ABN 34 093 877 331
Annual Financial Report
For the year ended 30 June 2020
Contents to annual report
Corporate information
Directors' report
Review of Operations
Consolidated Statement of Financial Position
Consolidated statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' declaration
1
2
3
12
13
14
15
16
64
Corporate information
ABN 34 093 877 331
This annual report covers Seeing Machines Limited as a consolidated entity. The Group’s functional and
presentation currency is AUD ($). The following information is current as at 30 June 2020.
A description of the Group's operations and its principal activities is included in the review of operations and
activities in the directors' report commencing on page 3. The directors' report is not part of the financial report. The
following information is current as at 30 June 2020:
Directors
Kate Hill, Non-Executive Director and Chair
Les Carmichael, Non-Executive Director
Paul McGlone, Executive Director & Chief Executive Officer
Rudolph Burger, Non-Executive Director
Yong Kang (YK) Ng, Non-Executive Director
Gerhard Vorster, Non-Executive Director
John Murray, Non-Executive Director
Michael Brown, Non-Executive Director
Company Secretary
Susan Dalliston
Registered office
80 Mildura Street
Fyshwick ACT 2609
Principal place of business
80 Mildura Street
Fyshwick ACT 2609
Phone: + (61) 2 6103 4700
Email: info@seeingmachines.com
Share register
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Australia
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZY
United Kingdom
Seeing Machines Limited shares are listed on the London Stock Exchange AIM market.
Solicitors
Herbert Smith Freehills
ANZ Tower 161,
Castlereagh Street,
Sydney NSW 2000
Australia
Fieldfisher LLP
Riverbank House
2 Swan Lane
London EC4R 3TT
United Kingdom
Bankers
HSBC Commercial Bank
580 George Street
Sydney NSW 2000
Australia
Auditors
Ernst & Young
121 Marcus Clarke Street
Canberra ACT 2600
Australia
Directors' report
Your Directors submit their report for the year ended 30 June 2020.
Directors
The names and details of the directors of Seeing Machines Limited (the " Company") in office during the year and
until the date of this report are listed below. All directors were in office for this entire period covered by the report
unless otherwise stated.
Kate Hill
Non-Executive Director and Chair Appointed Chair 22 July 2019
Jack Boyer
Non-Executive Director and Chair Resigned 22 July 2019
Paul McGlone
CEO and Executive Director
Appointed 4 July 2019
Luke Oxenham
CFO and Finance Director
Resigned 22 July 2019
Rudolph Burger
Non-Executive Director
Les Carmichael
Non-Executive Director
Yong Kang (YK) Ng
Non-Executive Director
Gerhard Vorster
Non-Executive Director
Appointed 1 Dec 2019
John Murray
Non-Executive Director
Appointed 1 Dec 2019
Michael Brown
Non-Executive Director
Appointed 14 May 2020
2
Financial Results
The Company’s total sales revenue for the financial year (excluding foreign exchange gains and finance income)
was A$40,012,000 compared to the 2019 revenue of A$31,889,000, representing a 25.5% increase.
The Company has identified two key operating segments, OEM and Aftermarket, reflecting the different paths to
market for our product. The OEM segment includes the Automotive and Aviation businesses which generate largely
license based revenue, channeled through Tier 1 customers. The Aftermarket segment includes Fleet and Off-
Road and generates revenue from a mix of direct and indirect customers who retro-fit Seeing Machines technology
into commercial vehicles.
Product
OEM
Aftermarket
Scientific Advances
Sales Revenue
2020
A$'000
12,789
27,019
204
40,012
2019
A$'000
9,720
20,782
1,387
31,889
Variance
%
32%
30%
(85)%
25.5%
Revenue momentum accelerated through the second half of the year with Aftermarket revenue in H2 increasing
by 10% on H1 results to A$14,153,000 (H1: A$12,866,000), despite the slowdown in installations arising as a
result of local and global pandemic-related changes to business conditions. Original equipment manufacturer
("OEM") revenue increased by 233% on H1 results to A$9,834,000 (H1 A$2,955,000) primarily due to a
USD$5,000,000 pre-production license deal with a major Automotive Tier 1 partner.
Gross profit decreased from A$18,525,000 in FY2019 to A$14,433,000 this year, reflecting the revised
presentation of engineering costs associated with the provision of Non-Recurring Revenue to OEM customers. If
this reclassification had not occurred then gross profit for the year would have been A$7,609,000 higher, at
A$22,042,000.
Revenue from Scientific Advances in FY20 fell to A$204,000 (2019: A$1,387,000) and represents the remaining
grant revenue from completed research projects funded by the Australian and ACT Government.
Australian Government COVID-19 Grants, JobKeeper and PAYG subsidy increased other income by A$1,971,000
to A$2,234,000 (2019: A$263,000). The initial phase of the JobKeeper Grant ran from 1 March 2020 to 27
September 2020 with subsequent phases to be subjected to additional qualifying tests.
The Company continued to invest in its core technology across global target OEM and Aftermarket industries,
reflected in the research and development expenditure for the year of A$30,976,000 (2019: A$35,895,000). The
current year amount is after the reallocation of A$7,609,000 to cost of sales.
Corporate services expenses were impacted by an additional one off charge of A$5,116,000 reflecting a change in
the method of recognising the annual STI and LTI grant in the year to which the grant related, rather than the year
in which the amounts were approved and paid based upon an assessment of the current facts and circumstances
of those arrangements. This category was also impacted by restructuring costs, the benefit of which will be felt in
future years.
Occupancy and facilities expenses declined from A$2,619,000 in 2019 to A$1,800,000 in 2020, with the adoption
of AASB16 Leases as outlined in note 3 and note 29, and the depreciation change for the year increased
accordingly.
Other expenses include the impairment of a A$2,986,000 non-recoverable receivable. Income tax expense includes
A$1,246,000 in non-recoverable withholding taxes per note10.
Cash used in operations fell from A$34,244,000 to A$24,246,000 as a result of increased revenues from a similar
cost base, one-off licence arrangements and a focus on working capital management.
The resultant loss for the period represented an increase of A$3,891,000 at A$46,488,000 (2019: A$42,598,000).
Cash and cash equivalents at 30 June 2020 totalled A$38,138,000 (2019: A$54,809,000).
3
Financial Results (continued)
On 23 October 2020, Seeing Machines issued 372,000,000 new ordinary shares of no par value each (the “New
Ordinary Shares”) to Federated Hermes, a well known US institutional investor, at a price of 4.10 pence per New
Ordinary Share, raising gross proceeds of approximately US$20,000,000 (the “Placing”). The net proceeds of the
Placing will be used to strengthen the Company’s balance sheet and for general working capital and corporate
purposes.
Operational Highlights
Despite the global economic conditions posed by COVID-19 in the second half of FY2019, Seeing Machines has
achieved pleasing growth over the past 12 months as demand for Driver Monitoring System (DMS) technology
continues to advance across its key transport sectors.
FY2020 saw the Company remove significant, permanent cost from the business to secure its ongoing financial
strength. While some measures put in place during the year were temporary and specifically targeted at managing
through COVID-19, Seeing Machines restructured the business to improve the balance between ongoing innovation,
key to its leadership position, and project delivery and to achieve more efficient collaboration between the corporate
services functions and engineering.
Guardian, the Company’s aftermarket solution for commercial drivers across transport and logistics, continues to
expand as safety remains a top priority. Insurance interest has expanded in Australia and Seeing Machines will enter
into its’ second year of exclusive joint marketing with leading Australian truck insurer, National Transport Insurance.
Seeing Machines’ distribution network has expanded to 14 channel partners through which more than 80% of the
Company’s Guardian business is sold. The increase in connections throughout the COVID-19 period has been
steady, despite close-down periods across a range of jurisdictions, and the Company’s Monthly Recurring Revenue
continues to increase.
In January 2020, Seeing Machines exhibited at the Consumer Electronics Show (CES) in Las Vegas, to showcase
its capabilities to Automotive and Fleet stakeholders from across the world. Featured on BMW’s palatial CES stand,
the Company was featured in daily presentations to promote its approach to Human Factors science which underpins
its technology efficacy and ongoing development. CES also facilitated the launch of Seeing Machines’ work with
Qualcomm. This represented the beginning of an extended collaboration which forms part of the Company’s recently
announced Three-Pillar Embedded Product Strategy designed for the automotive market, announced post-period (2
September 2020).
Seeing Machines continues to grow as an automotive leader in DMS technology, now in tie-ups with six OEMs
globally, across nine ongoing programs over an expanding range of vehicle models. The Seeing Machines FOVIO
Chip remains the highest performing, lowest cost market solution for standalone DMS vehicle integration and now
represents nearly one third of Seeing Machines booked business, and is projected to grow to approximately one half
in response to Euro NCAP requirements.
Global regulatory momentum has created significant increased demand for DMS technology to enhance safety on
roads and in cars around the world with Europe leading the charge. This past year also saw a positive shift in North
America with the US “Moving Forward Act’ being passed in the House of Representatives (post period), representing
the strongest automotive safety bill for that country, in decades. Seeing Machines is well placed to leverage this
momentum and has resolved its strategic direction which will ensure it is poised to leverage this demand and support
OEM requirements, and has continued to grow its Guardian footprint, now connected to over 23,000 vehicles
worldwide.
While the Aviation industry has all but come to a stand-still over the past six months, Seeing Machines continues to
deepen relationships and progress business opportunities for Crew Training and Pilot Monitoring with major aviation
brands based on the Seeing Machines eye-tracking capability.
4
Chief Executive Officer
The Company’s Chief Executive Officer (CEO) is Paul McGlone who stepped in initially as interim CEO until he
was appointed on a permanent basis on 4 July 2019.
Company Secretary
The Company Secretary was Ryan Murphy, Chief Operating Officer, until Susan Dalliston was appointed on 4
July 2019. Susan Dalliston is the Company Secretary at the date of this report.
Employee Numbers
At 30 June 2020 the Group had 203 full-time employees (228 employees at 30 June 2019).
Directors
The names and particulars of the directors of the Company are set out in the following table. The directors were
in office for the entire period unless otherwise stated.
Name
Kate Hill
Experience and special responsibilities
Chair of the Board and Member of Risk, Audit and Finance Committee and
appointed member of the People, Culture and Risk Committee (post period)
Appointed to the Board on 13 December 2018, Kate is a non-executive director
of CountPlus Limited (ASX: CUP), where she is the Chair of the Audit and Risk
Committee and a member of the Acquisitions Committee. She is also a non-
executive director of Elmo Software Limited (ASX: ELO) where she serves as
Chair of the Audit and Risk Committee and is a member of the Remuneration
and Nominations Committee.
Kate had a distinguished 20+ year career with Deloitte ToucheTomatsu as an
audit partner where she worked with Australian Securities Exchange (ASX)
listed and privately owned clients. She has worked extensively in regulated
environments including assisting with Initial Public Offerings, capital raising
and general compliance, as well as operating in an audit environment. She
held a variety of leadership and executive roles in Deloitte and was the first
woman appointed to the Board of Partners of the Australian firm.
Paul McGlone
CEO & Executive Director
Appointed on 4 July 2019.
Paul comes into the role of CEO with extensive experience in management,
public company leadership as well as logistics, supply chain management
and technology driven businesses
During his 10-year career at Australian listed company, Brambles, Paul held
operational and corporate leadership roles including President of CHEP Asia
Pacific and Group Vice President Strategy, Planning and Innovation. He was
the architect of its global growth plan which resulted in a threefold increase in
the company’s market capitalisation.
7
Directors (continued)
Gerhard Vorster
Non-Executive Director
Appointed on 1 December 2019.
Gerhard is an accomplished senior executive and former Deloitte partner with
a growing board portfolio and significant expertise in strategy and technology.
Gerhard is currently an alternate director of the Brisbane Airport Corporation
and Chairman of the Bio Capital Impact Fund.
Gerhard began his career at Deloitte in 1987 in the consulting business as a
strategic management consultant and partner. Over a 28-year career with the
firm, Gerhard was appointed to various executive roles, including Managing
Partner for Consulting for the Australia and Asia Pacific region and his most
recent role, Chief Strategy Office for the region.
Gerhard holds a Bachelor of Science in Civil Engineering from the University
of Pretoria and a Master of Business Administration (Cum Laude) from the
University of Potchefstroom. He is a member of the Australian Institute of
Company Directors.
John Murray
Non-Executive Director and Chair of the Risk, Audit and Finance Committee
Appointed 1 December 2019.
John is a highly experienced board director with significant expertise in the
technology sector. He is currently Chairman of PainChek Limited, listed on
the Australian Stock Exchange (ASX: PCK).
John has been non-executive director and Chair of several ASX-listed and
high-growth companies throughout his career, which began in audit and
investment banking, involved rising through various positions at large
organisations, and eventually becoming Vice President and Head of
Investment Banking at Bank of America Asia in 1989.
From there, John joined the Australian Technology Group where he identified
and managed investments into early stage technology companies and went
on to co-found the venture capital firm, Technology Venture Partners, in 1997,
establishing a 20 year career of investing in, advising and directing technology
companies.
John holds an Honours Degree in Law from Edinburgh University and is a
member of the Australian Institute of Company Directors. He is also a CA
and a Member of the Institute of Chartered Accountants of Scotland.
Dr Rudolph (Rudy) Burger
Non-Executive Director and member of the Risk, Audit and Finance Committee
Appointed on 15 January 2014.
Over the past twenty-five years, Rudy has founded five digital media
technology companies in the US, run a European public company, and
served as a senior executive for two global 500 companies. He is widely
recognised as an effective, dynamic leader with a proven track record in
management, strategic planning, business development, and M&A. Rudy is
currently Founder and Managing Partner of an
investment bank
headquartered in California. Rudy has a BSc and MSc from Yale University
and a PhD from Cambridge University
8
Directors (continued)
Les Carmichael
Non-Executive Director and Chair of the People, Culture and Remuneration
Committee
Appointed on 1 February 2016, Les, based in Dallas, is a veteran of the North
American transportation and logistics sectors, where he has spent over 40
years of his professional career. Holding numerous senior management and
operational positions, he has experience in all aspects of fleet logistics; sales,
marketing, operations, business development, and turnaround management.
After a proven track record as Vice-President and General Manager of
Dedicated Services at Swift Transportation Corporation, Les became CEO of
Taylor Companies, the largest independent crude oil transportation company
in the US. After retiring as an executive in 2015, Mr Carmichael served on the
Board of Directors of GlobalTranz, Inc., a venture capital funded, technology
focused, freight forwarding company operating in the US until its sale in June
2018. Les also served on the Board of TriCon Logistics LLC, an innovative
and customer-focused third-party logistics company based in the US, until it
was sold on 30 June 20.
Yong Kang (YK) Ng
Non-Executive Director and member of the Risk, Audit and Finance Committee
Appointed on 22 March 2016.
YK has extensive engineering and operations experience in the manufacturing
sector with multinational corporations. Based in Johor, Malaysia, YK has been
managing the manufacturing operations of V S Industry Berhad (VSI) since
2002 and was appointed as executive director in 2005. VSI is a leading
integrated electronics manufacturing services provider and a strategic investor
in Seeing Machines Limited. YK has a Bachelor of Science in Mechanical
Engineering from the National Taiwan University and a MBA from Heriot-Watt
University in Edinburgh, UK
Michael Brown
Non-Executive Director and member of the People, Culture and
Remuneration Committee
Appointed on 14 May 2020.
Michael Brown is a highly experienced financial markets professional based
in London and comes to the Seeing Machines board with a deep knowledge
of the AIM market and small to mid-cap technology companies, as well as
previous plc non-executive and observer board roles. He is currently a
portfolio manager within the Volantis team at Lombard Odier Investment
Managers
Jack Boyer OBE
Non-Executive Director
Appointed Director 16 July 2018. Appointed Chairman 19 September 2018.
Stepped down as Chairman 5 June 2019, resigned from the board 22 July
2019.
Luke Oxenham
Appointed Finance Director 3 December 2018.
Resigned 22 July 2019
9
Principal activities
The Company's principal activities during the year were:
• Developing, selling and licensing products, services and technology to detect and manage driver
fatigue and distraction, including continued market development to secure sustainable channels to
market for the product;
• Developing driver-monitoring technology to be incorporated into passenger cars;
• Entering commercial agreements with partners for the development, manufacturing and sale of
products into key target markets;
• Research and development of the Company’s core vision processing technologies to support the
development and refinement of the Company’s products.
Changes in State of Affairs
During the financial year there was no significant change in the state of affairs of the Company other than those
referred to elsewhere in this report and in the financial statements or notes thereto.
Subsequent Events after the Balance Date
On 23 October 2020, Seeing Machines issued 372,000,000 new ordinary shares of no par value each (the “New
Ordinary Shares”) to Federated Hermes, a well known US institutional investor, at a price of 4.10 pence per New
Ordinary Share, raising gross proceeds of approximately US$20,000,000 (the “Placing”). The net proceeds of the
Placing will be used to strengthen the Company’s balance sheet and for general working capital and corporate
purposes.
Likely developments and expected results
The likely developments and expected results are disclosed in note 2 of the financial statements.
Environmental Regulations
The Company holds no licenses issued by relevant Environmental Protection Authorities and there have been no
known breaches of any environmental regulations.
Dividends
No dividends or distributions have been made to members during the year ended 30 June 2020 (2019: nil) and no
dividends or distributions have been recommended or declared by the Directors in respect of the year ended 30
June 2020 (2019: nil).
Share Options
Unissued shares
Reference is made to note 33 of the Financial Statements in respect of options and performance rights in relation
to directors and staff members.
(i) Share options granted during or since the end of the year
During the year, 65,995,070 (2019: 19,936,023) options were granted by the Company under the performance
rights scheme. The terms and conditions of these options are disclosed in note 33 to the financial report.
(ii) Shares Issued as a result of the Vesting of Options
During the year 18,150,781 (2019: 28,441,325) options vested and ordinary shares were transferred to the
participant from the Group trust (the “Trust”). During the year the Company issued nil (2019 : 70,070,209) ordinary
shares to the Trust following the vesting of certain performance rights and options. The New Ordinary Shares will
be held in the existing trust until such time as the beneficiaries of the award exercise the performance rights and
options. On the exercise of such performance rights and / or options, the Trust will transfer the shares to the relevant
beneficiary.
Indemnification of Directors and Officers
During the financial year, the Company paid a premium in respect of a contract insuring the Directors of Seeing
Machines Limited (and its wholly owned subsidiaries), the Company Secretary, and all executive officers of those
companies against a liability incurred as such a Director, secretary, or executive officer 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.
10
Directors’ Meetings
During the 2020 financial year, Eight Board meetings were held. The following table sets out the number of
Board and Committee meetings each Director attended and the number they were eligible to attend.
Meetings Attended / Meetings Eligible to Attend
Board Risk, Audit & Finance Committee
People, Culture & Remuneration
Committee
Director
Kate Hill
Les Carmichael
Paul McGlone
Rudolph Burger
Yong Kang (YK) Ng
Gerhard Vorster
John Murray
Michael Brown
* Not a member of the committee
8/8
8/8
8/8
8/8
8/8
5/5
5/5
2/2
Indemnification of Auditors
4/4
*
4/4
2/2
3/4
*
2/2
*
*
4/4
4/4
2/2
*
*
*
1/1
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify Ernst & Young during or since the financial year.
Rounding
The amounts contained in the financial report have been rounded to the nearest A$1,000 (where rounding is
applicable) where noted ($000) under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument
applies.
Auditor’s Independence Declaration
We have obtained an independence declaration from our auditors, Ernst & Young. The signed declaration is
included after this report.
Non-Audit Services
Ernst & Young rendered taxation services to Seeing Machines Limited as disclosed at note 37.
The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied
that the services did not compromise the external auditor’s independence as the nature of the services provided
does not compromise the general principles relating to auditor independence in accordance with APES 110: Code
of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
Signed at Canberra on in accordance with a resolution of the Directors made pursuant to section 298(2) of the
Corporations Act 2001.
Paul McGlone
Executive Director & Chief Executive Officer
Canberra
11
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Auditor’s Independence Declaration to the Directors of Seeing Machines
Limited
As lead auditor for the audit of Seeing Machines Limited for the financial 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.
This declaration is in respect of Seeing Machines Limited and the entities it controlled during the financial
year.
Ernst & Young
Anthony Ewan
Partner
28 October 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Consolidated Statement of Financial Position
AS AT 30 June 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Current financial assets
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant & equipment
Intangible assets
Right-of-use assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Other current liabilities
Provisions
Contract liabilities
Current financial liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions
Other liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Accumulated losses
Other reserves
Equity attributable to the owners of the parent
TOTAL EQUITY
Notes
14
15
16
17
18
19
29
21
25
22
24
25
22
25
26
26
2020
A$000
38,138
9,584
4,743
512
4,233
57,210
3,208
899
4,371
8,478
65,688
7,874
1,057
3,763
263
553
13,510
215
5,766
5,981
19,491
2019
A$000
Restated
(Note 3.d)
As at 1 July
2018
A$000
Restated
(Note3.d)
54,809
15,670
8,211
9,561
4,761
93,012
2,940
2,539
5,154
10,633
103,645
3,621
1,115
2,831
673
903
9,143
211
6,811
7,022
16,165
42,786
19,758
4,301
579
876
68,300
3,659
3,529
5,580
12,768
81,068
6,300
810
2,644
874
-
10,628
81
7,422
7,503
18,131
46,197
87,480
62,937
217,204
-
(184,638)
13,631
46,197
46,197
217,204
(1,109)
(137,928)
9,313
87,480
87,480
158,031
(1,109)
(95,829)
1,844
62,937
62,937
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
12
Consolidated Statement of Comprehensive Income
FOR THE YEAR ENDED 30 June 2020
Sale of goods and licence fees
Rendering of services
Research revenue
Revenue
Cost of sales
Gross profit
Net gain/(loss) in foreign exchange
Net gain on disposal of property, plant and equipment
Net gain/(loss) on disposal of investment
Other income
Finance income
Expenses
Research and development expenses
Customer support and marketing expenses
Occupancy and facilities expenses
Corporate services expenses
Finance costs
Other expenses
Loss before income tax
Income tax expense
Loss after income tax
Loss for the period attributable to:
Equity holders of the parent
Other comprehensive income- to be reclassified subsequently to
profit and loss
Exchange differences on translation of foreign operations
Other comprehensive income/(loss) net of tax
Total comprehensive loss
Total comprehensive loss attributable to:
Equity holders of the parent
Total comprehensive loss for the year
Notes
7
8
8
8
9
2020
A$000
24,665
14,915
432
40,012
2019
Restated
A$000
15,840
14,441
1,608
31,889
(25,579)
14,433
(13,364)
18,525
(382)
(72)
-
2,234
829
178
-
39
263
778
(30,976)
(6,561)
(1,800)
(19,478)
(705)
(2,986)
(45,464)
(35,895)
(8,799)
(2,619)
(13,605)
(821)
(4)
(41,960)
10
(1,246)
(46,710)
(46)
(42,006)
(46,710)
(46,710)
(42,006)
(42,006)
222
222
(46,488)
(592)
(592)
(42,598)
(46,488)
(46,488)
(42,598)
(42,598)
Earnings per share for loss attributable to the ordinary equity holders of
the parent:
Basic earnings per share
Diluted earnings per share
12
12
($0.01)
($0.01)
($0.02)
($0.02)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
13
Consolidated Statement of Changes in Equity
Contributed
Equity
Treasury
Shares
Accumulated
Losses
Foreign
Currency
Translation
Reserve
Employee
Equity
Benefits &
Other Reserve Total Equity
A$000
A$000
A$000
A$000
A$000
A$000
158,031
(1,109)
(95,829)
(1,146)
2,990
62,937
-
-
(93)
-
-
(93)
158,031
-
(1,109)
-
(95,922)
(42,006)
(1,146)
-
2,990
-
62,844
(42,006)
-
(592)
(42,006)
(592)
-
-
(592)
(42,598)
-
-
61,737
(2,564)
-
-
-
-
-
-
217,204
(1,109)
(137,928)
(1,738)
-
-
-
-
-
-
-
-
8,061
11,051
61,737
(2,564)
8,061
87,480
217,204
-
(1,109)
-
(137,928)
(46,710)
(1,738)
-
11,051
-
87,480
(46,710)
-
-
-
-
-
217,204
-
-
-
(46,710)
222
222
-
-
222
(46,488)
1,109
-
-
-
-
-
-
-
-
-
(184,638)
(1,516)
(1,109)
1,109
4,096
15,147
-
1,109
4,096
46,197
FOR THE YEAR ENDED
30 June 2020
As at 1 July 2018
Effect of adoption of new
accounting standards
(AASB9)
As at 1 July 2018
(restated)
Loss for the period
Other comprehensive
income
Total comprehensive
income
Transactions with
owners in their capacity
as owners:
Shares issued
Capital raising costs
Share-based payments
At 30 June 2019
As at 1 July 2019
Loss for the period
Other comprehensive
income
Total comprehensive
income
Transactions with
owners in their capacity
as owners:
Reclassification of treasury
shares
Shares to be issued
Share-based payments
At 30 June 2020
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes
14
Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 June 2020
Operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Income tax paid
Receipt of government grants
Receipt for research and development tax incentive
Net cash flows used in operating activities
Investing activities
Proceeds from sale of property, plant and equipment
Purchase of plant and equipment
Payments for intangible assets
Maturity/(purchase) of term deposits
Proceeds on sale of investments
Net cash flows from/(used in) investing activities
Financing activities
Payment of lease liabilities
Proceeds from issue of new shares
Cost of capital raising
Proceeds from borrowings
Repayment of borrowings
Net cash flows (used in)/from financing activities
Note
2020
A$000
2019
Restated
A$000
42,702
(67,222)
-
(705)
(1,246)
2,043
182
(24,246)
33,091
(67,069)
231
(630)
(46)
-
-
(34,423)
27
(815)
(246)
9,049
-
8,015
(716)
-
-
-
(30)
(746)
-
(390)
(455)
(8,982)
39
(9,788)
(560)
58,781
(2,565)
3,333
(2,090)
56,899
12,688
(665)
42,786
54,809
Net (decrease)/increase in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
(16,977)
306
54,809
38,138
14
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
15
Notes to the Financial Statements
1.
Corporate Information
The consolidated financial report of Seeing Machines Limited and its subsidiaries (collectively, the Group) for the
year ended 30 June 2020 was authorised for issue in accordance with a resolution of the Directors on 28 October
2020.
Seeing Machines Limited (the parent) is a for-profit company limited by shares incorporated and domiciled in
Australia whose shares are publicly traded on the AIM of the London Stock Exchange.
The Group provides operator monitoring and intervention sensing technologies and services for the automotive,
mining, transport and aviation industries.
2. Going Concern Basis of Accounting
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and settlement of liabilities in the normal course of business.
The Group has made a loss for the year of A$46,710,000 (2019: Loss of A$42,006,000) and incurred net cash
outflows in operating activities of A$24,250,000(2019: A$34,423,000). The Group has net current assets at 30 June
2020 of A$ 43,700,000 (2019 A$83,869,000). The balance of cash and cash equivalents at 30 June 2020 is
A$38,138,000(2019: A$54,809,000).
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal
activities and realisation of assets and settlement of liabilities in the normal course of business. The ability of the
Group to continue its activities as a going concern is dependent on a range of factors including:
i) the ability to meet projected revenue levels;
(ii) timing of cash receipts;
(iii) the ability to manage overheads to budgeted levels; and
(iv) the ability to generate additional funds from further licensing activity, through lending arrangements or from
investors.
The Directors have reviewed the Company's financial position and cash flow forecasts for the next twelve months,
including giving consideration to the range of options the Group is exploring for obtaining further funding if required,
and are of the opinion that the use of the going concern basis of accounting is appropriate. In particular the
Directors have considered the impact of COVID-19 on the operations of the Group, and make the following
observations:
• OEM production schedules have remained on track and have not, in our view, been impacted by COVID-19. OEM
production schedules will drive a large volume of revenue for the Group over the next 3-7 years.
• While delays in installations were experienced at the start of the pandemic, demand for our after-market product
and the installation rate have returned to pre-COVID levels and show no signs of abating.
• Production and logistics arrangements for the supply chain of our after-market product has been tested during
the period of shutdowns and found to be robust.
• Monitoring activities associated with the after-market business were able to be maintained seamlessly during the
various worldwide shutdowns, and this is expected to continue.
• The Group’s staff successfully transitioned to working from home at the start of the pandemic, and many are now
back in our offices.
• The Group successfully raised gross proceeds of $27.4m through an equity placement announced to AIM on
23 October 2020 with settlement due on 28 October 2020.
• The Directors do not foresee any other impacts of COVID-19 on the Company’s ability to continue as a going
concern.
The Directors are confident that the above-mentioned strategies are appropriate to generate sufficient funds to
allow the Group to continue as a going concern. This is based on the belief that the Company will meet projected
revenue budgets, contain overheads to the amounts budgeted and generate additional funds from further licensing
activity, through lending arrangements or from investors. The Company has a strong track record of achieving such
aims.
16
Notes to the Financial Statements (continued)
3.
a.
Summary of Significant Accounting Policies
Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, Australian Accounting Standards as issued by the Australian
Accounting Standards Board and other authoritative pronouncements of the Australian Accounting Standards
Board. The financial report has also been prepared on a historical cost basis.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand.
The consolidated financial statements provide comparative information in respect of the previous period. In
addition, the Group presents an additional statement of financial position at the beginning of the preceding period
when there is a retrospective application of an accounting policy, a retrospective restatement, or a reclassification
of items in financial statements. An additional statement of financial position as at 1 July 2018 is presented in these
consolidated financial statements due to the retrospective application of accounting policies as a result of the
adoption of AASB 16 Leases. See note 3.d.
In March 2020, the World Health Organisation declared the outbreak of COVID-19 as a global pandemic.
Management has considered the impact of COVID-19 on the preparation of the financial statements including the
potential for impairment of current and non-current assets. No adjustments have been made to the financial
statements as at 30 June 2020 for the impacts of COVID-19.
b.
Compliance with Australian accounting standards and international financial reporting
standards
The financial report complies with Australian Accounting Standards and International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
c.
Changes in accounting policies and disclosures
Changes in accounting policies, new and amended standards and interpretations
Changes to presentation - classifications
The Group has revised its presentation of cost of sales to reclassify A$7,609,000 engineering development
expenditure from Research and development expenses to Cost of sales, which can now be directly assigned to
commercial NRE contracts. Management believes that this will provide more relevant information to stakeholders
as it more fairly reflects the split in engineering costs between revenue generating development on OEM programs,
and ongoing development of its core DMS technology. Program Related comparatives have not been restated
because the information is not retrospectively available.
The Group has reclassified its disclosure of warranty expenses from sales and marketing expenses to cost of sales
during the second half of FY20.
The Group re-assessed it's accounting presentation for treasury shares and on 1 July 2019 elected to reclassify
treasury shares to the employee share reserve once they are expired/exercised. This has been presented in the
Statement of Changes in Equity under Reclassification of treasury shares. The group believes that this
reclassification is more relevant to the ongoing nature of these shares.
d.
New accounting standards and interpretations
There were some amendments to existing accounting standards that were applicable to the Group this year.
During the current period, the Group applied AASB 16 Leases. The nature and effect of the changes as a result of
adoption of this new accounting standard are described below.
Several other amendments and interpretations apply for the first time in 2020, but do not have an impact on the
consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or
amendments that have been issued but are not yet effective.
17
Notes to the Financial Statements (continued)
3.
d.
Summary of Significant Accounting Policies (continued)
New accounting standards and interpretations (continued)
(i) AASB 16 Leases
AASB 16 supersedes AASB 117 Leases, AASB Interpretation 115 Determining whether an Arrangement contains
a Lease, AASB Interpretation 115 Operating Leases-Incentives and AASB Interpretation 127 Evaluating the
Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the
recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases
on the balance sheet.
The Group adopted AASB 16 using the full retrospective method of adoption, with the date of initial application of
1 July 2019. The Group elected to use the transition practical expedient to not reassess whether a contract is, or
contains, a lease at 1 July 2019. Instead, the Group applied the standard only to contracts that were previously
identified as leases applying AASB 117 and AASB Interpretation 4 Determining whether an Arrangement contains
a Lease at the date of initial application. The Group also elected to use the recognition exemptions for lease
contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase
option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value assets).
The effect of adopting AASB 16 is, as follows:
Impact on the consolidated statement of financial position (increase/(decrease)):
Assets
Right of use assets
Property,plant and equipment
Total Assets
Equity
Retained Earnings
Total Equity
Liabilities
Lease Liabilities
Provisions
Other liabilities
Total Liabilities
30 June 2020
A$000
30 June 2019
A$000
1 July 2018
A$000
4,371
(140)
4,231
5,154
(236)
4,918
5,580
-
5,580
(680)
(680)
(600)
(600)
(389)
(389)
6,419
59
(1,567)
4,911
6,791
60
(1,334)
5,517
7,268
52
(1,350)
5,970
Impact on the consolidated statement of profit or loss (increase/(decrease)):
Depreciation expense (included in Corporate services expenses)
Rent expense (included in Occupancy and facilities expense)
Operating profit
Finance costs
Loss /(Profit )for the period
Attributable to:
Equity holders of the parent
30 June 2020
A$000
30 June 2019
A$000
795
(1,261)
(466)
546
80
749
(1,143)
(394)
583
189
(80)
(189)
18
Notes to the Financial Statements (continued)
3.
d.
Summary of Significant Accounting Policies (continued)
New accounting standards and interpretations (continued)
Impact on consolidated statement of cash flows (increase/(decrease)):
Net cash flows from operating activities
Net cash flows from financing activities
30 June 2020
A$000
30 June 2019
A$000
716
(716)
560
(560)
There is no material impact on other comprehensive income or the basic and diluted earnings per share.
(i) Nature of the effect of adoption of AASB 16
The Group has lease contracts for office space, and some IT equipment. Before the adoption of AASB 16, the
Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease.
A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to
ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were
capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at
the present value of the minimum lease payments.
Lease payments were apportioned between interest (recognised as finance costs) and reduction of the lease
liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as
rent expense in the statement of profit or loss on a straight-line basis over the lease term.
Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases that
it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities
to make lease payments and right-of-use assets representing the right to use the underlying assets.
In accordance with the full retrospective method of adoption, the Group applied AASB 16 at the date of initial
application as if it had already been effective at the commencement date of existing lease contracts. Accordingly,
the comparative information in this consolidated financial statements has been restated.
As at 1 July 2018, 30 June 2019 and 30 June 2020:
• Right-of-use assets were recognised and presented separately in the statement of financial position.
Lease assets recognised previously under finance leases, which were included under ‘Property, plant
and equipment’, were reclassified as Right-of-use assets.
• Additional lease liabilities were recognised and included under ‘Other liabilities’.
•
‘Retained earnings’ decreased due to the net impact of these adjustments
For the year ended 30 June 2020:
• Depreciation expense increased by A$795,000 relating to the depreciation of additional assets recognised
(i.e., increase in right-of-use assets, net of decrease in Property, plant and equipment).
• Rent expense decreased by A$1,261,000 relating to previous operating leases previously included in
Occupancy and facilities expense.
•
Finance costs increased by A$546,000 relating to the interest expense on additional lease liabilities
recognised.
• Cash outflows from operating activities decreased by A$716,000 and cash outflows from financing activities
increased by the same amount, representing the payments for the principal portion of recognised lease
liabilities.
19
Notes to the Financial Statements (continued)
3.
d.
Summary of Significant Accounting Policies (continued)
New accounting standards and interpretations (continued)
(ii) Amounts recognised in the statement of financial position and profit or loss
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements
during the year:
As at 1 July 2018
Fx variance on opening balance
Addition to lease liabilities and right of use assets
Depreciation expense
Interest expense
Payments
As at 30 June 2019
As at 30 June 2019
Fx variance on opening balance
Depreciation expense
Interest expense
Payments
As at 30 June 2020
Office Space
A$000
5,580
28
-
(690)
-
-
4,918
4,918
12
(699)
-
-
4,231
Other
equipment
A$000
-
-
236
-
-
-
236
236
-
(96)
-
-
140
Set out below, are the amounts recognised in profit or loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Rent expense
Total amounts recognised in profit or loss
Set out below, are the movements in the cashflow:
Net cash flows from operating activities
Net cash flows from financing activities
e.
Standards issued but not yet effective
Total
A$000
5,580
28
236
(690)
-
-
5,154
5,154
12
(795)
-
-
4,371
2020
A$000
795
546
(1,261)
80
Lease
liabilities
A$000
7,268
-
427
-
583
(1,143)
7,135
7,135
-
-
546
(1,261)
6,420
2019
A$000
749
583
(1,143)
189
A$000
716
(716)
A$000
560
(560)
Australian Accounting Standards and Interpretations that have been issued or amended but are not yet effective
have not been adopted by the Group for the annual reporting period ended 30 June 2020. The Standards and
Interpretations that might be relevant to the Group are outlined below:
(i) AASB Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects
the application of AASB 12 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 12, nor
does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.
The Interpretation specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately
•
The assumptions an entity makes about the examination of tax treatments by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and
tax rates
• How an entity considers changes in facts and circumstances
20
Notes to the Financial Statements (continued)
3.
e.
Summary of Significant Accounting Policies (continued)
Standards issued but not yet effective (continued)
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or
more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to
be followed.
The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group
operates in a complex multinational environment, it assessed whether the Interpretation had an impact on its
consolidated financial statements.
Upon adoption of the Interpretation, the Group considered whether it had any uncertain tax positions, particularly
those relating to transfer pricing. The Company’s and the subsidiaries’ tax filings in different jurisdictions include
deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group
determined, based on its tax compliance and transfer pricing study, that it is probable that its tax treatments
(including those for the subsidiaries) will be accepted by the taxation authorities.
The interpretation did not have an impact on the consolidated financial statements of the Group.
(ii) AASB 2018-1 Amendments to Australian Accounting Standards - Annual Improvements
2015-2017 Cycle
The amendments clarify certain requirements in:
• AASB 3 Business Combinations and AASB 11 Joint Arrangements - previously held interest in a joint
operation
• AASB 112 Income Taxes - income tax consequences of payments on financial instruments classified as
equity
• AASB 123 Borrowing Costs - borrowing costs eligible for capitalisation.
Based on an initial assessment, the application of these amendments is not expected to have a material impact on
the Group’s financial position and performance.
(iii) AASB 2018-6 Amendments to Australian Accounting Standards - Definition of a Business
The Standard amends AASB 3 to clarify the definition of a business, assisting entities to determine whether a
transaction should be accounted for as a business combination or as an asset acquisition.
(iv) AASB 2018-7 Amendments to Australian Accounting Standards - Definition of Material
The amendments refine the definition of material in AASB 101. The amendments clarify the definition of material
and includes guidance relating to obscuring information that could be reasonably expected to influence decisions
of the primary users of the financial information.
(v) AASB 2019-1 Amendments to Australian Accounting Standards - References to the Conceptual
Framework
This Standard sets out amendments
Interpretations and other
pronouncements to reflect the issuance of the Conceptual Framework for Financial Reporting (Conceptual
Framework) by the AASB.
to Australian Accounting Standards,
The amendments to the Conceptual Framework apply to for-profit private sector entities that have public
accountability and are required by legislation to comply with Australian Accounting Standards; and other for-profit
entities that voluntarily elect to apply the Conceptual Framework, which would permit compliance with Australian
Accounting Standards (Tier 1) and International Financial Reporting Standards (IFRS Standards).
f.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Seeing Machines Limited and its
subsidiaries (as outlined in note 30) as at 30 June each year (the Group).
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee. Specifically, the Group
controls an investee if and only if the Group has:
21
Notes to the Financial Statements (continued)
3.
f.
Summary of Significant Accounting Policies (continued)
Basis of consolidation (continued)
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities
of the investee).
• Exposure, or rights, to variable returns from its involvement with the investee
•
The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee including:
•
The contractual arrangement(s) with the other vote holders of the investee
• Rights arising from other contractual arrangements
•
The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the Statement of
Comprehensive Income from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the
parent of the Group. When necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on
consolidation.
g.
Current versus non-current classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current
classification. An asset is current when it is:
• Expected to be realised or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period;
Or
• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
•
•
•
•
It is expected to be settled in the normal operating cycle;
It is held primarily for the purpose of trading;
It is due to be settled within twelve months after the reporting period;
Or
There is no unconditional right to defer the settlement of the liability for at least twelve months after the
reporting period.
22
Notes to the Financial Statements (continued)
3.
h.
Summary of Significant Accounting Policies (continued)
Segment Information- refer note 7
An operating segment is a component of the entity that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating
decision makers to make decisions about resources to be allocated to the segment and assess its performance
and for which discrete financial information is available. Management will also consider other factors in determining
operating segments such as the level of segment information presented to the board of directors.
Operating segments that meet the qualitative criteria as prescribed by AASB 8 are reported separately. However,
an operating segment that does not meet the qualitative criteria is still reported separately where information about
the segment would be useful to users of the financial statements.
A geographical segment is a distinguishable component of the entity that is engaged in providing products or
services within a particular economic environment and is subject to risks and returns that are different than those
of segments operating in other economic environments.
i.
Foreign currency translation
(i) Functional and presentation currency
The Group's consolidated financial statements are presented in Australian dollars, which is also the parent
company's functional currency. For each entity, the Group determines the functional currency and items included
in the financial statements of each entity are measured using that functional currency. The Group uses the direct
method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss
reflects the amount that arises from using this method.
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group's entities in the functional currency by applying
the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss. These are
recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulative
amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those
monetary items are also recognised in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions.
(iii) Group companies
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of
exchange prevailing at the reporting date and their statements of profit or loss are translated at exchange rates
prevailing at the dates of the transactions. The exchange differences arising on translation for consolidation are
recognised in other comprehensive income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is reclassified to profit or loss.
j.
Cash and cash equivalents- refer note 14
Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-
term deposits with an original maturity 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. For the purposes of the Consolidated
Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
23
Notes to the Financial Statements (continued)
3.
k.
Summary of Significant Accounting Policies (continued)
Inventories- refer note 16
Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for, as follows:
Raw materials, work in progress and finished goods - average cost on a first-in, first-out basis. The cost of purchase
comprises the purchase price, import duties and other taxes (other than those subsequently recoverable by the
entity from the taxing authorities), transport, handling and other costs directly attributable to the acquisition of raw
materials. Volume discounts and rebates are included in determining the cost of purchase.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
l.
Property, plant and equipment - refer note 18
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such
cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is
incurred.
Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised
in profit or loss as incurred.
Depending upon the sub-classification of the asset, the depreciation is calculated on the diminishing value or
straight line basis using the following depreciation rates of the specific asset as follows:
• Office furniture, fittings and equipment - 11.25% to 66.67%
• Research and development equipment - 33.3%
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at
each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
m.
Leases – refer note 29
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
i) Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain
ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on
a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject
to impairment.
• Office Space
• Other equipment
3 to 10 years
3 to 5 years
24
Notes to the Financial Statements (continued)
3.
m.
Summary of Significant Accounting Policies (continued)
Leases (continued)
ii) Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include fixed payments (including in-
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index
or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the
exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease
payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce
inventories) in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable.At transition the
incremental borrowing rate was 8% pa and at 30 June 20 it was 8% pa. After the commencement date, the amount
of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term,
a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used
to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.
The Group’s lease liabilities are included in interest-bearing loans and borrowings.
iii) Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment
(i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment
that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are
recognised as expense on a straight-line basis over the lease term.
n.
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU's fair value less costs of
disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other assets or groups of assets. When the
carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount.
In assessing value in use, the Group conducts an annual internal review of asset values, which is used as a source
of information to assess for any indicators of impairment. External factors, such as changes in expected future
processes, technology and economic conditions, are also monitored to assess for indicators of impairment. If any
indication of impairment exists, an estimate of the asset's recoverable amount is calculated.
Impairment losses, including write-down of inventories to net realisable value, are recognised in the statement of
profit or loss in expense categories consistent with the functions of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists,
the Group estimates the asset’s or CGU's recoverable amount. A previously recognised impairment loss is reversed
only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the
last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not
exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in
the Statement of Comprehensive Income.
25
Notes to the Financial Statements (continued)
3.
o.
Summary of Significant Accounting Policies (continued)
Intangibles- refer note 19
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an
intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. Internally generated Intellectual Property, excluding capitalised development costs, is not
capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives
are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset
may be impaired.
The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at
least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of
future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period
or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible
assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the
intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-
generating unit level. Impairment is determined by assessing the recoverable amount of the cash-generating unit
(group of cash generating units), to which the intangible relates. Such intangibles are not amortised. The useful life
of an intangible asset with an indefinite life is reviewed at each reporting period to determine whether indefinite life
assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is
accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.
Patents, Trademarks and Licenses
The Group made upfront payments to acquire patents and licences. The patents have been granted for a period of
15-20 years, depending on the patent, by the relevant government agency with the option of renewal at the end of
this period. Licences for the use of intellectual property are granted for periods ranging between 3 and 20 years
depending on the specific licences.
Research and development costs
Research costs are mostly expensed as 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. Any
expenditure so capitalised is amortised over the period of expected benefit from the related project.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not yet available for use, or more frequently when an indication of impairment arises during the
reporting period.
26
Notes to the Financial Statements (continued)
3.
o.
Summary of Significant Accounting Policies (continued)
Intangibles (continued)
Research and development costs (continued)
A summary of the policies applied to the Group's intangible assets is, as follows:
Patents and
Trademarks
Licences
Development Costs of
assets in use
Useful lives
Finite
Finite
Finite
Amortisation method
used
15-20
Straight line
years –
3–20
Straight line
years
–
3-5 years – Straight line
Internally generated
or acquired
Acquired
Acquired
Internally generated
test
Impairment
/
Recoverable amount
testing
When an indicator
impairment
of
exists
When an indicator
impairment
of
exists
at
Amortisation method
each
reviewed
year-end;
financial
for
Reviewed annually
indicators of impairment
Gains or losses arising from derecognition of intangible assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Comprehensive
Income when the asset is derecognised.
p.
Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that
do not contain a significant financing component or for which the Group has applied the practical expedient, the
Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or
for which the Group has applied the practical expedient are measured at the transaction price determined under
AASB 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to
give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation
or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the
Group commits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
•
Financial assets at amortised cost (debt instruments)
27
Notes to the Financial Statements (continued)
3.
p.
•
•
Summary of Significant Accounting Policies (continued)
Financial instruments - initial recognition and subsequent measurement (continued)
Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt
instruments).
Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses
upon derecognition (equity instruments)
•
Financial assets at fair value through profit or loss
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of
the following conditions are met:
•
•
The financial asset is held within a business model with the objective to hold financial assets in order to
collect contractual cash flows
And
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified
or impaired.
The Group’s financial assets at amortised cost includes cash and cash equivalents, trade receivables, receivables
subject to financial guarantee and term deposits.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets
designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be
measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. Financial assets with cash flows that are not solely payments of principal
and interest are classified and measured at fair value through profit or loss, irrespective of the business model.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or loss.
The Group holds A$512,000 financial assets at fair value through profit or loss at 30 June 2020 (30 June 2019:
A$9,561,000).
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is
primarily derecognised (i.e., removed from the Group’s Consolidated Statement of Financial Position) when:
•
•
The rights to receive cash flows from the asset have expired; or
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a 'pass-through'
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of
the original carrying amount of the asset and the maximum amount of consideration that the Group could be
required to repay.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value
through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original
effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit
enhancements that are integral to the contractual terms.
28
Notes to the Financial Statements (continued)
3.
p.
Summary of Significant Accounting Policies (continued)
Financial instruments - initial recognition and subsequent measurement (continued)
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in
credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are
possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore,
the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Group may also consider a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
ii) Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at amortised cost, or financial
liabilities at fair value through profit or loss.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest rate (“EIR”) method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that
are an integral part of the EIR. The EIR amortisation is included as finance costs in the Statement of Comprehensive
Income.
Financial guarantee contracts
After initial recognition, financial guarantee contracts are subsequently measured at the higher of:
•
•
the amount of loss allowance determined in accordance with AASB 9.5.5; and
the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance
with AASB 15.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying
amounts is recognised in the Statement of Comprehensive Income.
(iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to
settle on a net basis, to realise the assets and settle the liabilities simultaneously.
29
Notes to the Financial Statements (continued)
3.
q.
Summary of Significant Accounting Policies (continued)
Provisions - refer notes 22 and 23
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle
the present obligation at the reporting date using a discounted cash flow methodology. The risks specific to the
provision are factored into the cash flows and as such a risk-free government bond rate relative to the expected life
of the provision is used as a discount rate. If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability.
The increase in the provision resulting from the passage of time is recognised in finance costs.
(i) Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be wholly settled
within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date
and are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-
accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting
date are measured as the present value of expected future payments to be made in respect of services provided
by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience
of employee departures, and periods of service. Expected future payments are discounted using market yields at
the reporting date on Corporate bonds with terms to maturity and currencies that match, as closely as possible, the
estimated future cash outflows. Long service leave is recognised in current and non-current liabilities, provided
there is an unconditional right to defer settlement of the liability. Annual leave is recognised in current liabilities.
(iii) Warranty Provision
A provision is recognised for expected warranty claims on products sold during the last 5 years, based on past
experience of the level of repairs and returns. It is expected that most of these costs will be incurred within the next
four financial years. Assumptions used to calculate the provision for warranties was based on the current
information available about returns based on the extended warranty period of up to 5 years for all products sold.
r.
Share-based payments transactions - refer note 33
The Group provides benefits to employees, including KMP and directors, in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled
transactions’).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date
at which they are granted.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to
the price of the shares of Seeing Machines Limited (market conditions).The cost of equity-settled transactions is
recognised, together with a corresponding increase in equity, over the period in which the performance conditions
and/or service conditions are fulfilled (the vesting period) ending on the date on which the relevant employees
become fully-entitled to the award (the vesting date).
30
Notes to the Financial Statements (continued)
3.
r.
Summary of Significant Accounting Policies (continued)
Share-based payments transactions (continued)
At each subsequent reporting date until vesting, the charge to the Statement of Comprehensive Income is the
product of:
(a) The grant date fair value of the award.
(b) The current best estimate of the number of awards that will vest, taking into account such factors
as the likelihood of employee turnover during the vesting period and the likelihood of non-market
performance conditions being met.
(c) The expired portion of the vesting period.
The charge to the Statement of Comprehensive Income for the period is the cumulative amount as calculated above
less the amounts already charged in previous periods. There is a corresponding entry to equity.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had
not been modified. An additional expense is recognised for any modification that increases the total fair value of
the share-based payment arrangement, or if otherwise beneficial to the employee, as measured at the date of
modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense
not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled
award, and designated as a replacement award on the date that it is granted, the cancelled and new award are
treated as if they were a modification of the original award, as described in the previous paragraph.
s.
Contributed equity- refer note 26
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.
t.
Revenue recognition
Revenue of the Group arises mainly from the sale and licencing of Driver (or Operator) Monitoring System (“DMS”)
hardware and software, after-sales monitoring and consulting services.
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the
customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for
those goods or services.
The disclosures of significant accounting judgements, estimates and assumptions relating to revenue from
contracts with customers are provided in note 5.
The following specific recognition criteria must also be met before revenue is recognised:
(i) Sale of goods
Revenue from the sale of goods is recognised when control of the goods is transferred to the customer, usually at
the time of delivery of the goods to customer, even if the terms include a right of return or other price protection
features.
(ii) Licence fees
Licences granted to customers are perpetual licences for use of intellectual property (“IP”) (usually in the form of
software). Where the software is provided on a hardware kit this is treated as one deliverable of a license due to
the fact that the hardware provided is of no value to the customer without the inclusion of the software and that the
software cannot be delivered through any other acceptable mechanism to the customer.
Recognition of revenue from licence fees is dependent on the nature of the license and whether it is a right to
access or a right to use license.
Licenses that provide a right to use IP are performance obligations satisfied at a point in time, generally recognised
upon provision of access to the software.
31
Notes to the Financial Statements (continued)
3.
t.
Summary of Significant Accounting Policies (continued)
Revenue recognition (continued)
Licenses that provide a right to access Seeing Machines IP are performance obligations satisfied over time because
the customer simultaneously receives and consumes the benefits provided by the Group. The Group uses time
elapsed to measure progress toward complete satisfaction of the service and recognises revenue on that basis.
(iii) Rendering of services
Revenue from support and consultancy, including monitoring services, is recognised by reference to the stage of
completion of a contract or contracts in progress at reporting date or at the time of completion of the contract and
billing to the customer. Stage of completion is measured by reference to labour hours incurred to date as a
percentage of total estimated labour hours for each contract which is determined by a set quotation with the
customer. When the contract outcome cannot be estimated reliably, revenue is recognised only to the extent of the
expenses recognised that are recoverable.
These contracts are typically customer-specific, and revenue recognition is therefore dependent on the facts and
circumstances of each arrangement.
For each contract of this type, Seeing Machines will determine whether the performance obligation is satisfied at a
point in time or over time. For performance obligations satisfied over time, Seeing Machines will use the method
to measure progress that best depicts transfer of control to the customer, which could be an output or an input
method.
(iv) Interest revenue
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
(v) Agreements with multiple deliverables
Where the Group enters into agreements for the provision of both goods and services as part of a single
arrangement, each deliverable that is considered to have a value to the customer on a standalone basis is
accounted for separately. The consideration from the arrangement is allocated to each deliverable based on the
relative stand-alone selling prices of those deliverables. In the absence of a stand-alone selling price, the
deliverable is measured based on the best estimate of the stand-alone selling price. The price of each component
is set in order to achieve a margin on that component of the sale consistent with that which would be achieved if
the Company sold each item separately.
(vi) Paid Research
The Company receives funding for research activities. These are typically multi-year agreements where the
Company is paid after the achievement of certain milestones. Revenue is recognised once the milestone has been
achieved.
(vii) Timing of Revenue Recognition
Revenue is recognised either at a point in time or over time, when (or as) the Company satisfies performance
obligations by transferring the promised goods or services to its customers.
If the Company satisfies a performance obligation before it receives the consideration, the Group recognises either
a contract asset or a receivable in its Statement of Financial Position, depending on whether something other than
the passage of time is required before the consideration is due.
Contract balances
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the
Group performs by transferring goods or services to a customer before the customer pays consideration or before
payment is due, a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is due).
32
Notes to the Financial Statements (continued)
3.
t.
Summary of Significant Accounting Policies (continued)
Revenue recognition (continued)
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before
the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made,
or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs
under the contract.
u.
Income taxes and other taxes - refer note 10
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and
tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date in
the countries where the group operates and generates the taxable income. Current income tax relating to the items
recognised directly in equity is recognised in equity and not in the Statement of Comprehensive Income.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss;
• when the taxable temporary difference is associated with investments in subsidiaries, and the timing of
the reversal of the temporary difference can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits
and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carry forward of unused tax credits
and unused tax losses can be utilised, except:
• when the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable profit or loss;
•
in respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint arrangements, deferred tax assets are recognised only to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit will be available
against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
33
Notes to the Financial Statements (continued)
3.
u.
Summary of Significant Accounting Policies (continued)
Income taxes and other taxes (continued)
Tax consolidation legislation
Seeing Machines Limited and its wholly owned Australian controlled entities implemented the tax consolidation
legislation as of 1 July 2005.
The head entity, Seeing Machines Limited and the controlled entities in the tax consolidated group continue to
account for their own current and deferred tax amounts. The Group has applied the Group allocation approach in
determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax
consolidated group.
In addition to its own current and deferred tax amounts, Seeing Machines Limited also recognises the current tax
liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as
amounts receivable from or payable to other entities in the Group. Details of the tax funding agreement are
disclosed in note 10.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement
are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities.
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of GST, except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of
the expense item as applicable; and
•
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the Statement of Financial Position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
v.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received, and all
attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income
on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.
When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the
related asset.
w.
Earnings per share- refer note 12
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any
costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares,
adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
• Costs of servicing equity (other than dividends);
•
The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that
have been recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result from the
dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
34
Notes to the Financial Statements (continued)
3.
x.
Summary of Significant Accounting Policies (continued)
Fair value measurement
Fair value is 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. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
•
•
•
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based
on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting
period.
y.
Comparatives
Where necessary, comparatives have been reclassified to ensure consistency with current year disclosures.
The effects of reclassifications in accordance with AASB 16 are shown in note 3.d.
Reclassification of warranty expenses have been effected in 2019 resulting in Cost of sales increasing and
Customer support and marketing expenses decreasing by A$209,000.
4.
Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise cash, trade receivables, term deposits and trade payables.
The Group has various other financial assets and liabilities such as sundry receivables and borrowings.
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with
the Group’s financial risk management policy. The objective of this policy is to support the delivery of the Group’s
financial targets whilst protecting future financial security.
Primary responsibility for identification and control of risk rests with the Board. The Board reviews and agrees
policies for managing each of its risks identified below, including, credit allowances and future cash flow forecast
projections.
35
Notes to the Financial Statements (continued)
4.
Financial Risk Management Objectives and Policies (continued)
Risk Exposures and Responses
Interest rate risk
The Group’s exposure to market interest rates relates to the Group’s short-term cash holdings. The Group did not
enter into any forward contracts during the 30 June 2020 financial year.
The Group’s exposure to interest rate risk is minimal.
At reporting date, the Group had the following mix of financial assets exposed to variable interest rates at the
designated variable interest rate:
FOR THE YEAR ENDED
Financial Assets
Cash and cash equivalents:
Exposed to Australian variable interest rate risk
Exposed to United States of America variable interest rate risk
Exposed to United Kingdom variable interest rate risk
Exposed to Japanese variable interest rate risk
Total Cash and cash equivalents
Consolidated
2020
2019
A$000
A$000
28,109
9,030
920
79
38,138
48,747
3,867
2,177
18
54,809
In addition to the above, the group had term deposits classified as financial assets at amortised cost totalling
A$510,000 (2019: A$9,560,000) that were subject to short term fixed interest rates.
Interest rate risk sensitivity
The Group’s policy is to not hedge against interest rate movements as funds held are in cash and short-term
deposits.
At 30 June 2020, if interest rates had moved, as illustrated in the table below, with all other variables held
constant, post-tax profit would have been affected as follows:
FOR THE YEAR ENDED
Consolidated
+ 1% (100 basis points)
- 0.5% (50 basis points)
Post Tax Profit Higher /
(Lower)
2020
A$000
2019
A$000
381
(191)
548
(274)
The movement in profit is due to interest rate changes on cash balances.
Interest rates on the lease and financing arrangements outstanding at year end are fixed and range from 8% to
10%.
Foreign currency risk
As a result of significant sales in North America, New Zealand and Europe (denominated in those currencies),
staffing costs and significant purchases of inventory denominated in United States dollars, the Group’s Statement
of Financial Position can be affected by movement in exchange rates generally and the US$/A$ exchange rate in
particular. The Group seeks to mitigate the effect of its foreign currency exposure by operating US Dollar bank
accounts. Approximately 70% of the Group’s sales are denominated in currencies other than the functional currency
of the operating entity making the sale, whilst approximately 47% of costs are denominated in the functional
currency.
The Group requires that on specific contracts with a value greater than A$200,000, the contract may be hedged to
any level within the amount of the contract. Group policy is that forward exchange contracts are limited to a total of
A$2,000,000.
36
Notes to the Financial Statements (continued)
4.
Financial Risk Management Objectives and Policies (continued)
It is the Group’s policy not to enter into forward contracts until a firm commitment is in place and to negotiate the
terms of the hedge derivative to exactly match the terms of the hedged item to maximize hedge effectiveness. The
Group did not enter into any forward contracts during the 30 June 2020 financial year. Further, for the purpose of
settlement of accounts that will likely occur within three months, funds received may be held in a currency other
than the functional currency to settle such amounts.
At 30 June 2020 the Group had the following exposure to foreign currency:
Financial Assets
Cash and cash equivalents (US$)
Cash and cash equivalents (GB£)
Cash and cash equivalents (JP¥)
Term deposits (GB£)
Trade and other receivables (US$)
Trade and other receivables (EUR)
Trade and other receivables (GB£)
Trade and other receivables (NZD)
Trade and other receivables (ZAR)
Total
Financial Liabilities
Trade and other payables (US$)
Trade and other payables (GBP)
Trade and other payables (EUR)
Trade and other payables (JP¥)
Trade and other payables (NZD)
Trade and other payables (SGD)
Trade and other payables (ZAR)
Total
Net exposure
Consolidated
2020
A$000
9,030
920
79
-
2,423
41
1,168
1,048
6
14,715
(2,126)
(395)
(491)
(95)
(13)
(3)
(1)
(3,124)
11,591
2019
A$000
3,867
2,177
18
9,049
6,985
-
1,138
1,271
3
24,508
(471)
(163)
-
(22)
-
-
(7)
(663)
23,845
The following sensitivity is based on the foreign currency risk exposures in existence at the reporting date:
Had the Australian dollar moved against major trading currencies, as illustrated in the table below, with all other
variables held constant, post-tax profit and equity would have been affected as follows:
Effect on profit before tax
2020
A$000
2019
A$000
Equity Higher / (Lower)
2019
2020
A$000
A$000
Consolidated
Change in USD rate
AUD / foreign currency +10%
AUD / foreign currency -5%
Change in GBP rate
AUD / foreign currency +10%
AUD / foreign currency -5%
Change in EUR rate
AUD / foreign currency +10%
AUD / foreign currency -5%
Change in NZD rate
AUD / foreign currency +10%
AUD / foreign currency -5%
(848)
491
(154)
89
41
(24)
(94)
54
(944)
546
(287)
166
-
-
(116)
67
(848)
491
(154)
89
41
(24)
(94)
54
(944)
546
(287)
166
-
-
(116)
67
37
Notes to the Financial Statements (continued)
4.
Financial Risk Management Objectives and Policies (continued)
Change in ZAR rate
AUD / foreign currency +10%
Change in JPY rate
AUD / foreign currency +10%
AUD / foreign currency -5%
Effect on profit before tax
2020
A$000
2019
A$000
Equity Higher / (Lower)
2019
2020
A$000
A$000
(1)
1
(1)
-
-
-
(1)
1
(1)
-
-
-
Management believes the reporting date risk exposures are representative of the risk exposure inherent in financial
instruments.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and
other receivables, contract assets and other financial assets. The Group’s exposure to credit risk arises from
potential default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.
Exposure at reporting date is addressed in each particular note. The Group accounts for expected credit losses in
accordance with its policy on impairment of financial assets detailed in note 4 a). The Group does not hold any
credit derivatives to offset its credit exposure.
Trade receivables
It is the Group’s policy that all customers who wish to trade are subject to credit verification procedures. In addition,
receivables balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is
not significant. Collateral is not requested nor is it the Group’s policy to securitise its trade and other receivables.
Customer credit risk is managed in line with the Group’s established policy, procedures and control relating to
customer credit risk management. The assessment of each customer is done on the payment history and the
reputation and size of the customer. Outstanding customer receivables are regularly monitored and followed up.
Refer note 15 for credit risk disclosures on trade and other receivables.
Capital management and liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and by undertaking ongoing monitoring
of actual and forecast cash flows and maturity profiles of financial assets and liabilities, in particular, the impact of
differing sources of funds on cost and shareholder dilution are taken into consideration when contemplating any
funding shortfalls.
The following table reflects all contractually fixed pay-offs for settlement, repayments and interest resulting from
recognised financial liabilities as of 30 June 2020. Cash flows for financial liabilities without fixed amount or timing
are based on the conditions existing at 30 June 2020.
Maturity analysis of liabilities based on management’s expectation
The risk implied from the table below reflects a balanced view of cash inflows and outflows. Trade payables and
other financial liabilities mainly originate from the financing of assets used in our ongoing operations such as plant,
equipment and investments in working capital (e.g. inventories and trade receivables). To monitor existing financial
liabilities as well as to enable an effective controlling of future risks, Seeing Machines Limited has established risk
reporting systems that reflects expectations of management of expected settlement of financial liabilities.
38
Notes to the Financial Statements (continued)
4.
Financial Risk Management Objectives and Policies (continued)
The table below summarises the maturity profile of the Group’s liabilities based on contractual undiscounted
payments:
FOR THE YEAR ENDED 30 June 2020
Trade and other payables
Borrowings
Financial guarantee
Lease Liabilities
Total
FOR THE YEAR ENDED 30 June 2019
Trade and other payables
Borrowings
Financial guarantee
Lease Liabilities
Total
<=6
months
A$000
6-12
months
A$000
>1
year
A$000
7,874
82
212
459
8,627
-
82
224
434
740
-
239
117
5,527
5,883
<=6
months
A$000
6-12
months
A$000
>1
year
A$000
3,621
218
209
370
4,418
-
147
214
380
741
-
403
480
6,408
7,291
Total
A$000
7,874
403
553
6,420
15,250
Total
A$000
3,621
768
903
7,158
12,450
The group monitors rolling forecasts of liquidity reserves on the basis of expected cash flows.
Fair values
As at 30 June 2020, the carrying values of the financial instruments approximate their fair value.
5.
Significant 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 and estimates on historical experience and on other various factors it believes to be reasonable under
the circumstances, the result of which form the basis of the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions
and conditions.
Management has identified the following critical accounting policies for which significant judgements, estimates
and assumptions are made. Actual results may differ from these estimates under different assumptions and
conditions and may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the financial
statements.
Significant accounting judgements
Capitalised development costs
Research costs are expensed as 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.
Taxation
The Group's accounting policy for taxation requires management's judgement as to the types of arrangements
considered to be a tax on income in contrast to an operating cost. Judgement is also required in assessing whether
deferred tax assets and certain deferred tax liabilities are recognised on the Statement of Financial Position.
Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences,
are recognised only where it is considered probable that taxable profit will be available against which the deductible
temporary differences and tax losses can be utilised.
39
Notes to the Financial Statements (continued)
5.
Significant accounting judgements, estimates and assumptions (continued)
Significant accounting judgements (continued)
Assumptions about the generation of future taxable profits and repatriation of retained earnings depend on
management's estimates of future cash flows. These depend on estimates of future production and sales volumes,
operating costs, restoration costs, capital expenditure, dividends and other capital management transactions.
Judgements are also required about the application of income tax legislation. These judgements and assumptions
are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations,
which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the Statement of
Financial Position and the amount of other tax losses and temporary differences not yet recognised. In such
circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require
adjustment, resulting in a corresponding credit or charge to the Statement of Comprehensive Income.
Significant judgement in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered
by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not to be exercised.
The Group has the option, under some of its leases to lease the assets for additional terms of three to five years.
The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That
is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the
commencement date, the Group reassesses the lease term if there is a significant event or change in
circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew
(e.g. a change in business strategy).
Significant accounting estimates and assumptions
Impairment of non-financial assets
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment. These include product and manufacturing performance,
technology, economic and political environments and future product expectations. If an impairment trigger exists,
the recoverable amount of the asset is determined (higher of fair value less cost of disposal and its value in use).
The Group determines whether intangible assets and capitalised development costs are impaired at least on an
annual basis. This requires an estimation of the recoverable amount of the cash-generating units, using a value in
use discounted cash flow methodology, to which the intangibles with indefinite useful lives are allocated.
Share-based payments
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined using the Black Scholes
method, with the assumptions detailed in note 33. The accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the
next annual reporting period but may impact expenses and equity.
Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience as well as manufacturers'
warranties (for plant and equipment). In addition, the condition of the assets is assessed at least once per year and
considered against the remaining useful life. Adjustments to useful lives are made when considered necessary.
Revenue recognition - Agreements with multiple deliverables
Where the Group enters into agreements for the provision of both goods and services as part of a single
arrangement, each deliverable that is considered to have a value to the customer on a stand-alone basis is
accounted for separately. The consideration from the arrangement is allocated to each deliverable based on the
relative stand-alone selling prices of those deliverables. In the absence of a stand-alone selling price, the
deliverable is measured based on the best estimate of the stand-alone selling price. The price of each component
is set in order to achieve a margin on that component of the sale consistent with that which would be achieved if
the Company sold each item separately.
40
Notes to the Financial Statements (continued)
5.
Significant accounting judgements, estimates and assumptions (continued)
Significant accounting estimates and assumptions (continued)
Revenue recognition - Non-recurring engineering
The Group recognises revenue from pre-production engineering services over time, using the completion of
specific performance obligations to measure progress towards the complete satisfaction of the service.
Revenue recognition - licences
Licenses that provide a right to use IP are performance obligations satisfied at a point in time, generally recognised
upon provision of access to the software. Licenses that provide a right to access Seeing Machines IP are
performance obligations satisfied over time because the customer simultaneously receives and consumes the
benefits provided by the Group.
Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing
rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow
over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-
of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’,
which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into
financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using
observable inputs (such as market interest rates) when available and is required to make certain entity-specific
estimates (such as the subsidiary’s stand-alone credit rating).
6.
Business combinations and acquisition of non-controlling interests
No new business combinations or acquisitions of non-controlling interests have occurred throughout the year ended
30 June 2020.
7.
Segment information
An operating segment is a component of the entity that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operational
decision makers to make decisions about resources to be allocated to the segment and to assess its performance
and for which discrete financial information is available.
Operating segments that meet the qualitative criteria as prescribed by AASB 8 Operating Segments are reported
separately. However, an operating segment that does not meet the qualitative criteria is still reported separately
where information about the segment would be useful to users of the financial statements.
There are no inter-segment revenues and there have been no changes to how each segment’s profit or loss is
measured.
a.
Segment Revenue based on operating segment
For management purposes, the Group is organised into key business units based on the nature of its products and
services.
The Company has identified two key operating segments, OEM and Aftermarket. The OEM segment includes the
previously classed Automotive and Aviation businesses which generate largely license based revenue, channeled
through Tier 1 customers. The Aftermarket segment includes previously classed Fleet and Off-Road, which
generates revenue from a mix of direct and indirect customers who retro-fit Seeing Machines technology into
commercial vehicles.
41
Notes to the Financial Statements (continued)
7.
a.
Segment information (continued)
Segment Revenue based on operating segment (continued)
OEM
Aftermarket
Scientific Advances
Research & Development
Other
Total
Segment Revenue
2019
2020
A$000
A$000
Segment (Loss) / Profit*
2020
A$000
2019
A$000
12,789
27,019
204
-
-
9,720
20,782
1,387
-
-
40,012
31,889
(2,525)
(2,186)
(1,449)
(15,617)
(24,933)
(46,710)
4,399
(3,005)
206
(26,022)
(17,584)
(42,006)
*Segment (Loss) / Profit includes A$7,609,000 (2019: $nil) engineering development expenditure reclassified from
research and development expenses to cost of sales in OEM (A$6,458,000) and Aftermarket (A$1,152,000) segments.
b.
Revenue from contracts with customers
In the following tables, revenue segments have been disaggregated by type of goods or services which also
reflects the timing of revenue recognition.
FOR THE YEAR ENDED
30 June 2020
Revenue Types
Sales at a point in time
Paid Research
Hardware and Installations
Licencing
Sales over time
Driver Monitoring
Non-recurring Engineering
Licensing
Total revenue
FOR THE YEAR ENDED
30 June 2019
Revenue Types
Sales at a point in time
Paid Research
Hardware and Installations
Sales over time
Driver Monitoring
Non-recurring Engineering
Licensing
Total revenue
OEM
A$000
Aftermarket
A$000
Scientific
Advances
A$000
Total
A$000
228
1,140
8,027
1,432
12,130
-
-
3,308
86
12,789
9,812
7
3,638
27,019
204
-
-
-
-
-
204
1,864
13,270
8,027
9,812
3,315
3,724
40,012
OEM
A$000
Aftermarket Advances
A$000
A$000
Total
A$000
Scientific
221
2,566
802
8,348
1,387
-
2,410
10,914
-
6,933
-
9,720
5,662
-
5,970
20,782
-
-
-
1,387
5,662
6,933
5,970
31,889
42
Notes to the Financial Statements (continued)
7.
c.
Segment information (continued)
Geographic Information
Revenues from external customers
Australia
North America
Asia-Pacific (excluding Australia)
Europe
Other
Total revenue from external customers
The revenue information above is based on the locations of the customers.
8. Other income
a. Net gain/(loss) on foreign exchange
Unrealised gain/(loss)
Realised gain/(loss)
Total gain on foreign exchange
b. Net gain on disposal of investment
Net gain/(loss) on disposal of investment
Total gain on disposal of investment
c. Other income
Government Grants
Research and development refundable tax incentives
Other income
Total other income
2020
A$000
2019
A$000
12,532
13,429
9,755
1,448
2,848
40,012
9,428
13,834
1,441
5,591
1,595
31,889
Consolidated
2020
A$000
2019
A$000
306
(688)
(382)
-
-
2,043
182
9
2,234
(65)
243
178
39
39
-
243
20
263
A total of A$1,690,000 is included in Government grants, relating to the JobKeeper Payment scheme subsidy
issued by the Australian Government for businesses significantly affected by COVID-19.
A total of A$182,000 relating to Research and Development refundable tax incentives from the Australian Taxation
Office were recognised during the year (2019: A$243,000). These are included in Other income and result from
Research and Development expenditure incurred in previous financial years.
43
Notes to the Financial Statements (continued)
9.
Expenses
a. Depreciation, impairment and amortisation expense
Depreciation expenses
Amortisation expense
Total depreciation, impairment and amortisation expense
b. Employee benefits expense
Wages and salaries and on-costs (excluding superannuation)
Superannuation expense
Share-based payment expense
Wages and salaries reported as cost of sales
Wages and salaries reported as cost of sales(NRE)
Total employee benefits expense
c. Short-term leases
Short-term leases and variable lease payments
d. Other expenses
Impairment of receivable
Sundry net rebate
Total other expenses
Consolidated
2020
A$000
2019
A$000
1,337
1,105
2,442
873
1,444
2,317
45,155
2,708
5,205
(2,761)
(7,609)
42,698
112
112
2,986
-
2,986
35,154
2,170
11,017
(2,194)
-
46,147
8
8
-
4
4
Employees benefit expenses include A$5,116,000 reflecting a change in the method of recognising the annual STI
and LTI grant in the year to which the grant related, rather than the year in which the amounts were approved and
paid, based upon an assessment of the current facts and circumstances of those arrangements. This has resulted
in the current year including both 2019 and 2020 amounts.
10.
Income Tax
The major components of income tax expense for the years ended 30 June 2020 and 2019 are:
The major components of income tax expense are:
Current income tax:
Current income tax charge
Adjustments in respect of current income tax of previous year
Taxation loss not recognised
Deferred tax:
Relating to the origination and reversal of temporary differences
Temporary differences not recognised
Income tax expense reported in the statement of comprehensive income
Consolidated
2020
A$000
2019
A$000
(9,046)
(71)
10,363
(935)
935
1,246
(8,352)
4,282
4,116
(4,294)
4,294
46
44
Notes to the Financial Statements (continued)
10.
Income Tax (continued)
a.
Reconciliation between tax expense and the product of the accounting profit before
income tax multiplied by the Group's applicable income tax rate is as follows:
Reconciliation of tax expense and the accounting profit multiplied by Australia’s domestic tax rate for 2019 and
2020:
Loss before income tax
(45,464)
(41,960)
At the parent entity's statutory income tax rate of 27.5% (2019:27.5%)
Share based payments (equity settled)
Entertainment
Research and development – R&D tax credit
Equity raising costs
Other
Origination and reversal of temporary differences
Other temporary differences
Temporary differences not recognised
Adjustments in respect of current income tax of previous years
Taxation loss not recognised
Foreign tax-withholding not recoverable
Impact of tax rate change on deferred tax balances not recognised
Total
b.
Deferred income tax at 30 June relates to the following:
Deferred tax relates to the following:
(i) Deferred tax liabilities
Intangible assets
Right of use assets
Accrued income (Jobkeeper)
Gross deferred tax liabilities
Set off deferred tax assets
Net deferred tax liabilities
(ii) Deferred tax assets
R&D offset
Provision for expected credit loss
Accrued expenses
Annual leave
Long service leave
Warranties
S. 40-880 Deduction
Finance lease liabilities
Unrealised FX loss
OPEX interest
Gross deferred tax assets
Net deferred tax balance not brought to account
Tax Losses
Losses not recognised
Net deferred tax asset
(12,503)
1,359
12
(50)
-
18
(63)
935
(71)
10,363
1,246
-
1,246
(11,539)
3,030
8
(67)
(705)
-
(3,917)
4,699
4,282
4,116
46
93
46
Consolidated
Statement of Financial
Position
2020
A$000
2019
A$000
58
(1,163)
(175)
(1,280)
1,280
-
3,244
41
1,067
726
221
131
868
1,765
(85)
150
8,128
6,848
(268)
(1,352)
-
(1,620)
1,620
-
3,244
69
11
566
192
65
1,286
1,868
20
213
7,534
5,914
(37,941)
37,941
-
(27,578)
27,578
-
45
Notes to the Financial Statements (continued)
10.
Income Tax (continued)
c.
Unrecognised temporary differences
At 30 June 2020, Seeing Machines Limited (consolidated) has unrecognised temporary differences in relation to
unbooked tax losses of A$138,225,000 (DTA of A$37,941,000) for which no deferred tax asset has been
recognised on the Statement of Financial Position (2019: Unrecognised tax losses of A$100,284,000 and DTA of
A$27,578,000). These losses are available for recoupment subject to satisfaction of relevant statutory tests in each
jurisdiction. As at 30 June 2020 there are net unrecognised deductible temporary differences of A$24,901,000
(DTA of A$6,848,000) for which no deferred tax asset has been recognised on the Statement of Financial Position
(2019: net unrecognised deductible temporary differences of A$21,500,000 and DTA of A$5,913,000).
d.
Tax consolidation
(i) Members of the tax consolidated group and the tax sharing arrangement
Seeing Machines Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group
with effect from 1 July 2016. Seeing Machines Limited is the head entity of the tax consolidated group. Members
of the tax consolidated group have entered into a tax sharing agreement that provides for the allocation of income
tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have
been recognised in the financial statements in respect of this agreement on the basis that the possibility of default
is remote.
(ii) Tax effect accounting by members of the tax consolidated group
Measurement method adopted under AASB Interpretation 1052 Tax Consolidation Accounting
The head entity and the controlled entities in the tax consolidated group continue to account for their own current
and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate
amount of current taxes and deferred taxes to allocate to members of the tax consolidated group. The current and
deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB
112 Income Taxes. The nature of the tax funding agreement is discussed further below.
In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Nature of the tax funding agreement
Members of the tax consolidated group have entered into a tax funding agreement. Under the funding agreement,
the funding of tax within the Group is based on accounting profit, which is not an acceptable method of allocation
under AASB Interpretation 1052. The tax funding agreement requires payments to/from the head entity to be
recognised via an inter-entity receivable (payable) which is at call. To the extent that there is a difference between
the amount charged under the tax funding agreement and the allocation under AASB Interpretation 1052, the head
entity accounts for these as equity transactions with the subsidiaries.
The amounts receivable or payable under the tax funding agreement are due upon receipt of the funding advice
from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity
may also require payment of interim funding amounts to assist with its obligations to pay tax instalments.
11. Dividends Paid and Proposed
No dividends or distributions have been made to members during the year ended 30 June 2020 (2019: nil) and no
dividends or distributions have been recommended or declared by the directors in respect of the year ended 30
June 2020 (2019: nil).
46
Notes to the Financial Statements (continued)
12. Earnings Per Share
Basic EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of the
Parent by the weighted average number of ordinary shares outstanding during the year. Diluted EPS amounts are
calculated by dividing the profit attributable to ordinary equity holders of the Parent by the sum of the weighted
average number of ordinary shares outstanding during the year and the weighted average number of ordinary
shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in the basic and diluted earnings per share
computations:
Earnings used in calculating earnings per share
For basic and diluted earnings per share:
Net Profit/(loss)
Net (Loss) attributable to ordinary equity holders of the company
Weighted average number of shares
Weighted average number of ordinary shares for basic earnings per share
Weighted average number of ordinary shares adjusted for the effect of
dilution
Consolidated
2020
A$000
2019
A$000
(46,710)
(46,710)
(42,006)
(42,006)
2020
Thousands
2019
Thousands
3,365,319
2,479,697
3,365,319 2,479,697
There are no instruments (e.g. share options) excluded from the calculation of diluted earnings per share that could
potentially dilute basic earnings per share in the future because they are either non-dilutive or anti-dilutive for both
of the periods presented.
There have been no transactions involving ordinary shares or potential ordinary shares outstanding between the
reporting date and the date of completion of these financial statements.
Information on the classification of securities
Options granted to employees (including KMP) as well as in the form of capital raising cost as described in note
33 are considered to be potential ordinary shares and have been included in the determination of diluted
earnings per share to the extent that they are dilutive. These shares have not been included in the determination
of basic earnings per share.
13. Parent Entity Information
Information relating to Seeing Machines Limited
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Reserves
Total shareholders’ equity
Loss of the Parent entity
Total comprehensive income of the parent entity
2020
A$000
2019
A$000
70,433
78,507
12,250
17,878
217,204
(171,359)
14,784
60,629
(34,377)
(34,377)
94,760
100,327
8,198
10,004
217,204
(136,652)
9,771
90,323
(43,197)
(43,197)
47
Notes to the Financial Statements (continued)
13.
Information relating to Seeing Machines Limited (the Parent) (continued)
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in
note 3, except, investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
14. Current Assets – Cash and Cash Equivalents
Reconciliation to Statement of Cash Flows
For the purpose of the Statement of Cash Flows,
cash and cash equivalents comprise the following
at 30 June:
Cash at bank
Total Cash and cash equivalents
15. Current Assets – Trade and Other Receivables
Current
Trade receivables
Provision for expected credit losses
Deferred finance income
Receivables subject to financial guarantee
Other receivables
Total trade and other receivables - current
a.
Allowance for expected credit loss
Consolidated
2020
A$000
2019
A$000
38,138
38,138
54,809
54,809
Consolidated
2020
A$000
2019
A$000
9,389
(150)
(546)
8,693
553
338
9,584
15,353
(250)
(774)
14,329
903
438
15,670
Trade receivables are non-interest bearing and are generally 30-60 days terms. The Group applies a simplified
approach in calculating ECLs and recognises a loss allowance based on lifetime ECL’s at reporting date (see note
a)). The provision for impairment loss recognised by the Group at 30 June 2020 was A$150,000 (2019: A$250,000).
See below for the movement in the allowance for expected credit losses:
As at 1 July
Provision recognised on adoption of AASB9
Provision for expected credit losses (decrease)/increase
As at 30 June
Individually Impaired
2020
A$000
250
-
(100)
150
2019
A$000
-
92
158
250
48
Notes to the Financial Statements (continued)
15. Current Assets – Trade and Other Receivables (continued)
a.
Allowance for expected credit loss (continued)
Set out below is the information about the credit risk exposure on the Group’s trade receivables and contract
assets using a provision matrix:
2020
Expected credit loss rate
Estimated total gross
carrying amount assessed
Expected credit loss
2019
Expected credit loss rate
Estimated total gross
carrying amount assessed
Expected credit loss
Trade receivables
0 - 30
days
31 - 60
days
Days past due
61 - 90
days
1.60%
3.60%
6.60%
Current
0.30%
91 +
days
10.60%
Total
A$000
7,752
23
319
5
452
16
321
21
545
58
9,389
123*
0.30%
1.60%
3.60%
6.60%
10.60%
12,774
38
473
7
131
5
238
16
1,737
184
15,353
250
*A specific provision for the amount of A$27,000 (2019: A$nil) was created for certain balances in addition to the expected credit
loss calculated using the provision matrix. The specific provision and expected loss amount in total constitute the allowance for
expected credit loss as shown in the previous table on page 48.
The Group considers a financial asset in default when contractual payments are 90 days past due unless the Group
has entered into discussion with the customer to agree varied payment terms. An impairment of A$2,986,000 (2019:
A$nil) has been recognised and included in Other expenses. Receivables 90 days past due but not considered in
default are: A$545,000 (2019: A$1,737,000). Payment terms on these amounts have been re-negotiated, and
satisfaction has been gained that payment will be received in full. It is expected that all other balances will be
received when due.
b.
Fair value and credit risk
All trade receivables are short term in nature and therefore, the carrying values approximate their fair value.
The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the
Group’s policy to transfer (on-sell) receivables.
c.
Foreign exchange risk
Detail regarding foreign exchange risk exposure is disclosed in note 4.
16. Current Assets – Inventories
Finished goods
Work in progress
Write-down of inventories for the period
Total inventories
Consolidated
2020
A$000
2019
A$000
5,168
-
(425)
4,743
7,932
304
(25)
8,211
49
Notes to the Financial Statements (continued)
17. Other Current Assets
Prepayments
Rental bonds
Contract assets
Other
Total other current assets
Consolidated
2020
A$000
2019
A$000
831
103
2,952
347
4,233
25
84
4,516
136
4,761
18. Non-current Assets – Property, Plant and Equipment
a.
Reconciliation of carrying amounts at the beginning and end of the year
CONSOLIDATED
Office Furniture,
Fittings and
Equipment
Research and
Development
Equipment
$000
$000
Total
$000
At 1 July 2019 net of accumulated depreciation and impairment
At 1 July 2019
Additions
Disposals
Depreciation charge for the year
2,801
731
(21)
(511)
139
191
(80)
(42)
2,940
922
(101)
(553)
At 30 June 2020 net of accumulated depreciation and
impairment
3,000
208
3,208
At 30 June 2020
Cost
Accumulated depreciation and impairment
Net carrying amount
6,685
(3,685)
3,000
793
(585)
208
7,478
(4,270)
3,208
Office Furniture,
Fittings and
Equipment
Research and
Development
Equipment
Total
CONSOLIDATED
A$000
A$000
A$000
At 1 July 2018 net of accumulated depreciation and impairment
At 1 July 2018
Additions
Disposals
Transfer to Right Of use assets
Depreciation charge for the year
3,490
382
-
(236)
(835)
169
8
-
-
(38)
3,659
390
-
(236)
(873)
At 30 June 2019 net of accumulated depreciation and
impairment
2,801
139
2,940
At 30 June 2019
Cost
Accumulated depreciation and impairment
Net carrying amount
6,078
(3,277)
2,801
726
(587)
139
6,804
(3,864)
2,940
50
Notes to the Financial Statements (continued)
19. Non-current Assets – Intangible Assets and Development Costs
a.
Reconciliation of carrying amounts at the beginning and end of the year
CONSOLIDATED
At 1 July 2019 net of accumulated amortisation
Additions
Amortisation
At 30 June 2020 net of accumulated amortisation
At 30 June 2020
Cost
Accumulated amortisation
Net carrying amount
CONSOLIDATED
At 1 July 2018 net of accumulated amortisation
Additions
Amortisation
At 30 June 2019 net of accumulated amortisation
At 30 June 2019
Cost
Accumulated amortisation
Net carrying amount
20. Other Financial Assets
Financial assets at amortised cost
Term deposits
Total Financial assets
21. Current Liabilities – Trade and Other Payables
Trade payables
Accrued expenses
GST, Payroll Tax and Payroll Liabilities
Other current liabilities
Total trade and other payables
Patents,
Development Licences and
Trademarks
$000
Costs
$000
Total
$000
1,456
-
(1,456)
-
1,083
246
(430)
899
2,539
246
(1,886)
899
4,251
(4,251)
-
1,373
(474)
899
5,624
(4,725)
899
Patents,
Development Licences and
Trademarks
A$000
costs
A$000
Total
A$000
2,764
109
(1,417)
1,456
765
346
(28)
1,083
3,529
455
(1,445)
2,539
4,644
(3,188)
1,456
1,595
(512)
1,083
6,239
(3,700)
2,539
Consolidated
2020
A$000
2019
A$000
512
512
9,561
9,561
Consolidated
2020
A$000
2019
A$000
1,789
1,349
4,666
70
7,874
2,313
659
573
76
3,621
51
Notes to the Financial Statements (continued)
21. Current Liabilities – Trade and Other Payables (continued)
a.
Fair value
Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.
Included in the GST, Payroll Tax and Payroll Liabilities is the accrual for the FY20 STI and AIP (Annual Incentive
Plan) amounting to A$3,739,000.
b.
Foreign exchange, interest rate and liquidity risk
Information regarding foreign exchange, interest rate and liquidity risk exposure is set out in note 4.
22. Provisions
Current
Annual leave
Long service leave
Warranties provision
Total provisions - current
Non-current
Long service leave
Other provisions
Total provisions - non-current
Consolidated
2020
A$000
2019
A$000
2,641
647
475
3,763
156
59
215
2,055
539
237
2,831
158
53
211
a.
Nature and timing of provisions
Refer to note 3(q) for the relevant accounting policy and a discussion of the significant estimations and
assumptions applied in the measurement of the provisions.
23. Warranties – Provisions
At 1 July 2019
Arising during the year
At 30 June 2020
At 1 July 2018
Arising during the year
Utilised
At 30 June 2019
Maintenance
Warranties
A$000
237
238
475
255
388
(406)
237
52
Notes to the Financial Statements (continued)
24. Contract liabilities
Deferred R&D grant relating to capitalised labour
Contract liabilities
Total contract liabilities
25. Financial Liabilities
Current
Financial liabilities at amortised cost
Lease liabilities
Loans and borrowings
Total financial liabilities at amortised cost
Financial guarantee contracts
Financial guarantor
Total financial guarantee contracts
Consolidated
2020
A$000
2019
A$000
-
263
263
182
491
673
Consolidated
2020
A$000
2019
A$000
893
164
1,057
553
553
750
365
1,115
903
903
Total financial liabilities - current
1,610
2,018
Non-Current
Financial liabilities at amortised cost
Lease liabilities
Loans and borrowings
Total financial liabilities at amortised cost
Total financial liabilities - non-current
Consolidated
2020
A$000
2019
A$000
5,527
239
5,766
6,408
403
6,811
5,766
6,811
Securitisation finance, in loans and borrowings, relates to the financing of system hardware and support. The term
of the finance is from October 2017 to October 2022. The finance is secured by the related equipment.
Inventory finance of nil (2019 A$200,000) was part of loans and borrowings, which was an Export Line of Credit
Agreement with the Export Finance and Insurance Corporation which was signed on 31 January 2019. The
Agreement provided a revolving loan facility to the Company up to the value of US$2,000,000 for funding inventory
purchases for sales to approved overseas customers.
53
Notes to the Financial Statements (continued)
25. Financial Liabilities (continued)
Loan facilities
Loan facilities
Amount utilised
Unused facilities
Consolidated
2020
A$000
2019
A$000
-
-
-
2,849
(214)
2,635
The unused facility related to a revolving loan facility of US$2,000,000 provided by the Export Finance and
Insurance Corporation. The facility expired 31 October 2019. This facility was secured by a general security deed
over all present and after-acquired assets of the Group.
26. Contributed Equity
Ordinary shares
Treasury shares
Total contributed equity
Number of ordinary shares
Consolidated
2020
A$000
2019
A$000
217,204
-
217,204
217,204
(1,109)
216,095
A$000
Restated
158,031
(1,109)
156,922
Issued and fully paid
Fully paid shares carry one vote per share and carry the right to dividends.
The Company has no set authorised share capital and shares have no par value.
Movement in ordinary shares:
As at 1 July 2018
Shares issued
Transaction costs
As at 30 June 2019
As at 1 July 2019
Shares issued
At 30 June 2020
Consolidated
2020
Thousands
2019
Thousands
3,365,214
3,365,214
Shares
Thousands
A$000
2,240,954
1,124,260
-
3,365,214
3,365,214
-
3,365,214
158,031
61,737
(2,564)
217,204
217,204
-
217,204
54
Notes to the Financial Statements (continued)
27. Accumulated Losses and Reserves
a.
Movements in accumulated losses and reserves
Refer to the Statement of Changes in Equity for movements in accumulated losses and other reserves.
b.
Nature and purpose of reserves
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries.
Employee equity benefits reserve
The employee equity benefits reserve is used to record the value of share-based payments provided to
employees, including KMP, as part of their remuneration. Refer to note 33 for further details of the plan.
28. Statement of Cash Flow Information
a.
Reconciliation of net loss after tax to net cash flows
FOR THE YEAR ENDED 30 June 2020
Reconciliation of net loss after tax to net cash flows from operations
Loss after tax
Depreciation
Amortisation
Net gain on foreign exchange (unrealised)
Foreign exchange movement relating to financing activities
Financial guarantor
(Profit)/Loss on disposal of investment
Share-based payments
Changes in assets / liabilities net of the effect of purchases
(Increase) / decrease in inventories
(Increase) / decrease in trade and other receivables
Decrease / (increase) in other assets
Increase / (decrease) in provisions
Increase / (decrease) in trade and other payables
Increase / (decrease) in other liabilities
Increase / (decrease) in contract liabilities
Net Cash used in operating activities
29. Leases
Group as a lessee
Consolidated
2020
A$000
2019
A$000
(46,710)
1,337
1,105
305
-
(350)
-
5,206
3,469
6,086
528
932
4,256
-
(410)
(24,246)
(42,006)
873
1,444
(65)
(9)
750
(39)
11,017
(3,911)
4,087
(3,884)
217
(2,680)
(16)
(201)
(34,423)
The Group has lease contracts for office space and other equipment used in its operations. Leases of office space
and other equipment generally have lease terms between 3 and 15 years. The Group’s obligations under its leases
are secured by the lessor’s title to the leased assets. Generally, the Group is restricted from assigning and
subleasing the leased assets.
The Group also has certain leases of machinery with lease terms of 12 months or less and leases of office
equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition
exemptions for these leases.
55
Notes to the Financial Statements (continued)
29. Leases (continued)
Group as a lessee (continued)
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
As at 1 July 2018 (restated)
Additions
Depreciation expense
Fx difference on opening balance
As at 30 June 2019 (restated)
Depreciation expense
Fx difference on opening balance
As at 30 June 2020 (restated)
Office space
A$000
5,580
-
(690)
28
4,918
(699)
12
4,231
Other
equipment
A$000
-
236
-
-
236
(96)
-
140
Total
A$000
5,580
236
(690)
28
5,154
(795)
12
4,371
Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and borrowings)
and the movements during the period:
As at 1 July
Additions
Accretion of interest
Payments
At 30 June
Current
Non-current
The maturity analysis of lease liabilities are disclosed in note 4.
The following are the amounts recognised in profit or loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases (included in occupancy and facilities
expense)
At 30 June
2020
A$000
7,158
-
546
(1,284)
6,420
893
5,527
2019
A$000
Restated
7,268
428
583
(1,121)
7,158
750
6,408
2020
A$000
795
546
112
2019
A$000
Restated
749
583
8
1,453
1,340
The Group has lease contracts that include extension and termination options. These options are negotiated by
management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs.
Management exercises significant judgement in determining whether these extension and termination options are
reasonably certain to be exercised (see note 5).
56
Notes to the Financial Statements (continued)
30. Related Party Disclosure
a.
Information about subsidiaries
The consolidated financial statements include the financial statements of Seeing Machines Limited and its
subsidiaries’ details are as follows:
Name
Seeing Machines
Incorporated
Seeing Machines Executive
Share Plan Pty Ltd
Seeing Machines Share
Plans Trust
Seeing Machines (Sales) Pty
Ltd
Fovio Pty Limited (formerly
Fovionix Pty Limited)
Fovio Incorporated
Seeing Machines (UK) Ltd
Seeing Machines Japan Ltd
Seeing Machines Germany
Country of
incorporation
United States
Australia
Australia
Australia
Australia
United States
United Kingdom
Japan
Germany
% Equity Interest
Investment
2020
2019
2020
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
770,307
770,307
100%
100%
100%
100%
100%
100%
100%
-%
100
10
12
100
50
169
13,636
41,689
100
10
12
100
50
169
12,132
-
b.
Materially owned subsidiaries
There are no subsidiaries held at 30 June 2020 that have non-controlling interests.
c.
Key management personnel
Details relating to key management personnel, including remuneration paid are included in note 32.
d.
Director-related transactions
(i) Shareholdings of Directors
Balance 1 July
2019
Granted as
remuneration
Acquired or
sold for cash
Net change
other
Balance 30
June 2020
Directors
K Hill
P McGlone (appointed
04/07/2019)
R Burger
L Carmichael
Y K NG*
J Murray (appointed
01/12/2019)
G Vorster (appointed
01/12/2019)
M. Brown (appointed
01/05/2020)
J Boyer (resigned 19/07/2019)
L Oxenham (resigned
22/07/2019)
550,000
187,080
1,450,000
-
606,383
1,696,654
1,411,190
-
187,080
374,159
374,159
-
-
-
666,667
-
-
-
-
100,000
5,030,894
-
1,122,478
-
-
-
-
-
-
-
(666,667)
(100,000)
683,333
-
-
-
-
-
-
-
-
-
-
-
2,187,080
-
793,463
2,070,813
1,785,349
-
-
-
-
-
6,836,705
57
Notes to the Financial Statements (continued)
30. Related Party Disclosure (continued)
d.
Director-related transactions (continued)
Balance 1 July
2018
Granted as
remuneration
Acquired or
sold for cash
Net change
other
Balance 30
June 2019
Directors
K Kroeger* (resigned
06/06/2019)
T Crane (resigned 30/04/2019)
R Burger
J A Walker (resigned
13/12/2018)
L Carmichael
Y K NG*
J Boyer (appointed
16/07/2018)
K Hill (appointed 13/12/2018)
L Oxenham (appointed
3/12/2018)
8,331,393
156,753
503,798
604,558
327,402
308,605
410,377
102,585
102,585
123,102
102,585
102,585
400,000
384,615
-
-
1,266,667
1,000,000
-
-
-
-
666,667
550,000
-
10,232,509
-
943,819
100,000
4,367,949
-
-
-
-
-
-
-
-
-
-
9,141,770
643,953
606,383
727,660
1,696,654
1,411,190
666,667
550,000
100,000
15,544,277
Notes:
* Yong Kang NG has an additional indirect interest in the Company by virtue of his direct and deemed (by virtue of his spouse)
ownership of shares in V S Industry Berhad (VSI), being 0.1606% of VSI's current issued share capital.
(ii) Other Director related transactions
All transactions with director-related entities were made under normal commercial terms and conditions.
31. Key Management Personnel
a.
Details of Key Management Personnel
(i) Directors
Kate Hill
Paul McGlone
Rudolph Burger
Les Carmichael
Yong Kang NG
Gerhard Vorster
John Murray
Michael Brown
Non-Executive Director and Chair
CEO and Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
(ii) Executives (Other Key Management Personnel)
Paul McGlone
Naomi Rule
Ryan Murphy
Nicolas Difiore
Mike Lenne
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Senior Vice President (SVP) OEM Solutions
Senior Vice President (SVP) Aftermarket Solutions
58
Notes to the Financial Statements (continued)
32. Compensation for Key Management Personnel
Post-
Employment
A$000
Share-Based
Payments*
A$000
Total
A$000
Short-Term
A$000
Salary/Fees/
Bonus/Leave
-
25
45
114
548
Options/Rights
Superannuation
FOR THE YEAR ENDED
30 June 2020
Chair
Kate Hill
Paul McGlone (appointed
4 July 2019)
Non-Executive Directors
R Burger
L Carmichael
Y K NG
John Murray (appointed 1
Dec 2019)
Gerhard Vorster
(appointed 1 Dec 2019)
Other Key Management
209
3,941
Personnel**
234 2,123 5,724
Total
*Share based payments includes accrued Director shares pertaining to remuneration taken as shares during the financial year
which will be granted post balance date. In previous financial years, only the value of shares issued during the year were
included in the compensation disclosure.
1,257
2,475
3,367
88
116
105
30
61
61
58
55
44
1,218
-
-
-
159
645
55
42
15
33
40
9
-
-
Post-
Employment
A$000
Share-Based
Payments
A$000
Total
A$000
Short-Term
A$000
Salary/Fees/
Bonus/Leave
-
-
37
170
Options/Rights
Superannuation
FOR THE YEAR ENDED
30 June 2019
Chairman
CEO and Executive
Directors
Kate Hill (appointed 13 Dec
2018)
Jack Boyer (resigned 22
July 2019)
K. Kroeger (resigned 6 Jun
2019)
L Oxenham (appointed 3
Dec 2018)
Non-Executive Directors
R Burger
J A Walker (resigned 13
Dec 2018)
T Crane (resigned 30 Apr
2019)
L Carmichael
Y K NG
Other Key Management
Personnel**
Total
**Other key management personnel include the Executive as listed at note Executives (Other Key Management Personnel)
6,323
6,541
3,504
4,598
207
265
12
12
12
51
50
43
-
-
-
155
457
201
12
15
43
13
63
22
2
-
-
-
-
37
170
655
214
75
39
63
62
55
10,034
11,404
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period
related to key management personnel.
59
Notes to the Financial Statements (continued)
33. Share-based payments plans
a.
Recognised share-based payment expenses
The expense recognised for employee services received during the year is shown in the table below:
Expense arising from the performance rights long term incentive
Expense arising from options under long term incentive
Expense arising from the shares issued to employees
Directors’ shares
Total expense arising from share-based payment transactions
b.
Type of share-based payment plan
2010 Executive Share Plan
Consolidated
2020
A$000
2019
A$000
4,919
23
171
93
5,206
10,741
60
153
63
11,017
In July 2010 the Company adopted an Executive Share Plan (2010 Plan). Under the 2010 Plan the Board may offer
and issue ordinary fully paid shares (Shares) to employees or officers (including Directors) of the Company from
time to time. The Company has made the following types of offers under the 2010 Plan:
(i) Long Term Incentive - 2019 Performance rights or share options offers- Executive and key staff
From 1 July 2015, senior staff and other key staff are offered long term incentive (LTI) performance rights or share
options. Under this structure, the staff are only able to exercise the rights, and have new ordinary shares issued to
them, if any performance, market and vesting conditions are met. These conditions typically include a performance
condition requiring the staff member to achieve a minimum “meets expectations” rating and some rights have
included a market condition in the form of a minimum Target Share Price (TSP). The vesting period ranges from 9
months to 5 years from the end of the relevant financial year or grant date. Performance rights or options are often
offered as part of the annual remuneration review and may be offered at other times. Any offer of performance
rights or options requires Board approval and, when granted, is announced to the market.
Options were issued to a key staff member in October 2016, the options were valued using a binomial model using
volatility as a proxy for implied volatility, long term UK government bond prices for the risk free rate and AIM share
price information. All options expire after 10 years. At 30 June 2020 the weighted average remaining life for the
outstanding share options was 8.87 years (2019: 9.18 years) and the exercise price for all outstanding options was
£0.0561. No new options were granted during the year.
In October 2019 the Company awarded a total of 28,995,070 performance rights in respect of ordinary shares to
Executive and key staff to be issued at nil cost. The rights were valued at the spot rate of the shares at grant date.
The rights vest annually over 3 years in equal tranches with the first vesting date being 1 July 2020 and require the
employee to remain continuously employed by the Company until each relevant vesting date. If an employee leaves
before the rights vest and the service condition is therefore not met the rights lapse.
In some cases, for 'good leavers', determined on a discretionary basis by management, options are prorated for
service in the current period and that portion are vested on termination, the remaining rights are cancelled.
There is no cash settlement of the rights.
(ii) STI 2019 - Ordinary Shares
In October 2019 the Company issued a total of 3,250,877 ordinary shares to staff and non-executive directors in
lieu of cash remuneration. The shares were valued at grant date at £0.0441. The number of shares issued to each
employee was calculated with reference to the cash equivalent the individual would have received based on their
performance, net of superannuation and tax payable on the gross bonus.
60
Notes to the Financial Statements (continued)
33. Share-based payments plans (continued)
(iii) 2019 CEO Call Options Scheme
In September 2019 the Company awarded rights to acquire 12,000,000 ordinary shares as part of the Company's
Call Option Scheme to the CEO. These rights will vest on 1 July 2022, providing the CEO remains continuously
employed by the company, and will be exercisable at any point within one year at a price of £0.0441 per ordinary
share, being the average daily volume weighted average price (VWAP) over the 5 trading days to 27 September
2019. There is no cash settlement of the options and the options will expire if they are not exercised by 1 July 2023.
Taking into account the terms and conditions upon which the options were granted, and the assumptions outlined
below, the weighted average fair value of the options at grant date is £0.0182. At 30 June the weighted average
remaining life for the outstanding share options was 3 years (2019: nil)
(iv) 2019 CEO LTI Performance Rights
In September 2019 the Company awarded 25,000,000 rights in respect of ordinary shares to the CEO to be issued
at nil cost. The rights vest annually over 5 years in equal tranches with the first vesting date being 1 July 2020, with
each issue conditional on the satisfaction of key conditions including TSP performance and require the employee
to remain continuously employed by the Company until each relevant vesting date. For the purposes of determining
whether the TSP has been achieved at a particular vesting date the share price will be determined by the 30-day
VWAP immediately prior to the particular vesting date. If the employee leaves before the rights vest and the service
condition is therefore not met the rights lapse.
Achievement of the following TSP performance is required for each tranche to vest:
Tranche 1: £0.061
Tranche 2: £0.076
Tranche 3: £0.095
Tranche 4: £0.119
Tranche 5: £0.149
If the TSP has been achieved at the particular vesting date, then 100% of the performance rights allocated to that
tranche will vest.
Where at least 90% of the TSP has been achieved at the particular vesting date the corresponding Performance
Rights equal to the proportion of the TSP achieved for that year will vest.
Where less than 90% of the TSP is achieved 0% of the rights will vest. However, the performance rights issued
under the tranche will have the opportunity to achieve 50% vesting two years later by way of re-test. The re-test
feature is such that 50% will vest if the original TSP is achieved at the following two consecutive LTI vesting dates.
The remaining 50% will lapse.
In some cases, for ‘good leavers’, the Board, in its absolute discretion, may partially allow some of the rights to
acquire Shares to be exercised or allocate cash on a pro rata basis, having regard to the group performance to that
point and the likelihood that the group will achieve the KPIs by the performance date. Any remaining rights are
cancelled.
Taking into account the terms and conditions upon which the options were granted, and the assumptions outlined
below, the following fair values have been calculated:
Tranche 1: £0.0190
Tranche 2: £0.0193
Tranche 3: £0.0193
Tranche 4: £0.0192
Tranche 5: £0.0192
61
Notes to the Financial Statements (continued)
33. Share-based payments plans (continued)
At 30 June the weighted average remaining life for the outstanding performance rights was 4.2 years (2019: Nil).
The fair values at grant date are estimated using a binomial pricing model using historic volatility as a proxy for
implied volatility, long term UK government bond prices for the risk-free rate and share price information from
DataStream. The following assumptions have been used in calculating the fair values in relation to offers made to
the CEO:
Dividend yield: 0%
Volatility: 63%
Post-vesting Withdrawal Rate (options only): 0%
Risk-free interest rate:
1 Year: 0.56%
2 Year: 0.44%
3 Year: 0.39%
4 Year: 0.36%
5 Year: 0.35%
6 Year: 0.36%
7 Year: 0.37%
For the year ended 30 June 2020, the Company has recognised A$5,206,000 of share-based payment expense
in the statement of profit or loss (2019: A$11,017,000).
e.
Summaries of shares issued and held in Trust:
Shares held in Trust at 1 July 2019
Issued during the year
Vested and transferred during the year
Shares held in Trust at 30 June
2020
No '000
59,556
-
(18,151)
41,405
2020
WAEP
(pence)
7.06
-
4.57
6.92
2019
No '000
17,927
70,070
(28,441)
59,556
2019
WAEP
(pence)
5.78
6.60
5.13
7.06
f.
Summaries of rights granted under the Performance Right Scheme:
Outstanding at 1 July
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 30 June
Exercisable at 30 June
34. Commitments
2020
Number
87,717,529
65,995,070
(8,450,406)
(12,928,785)
132,333,408
2020
WAEP
(pence)
7.06
4.27
4.99
7.65
5.97
2019
Number
111,920,976
19,936,023
(13,975,165)
(30,164,305)
87,717,529
48,116,677
7.50
39,099,094
2019
WAEP
(pence)
8.25
6.75
10.25
8.79
7.06
7.75
At 30 June 2020, the group had commitments of A$30,284,000 (2019: A$nil) relating to the manufacturing
contract for the Group's Guardian 2.1 product for the period July 2020 to March 2021.
62
Notes to the Financial Statements (continued)
35. Contingent Assets and Contingent Liabilities
During the 2019 financial year, the Company made a sale of its Fleet product to a customer in New Zealand. The
customer subsequently entered into a sale and leaseback agreement with HP Financial Services (New Zealand)
for the total amount of the sale being A$1,200,000. The proceeds from the sale and leaseback agreement were
used by the customer to pay the Company in full for the sale. The Company has agreed to act as ‘step in guarantor’
to HP Financial Services New Zealand such that - in the event of a default by the customer on the repayments of
the loan - the Company will ‘step in’ and assume responsibility for the loan repayments. In the event that the
customer defaults on the loan agreement, the maximum exposure to the Company would be A$500,000. There is
currently no reason to expect that such a circumstance should arise.
36. Events After the Reporting Date
On 23 October 2020, Seeing Machines issued 372,000,000 new ordinary shares of no par value each (the “New
Ordinary Shares”) to Federated Hermes, a well known US institutional investor, at a price of 4.10 pence per New
Ordinary Share, raising gross proceeds of approximately US$20,000,000 (the “Placing”). The net proceeds of the
Placing will be used to strengthen the Company’s balance sheet and for general working capital and corporate
purposes.
37. Auditors' Remuneration
The auditor of Seeing Machines Limited is Ernst & Young.
Consolidated
2020
A$
2019
A$
Amounts received or due and receivable by Ernst & Young for:
An audit or review of the financial report of the entity and any other entity in
the consolidated group 199,443 163,386
Other services in relation to the entity and any other entity in the
consolidated group:
Tax compliance
56,900
256,343
34,105
197,491
63
Directors' declaration
In accordance with a resolution of the Directors of Seeing Machines Limited, I state that:
1.
In the opinion of the Directors:
(a)
the financial statements and notes of the consolidated entity are in accordance with the Corporations
Act 2001, including:
(i) Giving a true and fair view of the consolidated entity's financial position as at 30 June 2020 and
of its performance for the year ended on that date; and
(ii) Complying with Accounting Standards (including Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b) The financial statements and notes comply with International Financial Reporting Standards as
disclosed in note 3.6; and
(c) There are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2.
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020.
On behalf of the board
Paul McGlone
Executive Director & Chief Executive Officer
Canberra
64
Ernst & Young
200 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
Independent Auditor's Report to the Members of Seeing Machines
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Seeing Machines Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2020, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year then ended, notes to the financial statements,
including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020
and of its consolidated 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 Responsibilities for the Audit of the Financial
Report section of our report. 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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, 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. We have determined the matters described below to be the key audit matters
to be communicated in our report.
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Liability limited by a scheme approved under Professional Standards Legislation
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
Revenue recognition for non-recurring engineering services and licensing arrangements
Why significant
How our audit addressed the key audit matter
The Group has contractual arrangements with
certain customers for non-recurring engineering
services. In the year ending 30 June 2020 non-
recurring engineering services accounted for
$3.3m of total revenues of $40.0m. There is
significant judgement associated with
determining when performance obligations have
been satisfied in order to recognise revenue over
time.
The Group has licensing arrangements with
customers for use of technology developed by
the Group. In the year ending 30 June 2020
licensing revenue accounted for $11.5m of total
revenues of $40.0m. There is significant
judgement associated with determining whether
a licence conveys either:
► A right to access the Group’s intellectual
property throughout the licence period,
which results in revenue that is recognised
over time; or
► A right to use the Group’s intellectual
property as it exists at the point in time the
licence is granted, which results in revenue
that is recognised at a point in time.
Based on the significant judgement required to
determine revenue recognition for non-recurring
engineering services and licences and their
significance to total revenues recorded by the
Group, we have determined this to be a key audit
matter.
Our procedures included the following:
► We assessed whether the Group’s revenue
recognition policies were in accordance with
Australian Accounting Standards.
►
For all non-recurring engineering and licence
arrangements that we considered to be
individually significant and for a sample of the
remaining arrangements we:
► obtained an understanding of the
transaction through inspection of the
underlying contractual agreements and
other related documents, as well as
discussions with the Group’s accounting
and/or sales representatives;
►
►
evaluated management’s analysis of the
engineering services delivered with
reference to the performance obligations
and obtained evidence of service delivery
and customer acceptance. We agreed inputs
into the revenue recognition calculation to
sales documentation, employee time and
cost records; and
evaluated management’s analysis of the
licence arrangements including whether the
licence conveyed a right to use or a right to
access the Group’s intellectual property and
the performance obligations, if any, over
the licence period. We obtained and read
the licence agreements to assess the
position adopted by Group including
reconciliation of key inputs into the revenue
recognition calculations.
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Liability limited by a scheme approved under Professional Standards Legislation
Why significant
How our audit addressed the key audit matter
The Group has included disclosures for revenue
recognition in Note 7 and related significant
judgments in Note 5 of the financial report.
► We evaluated the associated financial report
disclosures.
Share based payments
Why significant
How our audit addressed the key audit matter
The Group provides benefits to employees and
directors, in the form of share based payment
arrangements, whereby employees render
services in exchange for shares or rights over
shares. A new plan was entered into with the
Chief Executive Officer (CEO) of the Group
during the year. The total expense arising from
share-based payments arrangements for the
year ended 30 June 2020 is $5.2m.
The accounting for share based payments is
complex, including the valuation of options on
grant date, assessing the impact of modifications
or cancellations of awards and determining the
vesting period.
Given the significant judgement and complexity
in accounting for share based payments, we
have determined this to be a key audit matter.
The Group has included disclosures for share
based payments in Note 33 of the financial
report.
Our procedures included the following:
► We obtained the share based payment plans and
agreed the key terms to the valuation
calculations.
► We assessed the accounting treatment adopted
by the Group, including the judgement applied in
determining vesting periods, to determine
whether it is in accordance with the
requirements of Australian Accounting
Standards.
► On a sample basis we agreed key inputs to the
valuation calculation to individual employment
contracts.
► We considered the third party valuation for the
new plan provided to the CEO during the year. In
conjunction with EY valuation specialists, we
assessed the assumptions and inputs applied by
the third party valuation. We assessed the
competence, capabilities and objectivity of the
third party expert.
► We tested the mathematical accuracy of each
valuation model used in calculating the share
based payment expense recognised during the
year.
► We evaluated the associated financial report
disclosures.
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Preparation of the financial report on a going concern basis
Why significant
How our audit addressed the key audit matter
As explained in Note 2, the Group reported a loss
for the year of $46.7m, incurred net cash
outflows from operating activities of $24.5m and
had a balance of cash and cash equivalents at 30
June 2020 of $38.1m.
Subsequent to year end, on 23 October 2020,
the Group announced a placement of 372m
shares to raise gross proceeds of approximately
$27m.
The financial report has been prepared on a
going concern basis. Following the capital raise,
based on the forecasts prepared by
Management, the Group has sufficient liquidity
to meet it’s requirements beyond 12 months
from the date of this financial report.
Given the significance of this matter to the basis
of preparation of the financial report and the
subjective nature of estimating future cash flows
and results, we have determined this to be a key
audit matter.
The Group has included disclosures for the going
concern basis of preparation in Note 2 of the
financial report.
Our procedures included the following:
► Obtained an understanding of the process
undertaken by Management to prepare the FY21
budget and FY22 cash flow forecast;
► Obtained the board approved FY21 budget and
FY22 cash flow forecast and assessed the
reasonableness of a sample of key inputs and
assumptions used, with reference to historical
performance and the Group’s strategic plans;
► Challenged the key assumptions in the forecasts
including those pertaining to revenue growth
and the timing of significant payments for the 12
month period from the date of this report
including the performance of a number of
sensitivity tests for key assumptions;
► Obtained the Group’s market announcement of
the share placement dated 23 October 2020 and
reconciled the total number of shares issued and
the gross proceeds raised to the transaction
statement provided by the broker of the
placement; and
► We evaluated the associated financial report
disclosures.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2020 Annual Report other than the financial report and our auditor’s report
thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date
of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the
date of this auditor’s 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.
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.
A member firm of Ernst & Young Global Limited
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If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary 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.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the 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 the 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 the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
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.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
•
•
•
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.
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.
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 to the directors, we determine those matters 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.
Ernst & Young
Anthony Ewan
Partner
Sydney
28 October 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation