READCLOUD LIMITED
ABN 44 136 815 891
APPENDIX 4E PRELIMINARY FINAL REPORT
30 JUNE 2020
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ReadCloud Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
ReadCloud Limited
44 136 815 891
For the year ended 30 June 2020
For the year ended 30 June 2019
2. Results for announcement to the market
$
Revenues from ordinary activities
up
55.1% to
7,456,231
Loss from ordinary activities after tax attributable to the Owners of
ReadCloud Limited
down
39.8%
to
(981,984)
Loss for the year attributable to the Owners of ReadCloud Limited
down
39.8% to
(981,984)
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
The loss for the Company after providing for income tax amounted to $981,984 (30 June 2019: $1,630,423). Underlying
earnings before interest taxation, depreciation and amortisation (‘Underlying EBITDA’) was a loss of $161,141 (30 June
2019: loss of $421,960). This is reconciled to the statutory loss as follows:
Reported (statutory) net loss after tax
Add back: Depreciation and amortisation
Share based payments
Fair value movement on contingent consideration
Transaction costs incurred on business acquisition (expensed) and
one-off ASX fees
Net interest (revenue) / expense
Income tax expense / (benefit)
Underlying EBITDA*
Consolidated
30 June 2020
$
(981,984)
702,262
130,392
-
27,751
30 June 2019
$
(1,630,423)
416,624
471,365
405,000
40,520
5,764
(45,326)
(37,296)
(87,750)
(161,141)
(421,960)
For further details on the results, refer to the Review of Operations within the Directors’ Report.
* EBITDA and Underlying EBITDA are non-statutory financial measures which are not prescribed by Australian Accounting
Standards (AAS). They represent the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and
certain other specified items. The Directors consider that EBITDA and underlying EBITDA reflect core earnings of the entity
consistent with internal reporting.
3. Net tangible assets
Net tangible assets per ordinary security
Reporting
Previous
period
Cents
period
Cents
3.12
1.17
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ReadCloud Limited
Appendix 4E
Preliminary final report
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
6. Dividends
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
7. Dividend reinvestment plans
Not applicable.
8. Details of associates and joint venture entities
Not applicable.
9. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
11. Attachments
Details of attachments (if any):
The Annual Report of ReadCloud Limited for the year ended 30 June 2020 is attached.
12. Signed
Signed ___________________________
Date: 27 August 2020
Paul Collins
Chairman
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ReadCloud Limited
ABN 44 136 815 891
Annual Report - 30 June 2020
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ReadCloud Limited
Contents
30 June 2020
Corporate directory
Directors’ report
Auditor’s independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of ReadCloud Limited
Shareholder information
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3
21
22
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25
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ReadCloud Limited
Corporate directory
30 June 2020
Directors
Mr Paul Collins (Non-Executive Chairman)
Mr Guy Mendelson (Non-Executive Director)
Mr Lars Lindstrom (Managing Director and Chief Executive Officer)
Mr Darren Hunter (Executive Director and Chief Information Officer)
Company secretary
Ms Melanie Leydin
Registered office
Principal place of business
284 Bay Street
Brighton VIC 3185
Phone: +61 3 9078 4833
284 Bay Street
Brighton VIC 3186
Phone: +61 3 9078 4833
Share register
Auditor
Boardroom Limited
Level 12, 225 George Street
Sydney NSW 2000
Phone: 1300 737 760; +61 2 9290 9600
PKF Melbourne Audit & Assurance Pty Ltd
Level 12, 440 Collins Street
Melbourne VIC 3000
Stock exchange listing
ReadCloud Limited shares are listed on the Australian Securities
Exchange (ASX code: RCL)
Website
www.readcloud.com
Corporate Governance Statement Refer to the Company's Corporate Governance statement at:
www.readcloud.com/investors#corporate-governance
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ReadCloud Limited
Directors’ report
30 June 2020
The Directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as ‘ReadCloud’ or the ’Group') consisting of ReadCloud Limited (referred to hereafter as the 'Company'
or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2020.
Directors
The following persons were Directors of ReadCloud Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Mr Paul Collins - Non-Executive Chairman
Mr Guy Mendelson - Non-Executive Director
Mr Lars Lindstrom - Managing Director and Chief Executive Officer
Mr Darren Hunter - Executive Director and Chief Information Officer
Principal activities
ReadCloud is a leading provider of software solutions, including eBooks, to schools within Australia. ReadCloud’s
proprietary eBook reader delivers digital content to students and teachers with extensive functionality, including the
ability to make commentary in, and import third party content into eBooks.
Students and teachers can share notes, questions, videos and weblinks directly inside the eBooks turning the
eBook into a place for discussion, collaboration and social learning, substantially improving learning outcomes.
ReadCloud sources content for its solutions from multiple publishers so that together with its reseller channel
partners, ReadCloud is able to deliver the Australian school curriculum in digital form in all States, on one platform.
ReadCloud also provides digital Vocational Education and Training (“VET”) course materials and services to
schools through its subsidiary Australian Institute of Education and Training Unit Trust (“AIET”), which offers over
40 VET courses and Auspicing services to schools across Australia.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
Revenue
The Directors are pleased to report that for FY20 ReadCloud achieved 55% revenue growth to $7.46 million (FY19:
$4.81 million), driven by:
• a 30% increase in the number of school customers to 360 secondary schools located throughout Australia
(FY19: 277);
• a 40% increase in the number of ReadCloud platform users to 112,000 users (FY19: 80,000); and
• an increase in average revenue per user from $55 in FY19 to $65 in FY20 (excluding schools at 30 June
2020 that were using but not paying for the ReadCloud software in FY20 but have entered into multi-year
contracts where the software is paid for in 2021 and onwards).
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Directors’ report
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Strong growth was achieved across both of the Group’s key operating segments.
The full curriculum schools segment (servicing direct and reseller school customers) achieved sales revenue
growth of 58% over FY19, driven by both new school wins and “organic” sales growth within existing direct
customer schools. Notable new school wins in FY20 included:
•
•
•
three of the largest State High schools in Brisbane (each with over 2,000 students, including the largest
State High School in Queensland with over 3,000 students);
a large independent Anglican School in New South Wales; and
two prestigious Grammar schools in Melbourne that used the ReadCloud eLearning platform in conjunction
with ReadCloud partner OfficeMax for physical books in the 2020 school year.
FY20 Revenue from these new school customers was in line with expectations. Direct sales efforts for the 2020
school year were deliberately focused on targeting larger schools as reference customers and for operational
efficiencies (the on-boarding process for a school with larger user numbers is not dissimilar to that for a smaller
school in terms of set-up and eBook provisioning). Pleasingly, on a “like-for-like” basis, revenue from direct full-
curriculum school customers that were customers in 2019 grew by 22% in FY20 (over FY19) as use of the
ReadCloud platform was expanded within those schools.
The VET business also achieved strong sales growth in FY20 (up 61% on FY19), driven by:
•
•
new school wins in Victoria, South Australia and Western Australia. A number of new customer schools that
had commenced VET subjects under the auspices of competitor Registered Training Organisations
(“RTO’s”) at the beginning of 2019 came across to AIET to complete the delivery of these subjects from
Term 3 2019; and
an increase in average revenue per VET course student as a result of the adoption of a new pricing structure
for AIET’s services for the 2020 school year.
In late 2019 AIET licenced and commenced implementation of leading specialist RTO software aXcelerate. Used
by over 700 RTO’s nationally, the aXcelerate software encompasses school compliance monitoring, student
enrolments, student management and finance in one system. The implementation was a significant undertaking
that resulted in additional employment costs (largely casual employees assisting with data migration from legacy
systems). This investment is already bearing fruit with more efficient (streamlined) operational processes and
enhanced school compliance monitoring.
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Directors’ report
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Underlying EBITDA
ReadCloud recorded an Underlying EBITDA* loss for FY20 of $161,141 (FY19 Underlying EBITDA loss $421,960),
which is reconciled to the statutory loss as detailed below. This reconciliation adds back the effect of certain non-
operating and non-recurring items which would not ordinarily relate to the Group’s underlying performance.
Underlying EBITDA for the second half of the financial year was $533,173 (positive) versus an Underlying EBITDA
loss for the first half of the financial year of $694,314, reflecting the normally strong bias of revenue from reseller
full curriculum schools and VET auspicing services towards the second half of each financial year.
Sales & fee revenue
Other revenue
Total revenue
Less operating expenses:
Advertising and marketing
Employment expenses
Legal & compliance
Professional services expenses
Publisher and bookseller fees expense
Telephone, internet & data hosting
Travel expenses
Other expenses
Finance costs
Add net interest expense / (revenue)
Consolidated
30 June 2020
$
6,956,136
500,096
7,456,231
30 June 2019
$
4,316,479
492,089
4,808,568
(115,831)
(2,628,224)
(143,465)
(301,014)
(3,891,795)
(80,811)
(136,713)
(315,720)
(9,563)
5,764
(112,711)
(1,889,309)
(114,439)
(165,005)
(2,329,507)
(47,019)
(192,917)
(342,087)
(238)
(37,296)
Underlying EBITDA*
(161,141)
(421,960)
Less: Depreciation and amortisation
Share based payments
Fair value movement on contingent consideration
Transaction costs incurred on business acquisition
(expensed) and one-off ASX fees
Net interest (expense) / revenue
Income tax expense / (benefit)
(702,262)
(130,392)
-
(27,751)
(5,764)
45,326
(416,624)
(471,365)
(405,000)
(40,520)
37,296
87,750
Reported (statutory) net loss after tax
(981,984)
(1,630,423)
* EBITDA and underlying EBITDA are non-statutory financial measures which are not prescribed by Australian
Accounting Standards (AAS). They represent the profit under AAS adjusted for Interest, Tax, Depreciation and
Amortisation and certain other specified items. The Directors consider that EBITDA and underlying EBITDA reflect
core earnings of the entity consistent with internal reporting.
Significant expenses included in the statutory net loss after tax for FY20 are discussed below.
Publisher and bookseller expenses
FY20 Publisher and bookseller expenses were $3.89 million (FY19: $2.32 million), with the increase from FY19
broadly a result of sales growth (the FY20 expense amounted to 56% of FY20 Sales & fee revenue, versus 54%
for FY19). Gross margins on eBook sales to direct full-curriculum and reseller schools were almost identical to
FY19. Expenditure on externally sourced VET course materials supplied to VET school customers was higher in
FY20 than in the prior comparable period, mainly as a result of a broader scope of VET courses offered to VET
school customers.
Employment expenses
FY20 Employment expenses increased by circa $0.74 million to $2.63 million (FY19: $1.89 million) as a result of:
•
the hiring of additional software development, sales and operational support staff;
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Directors’ report
30 June 2020
• a full year’s employment costs in FY20 for employees who joined the Group upon the acquisition of AIET
on 31 October 2018 (versus 8 months of costs for these employees in FY19); and
•
the employment of additional (mainly casual) staff to assist with the implementation (and related data
migration) of the aXcelerate software platform for the VET business.
At 30 June 2020 the Group had 24 full-time equivalent employees (30 June 2019: 20 full-time equivalent
employees).
Legal & compliance
FY20 Legal & compliance expenses of $0.14 million (FY19: $0.11 million) comprise legal fees, ASX and ASIC fees,
RTO licence fees and the cost of external RTO compliance consultants.
Professional services expenses
FY20 Professional services expenses were $0.30 million (FY19: $0.17 million), with the main components including
audit fees, share registry costs, company secretarial fees, contract bookkeeping costs and tax consulting fees.
Depreciation and amortisation expense
FY20 depreciation and amortization expenses were $0.70 million (FY19: $0.4 million), with the increase from FY19
due to more capitalised development costs from previous years commenced amortising during FY20 and adoption
of new Accounting Standard AASB 16 Leases from 1 July 2019, which resulted the recognition of “right-of-use
assets” equal to $426,398 on the Group’s balance sheet and depreciation of these assets during the year of
$136,255.
Funding / Cash flow
As at 30 June 2020 the Group had a strong balance sheet with cash at bank of $3.39 million (30 June 2019: $3.07
million) and zero debt. Net cash used in operating activities for FY20 was $0.31 million (FY19: $0.44 million), which
approximated Underlying EBITDA reasonably closely (with the difference mainly explained by higher receivable
and lower payable balances at 30 June 2020).
Platform update
Significant development of the ReadCloud platform was undertaken during FY20, including the development of new
features and automation of back-end processes to improve scalability and reduce the time to on-board new schools.
New platform features, either in development or released to customers, during FY20 include:
• ReadCloud’s new Media Overlay feature, which enables publishers to embed videos, audio podcasts, rich
text editing and images into their eBooks. This Media Overlay capability has broad application in the VET
market and has assisted in attracting new publishers in the sector to the ReadCloud platform. The Media
Overlay feature is also available for Teachers and Trainers to enhance students’ learning experience
whether in VET education or full curriculum schools;
•
•
text to speech, enabling teachers and students to select text in an eBook and have it read or translated for
them in any language;
real-time social annotations, enabling annotations and comments added to an eBook by a teacher or
student to be shared with the class cohort on a real-time basis;
• advanced reading analytics that provide a class teacher with insights (in the form of “heat-maps”) into which
pages of an eBook students are spending the most time on; and
• a new eBook quoting and ordering system developed to streamline the production and processing of sales
quotes to school customers.
These new features and continuing development of the ReadCloud platform provide the Group with a significant
competitive advantage.
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Directors’ report
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Impact of COVID-19
The COVID-19 pandemic had minimal impact on ReadCloud’s operations in FY20, as the Company is fully capable
of operating in a remote capacity whilst supporting current and new customers and continuing our exciting product
development. The on-boarding of full-curriculum schools for the 2020 school year, including eBook purchases, was
completed successfully prior to the outbreak of COVID-19 in Australia. Whilst student enrolments in VET courses
provided by AIET continued well into Term 2, the ability of the ReadCloud platform to digitally deliver VET course
materials to students and teachers combined with an end-to-end online compliance monitoring, student enrolment
and student management hub (powered by the aXcelerate software) enabled VET-school customers to continue
to deliver VET courses even after schools went to remote learning.
The COVID-19 pandemic has in fact heightened awareness of and interest in the ReadCloud platform from both
potential new customers and reseller partners. The platform is designed to enable teachers and students to access
all of their in-classroom content (eBooks, shared notes, videos, images and more) in one application, whether
they’re on-campus or studying remotely, with the ability to collaborate and socialise learning within the platform.
Leveraging our expertise, in late March 2020 ReadCloud published a white paper entitled “A Pathway Towards
Home Schooling” in conjunction with the Australian Secondary Principals Association. The white paper identifies
and addresses the various factors that schools should consider in order to effectively establish, run and maintain
remote learning, and can be found on the Company’s website www.readcloud.com.
Outlook
The Directors believe the Group is well-placed for strong growth in FY21 via:
• new customer (school) acquisitions across the full-curriculum and VET school segments;
• organic growth within existing school customers, driven by expanded usage of the ReadCloud platform and
AIET’s auspicing services within existing school customers; and
•
cross-selling of ReadCloud’s VET course offering to ReadCloud full-curriculum schools and vice-versa.
Whilst the selling season for the 2021 school year would not ordinarily commence until well into the September
quarter, leading up to 30 June 2020 ReadCloud signed up 10 new full-curriculum schools for the remainder of the
2020 school year and for 2021. These new direct full-curriculum school customers provide a good headstart on
budgeted revenue growth for FY21. The direct sales pipeline has significantly expanded in recent months, driven
by the COVID-19 pandemic and the resultant need for schools to have a remote learning solution. The ReadCloud
sales team is working to convert this pipeline in the coming months. Whilst State border closures have hindered
some in-person sales contact, the recent new school wins have proven our ability to sell the ReadCloud platform
via video conferencing.
During the June quarter ReadCloud signed up 2 new reseller partners, Western Australia-based Ziggies
Educational Supplies which currently supplies booklisting services to over 300 Western Australian schools, and
Victorian-based Lilydale Books which currently supplies booklisting services to circa 30 Victorian schools.
ReadCloud’s sales team is now actively working with these new partners to jointly promote the ReadCloud
eReading solution to both existing and potential new school customers of these resellers. Discussions with other
potential new resellers are continuing in the current quarter.
Whilst the sales cycle for VET-in-schools does not ordinarily commence until late in the school year for the following
school year, the AIET sales team has already signed up several new schools for delivery of VET courses in 2021,
including existing ReadCloud full-curriculum customers. In addition, the vast majority of VET courses provided by
AIET are run over 2 years, resulting in a large proportion of revenue being “locked in” for 2021.
The Directors expect to be in a position to provide an update on the sales outlook for the 2021 school year at the
Company’s Annual General Meeting in November 2020.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
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Directors’ report
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Matters subsequent to the end of the financial year
Since 30 June 2020:
• 1,223,134 ASX-listed options exercisable at $0.30 per share have been exercised, raising proceeds of
$366,940; and
•
the Company has granted 100,000 options exercisable at $0.28 each and expiring on 2 July 2023 to
employees pursuant to the Group’s Employee Share and Option Scheme.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group’s likely developments and expected results of operations are as follows:
•
•
•
•
continue in the provision of eBook solutions to secondary schools across Australia;
continue to source content so that, with its reseller partners and publisher agreements, the Company is
able to deliver the Australian secondary school curriculum in digital form in all States;
carry on providing Vocational Education and Training courses and services to enable secondary schools
across Australia to offer their students nationally accredited VET qualifications; and
continue to pursue partnerships with educational content publishers looking for a secure digital delivery
solution.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
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ReadCloud Limited
Directors’ report
30 June 2020
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Paul Collins
Chairman
BSc Applied Science (Computer Science), GAICD
Paul commenced his career with IBM in 1982. After 3 years he started his own
consulting business working in a state government agency and large
corporations primarily in software development and implementation roles. This
included 7 years at IOOF in the Development Manager’s role. Over the last 20
years, Paul has been extensively involved in the start-up and subsequent ASX
listing of 2 successful FinTech companies. A co-founder of IWL in 1997, Paul
was an Executive Director of the company from its inception, through its listing
in 1999 before leaving in 2004. Later in 2004, Paul was a co-founder and
Executive Director of Managed Accounts Ltd which listed on the ASX in 2014
(ASX:MGP). Paul chaired the Audit and the Risk and Compliance Committees
of MGP from 2009 until 2016.
Integrated Payment Technologies Ltd (ASX:IP1) Non-Executive Director
since October 2018
None
1,060,411 fully paid ordinary shares
125,000 options
Guy Mendelson
Non-Executive Director
B. Bus
Guy has a strong working knowledge of ReadCloud and its management
having been a member of the ReadCloud Advisory Board for three years prior
to the Company’s IPO in February 2018. Guy’s previous Board experience
includes being a BPAY Board Director for four years and a Brotherhood of St
Laurence Audit and Risk Committee member for the past 8 years. Guy has
extensive strategic and commercial experience at an executive level with 20
years’ experience working for ANZ Bank running various businesses. He is
currently Managing Director, Business Owners Portfolio within ANZ
responsible for the growth and profitability of this business segment.
None
None
1,435,318 fully paid ordinary shares
Lars Lindstrom
Managing Director and Chief Executive Officer
Masters in Business Administration & Corporate Law
Lars co-founded ReadCloud in 2009 and has extensive tech startup
experience. Previously a Partner in LundXY Global Ventures (the first investor
in Skype) and the CFO/Co–Founder of Nyhedsavisen which within one year
became the most read newspaper in Denmark publishing over 500,000 copies
daily. Lars spent his first 10 years working in investment banking/M&A working
for Deutsche Bank and Rothschild in Melbourne.
None
None
8,534,128 fully paid ordinary shares
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Directors’ report
30 June 2020
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3
years):
Interests in shares:
Interests in options:
Darren Hunter
Executive Director and Chief Information Officer
Darren commenced his career in IT in 1984. Following a number of varied and
senior roles he cofounded IWL, a financial planning and online stockbroking
software provider in 1997. IWL was listed on the ASX in 1999 and provided
Westpac and National Australia Bank with their online broking capabilities.
Darren’s role was that of CIO and group strategy. IWL grew into an ASX 300
company with over 500 employees and was eventually acquired by CBA for
$373 million. He commenced with ReadCloud in 2015 in the role of Chief
Information Officer.
None
None
7,009,880 fully paid ordinary shares
75,000 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 secretary
Ms Melanie Leydin, BBus (Acc. Corp Law) CA FGIA
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the
Institute of Chartered Accountants, Fellow of the Governance Institute of Australia and is a Registered Company
Auditor. She graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since
February 2000 has been the principal of Leydin Freyer. The practice provides outsourced company secretarial
and accounting services to public and private companies across a host of industries including but not limited to
the Resources, technology, bioscience, biotechnology and health sectors.
Melanie has over 25 years’ experience in the accounting profession and over 15 years as a Company Secretary.
She has extensive experience in relation to public company responsibilities, including ASX and ASIC compliance,
control and implementation of corporate governance, statutory financial reporting, reorganisation of companies
and shareholder relations.
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 2020, and the number of meetings attended by each Director were:
Full Board
Audit and Risk Committee
Paul Collins
Guy Mendelson
Lars Lindstrom
Darren Hunter
Attended
10
9
10
10
Held
10
10
10
10
Attended
4
4
-
4
Held
4
4
-
4
Remuneration and
Nomination Committee
Held
Attended
2
2
2
2
-
-
2
2
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Directors’ report
30 June 2020
Remuneration report (audited)
The remuneration report details the key management personnel (“KMP”) remuneration arrangements for the Group,
in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of
the Group, directly or indirectly, including all directors. The KMP of the Group during the year ended 30 June
2020 consisted of the following Directors and executives:
Paul Collins - Non-Executive Chairman
Mr Guy Mendelson - Non-Executive Director
•
•
• Lars Lindstrom - Managing Director and Chief Executive Officer
Mr Darren Hunter - Executive Director and Chief Information Officer
•
•
Mr Luke Murphy - Chief Financial Officer
• Mr Joshua Fisher - Chief Product Officer
The experience and expertise of each of the Directors and the Company Secretary are contained earlier in the
Director's report and for other KMP is described below.
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Luke Murphy
Chief Financial Officer
B.Comm, CA ANZ, AGIA, ICSA
Luke is a Chartered Accountant (previously with KPMG and Deloitte) and
Chartered Company Secretary with over 20 years’ equity capital markets
experience advising companies on capital raising, mergers and acquisitions
and investor relations, complemented by experience as Chief Financial Officer
of rapidly growing technology companies.
Joshua Fisher
Chief Product Officer
MBA (Executive), AGSM
Josh is a marketing practitioner with over fifteen years’ experience spanning
both the client and agency side (B2B and B2C), together with SME experience,
having successfully run an innovative Australian cosmetic company –
Rationale Skincare. Josh’s experience spans education, financial services,
FMCG and consumer goods.
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
References to performance rights and options issued to KMP in this remuneration report are to securities issued
by the Company that convert into fully-paid ordinary shares in the Company.
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive 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 ensures that executive reward satisfies the following key criteria for good
reward governance practices:
• Remuneration is competitive to allow the Company to attract and retain the best talent
• Drivers and outcomes of remuneration align with shareholder outcomes
• Remuneration outcomes are closely aligned with performance of the Group
• Remuneration structure is simple and transparent
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The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration
arrangements for its directors and executives. The performance of the Group depends on the quality of its directors
and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality
personnel.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the Group.
The reward framework is designed to align executive reward to shareholders' interests. The Board has considered
that it should seek to enhance shareholders' interests by:
• having economic profit as a core component of plan design
•
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and
delivering constant or increasing return on assets as well as focusing the executive on key non-financial
drivers of value
• attracting and retaining high calibre executives
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 Nomination and Remuneration Committee. The
Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration
consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The
chairman's fees are determined independently to the fees of other non-executive directors based on comparative
roles in the external market. The chairman is not present at any discussions relating to the determination of his own
remuneration.
Non-executive directors may receive equity-based incentives, such as options and/or performance rights, where it
is determined that this is an appropriate means of incentivising those directors by aligning their interests with the
interests of shareholders.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework has the following components:
•
•
•
base pay and non-monetary benefits
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually
by the Nomination and Remuneration Committee based on individual and business unit performance, the overall
performance of the Group and comparable market remunerations.
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.
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Directors’ report
30 June 2020
The long-term incentives ('LTI') include long service leave, performance rights and options. Details of performance
rights and options issued to KMP as part of their remuneration are set out below.
Group performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the Group, by way of the issue of
performance rights and options, details of which are as follows. Each performance right will convert to one fully paid
ordinary share in the Company following achievement of the relevant performance condition. Each option will
convert into one fully paid ordinary share in the Company following both the achievement of the relevant vesting
condition (being continued employment until the relevant vesting date) and payment of the relevant exercise price.
Refer to the section "Additional Information" below for details of the earnings and total shareholders return for the
period since ASX listing.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be
attributed in part to the adoption of performance-based compensation and is satisfied that this improvement will
continue to increase shareholder wealth if maintained over the coming years.
Details of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
2020
Cash
salary
Annual
leave
Non-
Super-
and fees accrued monetary annuation
$
$
$
$
Long
service
Leave
$
Equity-
settled
$
Non-Executive Directors:
Paul Collins
Guy Mendelson
40,000
30,000
-
-
Executive Directors:
Lars Lindstrom
Darren Hunter
237,443
237,443
3,255
15,619
-
-
-
-
3,800
-
-
-
22,557
22,557
2,983
2,983
-
-
-
-
Total
$
43,800
30,000
266,238
278,602
Other Key Management
Personnel:
Luke Murphy
Joshua Fisher
146,119
179,604
870,609
4,652
3,489
27,015
-
-
13,881
17,062
79,857
833
2,357
9,156
61,710
-
227,195
202,512
61,710 1,048,347
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Directors’ report
30 June 2020
2019
Non-Executive Directors:
Paul Collins
Guy Mendelson
Executive Directors:
Lars Lindstrom
Darren Hunter
Other Key Management
Personnel:
Luke Murphy*
Joshua Fisher
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash
salary
Annual
leave
Non-
Super-
and fees accrued monetary annuation
$
$
$
$
Long
service
Leave
$
Equity-
settled
$
Total
$
40,000
30,000
-
-
228,310
228,310
4,683
(5,854)
100,806
164,384
791,810
5,384
5,058
9,271
-
-
-
-
-
-
3,800
-
-
-
16,050
-
59,850
30,000
21,689
21,689
1,153
1,153
88,276 344,111
88,276 333,574
9,577
15,616
72,371
121
810
65,745 181,633
48,150 234,018
3,237 306,497 1,183,186
*
Luke Murphy was appointed as Chief Financial Officer on 20 August 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Paul Collins
Guy Mendelson
Executive Directors:
Lars Lindstrom
Darren Hunter
Other Key Management
Personnel:
Luke Murphy
Joshua Fisher
Fixed remuneration
2019
2020
At risk - STI
At risk - LTI
2020
2019
2020
2019
100%
100%
73%
100%
100%
100%
74%
74%
73%
100%
64%
79%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27%
-
26%
26%
27%
-
36%
21%
Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these
agreements are as follows:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Paul Collins
Chairman
No fixed term.
Annual fee of $40,000 plus statutory superannuation.
Guy Mendelson
Non-Executive Director
No fixed term.
Annual fee of $30,000 including Committee chair fees.
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ReadCloud Limited
Directors’ report
30 June 2020
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Lars Lindstrom
Managing Director and Chief Executive Officer
No fixed term. The Company may terminate the agreement by giving nine
months’ notice and may make payment in lieu of all or part of the notice period.
The employee may terminate his employment by giving 3 months’ notice.
Base salary of $260,000 per annum, inclusive of superannuation.
Darren Hunter
Executive Director and Chief Information Officer
No fixed term. The Company may terminate the agreement by giving nine
months’ notice and may make payment in lieu of all or part of the notice period.
The employee may terminate his employment by giving 3 months’ notice.
Base salary of $260,000 per annum, inclusive of superannuation.
Luke Murphy
Chief Financial Officer
No fixed term. The Company may terminate the agreement by giving two
months’ notice and may make payment in lieu of all or part of the notice period.
The employee may terminate his employment by giving two months’ notice.
Base salary of $160,000 per annum, inclusive of superannuation. The employee
has also been issued options by the Company, details of which are disclosed
elsewhere in this remuneration report.
Joshua Fisher
Chief Product Officer
No fixed term. The Company may terminate the agreement by giving nine
months’ notice and may make payment in lieu of all or part of the notice period.
The employee may terminate his employment by giving three months’ notice.
Base salary of $200,000 per annum, inclusive of superannuation (effective 1
November 2019).
KMP 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 KMP as part of compensation during the year ended 30 June
2020.
Options issued during the year
In July 2019 the Company issued 150,000 options over ordinary shares in the Company to Luke Murphy that vest
subject to continued employment as follows:
• 75,000 vesting on 12 July 2020; and
• 75,000 vesting on 12 July 2021.
Each option is exercisable at $0.34 per share and expires on 12 July 2022. The fair value of these options as at
their grant date was $0.141 per option.
There were no other options over ordinary shares granted to or vested by Directors and other KMP as part of
compensation during the year ended 30 June 2020.
15
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ReadCloud Limited
Directors’ report
30 June 2020
Details of options issued as part of compensation during the year ended 30 June 2020 and prior years and held
by Directors and other KMP as at the date of this report are as follows:
Class
KMP Holders
Vesting conditions
Options over ordinary shares,
exercisable at $0.41 per
share and expiring on 17 July
2022
Options over ordinary shares,
exercisable at $0.34 per
share and expiring on 12 July
2022
Options over ordinary shares,
exercisable at $0.20 per
share and expiring on 7
February 2022
Luke Murphy – 360,000
66.7% of these Options have vested
33.3% of these Options vest upon continued
employment until 17 July 2021
Luke Murphy – 150,000
50% of these Options have vested
50% of these Options vest upon continued
employment until 12 July 2021
Luke Murphy – 75,000
These Options vest upon continued employment until
7 February 2021
Options vested or lapsed during the year
During the year, the following options vested to KMP (no options held by KMP lapsed during the year):
Class
Options over ordinary shares, exercisable at $0.41 per
share and expiring on 17 July 2022
KMP Holder
Luke Murphy – 120,000
Performance rights issued during the year
There were no performance rights issued to Directors and other KMP as part of compensation during the year
ended 30 June 2020.
Performance rights vested or lapsed during the year
Details of performance rights held by Directors and KMP on 1 July 2019 were as follows:
Name
Number of
rights granted
Grant date
Performance right
type/Vesting
conditions
Expiry date
Lars Lindstrom
Darren Hunter
Joshua Fisher
Paul Collins
Lars Lindstrom
Darren Hunter
Joshua Fisher
Paul Collins
Lars Lindstrom
Darren Hunter
Joshua Fisher
Paul Collins
687,500 09 November 2017
687,500 09 November 2017
375,000 09 November 2017
125,000 09 November 2017
687,500 09 November 2017
687,500 09 November 2017
375,000 09 November 2017
125,000 09 November 2017
687,500 09 November 2017
687,500 09 November 2017
375,000 09 November 2017
125,000 09 November 2017
Class A Tranche 2 (i) 31 December 2019
Class A Tranche 2 (i) 31 December 2019
Class A Tranche 2 (i) 31 December 2019
Class A Tranche 2 (i) 31 December 2019
Class B Tranche 2 (ii) Refer (iv) below
Class B Tranche 2 (ii) Refer (iv) below
Class B Tranche 2 (ii) Refer (iv) below
Class B Tranche 2 (ii) Refer (iv) below
Class C Tranche 2 (iii) Refer (iv) below
Class C Tranche 2 (iii) Refer (iv) below
Class C Tranche 2 (iii) Refer (iv) below
Class C Tranche 2 (iii) Refer (iv) below
Fair value
per right at
grant date
$0.0640
$0.0640
$0.0640
$0.0640
$0.0270
$0.0270
$0.0270
$0.0270
$0.0130
$0.0130
$0.0130
$0.0130
(i) Class A Tranche 2 Rights convert to Shares if the Group has in excess of 100,000 Users by 31 December
2019
(ii) Class B Tranche 2 Rights convert to Shares if the Group achieves revenue of $7.5 million or greater for
FY19
(iii) Class C Tranche 2 Rights convert to Shares if the Group achieves EBITDA of $2 million or greater for FY19
(iv) Expiry date is 10 Business Days after release of FY19 financial statements
16
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ReadCloud Limited
Directors’ report
30 June 2020
All of the above performance rights lapsed during the year ended 30 June 2020. There were no other
performance rights granted to or vested by Directors and other KMP as part of compensation during the year
ended 30 June 2020.
Additional information
The earnings of the Group for the three years to 30 June 2020 are summarised below:
Sales revenue
Underlying EBITDA
Loss after income tax
2020
$
2019
$
2018
$
1,756,527
6,956,136 4,316,479
(161,141)
(931,685)
(421,960)
(981,984) (1,630,423) (1,152,779)
The factors that are considered to affect total shareholder return ('TSR') are summarised below:
Share price at financial year end ($)
Additional disclosures relating to key management personnel
2020
2019
2018
0.28
0.32
0.44
Shareholding
The number of shares in the Company held during the financial year by each Director and other KMP, including
their personally related parties, is set out below:
Ordinary shares
Paul Collins
Guy Mendelson
Lars Lindstrom
Darren Hunter
Luke Murphy
Joshua Fisher
Balance at
the start of
the year
1,060,411
1,435,318
8,534,128
7,009,880
50,000
4,874,721
22,964,458
Additions
-
-
-
-
-
138,889
138,889
Disposals/
other
-
-
-
-
-
-
-
Balance at
the end of
the year
1,060,411
1,435,318
8,534,128
7,009,880
50,000
5,013,610
23,103,347
Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director and
other KMP, including their personally related parties, is set out below:
Balance at Received as
the start of
the year
part of
remuneration Acquired Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
Options over ordinary shares
Paul Collins
Darren Hunter
Luke Murphy
125,000
75,000
360,000
560,000
-
-
150,000
360,000
-
-
75,000
75,000
-
-
-
-
-
-
-
-
125,000
75,000
585,000
785,000
17
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ReadCloud Limited
Directors’ report
30 June 2019
Options over ordinary shares
Paul Collins
Darren Hunter
Luke Murphy
Unvested
-
-
465,000
465,000
Vested and
exercisable
125,000
75,000
120,000
320,000
Balance at
the end of
the year
125,000
75,000
585,000
785,000
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each
Director and other KMP, including their personally related parties, is set out below:
Performance rights over ordinary shares
Paul Collins
Lars Lindstrom
Darren Hunter
Josh Fisher
Balance at
the start of
the year
Granted
Vested
Lapsed
Balance at
the end of
the year
375,000
2,062,500
2,062,500
1,125,000
5,625,000
-
-
-
-
-
(375,000)
-
- (2,062,500)
- (2,062,500)
- (1,125,000)
- (5,625,000)
-
-
-
-
-
Loans
The Group has not made, guaranteed or secured, directly or indirectly, any loans in respect of KMP (or their close
family members or controlled entities).
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of the Company under option at the date of this report are as follows:
Grant date
Expiry date
Exercise
price
Number
under option
02 February 2018
02 February 2018
13 March 2018
13 March 2018
28 May 2018
21 September 2018
9 January 2019
12 July 2019
13 July 2020
30 November 2020
30 November 2020
07 February 2021
07 February 2022
07 May 2022
17 July 2022
14 December 2021
12 July 2022
2 July 2023
$0.300 15,443,529
3,333,332
$0.300
375,000
$0.200
75,000
$0.200
300,000
$0.330
360,000
$0.410
240,000
$0.350
450,000
$0.340
100,000
$0.280
20,676,861
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 under performance rights
At the date of this report there are no unissued ordinary shares of the Company under performance rights. No
ordinary shares of the Company were issued on the exercise of performance rights during the year ended 30
June 2020 or since this date.
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ReadCloud Limited
Directors’ report
30 June 2020
Shares issued on the exercise of options
During the year ended 30 June 2020 150,000 ordinary shares of the Company were issued on the exercise of
options. Since 30 June 2020 until the date of this report 1,223,134 shares of the Company have been issued on
the exercise of options.
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 Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of
the Group or any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the
Group 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 Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking
responsibility on behalf of the Group 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 19 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.
The Directors are of the opinion that the services as disclosed in note 19 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 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 Group, acting as advocate for the Group or jointly sharing economic risks
and rewards.
Officers of the Group who are former partners of PKF Melbourne Audit & Assurance Pty Ltd
There are no officers of the Group who are former partners of PKF Melbourne Audit & Assurance Pty Ltd.
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
PKF Melbourne Audit & Assurance Pty Ltd continues in office in accordance with section 327 of the Corporations
Act 2001.
19
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ReadCloud Limited
Directors’ report
30 June 2020
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
___________________________
Paul Collins
Chairman
27 August 2020
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ReadCloud Limited
Auditor's independence declaration
Auditor’s Independence Declaration to the Directors of ReadCloud Limited
In relation to our audit of the financial report of ReadCloud Limited for the year ended 30 June 2020, I declare
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
PKF
Melbourne, 27 August 2020
Steven Bradby
Partner
21
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000 T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au Liability limited by a scheme approved under Professional Standards Legislation PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms. For personal use only
ReadCloud Limited
Consolidated statement of profit or loss and other comprehensive income
30 June 2020
Revenue
Sales revenue
Other income
Total revenue
Expenses
Advertising and marketing
Depreciation and amortisation expense
Employment expenses
Fair value movement on contingent consideration
Legal & compliance
Professional services expenses
Publisher and bookseller fees expense
Share-based payments
Telephone, internet & data hosting
Travel expenses
Other expenses
Finance costs
Loss before income tax expense/(benefit)
Note
2020
2019
Consolidated
$
$
5
5
6,956,136
500,095
4,316,479
492,089
7,456,231
4,808,568
6
6
6
(115,831)
(702,262)
(2,628,224)
-
(171,215)
(301,014)
(3,891,795)
(130,392)
(80,811)
(136,713)
(315,721)
(9,563)
(112,711)
(416,624)
(1,889,309)
(405,000)
(152,059)
(167,905)
(2,329,507)
(471,365)
(47,019)
(192,917)
(342,087)
(238)
(1,027,310)
(1,718,173)
Income tax expense/(benefit)
7
(45,326)
(87,750)
Loss after income tax expense/(benefit) for the year attributable to the
Owners of ReadCloud Limited
(981,984)
(1,630,423)
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year attributable to the Owners of
ReadCloud Limited
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
(981,984)
(1,630,423)
Cents
Cents
25
25
(1.01)
(1.01)
(1.87)
(1.87)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes. Comparatives have not been restated for the introduction of AASB 16 Leases.
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ReadCloud Limited
Consolidated Statement of financial position
30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Contract liabilities
Contingent consideration
Lease Liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Deferred tax liability
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Note
2020
2019
Consolidated
$
$
3,387,609
597,366
8
55,946
4,040,921
3,067,599
470,165
75,119
3,612,883
111,385
9 4,450,488
290,143
10
4,852,016
59,756
4,296,301
-
4,356,057
8,892,937
7,968,940
11
12
13
10
7
10
389,416
149,263
207,308
-
164,064
910,051
30,731
-
152,823
183,554
508,712
108,024
164,120
1,800,000
-
2,580,856
10,408
45,326
-
55,734
1,093,605
2,636,590
7,799,332
5,332,350
14 11,385,848
407,513
15
(3,994,029)
8,067,274
407,002
(3,141,926)
7,799,332
5,332,350
The above statement of financial position should be read in conjunction with the accompanying notes. Comparatives have
not been restated for the introduction of AASB 16 Leases.
23
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ReadCloud Limited
Consolidated statement of changes in equity
30 June 2020
Consolidated
Issued
capital
$
Share based Retained
payments
Reserve
$
Profits
Restated
$
Non-
controlling
interest
$
Total equity
$
Balance at 1 July 2018
7,257,899
299,005
(1,550,496)
-
6,006,408
Loss after income tax expense/(benefit) for the
year (restated)
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with Owners in their capacity as
Owners:
Issue of shares as consideration for acquisition
(note 14)
Share-based payments (note 26)
Exercise of performance rights
Lapse of performance rights
-
-
-
-
-
(1,630,423)
-
-
-
(1,630,423)
-
-
(1,630,423)
-
(1,630,423)
485,000
-
324,375
-
-
471,365
(324,375)
(38,993)
-
-
-
38,993
-
-
-
485,000
471,365
-
-
Balance at 30 June 2019
8,067,274
407,002
(3,141,926)
-
5,332,350
Consolidated
Issued
capital
$
Share based
payments
reserve
$
Retained
profits
$
Non-
controlling
interest
$
Total equity
$
Balance at 1 July 2019
8,067,274
407,002 (3,141,926)
-
5,332,350
-
-
-
-
-
(981,984)
-
-
-
(981,984)
-
-
(981,984)
-
(981,984)
Loss after income tax expense/(benefit) 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:
Contributions of equity (net of transaction
costs)
Issue of shares as consideration for acquisition
(note 14)
Share-based payments (note 26)
Exercise of performance rights
Lapse of performance rights
1,878,574
-
-
1,440,000
-
-
-
-
130,392
-
(129,881)
-
-
-
129,881
-
-
-
-
-
-
1,878,574
1,440,000
130,392
-
-
7,799,332
Balance at 30 June 2020
11,385,848
407,513 (3,994,029)
The above statement of changes in equity should be read in conjunction with the accompanying notes. Comparatives have
not been restated for the introduction of AASB 16 Leases.
24
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ReadCloud Limited
Consolidated statement of cash flows
30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Research and development tax incentive refund
Interest income
Other Government grant income
Consolidated
Note
2020
$
2019
$
6,898,163
(7,702,751)
393,123
3,799
100,000
4,538,336
(5,363,134)
351,725
37,534
-
Net cash used in operating activities
24
(307,666)
(435,539)
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Payments for property, plant and equipment
Payments for software development
(360,000)
(95,530)
(676,295)
(396,893)
(10,513)
(682,786)
9
Net cash used in investing activities
(1,131,825)
(1,090,192)
Cash flows from financing activities
Repayment of lease liabilities
Interest paid on lease liabilities
Proceeds from issue of shares
Share issue transaction costs
Repayment of borrowings
Net cash from financing activities
14
(109,510)
(9,563)
2,030,000
(151,426)
-
1,759,501
-
-
-
-
-
-
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
320,010
3,067,599
(1,525,731)
4,593,330
Cash and cash equivalents at the end of the financial year
3,387,609
3,067,599
The above statement of cash flows should be read in conjunction with the accompanying notes. Comparatives have not
been restated for the introduction of AASB 16 Leases.
25
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 1. General information
The financial statements cover the consolidated entity (referred to as the “Group”), consisting of ReadCloud Limited
(the “Company” or “parent entity”) and the entities it controlled at the end of, or during the year ended 30 June 2020.
The financial statements are presented in Australian dollars, which is ReadCloud Limited's functional and
presentation currency. ReadCloud Limited is a listed public company limited by shares, incorporated and domiciled
in Australia.
A description of the nature of the Group’s operations and its principal activities are included in the Directors' report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 27 August 2020.
The Directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
Basis of preparation
These general-purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations
Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to
the financial statements, are disclosed in note 3.
New or amended Accounting Standards and Interpretations adopted
The Group 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.
AASB 16 Leases
The Group has adopted this new standard from 1 July 2019. The standard replaces AASB 117 'Leases' and for
lessees eliminates the classifications of operating leases and finance leases. Upon adoption of the standard the
Group, as lessee, is required to recognise its leases in the statement of financial position. The only exceptions are
short-term (less than 12 months) leases and leases of low-value assets. The lease liability is measured as the
present value of the unavoidable future lease payments to be made over the lease term (refer Note 10 Leases).
The Group has elected to adopt the modified retrospective approach (with the application of practical expedients),
which equates the ‘right-of-use’ asset (ROUA) with the value of the lease liability, therefore there is no
requirement to restate either retained earnings or prior period comparatives
The expensing of lease payments evenly over the lease period has been replaced with (i) a depreciation charge
against the leased ROUA; and (ii) an interest expense on the recognised lease liability. Within the statement of
cash flows, lease payments are no longer recognised as operating cash flows, but as financing cash flows, with
the principal and interest components separately identified.
On adoption, the Group recognised lease liabilities in relation to leases which had previously been classified as
‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value
of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The
weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 4.13%.
26
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ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Determination of lease liabilities and ROUA
In calculating the value of each lease liability, future lease payments include known fixed percentage increases
but exclude variable consumer price index (CPI) increases, as estimations of future increases are prohibited by
the standard (CPI lease payment increases are taken into account via a re-measurement of the lease liability as
and when the increase occurs). The net present value of the unavoidable future lease payments are discounted
using the Group’s incremental borrowing rate, as none of the leases have an implicit interest rate.
An ROUA is recognised at the commencement date of a lease. The ROUA 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 an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
The ROUA is depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter.
The impact of the adoption of AASB 16 Leases on the financial performance and position of the Group has been
as follows:
a. Recognition of ROUA and lease liabilities in equal amount of $426,398;
b. Recognition during the year of $136,255 depreciation of the ROUA and $9,563 in interest on leases,
reversing $119,073 in lease rental expenses. The net impact on profit or loss before income tax has been
to increase the loss by $26,745;
c. The year-end balances of the ROUA and lease liabilities were $290,143 and $316,887 respectively; and
d. There has been no net impact on the consolidated statement of cash flows.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 22.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ReadCloud Limited
('Company' or 'parent entity') as at 30 June 2020 and the results of all subsidiaries for the period then ended.
ReadCloud Limited and its subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when the
Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. They are de-consolidated from the date that control ceases.
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 Company.
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The consideration
transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either
fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed
as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual terms, economic
conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at
the acquisition-date.
27
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value.
Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised
in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is
accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-
controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-
existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing
fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer,
the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after
a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the
acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair value.
Where the Company 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 Company 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.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12
months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged
or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-
current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is
held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there
is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All
other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items. Depreciation commences from the
time the asset is available for its intended use.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over
their expected useful lives of 2-4 years.
28
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ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each
reporting date to ensure it is not in excess of the asset’s recoverable amount. 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 not been discounted in determining recoverable amounts.
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 profit or loss.
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.
Note 3. 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. Where relevant,
current assessment incorporated a consideration of uncertainties associated with COVID-19. 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.
Capitalised software development costs
The Group capitalises software development costs associated with the ReadCloud platform in accordance with the
accounting policy described in Note 9. Initial capitalisation of costs is based on management’s judgement that
technological and economic feasibility is confirmed, usually when a product development project has reached a key
commercial milestone enabling the project to proceed. In determining the amounts to be capitalised, management
makes assumptions regarding the expected future cash generation of the project and the expected period of
benefits.
Share-based payments
The grant date fair value of share-based payments is recognised as an expense with a corresponding increase in
equity, over the period that the recipients unconditionally become entitled to the awards. The Group follows the
guidelines of AASB 2 Share-based payment and takes into account all performance conditions in estimating the
probability and expected timing of achieving these performance conditions. Accordingly, the expense recognised
over the vesting period may vary based upon information available and estimates made at each reporting period,
until the expiry of the vesting period.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property,
plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of
technical innovations or some other event. The depreciation and 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.
29
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ReadCloud Limited
Notes to the financial statements
30 June 2020
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may
lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves
fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and
assumptions.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities
for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Note 4. Operating segments
Identification of reportable operating segments
Segment information is based on the information that management uses to make decisions about operating
matters and allows users to review operations through the eyes of management. Operating segments represent
the information reported to the chief operating decision makers (CODM), being the executive management team,
for the purposes of resource allocation and assessment of segment performance.
The Group’s reportable segments under AASB 8 are as follows:
•
•
the provision of eBook solutions to secondary schools across Australia; and
the provision of Vocational Education and Training courses and services.
Consistent with information presented for internal management reporting purposes, segment performance is
measured by underlying EBITDA contribution, where underlying EBITDA (a non-statutory financial measure not
prescribed by Australian Accounting Standards – “AAS”) represents the profit under AAS adjusted for Interest,
Tax, Depreciation and Amortisation and certain other specified items.
The information reported to the CODM is on a monthly basis.
30
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ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 4. Operating segments (continued)
Consolidated – 30 June 2020
eBook solutions
Sales revenue
Other income
Total revenue
Underlying EBITDA
Depreciation and amortisation
Share based payments
Transaction costs incurred on
business acquisition (expensed) and
one-off ASX fees
Net interest revenue / (expense)
Income tax benefit / (expense)
Reported (statutory) net loss after tax
Total segment assets
Total segment liabilities
$
4,690,321
444,320
5,134,641
(319,971)
(581,970)
(116,859)
(27,751)
(2,113)
45,326
(1,003,338)
6,018,988
(802,195)
Vocational
Education and
Training
$
2,265,815
55,775
2,321,590
402,616
(120,292)
(13,533)
-
(3,651)
-
265,140
2,873,949
(291,410)
Unallocated
public company
costs
$
-
-
-
(243,786)
-
-
-
-
-
(243,786)
Total
$
6,956,136
500,095
7,456,231
(161,141)
(702,262)
(130,392)
(27,751)
(5,764)
45,326
(981,984)
8,892,937
(1,093,605)
Consolidated – 30 June 2019
eBook solutions
Sales revenue
Other income
Total revenue
Underlying EBITDA
Depreciation and amortisation
Share based payments
Fair value movement on contingent
consideration
Transaction costs incurred on
business acquisition (expensed)
Net interest revenue
Income tax benefit / (expense)
Reported (statutory) net loss after tax
$
2,976,602
468,911
3,445,513
(761,334)
(386,976)
(447,387)
(405,000)
(40,520)
37,534
87,750
(1,915,933)
Vocational
Education and
Training
$
1,339,878
23,178
1,363,056
Unallocated
public company
costs
$
-
-
-
563,542
(29,648)
(23,978)
-
(224,167)
-
-
-
Total
$
4,316,479
492,089
4,808,568
(421,960)
(416,624)
(471,365)
(405,000)
-
-
(40,520)
(238)
-
509,678
-
-
(224,167)
37,296
87,750
(1,630,423)
Major customers
During the year ended 30 June 2020 approximately 20% (2019: 28%) of the Group’s external revenue was derived
from sales to one reseller. The underlying customers on whose behalf this reseller transacts comprise
approximately 60 schools. Approximately 6% (2019: 6%) of the Group's external revenue was derived from sales
to one direct school customer.
31
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 5. Revenue
Sales revenue
eBook Sales
Licence Fee
Auspicing fees
Sales & fees - other
Other income
Government grants - R&D
Interest revenue calculated using the effective interest method
Other revenue
Revenue
The Group’s total sales revenue is recognised according to the following timing:
Goods transferred at a point in time
Services transferred over time
Revenue
Consolidated
2020
$
2019
$
4,289,991
403,780
2,217,973
44,392
6,956,136
2,766,660
284,597
1,118,245
146,977
4,316,479
390,019
3,799
106,277
500,095
417,915
37,534
36,640
492,089
7,456,231
4,808,568
Consolidated
2020
$
2019
$
4,334,383
2,621,753
2,913,637
1,402,842
6,956,136
4,316,479
Accounting policy for revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is
recognised with reference to the completion by the Group of specific performance obligations of contracts with
customers, as described below.
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled
in exchange for transferring goods or services to a customer. For each contract with a customer, the Group:
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 to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are
recognised as a refund liability.
Revenue is recognised to depict the transfer of eBooks and licencing services to customers in an amount that
reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. All
contracts (either written, verbal or implied) are identified, together with the separate performance obligations within
32
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 5. Revenue (continued)
the contract and the transaction price is determined. Adjustments are made for the time value of money excluding
credit risk and the transaction price is allocated to the separate performance obligations on a basis of relative stand-
alone selling price of each distinct service/good. The estimation approach is taken if no distinct observable prices
exists and revenue is recognised when each performance obligation is satisfied.
Credit risk is presented separately as an expense, rather than adjusted to revenue. For goods, the performance
obligation is satisfied when the customer takes control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For
performance obligations satisfied over time, the Group selects an appropriate measure of progress to determine
how much revenue is recognised as the performance obligation is satisfied. Contracts with customers are presented
in the Group's statement of financial position as a contract liability, a contract asset, or a receivable, depending on
the relationship between the entity's performance and the customer's payment.
Interest
Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate
inherent in the instrument.
eBook sales revenue
Revenue from eBook sales is recognised at the time of the eBook purchase.
Software licence fee revenue
The Group receives revenue for acquisition and use of software applications associated with eBook sales. The
software revenue is recognised at the time of sale and the maintenance component is recognised as revenue over
the period of the licence.
Auspicing fees
The Group receives revenue for the provision of auspicing services to secondary schools that enables these schools
to offer their students nationally accredited Vocational Education and Training courses under the auspices of
Australian Institute of Education and Training’s Registered Training Organisation (“RTO”) licence. The fees for
those services that relate to the pre-approval of a school to operate under the RTO licence and the provision of
course materials are recognised at the time of sale, whilst fees for those components that relate to the maintenance
of software services, ongoing compliance monitoring and the issuing of certificates to students are recognised at
the end of the relevant contract.
Government grants
Grants received on the condition that specified services are delivered, or conditions are fulfilled, are initially
recognised as a liability, and revenue is recognised as services are performed or conditions fulfilled. The Research
and Development Tax Incentive is recognised as a government grant as described in Note 7, Income tax.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
The timing of revenue recognition for the Group’s key revenue streams as they relate to specific performance
obligations are outlined in the table below:
33
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 5. Revenue (continued)
Revenue stream
Software license fees
Performance obligation 1 - Accessibility and usage of
ReadCloud’s software
Performance obligation 2 - Maintenance/support
eBooks sales
Auspicing fees
Performance obligation 1 – the pre-approval of a school
to offer a nationally-recognised VET qualification under
the auspices of AIET’s RTO licence and set-up of a
school, classes and students to enable VET course
delivery
Performance obligation 2 - ongoing service /
maintenance and compliance monitoring
Performance obligation 3 – issue of certificates to
students
Revenue recognition pattern
Point in time (upon a customer purchasing software)
Over time, which usually relates to a school year
Point in time (upon a customer purchasing an eBook)
Point in time (upon customer entering into a contract)
Over time, which usually relates to a school year
Over time, which usually relates to the school year
34
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Leasehold improvements
Right of use assets
Amortisation
Software development
Registered Training Organisation licence
Intellectual property in Vocational Education & Training course materials
Total depreciation and amortisation
Defined contribution superannuation expense
Share-based payments expense
Consolidated
2020
$
2019
$
33,412
10,487
136,255
180,154
486,916
7,692
27,500
522,108
19,592
1,742
-
21,334
371,829
5,128
18,333
395,290
702,262
416,624
275,709
208,793
130,392
471,365
Employee benefits expense excluding superannuation
2,352,515 1,680,516
Note 7. Income tax expense/(benefit)
Income tax expense / (benefit)
Deferred tax liability
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory
rate
Loss before income tax expense/(benefit)
Tax at the statutory tax rate of 27.5%
Non-assessable R&D tax incentive
Non-deductible R&D expenditure subject to incentive
Share based payments
Other net non-deductible expenditure
Recognition of and movement in temporary differences
Unrecognised income tax losses carried forward
Income tax expense / (benefit)
Consolidated
2020
$
2019
$
(45,326)
-
(87,750)
45,326
(1,027,310)
(1,718,173)
(282,510)
(472,498)
(107,255)
60,582
35,858
135,918
(12,594)
124,675
(114,927)
60,760
129,625
122,934
186,356
-
(45,326)
(87,750)
35
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 7. Income tax expense/(benefit) (continued)
Deferred tax liability comprises temporary differences attributable to:
Provisions, accruals and other amounts not yet deductible
Capitalised software costs deducted
Unused income tax losses
Total deferred tax liability
Deferred tax assets not recognised
Consolidated
2020
$
2019
$
(198,606)
602,309
(403,703)
(154,757)
550,229
(350,146)
-
45,326
124,675
-
The above deferred tax asset (potential tax benefit) has not been recognised in the statement of financial position
as the recovery of this benefit is uncertain.
Accounting policy for income tax
The income tax expense/(benefit) for the period is the tax payable on the current period's taxable income based
on the current income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences between the tax base of assets and liabilities and their carrying amounts in the financial statements,
and to unused tax losses.
i.
ii.
iii.
iv.
Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts
of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates
expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are
enacted or substantively enacted. Exceptions are made for certain temporary differences arising on initial
recognition of an asset or a liability if they arose in a transaction, other than a business combination, that
at the time of the transaction did not affect either accounting profit or taxable profit.
Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Current and deferred tax balances relating to amounts recognised directly in other comprehensive income
and equity are also recognised directly in other comprehensive income and equity, respectively.
The Research and Development Tax Offset is recognised as a government grant in profit before tax to
match the expense/(benefit) with the costs for which it is intended to compensate. It is recognised in the
period when there is a reasonable expectation that the Group will be able to realise the expense/(benefit).
v.
The carrying value of recognised deferred tax assets is reviewed at each reporting date.
Note 8. Current assets - trade and other receivables
Trade receivables
Deposits
R&D tax incentive receivable
Refer to note 17 for further information on financial instruments.
36
Consolidated
2020
$
2019
$
177,097
69,659
30,250
390,019
420,269
7,383
393,123
400,506
597,366
470,165
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 8. Current assets - trade and other receivables (continued)
Allowance for expected credit losses
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.
The Group has no receivables which are considered impaired. The ageing of receivables are as follows:
0 to 3 months
3 to 6 months
Consolidated
2020
$
2019
$
131,230
45,867
67,617
2,042
177,097
69,659
Accounting policy for trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any provision for impairment.
The recoverability of trade receivables is reviewed on an ongoing basis. Amounts which are determined not to be
recoverable are written off by reducing the carrying amount to its recoverable amount, and the difference is charged
to the statement of profit or loss in that period.
A provision for impairment of trade receivables is recognised where there is objective evidence that the Group is
unable to collect part or all of the amounts due. Factors such as previous trading relationship, financial position,
and probability of recoverability are considered when determining the extent the debtor is impaired.
Accounting policy for goods and services tax
Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred
is not recoverable from the ATO, in which case the GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item.
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 ATO is included with other receivables or payables in the statement of
financial position.
37
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 9. Non-current assets - intangibles
Goodwill - at cost
Software - at cost
Less: Accumulated amortisation
Registered Training Organisation Licence
Less: Accumulated amortisation
Intellectual property in Vocational Education & Training course materials
Less: Accumulated amortisation
Consolidated
2020
$
2019
$
2,213,929
2,213,929
3,559,782
(1,369,569)
2,190,213
2,883,487
(882,653)
2,000,834
50,000
(12,821)
37,179
55,000
(45,833)
9,167
50,000
(5,128)
44,872
55,000
(18,333)
36,667
4,450,488
4,296,301
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are
set out below:
Consolidated
Software at
cost
$
Goodwill
$
Registered
Training
Organisation
licence
$
Intellectual
property
in course
materials
$
Total
$
Balance at 1 July 2018
Additions
Additions through business combinations
Amortisation expense
1,689,877
682,786
-
(371,829)
-
-
2,213,929
-
Balance at 30 June 2019
Additions
Amortisation expense
2,000,834
676,295
(486,916)
2,213,929
-
-
-
-
50,000
(5,128)
44,872
-
(7,692)
-
-
55,000
(18,333)
1,689,877
682,786
2,318,929
(395,290)
36,667
-
(27,500)
4,296,301
676,295
(522,108)
Balance at 30 June 2020
2,190,213
2,213,929
37,179
9,167
4,450,488
Accounting policy for Goodwill
Goodwill arises on the acquisition of a business. It is recorded at the amount by which the purchase price for a
business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets,
liabilities and contingent liabilities acquired at date of acquisition.
Goodwill is not amortised. Instead, it is tested annually for impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to benefit from the business combination
in which the goodwill arose.
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair
value at the date of the acquisition.
38
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 9. Non-current assets – intangibles (continued)
Accounting policy for internally developed software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of
their expected benefit, being their finite life of 5 years. Internally generated intangibles, excluding internally
developed software, are not capitalised and the related expenditure is reflected in the statement of profit or loss in
the period in which the expenditure is incurred.
An intangible asset arising from development expenditure on an internal project is recognised only when the Group
can demonstrate:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
its intention to complete and its ability to use or sell the asset;
how the asset will generate future economic benefits;
the availability of resources to complete the development; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be
carried at cost less any accumulated amortisation and accumulated impairment losses. Expenditure so capitalised
is amortised when the asset is available for use over the period of expected benefit from the related project. The
useful life of the capitalised development costs is estimated to be 5 years.
Impairment of non-financial assets
Non-financial assets other than goodwill are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The Group assesses impairment of non-financial assets at each reporting date by evaluating conditions specific to
the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable
amount of the asset is determined.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to
the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
Goodwill has been allocated to the Vocational Education and Training segment cash-generating unit (CGU). The
recoverable amount of the CGU is determined based on a value-in-use model. The model uses a discount rate of
11% (FY19: 11%), based on the weighted average cost of capital adjusted to reflect an estimate of specific risks
assumed in the cash flow projections. Those projections are based on the financial budget for the 12 months
immediately following the reporting date, cash flows beyond 12 months extrapolated through a 4-year outlook
utilising annual growth rates based on current and forecast trading conditions and the growth objectives of business
plans, and a terminal value growth rate of 2.5% (FY19: 2.5%).
The Board has reviewed and is comfortable with the significant assumptions determined by Management and
utilised in the value-in-use calculations. Upon applying the test to purchased goodwill, it is concluded that no
impairment has occurred. Considering the early stage of the Group’s business and operating cash outflows during
the year, Management applied the value-in-use model to assess the recoverable amount of all intangibles on a
Group-wide basis, again concluding that the carrying value of goodwill and other intangibles does not exceed their
value-in-use, and no impairment charge is required.
Sensitivity analysis on the key assumptions employed in the value-in-use calculations has been performed by
Management. The sensitivities applied were decreasing sales and associated cost of goods sold by 20%
throughout the model period (whilst holding operating costs stable), increasing the weighted average cost of
capital by 9 percentage points (to 20%) and reducing the terminal value growth to nil. This has concluded that any
reasonable possible change in valuation parameters would not cause the carrying amount of the CGU to exceed
its recoverable amount.
39
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 10. Leases
A. Expenses
Expenses from transactions not recognised as leases:
Rental expense relating to leases of low-value assets
21,932
Consolidated
30 June 2020
$
B. Cash flows
Total cash outflow for leases:
Brighton office lease
Brunswick office lease
Photocopying equipment
C.
Right-of-use assets
Consolidated
30 June 2020
$
45,833
31,263
41,977
119,073
Property
$
Photocopying
Equipment
$
Total
$
Right-of-use assets
Less: Accumulated depreciation
355,405
(95,688)
70,993
(40,567)
426,398
(136,255)
Net book amount at 30 June 2020
259,717
30,426
290,143
Reconciliation
Opening balance at 1 July 2019 (upon adoption of
AASB16 Leases)
Additions (new leases)
Depreciation charge
508,712
615,123
60,151
295,254
(95,688)
70,993
-
(40,567)
131,144
295,254
(136,255)
Balance at 30 June 2020
259,717
30,426
290,143
40
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 10. Leases (continued)
D.
Lease liabilities
Current
Non-current
Total at 30 June 2020
Refer to note 17 for further information on financial instruments.
Reconciliation of opening balance:
Non-cancellable lease commitments at 30 June 2019
Reduction to reflect commitment disclosed for short term leases at 30 June 2019
Reduction from discounting future, undiscounted lease payments to their net present
value at the Group’s incremental borrowing rate
Lease liability as at 1 July 2019
Additional information
Accounting policies relative to leases
Consolidated
30 June 2020
$
164,064
152,823
316,887
142,420
(6,402)
(4,874)
131,144
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, 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 depreciated 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 depreciation is over its estimated useful life. Right-of use assets are subject to
impairment or adjusted for any remeasurement of lease liabilities.
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.
For the purpose of calculating unavoidable future lease payments, only the current term of each property lease has
been considered because all property locations reflect office locations with no installed critical infrastructure which
are therefore viewed as readily replaceable. In addition, the Group does not expect to continue the lease
arrangement for equipment past the maturity of the current lease.
41
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 10. Leases (continued)
The Group has adopted the practical expedient available within AASB 16 to not recognise low value assets within
the above lease calculations. These assets relate to telephony equipment and are expensed when costs are
incurred.
Weighted average lease term
The average unavoidable property lease term, weighted by the outstanding lease liability as 30 June 2020, is 2.23
years.
The Group (via the acquisition of Australian Institute of Education and Training) has leased equipment with 0.72
years remaining on the lease term as at 30 June 2020. There is no residual payment at the end of the lease term.
Note 11. Current liabilities - trade and other payables
Trade payables
Accrued expenses
GST payable / (receivable)
Other payables
Consolidated
2020
$
2019
$
240,847
37,777
(40,378)
151,170
108,401
31,516
21,445
347,350
389,416
508,712
Refer to note 17 for further information on financial instruments.
Accounting policy for trade and other payables
Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted.
They represent liabilities for goods and services provided to the Group prior to the end of the reporting period that
are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these
goods and services.
Note 12. Current liabilities - employee benefits
Annual leave
Accounting policy for employee benefits
Consolidated
2020
$
2019
$
149,263
108,024
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.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
42
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 13. Current liabilities – Contract liabilities
Unearned revenue - software
Unearned revenue - distribution agreement
Unearned revenue – auspicing fees
Unearned revenue - distribution agreement
Consolidated
2020
$
2019
$
23,306
100,000
84,002
18,270
100,000
45,850
207,308
164,120
Under a distribution agreement with an authorised reseller the Group receives minimum guarantee funds from the
reseller in advance of it distributing the Group’s products to end users in the following calendar year. The minimum
guarantee funds are deferred as unearned and accounted as revenue in the next calendar year.
Unearned revenue – Software licence fees and Auspicing fees
Refer to note 5 for further information on the timing of revenue recognition in relation to these revenue streams.
43
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 14. Equity - contributed equity
Consolidated
2020
Shares
2019
Shares
2020
$
2019
$
Ordinary shares - fully paid
98,055,556 88,750,000 11,385,848
8,067,274
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$
1 July 2018
83,750,000
7,257,899
Shares issued upon vesting of performance
rights
Shares issued upon vesting of performance
rights
Shares issued as part consideration for
acquisition of AIET
Shares issued as part consideration for
acquisition of AIET
8 August 2018
1,875,000
$0.00
183,750
21 September 2018
1,875,000
$0.00
140,625
23 November 2018
250,000
$0.34
85,000
13 May 2019
1,000,000
$0.40
400,000
Balance
30 June 2019
88,750,000
8,067,274
Shares issued pursuant to placement
Share issue transaction costs
Shares issued as final consideration for
acquisition of AIET
Shares issued pursuant to exercise of options
Share issue transaction costs
6 August 2019
5,555,556
$0.36 2,000,000
(149,504)
23 September 2019
5 June 2020
3,600,000
150,000
$0.40
$0.20
1,440,000
30,000
(1,922)
Balance
30 June 2020
98,055,556
11,385,848
Share buy-back
There is no current on-market share buy-back.
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.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is
calculated as total borrowings less cash and cash equivalents.
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.
Accounting policy for 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.
44
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 15. Equity – reserves
Share-based payments reserve
Consolidated
2020
$
2019
$
407,513
407,002
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Share based
payments reserve
$
Total
$
Balance at 1 July 2018
Share based payments
Conversion of employee performance rights
Lapse of performance rights
299,005
471,365
(324,375)
(38,993)
299,005
471,365
(324,375)
(38,993)
407,002
130,392
-
(129,881)
407,002
130,392
-
(129,881)
407,513
407,513
Balance at 30 June 2019
Share based payments expense
Conversion of employee performance rights
Lapse of performance rights
Balance at 30 June 2020
Note 16. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 17. Financial instruments
Financial risk management objectives
The Group’s activities may expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group.
The Group's principal financial instruments comprise cash and cash equivalents. The main purpose of these
financial instruments is to finance the Group's operations. The Group has various other financial assets and
liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been
throughout the entire period, the Group's policy that no trading in financial instruments shall be undertaken.
45
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 17. Financial instruments (continued)
There are no major risks arising from the entity’s financial instruments. Minor risks are summarised below. The
Board reviews and agrees policies for managing each of these risks.
A summary of the Group's financial assets and liabilities is as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Lease obligations
Cash component of contingent consideration for acquisition
Lease Liabilities
Accounting policy for financial instruments
Consolidated
2020
$
2019
$
3,387,609
567,116
3,954,725
3,067,599
462,782
3,530,381
389,416
-
-
306,887
696,303
508,713
142,420
360,000
1,011,133
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 and other receivables are initially recognised at their face value, less any allowance for expected credit
losses. Trade receivables are generally due for settlement within 30 days.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group which at period-end are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition, and accordingly they are measured
at their face value.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk.
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is not exposed to any significant interest rate risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has a strict code of credit, including, where required, obtaining agency credit information,
confirming references and setting appropriate credit limits. The maximum exposure to credit risk at the reporting
date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as
disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any
collateral.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables
through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
46
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 17. Financial instruments (continued)
representative across all customers of the Group based on recent sales experience, historical collection rates and
forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this
include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make
contractual payments for a period greater than 1 year.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and
liabilities.
Remaining contractual maturities
The following tables detail the Group'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.
Weighted
average
interest
rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
389,416
-
-
3.84%
172,778
562,194
110,000
110,000
36,667
36,667
Weighted
average
interest rate
%
1 year or
less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5
years
$
-
-
-
389,416
319,445
708,861
Remaining
contractual
maturities
$
-
-
508,712
80,173
360,000
948,885
-
62,247
-
62,247
-
-
-
-
-
-
-
-
508,712
142,420
360,000
1,011,132
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade and other payables
Interest bearing
Lease liabilities
Total non-derivatives
Consolidated - 2019
Non-derivatives
Non-interest bearing
Trade and other payables
Lease obligations
Contingent consideration for
acquisition
Total non-derivatives
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
47
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 18. Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 19. Remuneration of auditors
Consolidated
2020
$
2019
$
897,624
79,857
9,156
61,710
801,081
72,371
3,237
306,497
1,048,347
1,183,186
During the financial year the following fees were paid or payable for services provided by PKF Melbourne Audit &
Assurance Pty Ltd, the auditor of the Group:
Consolidated
2020
$
2019
$
60,000
52,700
-
2,900
60,000
55,600
Audit services - PKF Melbourne Audit & Assurance Pty Ltd
Audit or review of the financial statements
Non-audit services - PKF Melbourne Corporate Pty Ltd
Payroll tax and GST advice
Note 20. Contingent liabilities
The Group has no contingent liabilities as at 30 June 2020 (2019: $Nil).
Note 21. Related party transactions
Parent entity
ReadCloud Limited is the parent entity.
Key management personnel
Disclosures relating to key management personnel are set out in note 18 and in 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 related parties
There were no loans to or from related parties at the current and previous reporting date.
48
For personal use only
ReadCloud Limited
Notes to the financial statements
30 June 2019
Note 22. 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
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
2020
$
Parent
2019
$
(1,247,124)
(1,759,079)
(1,247,124)
(1,759,079)
Parent
2020
$
2019
$
3,513,920
3,299,805
8,703,988
8,025,049
(1,313,556)
(2,860,768)
(1,488,407)
(2,913,776)
7,215,581
5,111,273
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2020.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, 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.
Interests in subsidiaries
The parent entity, ReadCloud Limited, consolidates the following subsidiaries:
• Australian Institute of Education and Training, 100% controlled
49
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 23. Events after the reporting period
Since 30 June 2020:
• 1,223,134 ASX-listed options exercisable at $0.30 per share have been exercised, raising proceeds of
$366,940; and
• The Company has granted 100,000 options exercisable at $0.28 each and expiring on 2 July 2023 to
employees pursuant to the Group’s Employee Share and Option Scheme.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly
affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Note 24. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense/(benefit) for the year
(981,984)
(1,630,423)
Consolidated
2020
$
2019
$
Adjustments for:
Depreciation and amortisation
Share-based payments
Interest paid on lease liabilities
Fair value movement on contingent consideration
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(Increase) in prepayments
Increase/(decrease) in trade and other payables
Increase in employee benefits
Increase in unearned revenue
(Decrease) in deferred tax liability
Net cash used in operating activities
Note 25. Earnings per share
702,262
130,392
9,563
-
416,624
471,365
0
405,000
(167,385)
19,174
(79,112)
61,561
43,188
(45,326)
129,380
(41,248)
(218,135)
63,134
56,514
(87,750)
(307,666)
(435,539)
Consolidated
2020
$
2019
$
Loss after income tax attributable to the Owners of ReadCloud Limited
(981,984)
(1,630,423)
Weighted average number of ordinary shares used in calculating basic earnings
per share
96,808,037
87,168,493
Weighted average number of ordinary shares used in calculating diluted earnings
per share
96,808,037
87,168,493
Number
Number
Basic earnings / (loss) per share
Diluted earnings / (loss) per share
Cents
Cents
(1.01)
(1.01)
(1.87)
(1.87)
50
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 25. Earnings per share (continued)
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the Owners of ReadCloud 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.
The options and performance rights that have been granted by the Company, as set out below, have not been
included in the weighted average number of ordinary shares for the purpose of calculating diluted EPS as they do
not meet the requirements for inclusion in AASB 133 “Earnings per Share”.
Description
Options issued under the Group’s employee share plan (refer Note 26)
Options exercisable at $0.30 each, expiring 30 November 2020 issued in connection
with the Company’s initial public offering
Number on issue
1,800,000
19,999,995
Note 26. Share-based payments
An employee share plan has been established by the Group, whereby the Group may, at the discretion of the
Nomination and Remuneration Committee, grant options over ordinary shares in the Company or performance
rights over ordinary shares in the Company to certain key management personnel and employees of the Group.
The options and performance rights are issued for nil consideration and are granted in accordance with
performance guidelines established by the Nomination and Remuneration Committee.
Set out below are summaries of options granted under the plan:
2020
Grant date
Expiry date
price
the year
Granted
Balance at
Exercise the start of
Expired/ Balance at
the end of
the year
forfeited/
Other
Exercised
13/03/2018
13/03/2018
28/05/2018
28/05/2018
21/09/2018
9/01/2019
12/07/2019
07/02/2021
07/02/2022
27/03/2021
7/05/2022
17/07/2022
14/12/2021
12/07/2022
$0.200
$0.200
$0.330
$0.330
$0.410
$0.350
$0.340
375,000
225,000
120,000
300,000
360,000
360,000
-
1,740,000
-
-
-
-
-
-
450,000
450,000
-
(150,000)
-
-
-
-
-
(150,000)
-
-
(120,000)
-
-
(120,000)
-
375,000
75,000
-
300,000
360,000
240,000
450,000
(240,000) 1,800,000
Weighted average exercise price
$0.310
$0.340
$0.200
$0.340
$0.320
51
For personal use only
ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 26. Share-based payments (continued)
2019
Grant date
Expiry date
price
the year
Granted
Balance at
Exercise the start of
Expired/ Balance at
the end of
the year
forfeited/
Other
Exercised
13/03/2018
13/03/2018
28/05/2018
28/05/2018
28/05/2018
21/09/2018
09/01/2019
07/02/2021
07/02/2022
21/03/2021
27/03/2021
07/05/2022
17/07/2022
14/12/2021
$0.200
$0.200
$0.330
$0.330
$0.330
$0.410
$0.350
375,000
225,000
240,000
120,000
300,000
-
-
1,260,000
-
-
-
-
-
360,000
360,000
720,000
-
-
-
-
-
-
-
-
-
-
(240,000)
-
-
-
-
(240,000)
375,000
225,000
-
120,000
300,000
360,000
360,000
1,740,000
Weighted average exercise price
$0.270
$0.380
$0.000
$0.330
$0.310
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.67
years (2019: 2.44 years).
Set out below are summaries of performance rights granted under the plan:
2020
Grant date
Expiry date
price
the year
Granted
Balance at
Exercise the start of
Expired/ Balance at
the end of
the year
forfeited/
other
Exercised
09/11/2017
09/11/2017
13/09/2019
31/12/2019
$0.000 3,750,000
$0.000 1,875,000
5,625,000
-
-
-
- (3,750,000)
- (1,875,000)
- (5,625,000)
-
-
-
2019
Grant date
Expiry date
price
the year
Granted
Balance at
Exercise the start of
Expired/ Balance at
the end of
the year
forfeited/
other
Exercised
09/11/2017
09/11/2017
09/11/2017
14/09/2018
13/09/2019
31/12/2019
$0.000 3,750,000
$0.000 3,750,000
$0.000 3,750,000
11,250,000
- (1,875,000) (1,875,000)
-
-
-
- (1,875,000)
-
(3,750,000) (1,875,000)
-
-
3,750,000
1,875,000
5,625,000
At the end of the financial year there were no unissued ordinary shares of the Company under performance rights.
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
yield
Risk-free
interest rate at grant date
Fair value
12/07/2019
12/07/2022
$0.330
$0.340
80.54%
-
1.00%
$0.141
Accounting policy for share-based payments
Equity-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.
52
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ReadCloud Limited
Notes to the consolidated financial statements
30 June 2020
Note 26. Share-based payments (continued)
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.
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.
53
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ReadCloud Limited
Directors’ declaration
30 June 2020
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 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group’s financial position as at
30 June 2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Group 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
__________________________
Paul Collins
Chairman
27 August 2020
54
For personal use only
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF READCLOUD LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of ReadCloud Limited (the Company), which comprises the
consolidated statement of financial position as at 30 June 2020, and the consolidated statements of profit or loss and
other comprehensive income, changes in equity, and cash flows for the year then ended, notes comprising a summary
of significant accounting policies and other explanatory information, and the Directors’ Declaration of the Company
and the Group comprising the Company and the entities it controlled at the year’s end or from time to time during the
financial year.
In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its financial performance for
the year ended on that date; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibility section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act
2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report of the current year. These matters were addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each
matter below, our description of how our audit addressed the matter is provided in that context.
Key audit matter – Recoverability of goodwill and other
intangible assets
As disclosed in note 9 of the financial report, the carrying
amount of goodwill and related acquired intangibles
allocated to the Vocational Education and Training Cash
Generating Unit (VET-CGU) is $2,260,275 (2019:
$2,295,468). Other intangibles comprising internally
developed software is carried at $2,190,213 (2019:
$2,000,834). Relevant accounting policies are also
disclosed in Note 9.
The carrying value of goodwill and related acquired
intangible assets is considered with reference to the
Group’s analysis of future cash flows using a value-in-use
(VIU) model, applied to the VET-CGU.
The Group’s early stage of maturity anticipates the
continuing investment of cash resources to enable cash
positive operating activities. Net operating cash outflows
during the year are an indicator of impairment of
internally developed software, causing the Group to
extend its VIU model to consider this asset, which is
utilised Group-wide.
How our audit addressed this matter
Our procedures included, but were not limited to, assessing
and challenging:
•
•
•
•
•
•
the reasonableness of the financial year 2021 budget
approved by the Directors, comparing to current actual
results, and considering trends, strategies and outlooks;
the testing of inputs used in the impairment model,
including the approved budget;
the determination of the discount rate applied in the
impairment model, comparing to available industry
data;
the short to medium term growth rates applied in the
forecast cash flow, considering historical results
including the growth achieved from services to new
client schools and their student population, and
available industry data;
the arithmetic accuracy of the impairment model;
the appropriateness of CGU determination;
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184
Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288
Liability limited by a scheme approved under Professional Standards Legislation
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any
responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
For personal use only
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF READCLOUD LIMITED
Key audit matter – Recoverability of goodwill and other
intangible assets (continued)
How our audit addressed this matter
The Group’s VIU models are internally developed, using a
range of internal and external data, and forward-looking
assumptions and judgements that may not materialise as
expected.
• Management’s sensitivity analysis around the key
drivers of the cash flow projections, to consider the
likelihood of such movements occurring sufficient to
give rise to impairment; and
•
the appropriateness of the disclosures including those
relating to sensitivities in assumptions used in note 9.
The key assumptions in the VIU model include:
•
•
•
preparation of forecast cash flows, incorporating
forecast growth rates during the forecast period;
determination of a terminal growth factor; and
determination of a discount rate.
Our assessment of Management’s evaluation of the
recoverable amount of intangibles in accordance with the
requirements of AASB 136 Impairment of Assets is a Key
Audit Matter.
Key audit matter – Capitalisation of software development
costs as intangible assets
How our audit addressed this matter
As disclosed in note 9 of the financial report, the carrying
amount of the Group’s internally developed software is
$2,190,213 (2019: $2,000,834). The accounting policy in
respect of this asset is also outlined in Note 9.
Judgement is required in determining development
expenditures that should be capitalised. Such judgements
include consideration of matters such as generation of
future economic benefits and distinction between
development of new software and maintenance or
upgrade of existing software. Capitalised development
costs are then amortised over the estimated useful life of
the asset, presently judged to be five years.
Capitalised software is considered a Key Audit Matter due
to the judgements applied in the amount of expenditure
capitalised and the specific criteria that have to be met for
capitalisation, in accordance with AASB 138 Intangible
Assets.
Our procedures included, but were not limited to, the
following:
•
•
•
•
•
•
testing, on a sample basis, of development expenditure
incurred during the year for compliance with AASB 138
and the Group’s accounting policy;
assessing evidence of Management’s conclusion of the
economic feasibility of the products relying on the
application of the software, including board approved
budgets, historical sales levels and marketing and
business development plans;
assessing the reasonableness of estimated useful life of
five years and the calculation of amortisation;
assessing whether there are any indicators of
impairment, such as evidence of adverse market or
internal conditions, and product or revenue
underperformance;
assessing and challenging, with reference to
Management’s recoverability analysis, that the
recoverable amount of the asset from its continuing use
supports its carrying amount; and
the appropriateness of related disclosures in Note 9.
Other Information
Other Information is financial and non-financial information in the annual report of the Group which is provided in addition to
the financial report and our Auditor’s Report thereon. The Directors are responsible for the Other Information in the annual
report.
Our opinion on the financial report does not cover the Other Information and, accordingly, we do not express any form of
assurance conclusion thereon, with the exception of our opinion on the Remuneration Report.
In connection with our audit of the financial report, our responsibility is to read the Other Information and, in doing so,
consider whether the Other Information is materially inconsistent with the financial report or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the Other Information we
obtained prior to the date of the Auditor’s Report, we are required to report that fact. We have nothing to report in this
regard.
56
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF READCLOUD LIMITED
Directors’ responsibility for the Financial Report
The Directors of the Company are responsible for:
•
•
preparing the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001;
implementing necessary internal control to enable the preparation of the financial report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error; and
assessing the Group’s and the Company’s ability to continue as a going concern and whether the use of the going concern
basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to liquidate Group and the Company or to cease
operations or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
•
Our objective is to:
•
•
obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether
due to fraud or error; and
issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit.
We identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Directors.
We conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of
the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Directors, we determine those that were of most significance in the audit of the
financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
57
For personal use only
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF READCLOUD LIMITED
Report on the Remuneration Report
Opinion
We have audited the Remuneration Report included in the Directors’ Report for the year ended 30 June 2020. In our opinion,
the Remuneration Report of ReadCloud Limited for the year then ended complies with Section 300A of the Corporations Act
2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
PKF
Melbourne, 27 August 2020
Steven Bradby
Partner
58
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ReadCloud Limited
Shareholder information
30 June 2020
The shareholder information set out below was applicable as at 13 August 2020.
Distribution of equity securities
Number
Number
of holders
of unquoted
employee
options
of holders
of other
unquoted
options
Number
Number
of holders
of quoted
options
of holders
of voluntarily
escrowed
shares
Number
of holders
of ordinary
shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
-
-
-
-
9
9
-
-
-
-
-
2
2
-
0
32
21
108
28
189
-
-
-
-
-
1
1
-
29
226
102
261
69
687
41
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
% of total
quoted shares
issued
Number held
HSBC Custody Nominees (Australia) Limited
Amity Agency Pty Ltd
Mr Lars Peder Lindstrom
Brindle Holdings Pty Ltd
UBS Nominees Pty Ltd
Mr Nicholas Mardling*
Mr Jonathan Brett Isaacs
National Nominees Limited
Hunmar Holdings Pty Ltd
Ms Kimberley Juanita Therese Marshall
Sandhurst Trustees Ltd
Mr Darren Hunter
J P Morgan Nominees Australia Pty Limited
Ms Natanya Pesha Fisher
Mr Joshua Fisher
Mrs Natanya Pesha Fisher & Mr Joshua Luke Fisher
Mr Guy Samuel Mendelson
Mr Raymond Jowett & Ms Claudia Gardiner
Ms Nicole Sharp
Mrs Katrina Claire Andrew & Mr Christian Thomas Andrew
10,155,239
9,358,243
8,454,128
5,260,000
4,933,556
4,850,000
4,231,667
4,157,862
3,817,786
3,510,920
3,194,444
2,750,000
2,136,742
2,026,955
1,500,000
1,486,655
1,435,318
1,034,702
968,375
811,843
10.29%
9.49%
8.57%
5.33%
5.00%
4.92%
4.29%
4.21%
3.87%
3.56%
3.24%
2.79%
2.17%
2.05%
1.52%
1.51%
1.45%
1.05%
0.98%
0.82%
76,074,435
77.11%
* These quoted ordinary shares are subject to voluntary escrow with escrow expiry dates shown in the table
below:
59
For personal use only
ReadCloud Limited
Shareholder information
30 June 2020
Escrow expiry
12 Month voluntary escrow until 13 September 2020
24 Month voluntary escrow until 23 November 2020
24 Month voluntary escrow until 13 May 2021
24 Month voluntary escrow until 13 September 2021
Total
Number
1,800,000
125,000
500,000
1,800,000
4,225,000
Options over ordinary
shares
% of total
options
issued
Number held
HSBC Custody Nominees (Australia) Limited
UBS Nominees Pty Ltd
Sandhurst Trustees Ltd
Australian Executor Trustees Ltd
Mr Daniel Alan Brady
Custodial Services Limited
Biggins Super Pty Ltd
Atlantis MG Pty Ltd
Mr Kenneth Biddick & Mrs Catherine Biddick
Mila Investment Co Pty Ltd
Sandhurst Trustees Ltd
Retzos Executive Pty Ltd
Mrs Sajini Menaka Perera
Mackay Group Pty Ltd
Sam Goulopoulos Pty Ltd
Mr Timothy Grantham Simpson Hosking
Dr Ida Constable
Mr Shehan Cecil Goonesekera
GT Capital Pty Ltd
Hoppscotch Pty Ltd
2,500,000
2,500,000
1,000,000
666,666
564,525
550,000
479,000
441,666
375,000
360,000
326,250
250,000
219,736
209,916
208,333
200,217
195,000
181,909
175,000
150,000
15.56
15.56
6.22
4.15
3.51
3.42
2.98
2.75
2.33
2.24
2.03
1.56
1.37
1.31
1.30
1.25
1.21
1.13
1.09
0.93
Unquoted equity securities
11,553,218
71.90
Number
on issue
Number
of holders
Options exercisable at $0.30 and expiring on 30 November 2020
Employee options with various exercise prices and expiry dates
3,333,332
1,900,000
2
9
The following persons hold 20% or more of unquoted equity securities:
Name
Class
UBS Securities Australia Limited
HSBC Custody Nominees (Australia) Limited
Options escrowed for 24 months until 7
February 2020
Options escrowed for 24 months until 7
February 2020
Number held
1,666,666
1,666,666
60
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ReadCloud Limited
Shareholder information
30 June 2020
Substantial holders
Substantial holders in the Company are set out below:
Thorney Technologies Ltd
TIGA Trading Pty Ltd
Amity Agency
Lars Lindstrom
Darren Hunter
Brindle Holdings Pty Ltd
D & J Pollaers Holdings Pty Limited (Pollaers Family Trust)
Joshua Fisher
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
10,509,589
10,509,589
9,358,243
8,534,128
7,009,880
5,260,000
5,193,750
5,013,610
10.65%
10.65%
9.49%
8.65%
7.11%
5.33%
5.26%
5.08%
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.
Annual General Meeting
ReadCloud Limited advises that its Annual General Meeting will be held on or about 10 November 2020. The time
and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all Shareholders and
released to ASX immediately upon despatch. The Closing date for receipt of nomination for the position of Director
is 22 September 2020. Any nominations must be received in writing no later than 5.00pm (Melbourne time) on 22
September 2020 at the Company’s Registered Office. The Company notes that the deadline for nominations for
the position of Director is separate to voting on Director elections. Details of the Directors to be elected will be
provided in the Company’s Notice of Annual General Meeting in due course.
61
For personal use only