)
32
(1,112)
-
(1,481)
35
(1,507)
(13)
(1,650)
(2,028)
(118)
1,445
(1,568)
(367)
(7,540)
(11,826)
6,491
3,154
2
40,756
2,035
2,414
8,935
5,373
1,117
17
37,834
353
2,410
7,785
(17)
(11,843)
63,787
63,787
54,889
54,889
5,360
2,894
80
2,149
1,499
819
3,087
15,888
174
42
-
-
-
2
475
693
50
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 3. Operating segments (continued)
Business
Alternative Banking
Technology Automation Acquiring Payments Services
Issuing
Novatti
Group
Limited
Total
Consolidated -
2020
Revenue
Sales to external
customers
Other revenue
Total revenue
EBITDA
Depreciation and
amortisation
Interest revenue
Finance costs
Other costs
Profit/(loss)
before income
tax expense
Income tax
expense
Loss after
income tax
expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Employee
Benefits
Additions to
non-current
assets (Other
than financial
assets, deferred
tax, post
employment
benefits assets,
rights under
insurance
contracts)
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
4,487
176
4,663
(1,946)
(538)
5
(197)
(66)
479
-
479
(68)
(181)
-
(10)
-
(2,742)
(259)
-
-
-
-
-
-
-
-
-
5,922
19
5,941
-
45
45
116
24
140
-
581
581
11,004
845
11,849
851
(4,669)
(878)
(1,829)
(8,539)
(27)
-
(68)
(46)
(13)
-
(38)
(140)
(5)
4
(1)
-
(141)
-
(606)
(306)
(905)
9
(920)
(558)
710
(4,860)
(880)
(2,882)
(10,913)
6,072
3,488
-
20,553
34
(206)
2,898
5,420
1,302
-
19,818
1,804
(194)
5,175
(47)
(10,960)
32,839
32,839
33,325
33,325
5,663
418
-
1,521
1,236
725
1,671
11,234
2,405
3,464
-
83
31
-
-
5,983
For the breakdown of operating segment revenue into disaggregated revenue components, refer to note 4.
During the year ended 30 June 2021, approximately 11.45% (FY 2020: 14.09%) and 13.98% (FY 2020: 13.56%) of the
Group's external revenue were derived from two major customers respectively generating $1,887,000 and $2,304,000 in FY
2021 (FY 2020: $1,551,000 and $1,492,000). This revenue is reported under the Alternative Payments operating segment.
51
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 3. Operating segments (continued)
Geographical information
Australia
Malta
Mauritius
United States
Other
Sales to external customers
Geographical non-current
assets
2021
$'000
2020
$'000
2021
$'000
2020
$'000
7,727
1,887
2,304
1,836
2,728
3,928
1,551
1,492
2,214
1,819
11,508
-
-
-
-
9,082
-
-
-
-
16,482
11,004
11,508
9,082
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets,
post-employment benefits assets and rights under insurance contracts.
Note 4. Revenue
2021
Sales revenue:
Technology
Business Automation
Acquiring
Alternative Payments
Banking Services
Issuing
2020
Sales revenue
Technology
Business Automation
Acquiring
Alternative Payments
Banking Services
Issuing
Timing of
revenue
recognition
Timing of
revenue
recognition
Services
provided
at point in
time
$
Services
provided
over time
$
Consolidated
2021
$
3,203
-
-
8,362
-
935
1,753
2,229
-
-
-
-
4,956
2,229
-
8,362
-
935
12,500
3,982
16,482
Timing of
revenue
recognition
Timing of
revenue
recognition
Services
provided
at point in
time
$
Services
provided
over time
$
Consolidated
2020
$
1,289
-
-
5,922
-
116
3,198
479
-
-
-
-
4,487
479
-
5,922
-
116
7,327
3,677
11,004
52
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 5. Administrative and corporate costs
Travel expenses
Insurance
Accounting, tax and compliance fees
Other expenses
Occupancy
Note 6. Income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 26% (2020: 27.5%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Adjustment for tax rate differences in foreign jurisdictions
Adjustment for income tax payable in foreign jurisdictions
Adjustment for tax exempt research and development tax
Adjustments from prior periods
Adjustment for changes in tax rates
Share-based payments
Adjustment for R&D accounting expense included within R&D incentive
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
Adjustment for changes in tax rates
Income tax expense
Deferred tax assets not brought to account:
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 26% (2020: 27.5%)
53
Consolidated
2021
$'000
2020
$'000
28
205
263
1,561
170
245
177
291
1,047
144
2,227
1,904
Consolidated
2021
$'000
2020
$'000
(11,826)
(10,913)
(3,075)
(3,001)
16
-
(290)
1,439
132
393
338
(25)
(1,072)
2,003
995
(1,777)
(132)
41
47
(155)
391
-
366
357
67
(1,887)
2,354
328
(748)
-
17
47
Consolidated
2021
$'000
2020
$'000
21,100
18,906
5,486
5,199
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 7. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Accrued revenue
Consolidated
2021
$'000
2020
$'000
3,076
(55)
3,021
1,117
2,376
(87)
2,289
496
4,138
2,785
Allowance for expected credit losses
The consolidated entity has recognised a credit of $32,000 (2020: $87,000 of loss) in statement of profit or loss and other
comprehensive income in respect of the expected credit losses for the year ended 30 June 2021.
Other than the provision noted above, management are of the opinion that these receivables are reflective of fair value and
should not be impaired.
The ageing of the past due but not impaired receivables are as follows:
Current
3 to 6 months overdue
Over 6 months overdue
Trade receivables
Accrued revenue
Note 8. Current assets - financial assets - funds in trust
Settlement funds*
Remittance funds*
Client visa funds
* Refer to note 14 Current liabilities – Settlement and Remittance funds payable
Consolidated
2021
$'000
2020
$'000
2,114
217
690
3,021
1,117
1,320
94
875
2,289
496
4,138
2,785
Consolidated
2021
$'000
2020
$'000
15,913
18,371
4,735
9,103
8,349
-
39,019
17,452
54
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 9. Non-current assets - plant and equipment
Leasehold fixture and fittings - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2021
$'000
2020
$'000
537
(152)
385
772
(613)
159
544
534
(102)
432
710
(569)
141
573
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2019
Additions
Disposals
Depreciation expense
Balance at 30 June 2020
Additions
Disposals
Depreciation expense
Balance at 30 June 2021
Note 10. Non-current assets - right-of-use assets
Buildings - right-of-use
Less: Accumulated amortisation
Leasehold
Plant &
Equipment at
cost
$'000
Fixtures
& Fittings at
cost
$'000
Total
$'000
155
39
(1)
(52)
141
174
(112)
(44)
159
468
12
-
(48)
432
3
-
(50)
385
623
51
(1)
(100)
573
177
(112)
(94)
544
Consolidated
2021
$'000
2020
$'000
2,526
(593)
2,526
(282)
1,933
2,244
55
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 10. Non-current assets - right-of-use assets (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2019
Recognition on adoption of AASB 16
Additions
Foreign exchange differences
Amortisation expense
Balance at 30 June 2020
Foreign exchange differences
Amortisation expense
Balance at 30 June 2021
Note 11. Non-current assets - intangible assets
Brand Asset
Less: Accumulated amortisation
Intellectual property - at cost
Less: Accumulated amortisation
Customer Lists
Less: Accumulated amortisation
Licences
Less: Accumulated amortisation
Other intangible assets
Product development
Less: Accumulated amortisation
56
Buildings -
Right-of-use
$'000
-
2,460
30
36
(282)
2,244
1
(312)
1,933
Consolidated
2021
$'000
2020
$'000
568
(173)
395
847
(347)
500
3,619
(1,206)
2,413
475
(71)
404
46
1,643
(410)
1,233
568
(116)
452
847
(263)
584
3,785
(724)
3,061
-
-
-
46
1,643
(82)
1,561
4,991
5,704
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 11. Non-current assets - intangible assets (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2019
Additions
Additions through business
combinations
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2020
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2021
Brand Asset
$'000
Intellectual
Property
$'000
Customer
Lists
$'000
Licences
$'000
Other
Product
Intangible
Assets
$'000
Developme
nt
$'000
Total
$'000
508
-
-
-
-
(56)
452
-
-
(57)
395
669
-
-
-
-
(85)
584
-
-
(84)
1,595
-
1,728
36
-
(298)
3,061
-
(165)
(483)
500
2,413
1,662
1,139
-
2
(2,803)
-
-
475
-
(71)
404
212
-
44
-
(210)
-
46
-
-
-
46
-
-
4,646
1,139
1,643
-
-
(82)
1,561
-
-
(328)
3,415
38
(3,013)
(521)
5,704
475
(165)
(1,023)
1,233
4,991
Note 12. Non-current assets - Deposits
Security deposits*
Prepaid deposit to landlord
Other non-current assets
*Security deposits are refundable collateral held on application of issuing Visa licence.
Note 13. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Income tax payable
Amounts payable to Emersion Software Systems Pty Ltd
Other payables
Consolidated
2021
$'000
2020
$'000
2,117
83
6
2,206
239
-
-
239
Consolidated
2021
$'000
2020
$'000
3,596
3,012
13
-
196
3,019
1,913
-
810
111
6,817
5,853
57
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 14. Current liabilities - settlement and remittance funds payable
Settlement funds payable*
Remittance funds payable*
Client visa funds payable
*Client Funds held for Settlement and Remittance, refer to note 8.
Note 15. Current liabilities - lease liabilities
Current
Office lease liabilities for Melbourne, United Kingdom and Malta
Non-Current
Office lease liabilities for Melbourne, United Kingdom and Malta
Note 16. Current liabilities - unearned revenue
Revenue billed in advance
Reconciliation of the values at the beginning and end of the current and previous financial
year:
Opening balance
Amounts billed in advance (ex GST)
Less revenue recognised over a period of time
Consolidated
2021
$'000
2020
$'000
15,913
18,371
4,325
9,103
8,349
-
38,609
17,452
Consolidated
2021
$'000
2020
$'000
247
245
1,971
2,233
2,218
2,478
Consolidated
2021
$'000
2020
$'000
876
861
Consolidated
2021
$
Consolidated
2020
$
861
3,997
(3,982)
937
3,601
(3,677)
876
861
58
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 17. Current liabilities - convertible note facilities
Current
Loan payable - Convertible note facility
Embedded derivative - Convertible note facility
Non-current
Loan payable - Convertible note facility
Embedded derivative - Convertible note facility
Consolidated
2021
$'000
2020
$'000
2,389
2,518
4,907
1,100
-
1,100
-
-
2,818
1,727
4,907
5,645
2021
No.
2021
$'000
2020
No.
2020
$'000
Opening balance
Convertible notes issued during the year
Transaction costs associated with issue
Movement attributable to fair value of embedded derivative
Interest charged on convertible notes over period
Conversion of convertible notes into shares during the year
Additional shares issued on settlement of interest
Repayment of convertible notes for cash
3,500,001
-
-
-
-
(1,882,500)
-
-
5,645
-
-
1,687
253
(1,883)
(395)
(400)
-
3,500,001
-
-
-
-
-
-
-
4,600
(214)
828
431
-
-
-
Closing balance
1,617,501
4,907
3,500,001
5,645
$2.275 million 9% convertible note facility
- Proceeds from issue $2,275,000, less transaction costs of $150,000.
On 7 November 2019, Novatti Group issued convertible notes for the amount of $2.275 million to professional and
sophisticated investors.
The primary terms of the convertible note facility are:
Issuer: Novatti Group Ltd
Face value: $2.275M ($1 per note) Interest: 9% pa – payable quarterly based on the face value
Term: 15 November 2019 to 30 July 2021
Conversion price:
Lesser of
i. $0.25 and
ii. lowest share issue price under any capital raising by Novatti Group Ltd between the date of issue of the notes and the
date of receipt of conversion notice.
59
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 17. Current liabilities - convertible note facilities (continued)
$1.225 million 9% convertible note facility
- Proceeds from issue $1,225,000, less transaction costs of $64,000.
On 18 February 2020, Novatti Group issued an additional convertible notes for the amount of $1.225 million to
professional and sophisticated investors under the same terms as the $2.275 million notes noted above.
The primary terms of the convertible note facility are:
Issuer: Novatti Group Ltd
Face value: $1.225M ($1 per note) Interest: 9% pa – payable quarterly based on the face value
Term: 18 February 2020 to 30 July 2021
Conversion price:
Lesser of
i. $0.25 and
ii. lowest share issue price under any capital raising by Novatti Group Ltd between the date of issue of the notes and the
date of receipt of conversion notice.
All convertible notes are measured at level two of the fair value hierarchy as these have been calculated utilising market
observable factors. The convertible notes are unsecured.
As part of its convertible note, the Group’s embedded derivative was subsequently valued at fair value as at 30 June 2021,
with gains or losses recognised in the statement of profit or loss and other comprehensive income. The embedded derivatives
were valued using the Black-Scholes valuation method. Key valuation inputs are as follows:
●
●
●
●
●
●
Valuation date: 30 June 2021
Stock price: $0.26 (26 cents)
Strike price: $0.25 (25 cents)
Expiry date: 30 July 2021
Volatility: 80%
Risk free rate: 0.49%
$1.1 million convertible note facility
- Proceeds from issue $1,100,000 less transaction costs of $140,000.
On the 8 November 2019, Novatti B Holding Company Pty Ltd (NBHC) the Group’s wholly owned subsidiary and head of
its banking services unit, issued a $1.1 million convertible note to Australian Fintech Investment Group Pty Ltd (AFIG).
This note was transferred to Novatti Group Limited during the year.
The primary terms of the convertible note facility are:
Issuer: NBHC Holder:
AFIG Face value: $1.1M Interest: nil
Term: 8 November 2019 to 31 March 2020
Conversion formula: If NBHC obtains its Restricted Authorised Deposit-taking Institution (RADI) license from the Australian
Prudential Regulation Authority (APRA), the facility automatically converts into the number of NBHC shares equal to 5.5%
of its issued capital, (1,100,000 NBHC shares based on 20M shares on issue at the time of agreement). The value
attached to the conversion of notes into NBHC shares is equal to $37,987, classified in equity reserve.
$400,000 of the $1.1M was repaid during the year with the remaining balance due to be repaid in cash.
Note 18. Equity - issued capital
Consolidated
2021
Shares
2020
Shares
2021
$'000
2020
$'000
Ordinary shares - fully paid
244,203,326 185,210,500
44,144
26,685
60
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 18. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
$'000
Balance
Take up of fully paid ordinary shares
Fully paid ordinary shares on exercise of options
Issue of shares as consideration for acquisition of Emersion Pty Ltd 2 April 2020
9 June 2020
Issue of shares to Directors in lieu of fees
Conversion of director options
24 June 2020
Issue of shares for the settlement of convertible note debt
1 July 2019
25 November 2019
31 December 2019
Balance
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of placement shares to institutional and sophisticated
investors
Issue of placement shares to Directors
Issue of shares in lieu of consultancy fees
Issue of shares on cashless exercise of options
Issue of shares on exercise of options
Issue of shares on conversion of convertible notes and compound
interest
Issue of shares on exercise of options
Issue of shares on conversion of convertible notes and compound
interest
Issue of shares on exercise of options
Issue of shares in lieu of consultancy fees
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of placement shares to sophisticated investors
Issue of shares on conversion of convertible notes
Issue of shares on exercise of options
Issue of shares on exercise of options
Issue of shares on conversion of convertible notes and compound
interest
Issue of shares on exercise of options
Issue of shares on conversion of convertible notes and compound
interest
Issue of shares on exercise of options
Cash received for exercise of options
Cost of capital raising
30 June 2020
3 July 2020
3 July 2020
7 July 2020
15 September 2020
15 September 2020
5 November 2020
8 December 2020
26 February 2021
26 February 2021
19 March 2021
19 March 2021
19 March 2021
24 March 2021
24 March 2021
23 April 2021
23 April 2021
13 May 2021
21 May 2021
21 May 2021
28 May 2021
4 June 2021
4 June 2021
15 June 2021
18 June 2021
166,879,214
238,096
200,000
16,725,000
1,061,342
106,848
-
185,210,500
700,000
175,000
40,000,000
800,000
200,000
51,038
20,000
844,811
280,000
406,332
115,000
115,163
1,660,000
250,000
1,618,032
210,000
6,833,713
190,000
55,000
500,000
1,381,084
300,000
1,125,153
1,162,500
-
-
24,074
50
40
2,208
202
53
58
26,685
183
-
10,000
200
50
18
6
354
87
170
39
29
696
83
875
71
3,000
103
17
166
925
100
753
386
18
(870)
Balance
30 June 2021
244,203,326
44,144
Ordinary shares
Ordinary shares entitle the holder to participate in dividends, when declared and the proceeds on the winding up of the
Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
61
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 18. Equity - issued capital (continued)
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.
Note 19. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2021
$'000
2020
$'000
577
3,226
620
1,756
3,803
2,376
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. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
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 in other share-based payment transactions. The balance is transferred to
Issued Capital when options are exercised and balance is transferred to retained earnings when options lapse.
Note 20. Equity - non-controlling interest
Issued capital
Accumulated losses
Consolidated
2021
$'000
2020
$'000
2,000
(31)
1,969
-
-
-
Details
Date
Shares
Issue Price
Opening Balance
Issue of shares*
01/07/2020
03/05/2021
Closing Balance as at 30 June 2021
-
5,000,000
5,000,000
$0.00
$0.40
$
$'000
-
2,000
2,000
*As announced on 3 May 2021, BC Investment Group Holdings, through a wholly-owned subsidiary, has invested $2m into
the Company’s dedicated banking subsidiary, Novatti B Holding Company Pty Ltd (NBHC), as part of a seed funding round,
to acquire a 19.9% share of NBHC.
62
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 20. Equity - non-controlling interest (continued)
For the year ended 30 June 2021, NBHC incurred a loss after tax of $1,567,000 (NCI portion amounting to $31,000).
As at 30 June 2021, the financial position included total assets of $2,066,000 and total liabilities of $385,000, amounting to
net assets of $1,681,000.
Note 21. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
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
Financial assets
Trade and other payables
Lease liabilities
Convertible note facilities
Client funds held for settlement and remittance are not recognised as financial instruments as the net value of the two net
off in total.
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.
63
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other
receivables and other financial assets. The Group’s exposure to credit risk arises from potential default by the counter-
party, with maximum exposure equal to the carrying amount of these instruments. Exposure at the reporting date is
addressed in each applicable note.
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. Moving from milestone to milestone requires the payment of each to move onto the next. 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.
Transactional sales obligations are settled generally on 21-day terms and after receipt from distributors.
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. Refer to note 7 trade and other receivable for the ageing analysis.
The Group does not have any material credit risk exposure for other receivables or other financial instruments.
Market risk
Foreign 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, accounts receivable and payable accounts and on its financial assets
in Canadian Dollars (CAD) to fund its Canadian operations, Euro (EUR) and Great British Pounds (GBP) to service its
European Operations in the UK, also US Dollars (USD) and New Zealand Dollars (NZD).
The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the
reporting date were as follows:
Consolidated
CAD
USD
EUR
GBP
NZD
Assets
2021
$'000
2020
$'000
Liabilities
2021
$'000
2020
$'000
1,219
1,090
11,428
-
2,544
3,463
1,052
9,218
35
-
(1,109)
(206)
(432)
(15)
-
(693)
(227)
(188)
(36)
-
16,281
13,768
(1,762)
(1,144)
The following tables below illustrate the sensitivity of the net result for the year and equity in regard to the Group’s financial
assets and financial liabilities compared with the currency on deposit and AUD exchange rate. It assumes a +/- 5% change
in the exchange rate for the year ended at 30 June 2021. 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.
64
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Consolidated - 2021
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
CAD
USD
EUR
GBP
NZD
5%
5%
5%
5%
5%
(5)
(42)
(524)
1
(121)
(691)
AUD strengthened
Consolidated - 2020
% change
Effect on
profit before
tax
Effect on
equity
CAD
USD
EUR
GBP
NZD
5%
5%
5%
5%
5%
(132)
(39)
(430)
-
-
(601)
-
-
-
-
-
-
-
-
-
-
-
-
5%
5%
5%
5%
5%
6
47
579
(1)
134
765
AUD weakened
Effect on
% change
profit before
tax
Effect on
equity
5%
5%
5%
5%
5%
146
43
475
-
-
664
-
-
-
-
-
-
-
-
-
-
-
-
Price risk
The Group is exposed to other price risk on its investments in unlisted entities. These investments are classified on the
statement of financial position as investment assets initially recorded at cost and are subsequently measured at fair value
through the statement of profit or loss and other comprehensive income. The investments are in two different entities. The
assets and liabilities within these investments indirectly expose the Group to equity price risks. It is not considered practicable
to ‘look through’ the investments to analyse these risks in detail.
If the fair value of investments increased by 10% this would have increased total comprehensive income for the Group by
$103,000. A decrease of 10% would have reduced total comprehensive income by the same amount.
Investments measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy:
●
●
●
Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – a valuation technique is applied using inputs other than quoted prices within Level 1 that are observable for
the financial instrument, either directly (i.e. as prices), or indirectly (i.e. derived from prices)
Level 3 – a valuation technique is applied using inputs that are not based on observable market data (unobservable
inputs)
2021
Assets
Shares in unlisted entities
2020
Assets
Shares in unlisted entities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
1,030
1,030
Level 2
$'000
Level 3
$'000
Total
$
-
860
860
65
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and previous
financial year are set out below:
Opening fair value
Additions
Disposals
Revaluation increments
Closing fair value
2021
$'000
2020
$'000
860
364
(560)
366
1,030
800
60
-
-
860
These investments are in private entities where obtaining input values is not readily possible. Input values recognised were
based on judgement and most recent transaction values.
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.
As at 30 June 2021, the financial liabilities of the Group include:
●
●
●
Trade and other payables. For further details including breakdown of balances, refer to trade and other payables in note
13 for a breakdown of account balances
Lease liabilities. Refer to note 15 for a summary of the outstanding lease liabilities
Convertible note facilities. Refer to note 17 for a summary of terms and conditions
The contractual amounts of financial liabilities are equal to their carrying values.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2021
Non-derivatives
Non-interest bearing
Trade payables and other
payables
Interest-bearing - fixed rate
Borrowings
Convertible note facilities
Lease liabilities
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
6,817
-
-
9.00%
5.21%
700
4,207
247
11,971
-
-
1,971
1,971
-
-
-
-
-
-
-
-
-
-
6,817
700
4,207
2,218
13,942
66
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 22. Financial instruments (continued)
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables and other
payables
Interest-bearing - fixed rate
Convertible note facilities
Convertible note facilities
Lease liabilities
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
-
5,853
-
-
9.00%
5.21%
1,100
-
245
7,198
-
4,545
2,233
6,778
-
-
-
-
-
-
-
-
-
-
5,853
1,100
4,545
2,478
13,976
Note 23. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 24. Remuneration of auditors
Consolidated
2021
$
2020
$
1,313,631
80,782
18,697
427,632
924,544
75,271
15,697
885,740
1,840,742
1,901,252
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 financial statements
Other services - William Buck
Preparation of the tax return and associated tax services (including R&D)
Consolidated
2021
$
2020
$
86,000
90,500
49,460
72,635
135,460
163,135
67
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 25. Contingent liabilities
Programs managed under the Novatti Visa licence requires Novatti clients to maintain 6 days float in accounts held by Novatti
for the client. Where a client's business model fails, their float held by Novatti, is used to settle outstanding card payments.
In the unlikely event that the client funds fall short of clearing their outstanding Visa settlements, the cash on deposit will be
used for the shortfall.
The consolidated entity had no other contingent liabilities as at 30 June 2021 and 30 June 2020.
Note 26. Related party transactions
Parent entity
Novatti Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 28.
Key management personnel
Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from Directors
There were no other Director related services that have been provided to the Group outside of the Directors normal fiduciary
duties and responsibilities as Directors of Novatti Group other than as outlined in this report.
Loans to/from related parties
Loan provided to the Group’s joint venture partner, Hi Impact. This loan agreement is for a total of USD 24,462 (AUD
30,307) as at 30 June 2021 (FY20, USD 18,335 (AUD 26,611)). The loan is on commercial terms and interest has been
calculated daily at 6% per annum.
There were no other loans to or from related parties at the current reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 27. 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 income
68
Parent
2021
$'000
2020
$'000
(7,391)
(2,812)
(7,391)
(2,812)
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 27. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
Parent
2021
$'000
2020
$'000
42,956
31,083
46,759
32,116
7,901
629
7,901
5,174
47,061
3,825
(12,028)
29,602
2,318
(4,978)
38,858
26,942
Prepaid deposit entered into by the parent entity in relation to the debts of its subsidiaries
There exists a prepaid deposit for offices leased in Melbourne. As at 30 June 2021, this totalled $83,010 (FY20: $79,169).
No other prepaid deposit exist.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2021 (2020: Nil).
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 (2020: Nil).
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1, except
for the following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates 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.
Note 28. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1:
Name
Novatti Group Ltd Subsidiaries
Novatti Pty Ltd
Flexe Payments Ltd
Flexe Payments Pty Ltd
Flexe Payments (MLT) Ltd
Novatti Commerce Solutions Inc.
Novatti Commerce Solutions (MLT) Ltd
Novatti Technologies Ltd
Novatti Inc.
Vasco Pay Pty Ltd
Principal place of business /
Country of incorporation
Ownership interest
2020
2021
%
%
Australia
United Kingdom
South Africa
Malta
Canada
Malta
United Kingdom
United States of America
Australia
69
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 28. Interests in subsidiaries (continued)
Name
Novatti B Holding Pty Ltd
Novatti IBA Pty Ltd
Novatti Billing Solutions Pty Ltd
Flexe Payments (AUS) Pty Ltd
UAB Novtec Global
Emersion Systems Pty Ltd
Novatti Acquiring Services (AUS) Pty Ltd
Novatti Tech Europe Ltd
Novatti Acquiring Holdings Pty Ltd
Novatti Emersion Inc.
Novatti Pty Ltd Subsidiaries
Flexewallet Pty Ltd
Flexewallet (NZ) Ltd
TransferBridge Pty Ltd
Note 29. Events after the reporting period
Principal place of business /
Country of incorporation
Ownership interest
2020
2021
%
%
Australia
Australia
Australia
Australia
Lithuania
Australia
Australia
Cyprus
Australia
United States of America
Australia
New Zealand
Australia
80.1%
80.1%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
-
-
-
-
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
The impact of Coronavirus (COVID-19) pandemic is ongoing and while there have been mixed financial and operational
impacts for the Consolidated Entity up to 30 June 2021, it is not practical to estimate the potential impact, positive or negative,
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian
Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any
economic stimulus that may be provided.
On 2 July 2021, Novatti launched a $45 million capital raising under a $40 million placement and a $5 million share purchase
plan to expand its presence in existing markets, enter new markets, and acquire a 19.9% interest in Reckon Limited
(ASX:RKN).
On 9 July 2021, Novatti completed Tranche 1 of its capital raising, by issue of 51,120,472 fully paid ordinary shares at $0.55
per share, raising $28,116,260 before costs.
On 13 July 2021, Novatti completed its previously announced acquisition of a 19.9% interest in Reckon Limited (ASX:RKN)
by payment of $22.5 million for acquisition of 22.5 million shares in Reckon and associated costs.
During July 2021, Novatti issued 6,080,000 fully paid ordinary shares upon conversion of 1,520,000 convertible notes (4 for
1). On 4 August 2021, Novatti settled the remaining 97,500 convertible notes by way of repayment or redemption and had
no further convertible notes on issue.
On 6 August 2021, Novatti completed the share purchase plan and issued 452,742 fully paid ordinary shares at $0.55 raising
$249,000 before costs.
On 20 August 2021, Novatti held a General Meeting for the ratification of shares issued prior and for the adoption of the 2021
Novatti Employee Incentive plan, and approval for issue of shares for Tranche 2 of the capital raising. On August 27
2021, Novatti completed Tranche 2 of the capital raising by the issue of 21,606,801 fully paid ordinary shares at $0.55 per
share, raising $11,883,740 before costs.
No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
70
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 30. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Write off of property, plant and equipment
Share-based payments
Unrealised foreign exchange (gain) / loss
Impairment of capitalised bank licensing costs
Loss / (gain) on convertible notes
Movements in reserves
Equity investments received for services rendered
Share of joint venture loss / (profit)
Non-cash finance charges
Gain on investments at fair value through profit or loss
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in trade and other payables
Increase in employee benefits
Increase/(decrease) in deferred income
Net cash used in operating activities
Note 31. Earnings per share
Loss after income tax
Non-controlling interest
Consolidated
2021
$'000
2020
$'000
(11,843)
(10,960)
1,481
111
2,180
1
-
2,860
-
(364)
33
1,094
(366)
905
-
1,602
201
3,010
(727)
375
(60)
(17)
1,900
-
(1,714)
963
427
(262)
(12,666)
15,015
262
(76)
(5,399)
(1,236)
Consolidated
2021
$'000
2020
$'000
(11,843)
31
(10,960)
-
Loss after income tax attributable to the owners of Novatti Group Limited
(11,812)
(10,960)
Weighted average number of ordinary shares used in calculating basic earnings per share
228,847,775 171,307,937
Weighted average number of ordinary shares used in calculating diluted earnings per share 228,847,775 171,307,937
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(5.162)
(5.162)
(6.398)
(6.398)
As at 30 June 2021, the Group has 36,070,835 unlisted option on issue. These options are considered to be non-dilutive
whilst the Group is in a loss position.
Note 32. Share-based payments
Options issued under employee share option plan
71
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 32. Share-based payments (continued)
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 options granted in FY21 were calculated based on the Binomial model method of calculation for share-based payments.
The following Share-based payment arrangements were in existence during the current financial year and are supported by
the table below.
Options issued to senior management and staff of the Group vest in three equal portions each year from the first year of
vesting over 36 months.
Set out below are summaries of options granted under the plan:
2021
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
27/11/2018
25/11/2019
19/12/2019
10/07/2020
10/07/2020
10/07/2020
10/07/2020
10/07/2020
26/10/2020
25/11/2020
22/12/2020
22/12/2020
05/05/2021
08/02/2021
07/04/2021
05/04/2021
31/05/2021
30/11/2022
30/11/2023
19/12/2022
10/07/2023
01/03/2024
01/03/2025
01/03/2026
31/12/2022
26/10/2023
30/11/2024
22/12/2023
14/10/2023
05/05/2024
08/02/2024
07/04/2024
05/04/2024
31/05/2024
$0.190
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.300
$0.270
$0.275
$0.300
$0.750
$0.300
$0.600
$0.300
$0.750
-
9,000,000
-
3,500,000
-
5,370,000
850,000
-
441,667
-
441,667
-
66,666
-
3,200,000
-
1,000,000
-
2,500,000
-
3,600,000
-
2,000,000
-
100,000
-
200,000
-
100,000
-
300,000
-
400,000
-
17,870,000 15,200,000
-
(166,667)
(355,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(521,667)
Expired/
forfeited/
other
Balance at
the end of
the year
(3,666,665)
(333,333)
(265,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,333,335
3,000,000
4,750,000
850,000
441,667
441,667
66,666
3,200,000
1,000,000
2,500,000
3,600,000
2,000,000
100,000
200,000
100,000
300,000
400,000
(4,264,998) 28,283,335
Weighted average exercise price
$0.185
$0.273
$0.200
$0.191
$0.237
2020
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
21/07/2016
21/07/2016
21/07/2016
27/11/2018
25/11/2019
19/12/2019
31/12/2019
31/12/2019
31/12/2019
30/11/2022
30/11/2023
19/12/2022
$0.200
$0.200
$0.200
$0.190
$0.200
$0.200
333,333
333,333
333,334
9,500,000
-
-
10,500,000
-
-
-
-
3,500,000
5,370,000
8,870,000
-
-
-
(500,000)
-
-
(500,000)
(333,333)
(333,333)
(333,334)
-
-
-
-
-
-
9,000,000
3,500,000
5,370,000
(1,000,000) 17,870,000
Weighted average exercise price
$0.191
$0.200
$0.190
$0.200
$0.185
72
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 32. Share-based payments (continued)
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
%
Dividend
Risk-free
Fair value
yield
%
interest rate at grant date
%
10/07/2020
10/07/2020
10/07/2020
10/07/2020
10/07/2020
10/07/2020
10/07/2020
26/10/2020
26/10/2020
26/10/2020
25/11/2020
25/11/2020
25/11/2020
22/12/2020
22/12/2020
22/12/2020
22/12/2020
22/12/2020
05/05/2021
08/02/2021
08/02/2021
08/02/2021
07/04/2021
07/04/2021
05/04/2021
05/04/2021
05/04/2021
31/05/2021
31/05/2021
31/05/2021
31/05/2021
10/07/2023
01/03/2024
01/03/2025
01/03/2026
31/12/2022
31/12/2022
31/12/2022
26/10/2023
26/10/2023
26/10/2023
30/11/2024
30/11/2024
30/11/2024
22/12/2023
22/12/2023
14/10/2023
14/10/2023
14/10/2023
05/05/2024
08/02/2024
08/02/2024
08/02/2024
07/04/2024
07/04/2024
05/04/2024
05/04/2024
05/04/2024
31/05/2024
31/05/2024
31/05/2024
31/05/2024
$0.285
$0.285
$0.285
$0.285
$0.285
$0.285
$0.285
$0.275
$0.275
$0.275
$0.270
$0.270
$0.270
$0.240
$0.240
$0.240
$0.240
$0.240
$0.635
$0.265
$0.265
$0.265
$0.505
$0.505
$0.495
$0.495
$0.495
$0.620
$0.620
$0.620
$0.620
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
$0.300
$0.300
$0.300
$0.270
$0.270
$0.270
$0.275
$0.275
$0.300
$0.300
$0.300
$0.750
$0.300
$0.300
$0.300
$0.600
$0.600
$0.300
$0.300
$0.300
$0.750
$0.750
$0.750
$0.750
80.00%
80.00%
80.00%
80.00%
80.00%
80.00%
80.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
70.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.30%
0.30%
0.30%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
0.98%
$0.166
$0.166
$0.166
$0.166
$0.162
$0.143
$0.111
$0.121
$0.099
$0.068
$0.111
$0.114
$0.119
$0.102
$0.083
$0.092
$0.076
$0.048
$0.266
$0.114
$0.092
$0.062
$0.210
$0.168
$0.295
$0.268
$0.233
$0.243
$0.203
$0.131
$0.231
These options have different tranches with different vesting periods.
Bonus options issued for convertible notes
On 30 March 2020 the Group issued 3,500,000 bonus options to the convertible note holders. These options were valued
using the Binomial model method of calculation for share-based payments.
Set out below are summaries of bonus options granted to convertible note holders:
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
15/11/2019
18/02/2020
30/10/2022
30/10/2022
$0.25
$0.25
2,275,000
1,225,000
3,500,000
73
-
-
-
(800,000)
(112,500)
(912,500)
-
-
-
1,475,000
1,112,500
2,587,500
Novatti Group Limited
Notes to the financial statements
30 June 2021
Note 32. Share-based payments (continued)
Options issued to consultants
On 15 September 2020, the Group issued 7,000,000 unquoted options to consultants in lieu of investor relation service
fees. These options were valued using Black-Scholes valuation model.
Set out below are summaries of options granted to consultants:
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
15/09/2020
31/12/2021
$0.25
7,000,000
7,000,000
-
-
(1,800,000)
(1,800,000)
-
-
5,200,000
5,200,000
74
Novatti Group Limited
Directors' declaration
30 June 2021
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 consolidated entity's financial position as at
30 June 2021 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Peter Pawlowitsch
Chairman
31 August 2021
75
Novatti Group Limited
Independent auditor's report to the members of Novatti Group Limited
IndependentInde
76
Novatti Group Limited
Independent auditor's report to the members of Novatti Group Limited
77
Novatti Group Limited
Independent auditor's report to the members of Novatti Group Limited
78
Novatti Group Limited
Independent auditor's report to the members of Novatti Group Limited
79
Novatti Group Limited
Independent auditor's report to the members of Novatti Group Limited
80
Novatti Group Limited
Shareholder information
30 June 2021
The shareholder information set out below was applicable as at 27 August 2021.
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
Number
of holders
of ordinary
shares
Number
of
ordinary
shares
%
of ordinary
shares
275
1,343
657
210,695
3,781,865
5,331,518
1,283 44,793,510
280 269,383,253
3,838 323,500,841
0.07
1.17
1.65
13.85
83.26
100.00
Holding less than a marketable parcel
158
93,695
0.02
Unquoted options
5,001 to 10,000
10,001 to 100,000
100,001 and over
Number of
holders
of
unquoted
options
Number
of
unquoted
options
%
of unquoted
options
60,000
6
40
2,082,500
40 33,890,835
0.17
5.78
94.05
86 36,033,335
100.00
81
Novatti Group Limited
Shareholder information
30 June 2021
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
1. BRAYTER LIMITED
2. CITICORP NOMINEES PTY LIMITED
3. CS THIRD NOMINEES PTY LIMITED
4. QING LI
5. CORANGAMITE PTY LTD (LAKE CORANGAMITE A/C)
6. MADAM QING LI
7. EMERSION SOFTWARE SYSTEMS PTY LTD
8. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
9. UBS NOMINEES PTY LTD
10. MR FREEMAN XIN WAN (AFU FAMILY A/C)
11. BRISPOT NOMINEES PTY LTD (HOUSE HEAD NOMINEE A/C)
12. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
13. PORTMAN TRADING PTY LTD
13. BROADGATE INVESTMENTS PTY LTD
14. JINGTIAN LI
15. DASISTAS PTY LTD (DASISTAS SUPER FUND A/C)
16. NATIONAL NOMINEES LIMITED
17. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
18. MR WEI LI
19. MR PAUL MCLAREN
20. WASHINGTON H SOUL PATTINSON AND COMPANY
Unquoted equity securities
Options over ordinary shares issued
Ordinary shares
27 August
2021
% of total
Number held shares issued
46,631,507
21,702,529
21,456,989
12,500,000
11,507,904
10,407,452
6,355,226
6,243,310
5,236,975
4,000,000
3,975,904
3,927,096
3,909,091
3,909,091
3,571,428
3,427,802
3,044,871
2,628,781
2,500,000
2,262,500
2,000,000
14.41
6.71
6.63
3.86
3.56
3.22
1.96
1.93
1.62
1.24
1.23
1.22
1.21
1.21
1.10
1.06
0.94
0.81
0.77
0.70
0.62
181,198,456
56.01
Number
on issue
Number
of holders
36,033,335
86
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
CITICORP NOMINEES PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
Ordinary shares
% of total
shares
issued
Number held
46,631,507
21,702,529
21,456,989
14.41
6.71
6.63
82
Novatti Group Limited
Shareholder information
30 June 2021
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.
Securities subject to voluntary escrow
Class
Ordinary shares
Use of funds
Expiry date
19 December 2021
Number
of shares
11,250
Since admission, the Company has used its cash in a way consistent with business objectives.
83
Novatti Group Limited
ABN 98 606 556 183
Level 3, 461 Bourke St
Melbourne, Victoria
AUSTRALIA 3000
G.P.O. Box 171
380 Bourke St
Melbourne, Victoria
AUSTRALIA 3001
t. +61 3 9011 8490
www.novatti.com
84