Tesserent Limited Financial Report 2018
2018 ANNUAL REPORT
TESSERENT LIMITED AND
CONTROLLED ENTITIES
ABN: 13 605 672 928
Page 0
Tesserent Limited Financial Report 2018
CONTENTS
Chairman’s Letter to Shareholders
CEO’s Letter to Shareholders
About Tesserent
Tesserent Board of Directors
Tesserent Executive Team
Corporate Governance
Directors’ Report
Remuneration Report
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
Consolidated Statement of Financial
Position
Consolidated Statement of Changes in
Equity
Consolidated Statement of Cash Flows
Notes to The Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Information for Listed Public
Companies
Corporate Directory
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3
4
7
8
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10
18
26
38
39
41
42
43
72
73
77
79
FY18 COMPANY HIGHLIGHTS
Tesserent Limited Financial Report 2018
REVENUE
$5.33M
Up 21% yoy*
CASH BALANCE
$1.72M
REDUCED operating &
Personnel costs
OPEX
DOWN 11.9%
RECEIVED
$844K
& DEBT FREE
R&D TAX CONCESSION
CAPITAL RAISED
$500K
NEW CYBERSECURITY
PARTNERSHIP
SOPHOS
GARTNER MAGIC
QUADRANT LEADER
CATEGORY GROWTH
CATEGORY GROWTH
SIEM
SD-WAN
INNOVATIVE
PRODUCT DEVELOPMENT
ZERO TOUCH
ENABLING streamlined
CUSTOMER DEPLOYMENT
INNOVATIVE
PRODUCT DEVELOPMENT
SD-WAN
PROPRIETARY TECHNOLOGY
PLATFORM
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*Excluding Customer contracts sold to FZO in FY2017.
Tesserent Limited Financial Report 2018
CHAIRMAN’S LETTER TO SHAREHOLDERS
Dear shareholders,
We welcome you to this year’s annual report, which marks the end of the financial year to 30 June 2018 (“FY18”).
Tesserent is one of Australia’s leading specialists in managed cybersecurity and networking, and I am delighted to
update you on our progress over the last financial year.
FY18 of was a year of two halves. The first half of the year Tesserent worked at recovering the revenue gap left by
the disposal of Blue Reef assets. Our secure networking and software defined wide area networking (SD-WAN)
initiatives delivered strong new revenue from both new and existing customers.
In the second half of the year, I replaced Russell Yardley as Chairman and the board commenced a review of the
management structure. This review resulted in Julian Challingsworth being appointed interim CEO in July 2018.
Julian started immediately working on the Asta Solutions Pty Ltd (Asta) acquisition. Julian’s experience includes
serving as a Managing Director and Partner of The Litmus Group for over 10 years and as a board member of PPB
Advisory. Julian was a key driver in growing The Litmus Group's multiple business units in Australia and
internationally before it was acquired by PPB Advisory.
Julian’s appointment underpins Tesserent’s growth story to become a global leader as an end-to-end managed
security and IT services provider. As Julian discusses in the CEO’s letter, the upcoming Asta acquisition forms a
key cornerstone of our FY19 growth strategy. Asta first partnered with Tesserent in late 2017, to quickly become a
successful CyberBiz channel partner.
Creating leverage through partnerships with leading industry players continues to enhance and expand Tesserent’s
presence in new and existing markets. Recently we announced a new partnership with leading Australian cloud and
IT managed services provider, SXiQ.
We also signed a global partnership with Blockchain Global Limited, and working closely with Asta in this
partnership, we’ll develop a unique and scalable end-to-end managed security solution that can be replicated in
South East Asia for crypto exchanges.
We will continue to invest in strategic partnerships, both locally in Australia and overseas. Tesserent is currently
pursuing additional capability in cybersecurity consulting as there are considerable revenue opportunities that may
warrant an in-house based capability and potential acquisition.
The board will continue to consider opportunities in all complementary market segments, including the high-growth
areas of blockchain, cloud services, and software defined networking.
We have an exciting year of activity scheduled, to accelerate the Tesserent business, and drive shareholder value.
On behalf of the Tesserent Board, I’d like to express gratitude to our shareholders for your continued and ongoing
support of our growth journey.
Onwards and upwards.
ROBERT LANGFORD
Chairman and Non-executive Director
Tesserent Limited
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CHIEF EXECUTIVE OFFICER’S LETTER TO SHAREHOLDERS
Tesserent Limited Financial Report 2018
Dear shareholders,
The completion of FY18 represents the beginning of an exciting year of rapid growth for Tesserent.
The past year shows consistent activity in new sales, continual reduction in operational costs, strengthened
industry partnerships and ending in a solid debt-free position with a cash balance of $1.7M. Key financial metrics
include:
• Whilst reported revenue was down 0.9% year-on-year, underlying 21.6% revenue growth year-on-year
(excluding customer contracts sold to Family Zone Cyber Security Ltd (ASX:FZO) in FY17) was achieved.
• Received $844K from the ATO in Research and Development tax concessions for the ongoing
development and expansion of Tesserent’s proprietary technology platform.
• Strategic OEM partnership formed with Gartner Magic Quadrant1 cybersecurity company, Sophos.
• Sustained reduction in operating and personnel costs by 11.9%.
• Strong growth in SIEM (Security Information and Event Management) revenue due to an increased
regulatory environment with introduction of the Notifiable Data Breaches Scheme in February 2018.
• Strong growth in secure networking and SD-WAN (Software Defined Wide Area Networking) technologies.
THE RIGHT TEAM
I’d like to highlight the effort of co-founder and former CEO Keith Glennan to get Tesserent to where it is today.
The solid foundation on which Keith has built Tesserent, both technically and financially, has been essential to the
company’s evolution today as an MSSP and ASX-listed company. Tesserent’s continually expanding client base
and consistent reoccurring revenue has provided the perfect launchpad for our next phase of accelerated growth.
The managed security services business model provides customers with a smarter, faster and capital efficient
approach to optimising critical infrastructure and minimising risk.
I welcome Remko Jacobs to the Tesserent executive team as Chief Customer Officer. Remko, who also has been
leading sales at Asta, has over 25 years of experience in senior management roles in the IT Industry across the
globe, including executive roles at Infosys Australia (since inception), Cognizant Australia, and Wipro Limited.
The refreshed Tesserent board and executive team are seasoned experts in cybersecurity, IT services, and
consulting. We have a proven track-record of success and are capable of delivering on Tesserent’s vision to
become Australia’s leading end-to-end, secure IT service provider. We will continue to build a focused team that
can execute, whilst we scale the business and integrate new acquisitions including Asta.
STRATEGY FOR GROWTH
Tesserent’s accelerated growth strategy is to gain further leverage from its capabilities in the growing
cybersecurity and IT services markets, and to pursue new opportunities in the high-growth areas of blockchain
and software defined networking.
Locally, we are seeing unprecedented allocation of resources on cybersecurity, with the estimated spend in the
Asia-Pacific region to reach US$22 billion by 20202.
Globally there has been US$13.1B of investment into blockchain infrastructure and applications across multiple
industry categories in 2017-183.
1 Gartner Magic Quadrant for Endpoint Protection Platforms, 2018
2 Department of Prime Minister and Cabinet Cyber Strategy white paper
3 ICO Data 2018 and 2017
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Tesserent Limited Financial Report 2018
Tesserent has been investing in building scalable capability and capacity to become a leader in the managed
security service market. Initiatives include:
• State-of-the-art, ISO27001 certified Security Operations Centre (SOC) in Melbourne
• Proprietary MSSP technology enabling Security-as-a-Service
• Scalable products (Cloud Firewall, SIEM, SD-WAN)
• Additional services (cyber consulting, penetration testing, staff training)
Tesserent has built powerful partnerships with Gartner Magic Quadrant cybersecurity vendors including Palo Alto
Networks4, Cisco Systems5, Sophos6, and AlienVault7, and top-tier regional service providers including SXiQ and
Blockchain Global. Tesserent is well positioned to switch from a focus on product development to a focus on
delivering turn-key solutions that will accelerate the monetisation of available capacity.
Our exciting roadmap of new blockchain and security solutions will rapidly accelerate the company’s path to
profitability and underpin share price growth.
EXCITING ACQUISITION
In July 2018, Tesserent announced it had signed a binding terms sheet to acquire Asta Solutions Pty Ltd, a
company with a 19-year track record of delivering innovative IT solutions to businesses across Asia Pacific.
The acquisition consideration is based on a multiple of four times normalised EBITDA and is payable in a mix of
cash and shares. The acquisition will extend the company's value proposition, its geographical presence
(Melbourne, Sydney and Auckland), and significantly increases Tesserent’s active customer base. Tesserent
expects to seek shareholder approval at an EGM in December 2018.
It’s been exciting to work closely with Asta CEO, Bill Angelidis, over the past few months as we prepare for
integration, and to hit the ground running with sales, marketing and new product initiatives. The mix of immediate
cross-selling potential and our joint capabilities to deliver end-to-end secure IT solutions for customers, will amplify
revenue return and position us well to scale all aspects of the business.
I thank you for your support as a Tesserent shareholder and I look forward to a busy and successful year ahead
for FY19.
JULIAN CHALLINGSWORTH
Chief Executive Officer
Tesserent Limited
4 Gartner Magic Quadrant for Enterprise Network Firewalls, 2018
5 Gartner Magic Quadrant for Intrusion Detection and Prevention Systems, 2018
6 Gartner Magic Quadrant for Endpoint Protection Platforms, 2018
7 Gartner Magic Quadrant for Security Information and Event Management, 2017
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Tesserent Limited Financial Report 2018
ABOUT TESSERENT
1.1
ABOUT TESSERENT
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Tesserent Limited Financial Report 2018
ABOUT TESSERENT
CYBERSECURITY EXPERTS
Tesserent is a specialist in managed cybersecurity and networking. Tesserent provides enterprise-grade managed
cybersecurity and networking services to corporate customers in Australia and internationally.
Delivered via the cloud or on premise, Tesserent provides a 24/7 Security-as-a-Service offer to small and large
organisations’, giving customers peace of mind that their networks and critical data are protected. Tesserent also
provides innovative cybersecurity solutions to small-medium businesses via the CyberBiz suite of services.
PROVEN RETURN ON INVESTMENT
Tesserent’s business is dedicated to offering customers a cost-effective, world-class managed security solution.
While Tesserent is focused on optimising and securing customer network infrastructure, they’re free to focus on
their business, knowing that their network is being expertly managed by qualified security engineers.
Tesserent has a proven record of improving return on IT investment, driving efficiency and optimising network
performance. Tesserent also bundles services including Security Information and Event Management (SIEM),
internet connectivity and colocation to optimise customer network security and deliver a total solution at the most
competitive price.
PARTNERS
• Cybersecurity technology partners: Palo Alto Networks, Cisco Systems, Dell, Sophos, AlienVault,
Darktrace, Sandvine, and Cyren.
• Network and data centre partners: Telstra, TPG, Vocus, NEXTDC, and Equinix
TESSERENT’S PRODUCT AND SERVICES
Tesserent utilises proprietary cybersecurity technology and leading OEM vendor software to deliver a
comprehensive range of world-class managed cybersecurity services with 24/7/365 response from a team of
security experts, including:
• NETWORK PERIMETER SECURITY
• Tesserent proprietary and Palo Alto Networks Managed Next-Generation Firewalls
• Robust security at network boundary
• CyberBiz Managed Next-Generation Firewall for small-medium business
•
INTERNAL NETWORK SECURITY
• SIEMplicity – Managed Security Information and Event Management
• Alert management to identify and halt internal threats in their infancy.
•
INTERNET CONNECTIVITY
• Tesserent Secure Internet – Connects customer sites via high speed, secure internet and tailored SD-
WAN solutions
• Australia-wide network utilising all tier-one wholesale carriers, allowing for technology and carrier
diversity and deep security integration
• DATA CENTRE AND COLOCATION
• Secure colocation facilities at Australia’s leading co-location data centres
• CONSULTING
• Penetration testing, cyber risk strategy and governance, security audit, risk assessment, and incident
remediation.
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Tesserent Limited Financial Report 2018
TESSERENT BOARD OF DIRECTORS
Tesserent is pleased to have a Board of Directors with diverse experience across a range of sectors in both the
Australian and overseas markets. A brief summary of the Board and their current endeavours is provided below,
however detailed information on the credentials and experience of the Board is incorporated within the Director’s
Report on page 18 of this document.
ROBERT LANGFORD
Non-Executive Director and Chairman
Robert has over 40 years of IT experience, starting his career as a Cobol programmer with
Royal Insurance in Melbourne, through to roles as senior system architect and project
director with Mobil Oil in the UK European mainland during the early 90’s. Since 2002
Robert has owned and run various business in Australia ranging from IT to cattle farming.
Robert was a founding partner of Tesserent Australia Pty. Ltd.
KEITH GLENNAN
Executive Director
Current commercial role: Chief Technology Officer
Keith has been in the IT industry for over 30 years, operating in the managed security
business since 2002. Keith was the founding CEO of Tesserent.
GREG BAXTER
Non-Executive Director
Current commercial role: Chief Digital Officer at MetLife.
Previously Greg was Global Head of Digital at Citibank and a Partner and U.K. Board
member at Booz & Company. Additionally, Greg is a council member of Chatham House,
a leading international affairs think tank.
STEVE BERTAMINI
Non-Executive Director
Current commercial role: Chief Executive Officer of Al Rajhi Bank.
Steve has extensive finance experience. He is currently CEO of Al Rajhi Bank, a bank with
total assets of over 70 billion USD. Steve was formerly CEO of GE Australia and New
Zealand and CEO of Consumer Banking at Standard Chartered Bank.
RUSSELL YARDLEY
Non-Executive Chairman
Russell has over 35 years of entrepreneurial and corporate experience in the IT sector.
Russell is Founder and Chairman of The Resolution, Chairman of Powerhouse Ventures
Limited (ASX: PVL), non-executive chairman National eResearch Collaboration Tools and
Resources project for the Federal Government, non-executive director for Wunderman
Bienalto 2012-current and board member of the Victorian Government Purchasing Board.
Russell resigned from the Tesserent Board on 8th February 2018.
PAUL BRANDLING
Non-Executive Director
Paul is a non-executive director of Avoka, non-executive director of Infomedia Limited and
non- executive director of Integrated Research. Previously Paul was VP and MD of HP
South Pacific.
Paul resigned from the Tesserent Board on 2nd October 2017.
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Tesserent Limited Financial Report 2018
TESSERENT EXECUTIVE TEAM
Tesserent’s executive team consist of a small, yet dynamic team of industry professionals. Tesserent’s executive
team are focused on developing and executing a business plan focused on the delivery of significant growth and
increased revenues.
JULIAN CHALLINGSWORTH
Chief Executive Officer
Julian served as a Managing Director and Partner of The Litmus Group for over 10 years
and a board member of PPB Advisory. Julian was a Director of Cordence World Wide a
global consulting partnership with 2,800 consultants across 60+ locations. Julian worked
with the international team to develop sales and growth strategies for the eight-member
firms.
KEITH GLENNAN
Chief Technology Officer
Keith has been in the IT industry for over 30 years, operating in the managed security
business since 2002. Keith formulated Tesserent’s current business strategy and was the
founding CEO of Tesserent.
REMKO JACOBS
Chief Customer Officer
Leading sales at Tesserent and Asta, Remko has over 25 years of experience in IT
Solution/Software Sales and Operational Management roles. Prior to joining Asta in 2016,
Remko was the head of Banking, Financial Services & Insurance at Cognizant Australia.
Before that Remko was working for Wipro Limited with responsibility across Asia Pacific &
Japan growing the BFSI practice substantially in a two-year period. Remko was also part of
Infosys Australia’s founding team, who grew the organisation into Australia’s number one IT
consulting company in 2003.
JUSTIN OWEN
Chief Financial Officer
Justin is a highly qualified and results driven finance executive with over 25 years’
experience and an extensive background in financial and business performance
management covering keys skills of stakeholder management, corporate structuring,
finance function efficiency, client profitability and costing management. With significant
experience as CFO and adviser to ASX listed companies Justin is able to draw on his
experience and industry expertise as part of the Tesserent Leadership Team.
DAVID BUERCKNER
Head of Security Operations
David has over 30 years’ experience in the Information Technology sector, across a wide
range of technical and leadership roles. David spent more than 15 years at IBM in key
roles including the leadership of the global technical delivery team for BHP. More recently,
David has held a variety of operational and delivery leadership roles at Interactive Pty Ltd
and has been responsible for large projects such as ISO27001 certification, and the
establishment of an internal MPLS network.
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Tesserent Limited Financial Report 2018
CORPORATE GOVERNANCE
The Company has adopted systems of control and accountability as the basis for the administration of corporate
governance. The Board is committed to administering the policies and procedures with openness and integrity,
pursuing to the spirit of corporate governance commensurate with the Company’s needs.
To the extent applicable, the Company has adopted The Corporate Governance Principles and Recommendations
(3rd Edition) as published by the ASX Corporate Governance Council.
In light of Tesserent’s size and nature, the Board considers that the current board provides a cost effective and
practical method of directing and managing the Company. As Tesserent’s activities develop in size, nature, and
scope, the size of the Board and the implementation of additional corporate governance policies and structures will
be reviewed.
The Company’s corporate governance policies and practices are outlined below and the Company’s full Corporate
Governance Plan is available in a dedicated corporate governance information section of the Company’s website
www.tesserent.com.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
Code of Conduct – This policy sets out a statement of the shared values of the Company and how the
Company conducts itself and its business.
Board Charter – This policy sets out the principles for the operation of the Board and describes the
functions of the Board and those functions delegated to management of the Company.
Selection and Appointment of New Directors Policy – This policy ensures that the procedure when
selecting and appointing new Directors is formal and transparent.
Board and Senior Executive Evaluation Policy – This policy sets out the process relating to
performance and evaluation of the Board, senior executives and individual Directors.
Appointment of External Auditor Policy – This policy summarises the conditions on which the
Company will select an external auditor.
Continuous Disclosure Policy – This policy sets out certain procedures and measures which are
designed to ensure that the Company complies with its continuous disclosure obligations.
Trading Policy – This policy is designed to maintain investor confidence in the integrity of the
Company’s internal controls and procedures and to provide guidance on avoiding any breach of the
insider trading laws.
Shareholder Communications Policy – This policy sets out practices which the Company will
implement to ensure effective communication with its Shareholders.
Diversity Policy – This policy sets out the Company’s objectives for achieving diversity amongst its
Board, management and employees.
Audit and Risk Management Committee Charter – This policy sets out the objectives and procedures
for the Audit and Risk Management Committee.
Nominations and Remuneration Committee Charter - This policy sets out the objectives and procedures
for the Nominations and Remuneration Committee.
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Tesserent Limited Financial Report 2018
Compliance with and Departures from Recommendations
The Company’s compliance with and departures from the Recommendations during the reporting period are set out
on the following pages.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
1.1
A listed entity should disclose:
(a) the respective roles and responsibilities
of its board and management; and
(b) those matters expressly reserved to the
board and those delegated to
management.
1.2
A listed entity should:
(a) undertake appropriate checks before
appointing a person, or putting forward
to security holders a candidate for
election, as a director; and
provide security holders with all material
information in its possession relevant to a
decision on whether or not to elect or re-
elect a director.
A listed entity should have a written
agreement with each director and senior
executive setting out the terms of their
appointment.
The company secretary of a listed entity
should be accountable directly to the board,
through the chair, on all matters to do with
the proper functioning of the board.
1.3
1.4
The respective roles and responsibilities of the Board
and executives are defined in the Board Charter.
There is a clear delineation between the Board’s
responsibility for the Company’s strategy and activities,
and the day-to-day management of operations
conferred upon the Company’s officers.
The procedure for the selection of new Directors is set
out in the Selection and Appointment of New Directors
Policy. Under this policy, Shareholders are required to
be provided with all material information relevant to
making an informed decision on whether or not to elect
or re-elect a Director.
The Company has entered into a written agreement
with each Director and senior executive.
The Company Secretary, Oliver Carton, reports directly
to the Chairman of the Board. The role of the Company
Secretary is outlined in the Board Charter.
1.5
A listed entity should:
The Company has adopted a Diversity Policy.
(a) have a diversity policy which includes
requirements for the board or a relevant
committee of
to set
measurable objectives
for achieving
gender diversity and to assess annually
both the objectives and the entity’s
progress in achieving them;
the board
(b) disclose that policy or a summary of it;
and
(c) disclose as at the end of each reporting
period the measurable objectives for
achieving gender diversity set by the
board or a relevant committee of the
board in accordance with the entity’s
diversity policy and its progress towards
achieving them and either:
i.
the respective proportions of
men and women on the board,
The Company's Diversity Policy requires the Board to
establish measurable objectives to assist the Company
in achieving gender diversity.
The Company does not believe it is appropriate to
establish a quota system for measuring gender diversity,
and indeed such a quota system could itself lead to
discrimination.
The Company has asked management to monitor
gender diversity in line with the Corporate Governance
Council Recommendations and
take
appropriate action should it be of the view that there is
insufficient gender diversity within the business.
intends
to
As at 30 June 2018, there were 2 females employed
representing 11% of total employees. There were no
woman on the Board of Directors and 1 woman as part
of the executive team.
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RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2018
across
in senior executive positions
and
the whole
organisation (including how the
entity has defined
“senior
executive” for these purposes);
or
if the entity is a “relevant employer” under
the Workplace Gender Equality Act, the
entity’s most recent “Gender Equality
Indicators”, as defined in and published
under that Act.
1.6
A listed entity should:
(a) have and disclose a process
for
periodically evaluating the performance
its committees and
of
individual directors; and
the board,
disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
1.7
A listed entity should:
(a) have and disclose a process
for
periodically evaluating the performance
of its senior executives; and
disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
2.1
The board of a listed entity should:
(a) have a nomination committee which:
i.
ii.
iii.
iv.
v.
has at least three members, a
majority
are
independent directors; and
of whom
is chaired by an independent
director,
and disclose:
the charter of the committee;
the members of the committee;
and
as at the end of each reporting
period, the number of times the
committee met throughout the
period and
individual
attendances of the members at
those meetings; or
the
The Company has adopted a Board and Senior
Executive Evaluation Policy.
A Non-Executive Director will be responsible for the
performance evaluation of the Chairman. The process
for evaluating the performance of the Board as a whole
is the responsibility of the Board under the direction of
the Chairman. The Chairman is in charge of conducting
individual Director evaluations.
No evaluation was carried out during the reporting
period given there were changes to Board composition.
The Company has adopted a Board and Senior
Executive Evaluation Policy.
The Managing Director is subject to annual
performance evaluation by the Board. All senior
executives of the Company are subject to annual
performance evaluations by the Managing Director. As
the Managing Director position changed during the
period, no performance evaluation was undertaken.
The Company had established a Nominations and
Remuneration Committee.
During the Period the Nominations and Remuneration
Committee consisted of three members, all of whom
were independent directors.
The Chair of the Committee was not the Chair of the
Board during the period.
The names of the members of the Committee, details of
their qualifications and experience and details of the
number of meetings held during
the period, are
contained in the Directors’ Report section of this Annual
Report.
The Committee operated under a Charter which is
available on the Company website within the Corporate
Governance Section.
During the period the Board suspended the operations of
the Committee as it was determined that the Committee
was unnecessary given the size of the Board and the
The Board as a whole
Company’s operations.
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RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2018
if it does not have a nomination committee,
disclose that fact and the processes it
employs to address board succession
issues and to ensure that the board has the
appropriate balance of skills, knowledge,
experience, independence and diversity to
enable it to discharge its duties and
responsibilities effectively.
2.2
A listed entity should have and disclose a
board skills matrix setting out the mix of
skills and diversity that the board currently
has or is looking to achieve in its
membership.
2.3
A listed entity should disclose:
(a) the names of the directors considered
independent
the board
to be
by
directors;
(b) if a director has an interest, position,
association or relationship of the type
described above but the board is of the
opinion that it does not compromise the
independence of the director, the nature
of the interest, position, association or
relationship
in question and an
explanation of why the board is of that
opinion; and
the length of service of each director.
undertakes the role of the Committee as set out in its
Charter.
The Board has developed a skills matrix. Given the
changes to Board composition during the period, the
skills matrix has not been updated.
The Board considers that Steve Bertamini and Greg
Baxter are independent directors. The Board considers
that Keith Glennan and Rob Langford are not
they are substantial
independent directors given
shareholders and Mr Glennan in an employee..
The date of appointment of each director is disclosed in
details of each director in the Directors’ Report section
of the Annual Report.
2.4
2.5
2.6
A majority of the board of a listed entity
should be independent directors.
The majority of the Board are not independent Directors
for the ASX purposes.
The chair of the board of a listed entity
should be an independent director and, in
particular, should not be the same person
as the CEO of the entity.
The roles of the Chairman and Managing Director are
exercised by two separate individuals. The Chairman is
not considered to be an independent Director for the
ASX purposes.
A listed entity should have a program for
inducting new directors and provide
appropriate professional development
opportunities for directors to develop and
maintain the skills and knowledge needed
to perform their role as directors effectively.
The Company does not have a formal program for
inducting new Directors and providing appropriate
professional development opportunities. Given the size
and structure of the Board, this program will be adopted
on an individual basis for each Director.
3.1
A listed entity should:
(a) have a code of conduct for its directors,
senior executives and employees; and
disclose that code or a summary of it.
4.1
The board of a listed entity should:
(a) have an audit committee which:
The Company has adopted a Code of Conduct which
applies to all Directors, officers, employees, contractors
or consultants of the Company as well as a Trading
Policy. Each of these has been prepared having regard
to the Recommendations.
The Company had established an Audit and Risk
Management Committee.
During the Period the Audit and Risk Management
Committee consisted of three members, all of whom
were independent directors.
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RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2018
i.
ii.
has at least three members, all
of whom are non-executive
directors and a majority of
whom
independent
are
directors; and
is chaired by an independent
director, who is not the chair of
the board,
and disclose:
iii.
iv.
v.
the charter of the committee;
the relevant qualifications and
experience of the members of
the committee; and
in relation to each reporting
period, the number of times the
committee met throughout the
individual
period and
attendances of the members at
those meetings; or
the
The Chair of the Committee was not the Chair of the
Board during the period.
The names of the members of the Committee, details of
their qualifications and experience and details of the
number of meetings held during
the period, are
contained in the Directors’ Report section of this Annual
Report.
The Committee operates under a Charter which is
available on the Company website within the Corporate
Governance Section.
During the period the Board suspended the operations of
the Committee as it was determined that the Committee
was unnecessary given the size of the Board and the
The Board as a whole
Company’s operations.
undertakes the role of the Committee as set out in its
Charter.
4.2
if it does not have an audit committee,
disclose that fact and the processes it
employs that independently verify and
safeguard the integrity of its corporate
reporting, including the processes for the
appointment and removal of the external
auditor and the rotation of the audit
engagement partner.
The board of a listed entity should, before it
approves the entity’s financial statements
for a financial period, receive from its CEO
and CFO a declaration that, in their opinion,
the financial records of the entity have been
properly maintained and that the financial
statements comply with the appropriate
accounting standards and give a true and
fair view of the financial position and
performance of the entity and that the
opinion has been formed on the basis of a
sound system of risk management and
internal control which is operating
effectively.
4.3
A listed entity that has an AGM should
ensure that its external auditor attends its
AGM and is available to answer questions
from security holders relevant to the audit.
5.1
A listed entity should:
(a) have a written policy for complying with
its continuous disclosure obligations
under the Listing Rules; and
The Company complies with this Recommendation.
The Company complies with this Recommendation.
The Company is committed to providing timely and
balanced disclosure to the market in accordance with its
Continuous Disclosure Policy.
Page 14
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2018
6.1
6.2
6.3
6.4
disclose that policy or a summary of it.
A listed entity should provide information
about itself and its governance to investors
via its website.
A listed entity should design and implement
an investor relations program to facilitate
effective two-way communication with
investors.
A listed entity should disclose the policies
and processes it has in place to facilitate
and encourage participation at meetings of
security holders.
The Company has a dedicated corporate governance
information section on its website.
The Company has adopted a Shareholder
Communications Policy for Shareholders wishing to
communicate with the Board.
All Shareholders are invited to attend the Company’s
annual meeting, either in person or by representative.
The Board regards the annual meeting as an excellent
forum in which to discuss issues relevant to the
Company and accordingly encourages full participation
by Shareholders. Shareholders have an opportunity to
submit questions to the Board and to the Company’s
auditor.
A listed entity should give security holders
the option to receive communications from,
and send communications to, the entity and
its security registry electronically.
The Company seeks to recognise numerous modes of
communication, including electronic communication, to
ensure that its communication with Shareholders is
frequent, clear and accessible.
7.1
The board of a listed entity should:
(a) have a committee or committees to
oversee risk, each of which:
i.
ii.
has at least three members, a
majority
are
independent directors; and
of whom
is chaired by an independent
director,
and disclose:
iii.
iv.
v.
the charter of the committee;
the members of the committee;
and
as at the end of each reporting
period, the number of times the
committee met throughout the
period and
individual
attendances of the members at
those meetings; or
the
if it does not have a risk committee or
committees that satisfy (a) above, disclose
that fact and the processes it employs for
overseeing the entity’s risk management
framework.
During the Period the Company established an Audit and
Risk Management Committee.
During the Period the Audit and Risk Management
Committee consisted of three members, all of whom
were independent directors.
The Chair of the Committee was not the Chair of the
Board during the period.
The names of the members of the Committee, details of
their qualifications and experience and details of the
number of meetings held during
the period, are
contained in the Directors’ Report section of this Annual
Report.
The Committee operates under a Charter which is
available on the Company website within the Corporate
Governance Section.
During the period the Board suspended the operations of
the Committee as it was determined that the Committee
was unnecessary given the size of the Board and the
Company’s operations.
The Board as a whole
undertakes the role of the Committee as set out in its
Charter.
.
7.2
The board or a committee of the board
should:
The Company complies with this Recommendation.
Page 15
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2018
(a) review the entity’s risk management
framework at least annually to satisfy
itself that it continues to be sound; and
disclose, in relation to each reporting
period, whether such a review has taken
place.
7.3
A listed entity should disclose:
(a) if it has an internal audit function, how
the function is structured and what role
it performs; or
if it does not have an internal audit function,
that fact and the processes it employs for
evaluating and continually improving the
effectiveness of its risk management and
internal control processes.
A listed entity should disclose whether it has
any material exposure to economic,
environmental and social sustainability risks
and, if it does, how it manages or intends to
manage those risks.
7.4
8.1
The board of a listed entity should:
(a) have a remuneration committee which:
i.
ii.
has at least three members, a
are
majority
independent directors; and
of whom
is chaired by an independent
director,
and disclose:
iii.
iv.
v.
the charter of the committee;
the members of the committee;
and
as at the end of each reporting
period, the number of times the
committee met throughout the
period and
individual
attendances of the members at
those meetings; or
the
if it does not have a remuneration
committee, disclose that fact and the
processes it employs for setting the level
and composition of remuneration for
directors and senior executives and
ensuring that such remuneration is
appropriate and not excessive.
Management is required to design and implement risk
management and internal control systems to manage
the Company's material business risks and to report to
the Board on whether those risks are being managed
effectively.
The Board is responsible for reviewing whether the
Company has any material exposure to any economic,
environmental and social sustainability risks, and if so,
to develop strategies to manage such risks.
the Period
During
Nominations and remuneration Committee.
the Company established an
During the Period the Committee consisted of three
members, all of whom were independent directors.
The Chair of the Committee was not the Chair of the
Board during the period.
The names of the members of the Committee, details of
their qualifications and experience and details of the
number of meetings held during
the period, are
contained in the Directors’ Report section of this Annual
Report.
The Committee operates under a Charter which is
available on the Company website within the Corporate
Governance Section.
During the period the Board suspended the operations of
the Committee as it was determined that the Committee
was unnecessary given the size of the Board and the
Company’s operations.
The Board as a whole
undertakes the role of the Committee as set out in its
Charter.
8.2
A listed entity should separately disclose its
policies and practices regarding the
remuneration of non-executive directors and
The policies and practices regarding remuneration of
Directors is set out in the Selection and appointment of
Page 16
Tesserent Limited Financial Report 2018
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
the remuneration of executive directors and
other senior executives.
new Directors Policy. Full details of Director
remuneration is included in annual reports.
8.3
A listed entity which has an equity-based
remuneration scheme should:
(a) have a policy on whether participants
are permitted to enter into transactions
(whether through the use of derivatives
or otherwise) which limit the economic
risk of participating in the scheme; and
disclose that policy or a summary of it.
While the Company has issued options to Independent
Directors and some senior executives, it does not have
an equity based remuneration scheme. The Company
will consider implementation of such a scheme during
the current financial year.
Page 17
Tesserent Limited Financial Report 2018
Your directors present their report on the consolidated entity (referred to herein as “the Group” or “Tesserent”)
consisting of Tesserent Limited and its controlled entities for the financial year ended 30 June 2018.
DIRECTORS’ REPORT
1. Directors
The following persons were directors of Tesserent Limited during the whole of the financial year and up to the date
of this report, unless otherwise stated:
Robert Langford
Russell Yardley
Keith Glennan
Gregory Baxter
Stefano (Steve) Bertamini
Paul Brandling
2.
Information on Directors
Robert Langford
Qualifications
Appointed 8 February 2018
Resigned 8 February 2018
Resigned 2 October 2017
– Non-Executive Chairman – appointed 8 February 2018
–
Bachelor of Applied Science in Computing
Member of the Australian Computer Society
Experience
–
Robert has over 40 years of IT experience, starting his career as a
Cobol programmer with Royal Insurance in Melbourne, through to
roles as senior systems architect and project director with Mobil Oil
in the UK European mainland during the early 90’s. Since 2002
Robert has owned and run various businesses in Australia ranging
from IT to cattle farming.
Directorships held in other listed entities
during the three years prior to the current
year
–
None
Keith Glennan
– Managing Director up to 1 August 2018, becoming Executive
Qualifications
Experience
Special Responsibilities
Director from that date.
– B. Tech, MACS, MAICD
– Board member since 2015, Managing Director of Tesserent
Australia Pty Ltd (a subsidiary of Tesserent Limited) since 2012.
Keith has been working in the IT industry for three decades, and
has worked in Australia and the United States for companies such
as Hewlett Packard and IBM. He has been involved in the
managed security industry since 2002. In late 2012 Keith acquired
control of and took the Managing Director role at Tesserent
Australia Pty Ltd. In this position he formulated the strategy of
developing the MSSP Platform and the current business strategy.
– Chief Executive Officer (CEO) up to 1 August 2018. Appointed to
the role of Chief Technology Officer effective 1 August 2018, and
resigned from CEO role. Julian Challingsworth appointed Interim
CEO 1 August 2018.
Directorships held in other listed entities
during the three years prior to the current
year
– None
Page 18
Gregory Baxter
Qualifications
Experience
Tesserent Limited Financial Report 2018
DIRECTORS’ REPORT
– Non-Executive Director
– BSc MBA
– Board member since 2015. Gregory is currently Chief Digital
Officer at MetLife. Previously he was Global Head of Digital at
Citibank, leading Citi’s digital transformation across businesses and
geographies. He specialises in the development and delivery of
digital strategy, corporate innovation and business transformation.
He has held senior business, consulting and technology roles
across Asia, Europe and North America, with a track record of
high-impact business results. Previously Gregory was a Partner
and U.K. Board member at Booz & Company (formerly Booz Allen
Hamilton), where he held leadership roles across the financial
services, public sector and digital practices. Prior to this he was a
senior project and product manager with IBM, delivering large scale
systems integration projects in financial services and managing the
product lifecycle of leading market solutions. He is a regular
speaker on digital strategy and technology, and the impact of
disruptive innovation on business. Gregory is a council (board)
member of Chatham House (Royal Institute of International Affairs),
a leading international affairs think tank. He holds a BSc from
Monash University and a MBA from the University of Melbourne,
and has been a guest lecturer on strategy at the University of
Oxford, New York University, and American University
(Washington).
Directorships held in other listed entities
during the three years prior to the current
year
– None
Stefano (Steve) Bertamini
–
Non-Executive Director
Qualifications
Experience
– BBA MBA
– Board member since 2015. Steve is currently Chief Executive
Officer of Al Rajhi Bank, a bank with total assets in excess of
US$90 billion. Steve previously held the position of Group
Executive Director and CEO for Global Consumer Banking at
Standard Chartered Bank.
Prior to this Steve’s roles included:
• Group Executive Director and CEO Consumer Banking at
Standard Chartered Bank;
• Chairman & Chief Executive Officer of GE North East
Asia;
• Chief Executive Officer and President of GE (China) Co.
Ltd;
• Chief Executive Officer of GE Australia and New Zealand;
• President of GE Capital Asia; and
• Managing Director of GE’s Consumer Finance business in
Asia.
Steve has a BBA, Finance and Management from The University of
Texas at Austin and an MBA, Finance and International Banking
from University of North Texas.
Page 19
Tesserent Limited Financial Report 2018
Directorships held in other listed entities
during the three years prior to the current
year
– None
DIRECTORS’ REPORT
Russell Yardley
Qualifications
Experience
Directorships held in other listed entities
during the three years prior to the current
year
Paul Brandling
Qualifications
Experience
Directorships held in other listed entities
during the three years prior to the current
year
3. Directors’ Shareholdings
– Non-Executive Chairman – resigned 8 February 2018
– BSc FAICD
– Appointed Chair in 2015 and resigned 8 February 2018.
– Chairman Powerhouse Ventures Limited
–
Non-Executive Director – resigned 2 October 2017
– BSc (Hons), MAICD
– Board member since 2015 and resigned 2 October 2017.
– Previously held directorships in Vocus Communications Limited
and Integrated Research Limited.
The table below sets out each Director’s relevant interest in shares or options of the Company at the date of this
report:
Director
Robert Langford
Keith Glennan
Gregory Baxter
Stefano (Steve) Bertamini
Total
4. Company Secretary
Number of ordinary
shares
Number of options
24,071,282
28,761,435
1,406,043
1,406,043
55,644,803
-
-
1,500,000
1,500,000
3,000,000
Oliver Carton BJuris LLB was appointed Company Secretary on 6 May 2015.
Oliver is a qualified lawyer with over 29 years’ experience in a variety of corporate roles. He currently runs his own
consulting business, and was previously a Director of the Chartered Accounting firm KPMG where he managed its
Corporate Secretarial Group. Prior to that, he was a senior legal officer with ASIC.
Page 20
Tesserent Limited Financial Report 2018
5. Directors’ Meetings
DIRECTORS’ REPORT
The table below sets out the number of meetings held during the 2018 financial year and the number of meetings
attended by each Director. During the year,11 Board meetings were held.
Director
Robert Langford
Russell Yardley – resigned 8 February 2018
Keith Glennan
Gregory Baxter
Stefano (Steve) Bertamini
Paul Brandling – resigned 2 October 2017
Eligible to
attend
Attended
5
6
11
11
11
3
5
5
11
11
11
3
At the February 2017 Board meeting, the Board resolved to form an Audit and Risk Committee and a Remuneration
and Nominations Committee as sub committees of the Board. At the December 2017 Board meeting it was agreed
that, due to the size and composition of the Board and sub committees, that the sub committees would be
disbanded with responsibility transferring back to the full Board. Prior to the sub committees responsibility being
transferred back to the Board, membership of these committees was restricted to Non-executive directors and was
as follows:
Directors
Robert Langford1
Russell Yardley2
Gregory Baxter
Stefano (Steve) Bertamini
Paul Brandling3
Audit and Risk
Committee
Remuneration and Nominations
Committee
-
Member
-
Chair
Member
-
Member
Chair
-
Member
(1)
Appointed 8 February 2018 – post recommissioning of the sub committees
(2)
(3)
Resigned 8 February 2018
Resigned 2 October 2017
One Audit and Risk Committee meeting was held during FY2018, prior to the responsibility being transferred to the
Board – all members attended.
One Remuneration and Nominations Committee meeting was held during FY2018, prior to responsibility being
transferred to the Board – all members attended.
6. Review of Operations
Principal activities
Tesserent provides Internet Security-as-a-Service to a wide range of Australian and international customers,
including education providers, corporate enterprises, and government customers. Security-as-a-Service packages
security services for a customer’s computer infrastructure, including firewall, authentication, anti-virus, anti-
malware/spyware, intrusion detection, and security event management, amongst other services. These services are
provided on the basis of a subscription fee, most commonly as monthly or annual fees. This revenue model delivers
recurring revenues to Tesserent.
Tesserent has also appointed a number of international resellers (Channel partners) that licence the MSSP
Platform to deliver Security-as-a-Service to their own customers.
Group financial performance
The Group recorded a loss after tax of $3,095,670 for the year ended 30 June 2018 (2017: $3,464,036 loss).
Page 21
Tesserent Limited Financial Report 2018
DIRECTORS’ REPORT
Ongoing business revenue has risen by 21.6% year-on-year excluding Customer contracts sold to FZO in FY2017.
Reported revenue comparisons to FY2017 include sold Customer contracts and is therefore down 0.9%.
Tesserent raised $500K in Q4 in a placement to clients of Phillip Capital Limited at a share price of $0.07 per share.
A Share Purchase Plan (SPP) was also offered to existing shareholders providing an opportunity to buy shares at
the same price, netting $304K, with the funds received post year end. The SPP closed after the balance date and
this raising falls into FY19. Together this brings the total capital raised to $804K.
Research and Development tax concessions totalling $844K were received in FY18. The funds are a result of the
on-going development into Tesserent’s security and networking technology, and future capabilities, which will
continue to differentiate and drive the business.
Through the ongoing optimisation of operations and personnel costs, Tesserent was able to significantly reduce
operational expenditure.
Following a review of operations of Tesserent, including the restructure of various strategic OEM supplier
agreements and the intended acquisition of Asta, a review of the balance sheet has been undertaken, specifically
focused on the intangible assets. This has resulted in a write off of goodwill that was recognised on a previous
acquisition. By doing so, this will allow for a more informed assessment of FY19 company performance.
TECHNOLOGY
Tesserent’s core security services continue to experience consistent, strong growth. The annuity base of recurring
revenue from 24-36 month customer contracts has created stability and linear growth, with the CyberBiz product
category contributing positively. Continued R&D and capitalisation of the Tesserent proprietary platform has
resulted in new innovative product features including:
-
-
“Zero Touch” deployment technology, simplifying the networking hardware installation process, enabling
rapid customer deployment and configuration.
Proprietary SD-WAN (Software Defined Wide Area Networking) technology enabling every Tesserent
network appliance (including CyberBiz) to act as a secure SD-WAN intelligent device.
Secure networking is an area where Tesserent has been able to generate strong new revenue from both new and
existing customers. It also presents a significant opportunity to cross-sell networking solutions across our customer
base, generating internal commercialisation efficiencies.
By adapting and expanding to regulatory changes and market demand, Tesserent experienced strong growth in the
SIEM (Security Incident and Event Management) product category. Changes to the Australian Privacy Act resulting
in the Notifiable Data Breaches Scheme (NDB Scheme) launched in February 2018. The NDB Scheme established
requirements for organisations to report and respond to data breaches. Australian businesses with inadequate
cybersecurity and personal information data protection, now face the risk of large fines in the event of a data breach.
ACCELERATING GROWTH
In July 2018, Tesserent appointed Maecenas Capital to refine and drive Tesserent’s growth and go to market
strategies, optimise funding arrangements, and evaluate potential acquisition opportunities. On 27 July 2018,
Tesserent announced it had signed a binding terms sheet to acquire innovative ICT company, Asta Pty Ltd (Asta)
subject to shareholder approval. The acquisition consideration is based on a multiple of normalised EBITDA, and is
payable in a mix of cash and shares. Tesserent expects to seek shareholder approval at the 2018 AGM. Asta’s
unaudited revenue for FY18 totals $10.9m and therefore combined revenue between the two companies in FY18 is
over $17M. This acquisition will consolidate Tesserent’s positioning as a trusted end-to-end provider of secure IT
infrastructure and services. The acquisition will extend presence in Melbourne, Sydney and Auckland and increases
Tesserent’s active customer base from around 200 to around 450.
As part of Tesserent’s accelerated growth strategy, Julian Challingsworth has been appointed Chief Executive
Officer as of 1 August, 2018. Julian joins Tesserent after serving as a Managing Director and Partner of The Litmus
Group for over 10 years and a board member of PPB Advisory. In addition to advising over 20 organisations on
growth acceleration strategies in Australia, Asia and Europe, Julian was a key driver in growing Litmus multiple
business units in Australia and internationally before it was acquired by PPB Advisory.
Page 22
Tesserent Limited Financial Report 2018
7. Business Strategies, Prospects and Risks for the Future Financial Years
Tesserent’s strategy includes continued focus on the following areas:
DIRECTORS’ REPORT
•
•
•
•
expanding the number of Channel partners in Australia and internationally;
increasing the number of direct sales to organisations, in Australian and internationally, through increased
sales and marketing;
assessing acquisition opportunities; and
ongoing research and development.
8. Subsequent Events
On 27 July 2018 the Company announced that a binding term sheet, subject to conditions precedent, had been
signed to acquire ICT company Asta Solutions Pty Ltd (Asta). Asta is an Australian based business with more than
200 clients serviced by over 85 staff from offices in Melbourne, Sydney and Auckland. The purchase price is 4 X
EBITDA and expected to result in a purchase price of $3.8m. Purchase consideration will be a combination of cash
and equity. It is anticipated that the transaction will complete no later than end of December 2018.
On the 8 July 2018 the Company announced the results of the share purchase plan(SPP), noting that $304,000 had
been raised from existing shareholders who participated in the SPP. These funds have been received in full.
Apart from the matters noted above, there have been no matters or circumstances other than those referred to in
the financial statements or notes to the financial statements that have arisen since the end of the financial year, that
have significantly affected, or may significantly affect the operations of the Group, the results of those operations or
the state of affairs of the Group in subsequent financial years.
9. Changes in State of Affairs
There were no other significant changes in the state of affairs of the Group other than that referred to in the financial
statements or notes thereto.
10. Environmental Factors
Tesserent is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Tesserent recognises its obligations to its stakeholders (customers, shareholders, employees and the community)
to operate in a way that minimises the impact it has on the environment.
11. Dividends
No dividends were declared or paid during the financial year.
12. Indemnification of Directors, Officers and Auditors
The Directors and Officers of Tesserent Limited are indemnified against liabilities pursuant to agreements with
Tesserent Limited. Tesserent Limited has entered into insurance contracts with a third party insurance provider, in
accordance with normal commercial practices. Under the terms of the insurance contract, the nature of the liabilities
insured against and the amount of premiums paid are confidential. The Group are not aware of any liability that
arose under these indemnities as at the date of this report.
During or since the end of financial period, the company has not indemnified or made a relevant agreement to
indemnify the auditor against a liability incurred as auditor.
Page 23
Tesserent Limited Financial Report 2018
13. Proceedings on Behalf of Company
DIRECTORS’ REPORT
No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any
proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all
or any part of those proceedings.
The company was not a party to any such proceedings during the year.
14. Non-audit services
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 disclosed below 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.
The following fees were paid or payable to BDO East Coast Partnership for non-audit services provided during the
year ended 30 June 2018:
Tax services
15. Auditor’s Independence Declaration
2018
$
2017
$
45,025
99,400
The lead auditor’s independence declaration for the year ended 30 June 2018 has been received and can be found
on page 37 of the financial report.
16. Options / Deferred shares
At the date of this report, the unissued ordinary shares of Tesserent Limited under option are as follows:
Grant Date
Date of Expiry
Exercise Price
(Cents)
Number under
option
17 November 2015
31 August 2019
17 November 2015
31 August 2019
17 November 2015
31 August 2019
27 Jun 2016
27 Jun 2016
27 Jun 2019
27 Jun 2020
20
24
28.8
40
50
2,500,000
2,500,000
1,000,000
500,000
500,000
7,000,000
At the date of this report, the unissued ordinary shares of Tesserent Limited under deferred shares are as follows:
Grant date
Vesting date
Share price at
grant date
Number of
deferred shares
9 May 2016
8 May 2019
24 November 2016
15 June 2019
24 November 2016
3 October 2018
24 November 2016
3 October 2019
$0.16
$0.14
$0.14
$0.14
700,000
600,000
450,000
750,000
2,500,000
Page 24
Tesserent Limited Financial Report 2018
DIRECTORS’ REPORT
Option and deferred share holders do not have any rights to participate in any issues of shares or other interests of
the company or any other entity.
There have been no options granted or deferred shares issued over unissued shares or interests of any controlled
entity within the Group during or since the end of the reporting period.
For details of options issued and deferred shares granted to directors and executives as remuneration, refer to the
remuneration report.
No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue
of any other body corporate.
Page 25
Tesserent Limited Financial Report 2018
Remuneration Policy
REMUNERATION REPORT - AUDITED
The directors present the consolidated entity’s 2018 audited remuneration report which details the remuneration
information for Tesserent Limited’s executive director, non-executive directors and other key management
personnel.
For the purposes of this report, Key Management Personnel (KMP) are defined as those persons having authority
and responsibility for planning, directing and controlling the major activities of the business, directly or indirectly, as
an executive.
The names and positions of KMP in the Group during the whole of the financial year unless otherwise stated are:
Name
Position
Appointment Date Resignation Date
Keith Glennan
Managing Director
Robert Langford
Non-Executive Chairman
8 February 2018
Russell Yardley
Non-Executive Chairman
8 February 2018
Steve Bertamini
Non-Executive Director
Gregory Baxter
Non-Executive Director
Paul Brandling
Non-Executive Director
2 October 2017
Karen Negus1
Head of Sales and Marketing
David Buerckner
Head of Security Operations
Justin Owen2
Chief Financial Officer
1 July 2017
(1)
(2)
Karen Negus resigned 2 July 2018.
Justin Owen undertakes the CFO role on a permanent part time basis, providing this service via an unrelated company. From 1 July 2017 these services
were provided by a company controlled by Justin Owen.
Principles used to determine nature and amount of remuneration
The broad principles for determining the nature and amount of remuneration of KMP has historically been agreed
by the Board. In February 2017 the Board implemented a Nominations and Remuneration Committee, however in a
subsequent Board held December 2017 the Directors agreed that due to the size and structure of the Board and
sub committees that the sub committee responsibility would transition to the Board and the sub committees would
be disbanded.
An annual review of the Board and sub committee structure will be undertaken annually by the Board with changes
made as deemed appropriate to the size, structure and needs of the Company.
The Committee / Board can obtain professional advice where necessary to ensure that the Group attracts and
retains talented and motivated directors and employees who can enhance performance through their contribution
and leadership. No external advice regarding remuneration policy was obtained in the current year.
The guiding principles for determining the nature and amount of remuneration for KMP of the Group is as follows:
•
•
remuneration should include an appropriate mix of fixed and performance based components,
components of remuneration should be understandable, transparent and easy to communicate; and
• Remuneration Committee / Board to review KMP packages annually by reference to the Group’s
performance, executive performance and comparable information from industry sectors.
The Remuneration and Nominations Committee / Board sets out to link remuneration polices with the achievement
of financial and personal objectives.
Page 26
Tesserent Limited Financial Report 2018
Group financial performance
The earnings of the Group for the three years ending 30 June 2018 are summarised as follows:
Financial performance1
2018
2017
2016
Sales revenue – external customers
5,327,957
5,375,117
4,713,558
Earnings before interest, tax, depreciation,
amortisation and impairment(EBITDA)
Loss after income tax
Basic loss per share (cents)
Share price at year end (cents)
(1,529,345)
(2,883,644)
(130,658)
(3,095,670)
(3,464,036)
(218,654)
(2.62)
0.06
(2.99)
0.09
(0.29)
0.165
1 Three years of financial information provided as company only listed in February 2016.
No dividends were paid or declared during these financial years
Components of remuneration
Non-executive directors are remunerated with fees within the aggregate limit as approved by shareholders.
Name
Robert Langford1
Russell Yardley2
Steve Bertamini
Gregory Baxter
Paul Brandling3
(1)
(2)
(3)
Appointed 8 February 2018
Resigned 8 February 2018
Resigned 2 October 2017
Annual Approved Fee
$90,000
$90,000
$45,000
$45,000
$45,000
The executive directors and other KMP are remunerated based upon market value of the position and the range of
skills and experience they bring to the company and is split between fixed and performance linked remuneration.
Fixed remuneration consists of base remuneration and employer contributions to superannuation funds.
Performance linked remuneration includes short-term incentives and is designed to reward the Managing Director
(MD) and other KMP’s for meeting and exceeding their financial and personal objectives.
In February 2017 the Board established a Nominations and Remuneration Committee which was subsequently
disbanded in FY2018 with responsibility transferring back to the Board. Previously the Nominations and Review
Committee and now the Board has the responsibility of setting the Key Performance Indicators (KPI’s) for the MD
and have input to the KPI’s for the executives. KPI’s generally include measures relating to the Group, the relevant
business unit and the individual. At the conclusion of the year the Board will assess the performance of the MD,
and the MD assesses the performance of the individual executives against their targets. The MD’s
recommendations were presented to the Nominations and Remuneration Committee and now the Board for
approval.
The Board has implemented a Director Option Plan. The Option Plan is aimed at incentivising the Directors in
retaining key strategic skills. The options have been granted to the Directors vesting over three years with
exercising prices of $0.20, $0.24 and $0.288. Refer to tables on page 32 for options affecting remuneration in the
current and future reporting period.
At the 2017 Annual General Meeting (AGM), 97.3% of the votes received supported the adoption of the
remuneration report for the year ended 30 June 2017. The Company did not receive any specific feedback at the
AGM regarding its remuneration practices.
Page 27
Tesserent Limited Financial Report 2018
Consolidated entity performance and link to remuneration
2018
Keith Glennan
Performance measures for Keith Glennan were set by the Board to reflect key measures impacting the growth in
revenue, profitability and shareholder value. Mr Glennan was entitled to a bonus of 100% of his base salary and
was set as follows:
• Growth in Total Contract Value over the 12 month period ending 30 June 2018 – 50% weighting
Most contracts sold and renewed are for period up to three years, with total contract value (TCV)
representing the future revenue to be recognised over the three year period. For businesses based on
annuity revenue, this represents a leading indicator for future revenue to be recognised.
• Growth in TCV associated with new product CyberBiz – 30% weighting
The Group launched CyberBiz as a new product in FY18, with growth in TCV recognised as the basis in
success for the launch of the product.
• Growth in share price – 20% weighting
Growth in share price represents the underlying measure in growth in shareholder value.
David Buerckner
• Cash bonus up to $20,000 including superannuation based on the outcome of annual performance review
with CEO – weighting 100%.
Karen Negus
• Cash bonus up to $30,000 including superannuation based on the outcome of annual performance review
with CEO – weighting 100%.
• Participation in the Tesserent sales commission plan with commission based on sales performance.
There were no other performance based remuneration measures.
2017
Keith Glennan
Entitlement to receive a bonus of 100% of base salary based on agreed performance measures. There were no
performance based measures set for Keith Glennan for FY2017.
David Buerckner
• Cash bonus up to $20,000 including superannuation based on the outcome of annual performance review
with CEO – weighting 100%.
Karen Negus
• Cash bonus up to $30,000 including superannuation based on the outcome of annual performance review
with CEO – weighting 100%.
There were no other performance based remuneration measures.
In respect of the current financial year, bonus payments were made to key management personnel and are outlined
on pages 29 and 30.
Page 28
Tesserent Limited Financial Report 2018
Details of Remuneration
Details of remuneration of the Directors and KMP of the Group are set out in the following tables.
2018 Directors’ Remuneration
Short Term
Post
Employment
Long Term
Benefits
Share Based
Payments
Total
Salary/Fees
Bonus
Super-
annuation
Long Service
Leave
Options
Total
Performance
Related
Options as a
% of Total
R Langford1
R Yardley2
K Glennan
G Baxter4
S Bertamini4
P Brandling3
$
37,500
60,000
$
-
-
$
-
-
$
-
-
$
-
(19,459)
$
37,500
40,541
%
-
-
269,975 135,000
23,425
4,710
-
433,110
31.2
45,000
45,000
10,274
-
-
-
-
-
976
-
-
-
10,151
10,151
55,151
55,151
(12,290)
(1,040)
(11,447)
620,413
-
-
-
-
%
-
(48.0)
-
18.4
18.4
1,181.7
-
467,749 135,000
Total
1 Appointed 8 February 2018
2 Resigned 8 February 2018. Remuneration is payable up to date of resignation with balance forfeited
3 Resigned 2 October 2018 Remuneration is payable up to date of resignation with balance forfeited
4 Equity to the value of $26,250 taken in lieu of cash
There were no non monetary benefits provided
24,401
4,710
2018 Executive Remuneration
Short Term
Employment
Benefits
Payments
Total
Related
% of Total
Post
Long Term
Share Based
Performance
Shares as a
Total
Deferred
Salary/Fees
Bonus
Super-
annuation
Long Service
Leave
Deferred
Shares
D Buerckner
K Negus
J Owen1
$
183,000
205,831
175,617
Total
1 Appointed 1 July 2017
There were no non monetary benefits provided
564,448
$
-
-
-
-
$
$
$
$
17,385
3,496
83,408
287,289
19,554
3,495
63,918
292,798
-
-
-
175,617
36,939
6,991
147,326
755,704
%
-
-
-
-
%
29.0
21.8
-
-
Director and Executive Remuneration
Total
1,032,197 135,000
61,340
11,701
135,879
1,376,117
Page 29
Tesserent Limited Financial Report 2018
2017 Directors’ Remuneration
Short Term
Employment
Benefits
Payments
Total
Related
% of Total
Post
Long Term
Share Based
Performance
Options as a
Total
Salary/Fees
Bonus
Super-
annuation
Long Service
Leave
Options
R Yardley
K Glennan
G Baxter
S Bertamini
P Brandling
Total
$
90,000
269,975
45,000
45,000
41,096
491,071
$
-
-
-
-
-
-
There were no non monetary benefits provided
2017 Executive Remuneration
$
-
$
-
$
$
%
59,658
149,658
23,425
8,682
-
302,082
-
-
3,904
-
-
-
29,829
29,829
29,829
74,829
74,829
74,829
27,329
8,682
149,145
676,227
-
-
-
-
-
-
%
39.9
-
39.9
39.9
39.9
-
Short Term
Employment
Benefits
Payments
Total
Related
% of Total
Post
Long Term
Share Based
Performance
Shares as a
Total
Deferred
Salary/Fees
Bonus
Super-
annuation
Long Service
Leave
Deferred
Shares
N Conolly2
K Hansen3
K Negus
$
$
$
D Buerckner1
124,901 13,6995
13,039
75,592
180,929
-
-
7,158
13,699
$
-
-
$
$
2,592
71,455
225,686
306,687
389,437
77,500
272,128
152,195 22,8305
16,471
3,531
72,571
267,598
36,529
533,617
Total
1 Appointed 3 October 2016
2 Resigned 30 November 2016
3 Ceased employment 21 March 2017
4 Performance related remuneration is continuity of employment
5 Cash bonus paid on outcome of annual performance review
There were no non monetary benefits provided
50,367
6,123
528,213
1,154,849
Director and executive remuneration
Total
1,024,688
36,529
77,696
14,805
677,358
1,831,076
%
6.7
-
-
9.3
-
%
31.7
78.8
28.5
27.1
-
Page 30
Tesserent Limited Financial Report 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
At risk- STI
At risk - LTI
Name
2018
2017
2018
2017
2018
2017
Non-Executive Directors:
R Langford
R Yardley
G Baxter
S Bertamini
P Brandling
Executive Director
100%
100%
100%
100%
100%
n/a
100%
-
-
-
-
-
-
-
-
n/a
-
-
-
-
K Glennan
50%
50%
50%
50%
Other Key Management Personnel
D Buerckner
N Conolly
K Hansen
K Negus
J Owen
91%
n/a
n/a
87%
100%
91%
100%
100%
87%
n/a
9%
n/a
n/a
13%
-
9%
-
-
13%
-
-
-
-
-
-
-
-
n/a
n/a
-
-
n/a
-
-
-
-
-
-
-
-
-
-
Cash bonuses are dependent on meeting defined performance measures or the outcome of annual performance
reviews. The amount of the bonus is determined by having regard to the satisfaction of performance measures and
weightings as described above in the section “Consolidated entity performance and link to remuneration”. The
maximum bonus values are established by the Board and reviewed annually, payable by agreement between the
employee and the Board.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Cash bonus paid/payable
Cash bonus forfeited
2018
2017
2018
2017
Executive Director
K Glennan
Other Key Management Personnel
D Buerckner
K Negus
50%
-
50%
100%
-
-
75%
83%
100%
100%
25%
17%
Page 31
Tesserent Limited Financial Report 2018
Details of Share Based Compensation
Options
There were no options issued in the current financial year.
The terms and conditions of each grant of options affecting remuneration in the current or future reporting periods
are as follows:
KMP
Grant date No of options
exercise date Expiry date Exercise price
at grant date
% Vested
Vesting and
Value per option
Steve Bertamini
17 Nov 15
500,000
31 Aug 17
31 Aug 19
$0.24
Steve Bertamini
17 Nov 15
500,000
31 Aug 18
31 Aug 19
$0.288
Gregory Baxter
17 Nov 15
500,000
31 Aug 17
31 Aug 19
$0.24
Gregory Baxter
17 Nov 15
500,000
31 Aug 18
31 Aug 19
$0.288
$0.0539
$0.0423
$0.0539
$0.0423
100
n/a
100
n/a
The number of options over ordinary shares in the company provided as remuneration to key management
personnel is shown below. The options carry no dividends or voting rights. The options will vest if the option holder
remains employed by the company at the relevant vesting date.
The table below shows a reconciliation of options held by each KMP from the beginning to the end of FY 2018.
2018
Name and
grant date
S Bertamini
17 Nov 15
17 Nov 15
G Baxter
17 Nov 15
17 Nov 15
P Brandling
17 Nov 15
17 Nov 15
R Yardley
17 Nov 15
17 Nov 15
Balance at
1 Jul 2017
Unvested
Granted as
compensation
Vested
Exercised
Lapsed /
forfeited during
the year
% forfeited
during the
year
Balance at
30 June 2018
Unvested
500,000
500,000
500,000
500,000
500,000
500,000
1,000,000
1,000,000
-
-
-
-
-
-
-
-
500,000
-
500,000
-
500,000
-
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
-
1,000,000
-
-
-
-
-
50
-
50
-
500,000
-
500,000
-
-
-
-
Value of options granted as remuneration that have been granted, exercised or lapsed during the year.
Balance
Balance
1 July 2017
Value Granted
Value Exercised
Value Lapsed
30 Jun 2018
2018
Steve Bertamini
Gregory Baxter
Paul Brandling
$
81,424
81,424
81,424
Russell Yardley
162,848
$
-
-
-
-
$
-
-
-
-
$
-
-
(21,169)
(42,339)
$
81,424
81,424
60,255
120,509
Page 32
Tesserent Limited Financial Report 2018
The fair value of options granted as remuneration and as shown in the above table has been determined in
accordance with Australian Accounting Standards, using the Black-Scholes method of calculation and will be
recognised as an expense over the relevant vesting period to the extent that conditions necessary for vesting are
satisfied.
Deferred Shares
Rights to deferred shares are outlined in the respective employment agreements for each Executive KMP. The
shares vest once the performance conditions are met. On vesting each right automatically converts into one
ordinary share. The executives do not receive any dividend and are not entitled to vote in relation to the rights
during the vesting period. If an executive ceases employment before the rights vest and is not deemed a good
leaver the rights will be forfeited.
The fair value of the rights is determined based on the market price of the company’s shares at the grant date.
The terms and conditions of deferred shares affecting remuneration in the current or future reporting periods are as
follows
2018
AASB 2
Expense
Share price at
Grant Date
KMP
Deferred Shares
% Vested
$
Grant Date
D Buerckner
300,000
D Buerckner
450,000
D Buerckner
750,000
K Negus
360,000
K Negus2
600,000
100
n/a
n/a
100
n/a
12,748
24 November 2016
33,916
24 November 2016
36,744
24 November 2016
31,056
24 November 2016
32,862
24 November 2016
$
0.14
0.14
0.14
0.14
0.14
Vesting Date Exercise Price
3 October 2017
3 October 2018
3 October 2019
15 June 2018
15 June 2019
Nil
Nil
Nil
Nil
Nil
1 Nick Conolly resigned 30 November 2016 and was deemed a good leaver as per the terms of his employment contract. On this basis his rights are not forfeited, however
as per the requirements of AASB 2 all performance criteria have been met and therefore the cost of his deferred shares have been recognised in the prior year profit or loss .
The vesting date of the deferred shares has not changed.
2 Karen Negus has resigned post year end and has therefore forfeited deferred shares
2017
KMP
Deferred Shares
% Vested
$
Grant Date
$
Vesting Date Exercise Price
AASB 2
Expense
Share price at
Grant Date
N Conolly1
700,000
N Conolly1
700,000
N Conolly1
700,000
K Hansen2
500,000
D Buerckner
300,000
D Buerckner
450,000
D Buerckner
750,000
K Negus
240,000
K Negus
360,000
K Negus
600,000
100
n/a
n/a
n/a
n/a
n/a
n/a
100
n/a
n/a
96,000
9 May 2016
0.16
8 May 2017
104,011
9 May 2016
0.16
8 May 2018
106,676
9 May 2016
0.16
8 May 2019
77,500
22 October 2016
0.155
30 November 2016
29,252 24 November 2016
0.14
3 October 2017
20,527 24 November 2016
0.14
3 October 2018
21,946 24 November 2016
0.14
3 October 2019
33,600 24 November 2016
0.14
15 June 2017
19,344 24 November 2016
0.14
15 June 2018
19,627 24 November 2016
0.14
15 June 2019
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
1 Nick Conolly resigned 30 November 2016 and was deemed a good leaver as per the terms of his employment contract. On this basis his rights are not forfeited, however
as per the requirements of AASB 2 all performance criteria have been met and therefore the cost of his deferred shares have been recognised in the current year profit or
loss . The vesting date of the deferred shares has not changed.
2 Kurt Hansen ceased employment 21 March 2017. 500,000 shares vested prior to ceasing employment with the remainder of deferred shares being forfeited.
Page 33
Tesserent Limited Financial Report 2018
Rights to deferred shares
The table below shows a reconciliation of deferred shares held by each executive KMP from the beginning to the
end of FY 2018.
2018
Rights to deferred shares
Balance
1 Jul 17
Granted
during year
Vested
Forfeited
Balance
30 Jun 18
Unvested
Maximum
value yet to
vest*
Year
granted
No.
No.
No.
N Conolly1
2016
1,400,000
D Buerckner
2017
1,500,000
K Negus2
2017
960,000
-
-
-
700,000
300,000
360,000
%
50.0
20.0
37.5
No.
-
-
-
%
-
-
-
No.
$
700,000
31,941
1,200,000
55,136
600,000
31,511
1 Nick Conolly resigned 30 November 2016 and was deemed a good leaver as per the terms of his employment contract. On this basis his rights are not forfeited, however
as per the requirements of AASB 2 all performance criteria have been met and therefore the cost of his deferred shares were recognised in the prior year profit or loss. The
vesting date of the deferred shares has not changed.
2 Karen Negus has resigned post year end and therefore has forfeited rights to unvested deferred shares at the date of resignation
* The maximum value of the deferred shares yet to vest has been determined as the amount of the grant date fair value of the rights that is yet to be expensed. The minimum
value of the deferred shares yet to vest is nil as the shares will be forfeited if the vesting conditions are not met.
2017
Rights to deferred shares
Balance
1 Jul 16
Granted
during year
Vested
Forfeited
Balance
30 Jun 17
Unvested
Maximum
value yet to
vest*
Year
granted
No.
No.
No.
%
N Conolly1
2016
2,100,000
K Hansen2
2016
1,750,000
-
-
K Hansen
2017
D Buerckner
2017
K Negus
2017
-
-
-
700,000
33.3
No.
-
%
-
No.
$
1,400,000
117,243
-
-
1,750,000
100
3,000,000
500,000
16.7
2,500,000
83.3
-
-
-
-
1,500,000
-
-
1,200,000
240,000
20.0
-
-
-
-
1,500,000
138,545
960,000
95,429
1 Nick Conolly resigned 30 November 2016 and was deemed a good leaver as per the terms of his employment contract. On this basis his rights are not forfeited, however
as per the requirements of AASB 2 all performance criteria have been met and therefore the cost of his deferred shares were recognised in the FY2017 profit or loss. The
vesting date of the deferred shares has not changed.
2 Kurt Hansen ceased employment 21 March 2017. Prior year rights to deferred shares were forfeited following a renegotiated package where the additional rights were
granted. 500,000 rights vested prior to ceasing employment with the balance of 2,500,000 forfeited on resignation.
* The maximum value of the deferred shares yet to vest has been determined as the amount of the grant date fair value of the rights that is yet to be expensed. The minimum
value of the deferred shares yet to vest is nil as the shares will be forfeited if the vesting conditions are not met.
Service Agreements
The contracts for service between the Group and specified executives are formalised in service agreements. The
major provisions in the agreements relating to remuneration are set out below:
Keith Glennan, Chief Executive Officer
• Permanent employment contract commencing 1 July 2015
•
Fixed remuneration of $270,000 including superannuation and director fees along with allowances of
$23,400
• Opportunity to receive a bonus up to 100% of base salary based on achievement of KPI’s as set by
Chairman or Board. An accrual of $135,000 inclusive of superannuation has been taken up for FY2018.
•
Termination by provision of two months’ notice by either the Executive or the Company
Page 34
Tesserent Limited Financial Report 2018
David Buerckner, Head of Security Operations
• Permanent employment contract commencing 3 October 2016
•
Fixed remuneration of $200,385 including superannuation
• Opportunity to receive an annual bonus up to $20,000 inclusive of superannuation based on outcome of
annual review undertaken by CEO. No bonus was paid or accrued for the current year.
•
Termination by provision of two months’ notice by either the Executive or the Company
Karen Negus, Head of Sales and Marketing
• Permanent employment contract commencing 15 June 2016 and updated 1 April 2017 when appointed to
Head of Sales and Marketing.
•
Fixed remuneration of $200,385 inclusive of superannuation
• Sales commission of $25,000 inclusive of superannuation
• Opportunity to receive an annual bonus up to $30,000 inclusive of superannuation based on outcome of
annual review undertaken by CEO.
•
Termination by provision of one months’ notice by either the Executive or the Company.
Justin Owen, Chief Financial Officer
• Permanent part time contract with CFO Effect Pty Ltd commencing 1 July 2017.
• Monthly retainer based remuneration of $9,650, plus additional fee for other projects undertaken.
Termination by provision of one months’ notice by either CFO Effect Pty Ltd or the Company.
KMP Shareholding 2018
Deferred shares
Issued on
Balance at
vested as
exercise of
Beginning of
remuneration
options during
Balance at end
year
during year
year
Other changes during year
of year
R Langford
24,071,2821
R Yardley
K Glennan
G Baxter
S Bertamini
P Brandling
D Buerckner
K Negus
J Owen
641,666
31,711,435
1,200,000
1,200,000
1,200,000
-
-
-
-
-
-
-
-
300,000
240,000
360,000
-
1) shares held at appointment date
2) shares held at resignation date
3) shares sold off market
4) shares received as share based payment for Director fee remuneration
On Market
Other
-
-
24,071,282
(639,114)
(2,552)2
-
50,000
(3,000,000)3
28,761,435
-
-
206,0434
1,406,043
206,0434
1,406,043
(183,196)
(1,016,804)2
-
-
-
110,000
-
-
-
300,000
600,000
110,000
-
-
-
-
-
-
-
-
-
Page 35
Tesserent Limited Financial Report 2018
KMP Shareholding 2017
Deferred shares
Issued on
Balance at
vested as
exercise of
Beginning of
remuneration
options during
Balance at end
year
during year
year
Other changes during year
of year
R Yardley
K Glennan
G Baxter
S Bertamini
P Brandling
K Hansen
D Buerckner
K Negus
1) shares held at resignation date
600,000
31,451,435
1,200,000
1,200,000
1,200,000
-
-
-
-
-
30,000
500,000
-
-
-
240,000
-
-
-
-
-
-
-
-
On Market
Other
41,666
260,000
-
-
-
-
-
-
-
-
30,000
(560,000)1
-
-
-
-
641,666
31,711,435
1,200,000
1,200,000
1,200,000
-
-
240,000
Transactions with KMP and/or their related party
There were no transactions conducted between the Group and KMP or their related parties, apart from those disclosed
above relating to equity compensation, that were conducted other than in accordance with normal employee, customer
or supplier relationships on terms no more favourable than those reasonably expected under arm’s length dealings with
unrelated persons.
End Remuneration Report
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of
Directors:
Robert Langford, Chairman
30 September 2018
Page 36
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF TESSERENT LIMITED
As lead auditor of Tesserent Limited for the year ended 30 June 2018, I declare that, to the best of my
knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Tesserent Limited and the entities it controlled during the period.
David Garvey
Partner
BDO East Coast Partnership
Melbourne, 30 September 2018
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Page 37
Tesserent Limited Financial Report 2018
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Revenue from continuing operations
Other income
Software licence and connectivity fees
Employee benefits expense
Depreciation and amortisation expense
Goodwill written off
Intellectual property assets written off
Finance costs
Occupancy costs
Communication costs
Consulting and legal costs
Travel
Bad and doubtful debts
Other expenses
Loss before income tax
Tax expense
Net loss for the year
Other comprehensive income
Total comprehensive income for the year
Consolidated
Note
2.2
2.2
2018
$
2017
$
5,327,957
5,375,117
1,103,803
1,788,886
3.6
3.6
2.3
(2,372,554)
(2,347,575)
(2,662,491)
(4,127,401)
(277,594)
(617,303)
(777,375)
(67,736)
(68,777)
(458,351)
(595,152)
-
-
(8,152)
(688,074)
(507,645)
(568,993)
(734,695)
(78,135)
(51,185)
(170,231)
(40,916)
(1,174,244)
(1,148,549)
(9,152,587)
(10,390,541)
(2,720,827)
(3,226,538)
2.6
374,843
237,498
(3,095,670)
(3,464,036)
-
-
(3,095,670)
(3,464,036)
Basic earnings per share (cents)
Diluted earnings per share (cents)
2.4
2.4
(2.62)
(2.62)
(2.99)
(2.99)
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying
notes
Page 38
Tesserent Limited Financial Report 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Consolidated
Note
2018
$
2017
$
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Current tax asset
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Other financial assets
Plant and equipment
Intangible assets
Deferred tax asset
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Other financial liabilities
Unearned income
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other financial liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
4.3
3.1
2.6
3.8
3.5
3.6
2.6
3.2
3.9
3.3
3.9
3.3
1,717,221
2,860,648
344,194
259,231
55,693
361,256
834
799,568
160,698
25,981
765,430
834
2,738,429
4,613,159
165,810
623,882
733,848
139,619
257,229
1,920,388
4,658,817
-
694,727
867,572
514,462
298,598
2,375,359
6,988,518
1,210,577
1,277,767
61,212
678,792
269,266
-
709,463
646,464
2,219,847
2,633,694
352,157
365,117
717,274
2,937,121
1,721,696
-
206,541
206,541
2,840,235
4,148,283
Page 39
Tesserent Limited Financial Report 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
Note
4.4
5.2
Consolidated
2018
$
2017
$
10,875,937
10,140,892
639,385
705,347
(9,793,626)
(6,697,956)
1,721,696
4,148,283
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
Page 40
Tesserent Limited Financial Report 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
Balance at 1 July 2016 (restated)
9,917,792
235,877
(3,233,920)
6,919,749
Issued
capital
$
Accumulated
Reserves
losses
Total equity
$
$
$
Comprehensive income
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the
year
Transactions with owners, in their
capacity as owners, and other transfers
-
-
-
-
-
-
(3,464,036)
(3,464,036)
-
-
(3,464,036)
(3,464,036)
Shares issued during the year
223,100
(223,100)
Shares and options granted during the
year
Total transactions with owners and
other transfers
-
692,570
223,100
469,470
-
-
-
-
692,570
692,570
Balance at 30 June 2017
10,140,892
705,347
(6,697,956)
4,148,283
Balance at 1 July 2017
Comprehensive income
Loss for the year
Other comprehensive income for the year
Total comprehensive income for the
year
Transactions with owners, in their
capacity as owners, and other transfers
Shares issued during the year
Capital raising costs
Shares and options granted during the
year
Total transactions with owners and
other transfers
10,140,892
705,347
(6,697,956)
4,148,283
-
-
-
-
-
-
(3,095,670)
(3,095,670)
-
-
(3,095,670)
(3,095,670)
768,300
(33,255)
(204,400)
-
-
138,438
735,045
(65,962)
-
-
-
-
563,900
(33,255)
138,438
669,083
Balance at 30 June 2018
10,875,937
639,385
(9,793,626)
1,721,696
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Page 41
Tesserent Limited Financial Report 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
Consolidated
Note
2018
$
2017
$
Cash flows from operations
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Income tax paid
Interest received
Interest and other finance costs paid
Research & development tax concession
Proceeds from transaction restructure
5,922,560
6,385,337
(8,219,859)
(9,144,143)
(2,297,299)
(2,758,806)
-
27,804
(6,439)
844,010
150,000
(17,905)
31,983
(8,152)
-
-
Net cash outflow from operating activities
5.5
(1,281,924)
(2,752,880)
Cash flows from investing activities
Purchase of plant and equipment
Proceeds on disposal of plant and equipment
2.3
Purchase of intangibles – development costs capitalised
Payment of deferred settlement liability for software additions
Proceeds from deferred consideration on sale of software
Acquisitions of business, net of cash paid out
Payout on sale of customer contracts
Proceeds from sale of available-for-sale financial assets
Proceeds from disposal of business
(84,633)
199,779
(370,516)
(215,428)
250,000
-
-
-
-
(728,897)
457,126
(260,040)
-
-
(500,000)
(164,401)
429,000
3,000,000
Net cash (outflow)/inflow from investing activities
(220,798)
2,232,788
Cash flows from financing activities
Proceeds from issuing of shares
Payments for issuing of shares
Net cash inflow from financing activities
392,550
(33,255)
359,295
-
-
-
Net decrease in cash and cash equivalents
(1,143,427)
(520,092)
Cash and cash equivalents at the beginning of the financial year
2,860,648
3,380,740
Cash and cash equivalents at the end of the financial year
4.3
1,717,221
2,860,648
The above Statement of Cash Flows should be read in conjunction with the accompanying notes
Page 42
Tesserent Limited Financial Report 2018
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1.
Introduction to the Report
Statement of Compliance
These general purpose financial statements of Tesserent Limited and its controlled entities have been prepared in
accordance with the Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
and the Corporations Act 2001. The consolidated financial statements comply with the International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The financial statements were authorised for issue by the Board of Directors on 30 September 2018.
Basis of Preparation
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on
historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial
assets and financial liabilities.
General Information
Tesserent Limited is a listed public company limited by shares and domiciled in Australia. Its registered office and
place of business are:
Registered office
Level 5
990 Whitehorse Road
Box Hill VIC 3128
Principal place of business
Level 5
990 Whitehorse Road
Box Hill VIC 3128
Going concern
For the year ended 30 June 2018 the consolidated entity incurred a loss of $3,095,670 (2017: loss $3,464,036),
including the write down of intangible assets of $845,111, and had cash outflows from operating activities of
$1,281,924 (2017 outflows from operating activities: $2,752,880).
These financial statements have been prepared on the basis that the consolidated entity is a going concern, which
contemplates the continuity of its business, realisation of assets and settlement of its liabilities in the normal course of
business.
To this end the consolidated entity is expecting to fund its ongoing operations as follows:
•
•
•
•
•
•
The consolidated entity has cash reserves at 30 June 2018 of $1.717 million and trade receivables of
$344,194.
Subsequent to balance date the consolidated entity raised additional capital via the issue of shares of
$411,000.
The consolidated entity is expecting to shortly receive a research & development receivable of $361,256.
The directors have provided a commitment in writing to the company to provide working capital via loan
funding in the amount of $300,000 if the need arises, or $75,000 per director.
Additionally, if the need arises, the directors have agreed that they would take remuneration in form of
equity.
Included in current liabilities of $2,210,577 are amounts for deferred revenue of $678,792 which is not a
liability immediately payable.
Page 43
Tesserent Limited Financial Report 2018
•
•
The Company is expecting an improvement in financial performance in the 30 June 2019 financial year and
the directors have approved a budget reflecting an improved financial performance. The directors also have
a plan to reduce operating costs if the need arises.
The company has a history of successfully raising capital, and if the need arises, the directors are confident
that additional capital can be raised from existing and new shareholders.
Based on the above and cash flow forecasts prepared, the directors are of the opinion that the consolidated entity is
well position to meet its objectives and obligations going forward and therefore that the basis upon which the financial
statements are prepare is appropriate in the circumstances.
Critical accounting estimates and assumptions
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying the Group’s accounting policies.
Accounting estimates and judgments
Impairment of goodwill
Taxation
Significant accounting policies
Note
3.6
2.6
Page
58
51
The significant accounting policies adopted in the preparation of the financial statements are set out below. Other
significant policies are contained in the notes to the financial statements to which they relate. The financial
statements are for the Group consisting of Tesserent Limited (company) and its controlled entities.
i.
Principles of Consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent
Tesserent Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. A list of the
subsidiaries is provided in Note 5.1.
ii.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the
Group from the date on which control is obtained by the Group. Intercompany transactions, balances and
unrealised gains or losses on transactions between group entities are fully eliminated on consolidation.
Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure
uniformity of the accounting policies adopted by the Group.
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars (AUD), which is also the functional
currency of the Company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity,
using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange
gains and losses resulting from the settlement of such transactions and from re-measurement of monetary
items at year end exchange rates are recognised in profit or loss.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional
currency other than the AUD are translated into AUD upon consolidation. The functional currency of the
entities in the Group has remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into AUD at the closing rate at the reporting
date. Income and expenses have been translated into AUD at the average rate over the reporting period.
Exchange differences are changed or credited to other comprehensive income and recognised in the
currency translation reserve in equity.
Page 44
Tesserent Limited Financial Report 2018
iii.
New Accounting Standards and Interpretations not yet adopted by the Group
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not
yet mandatory, have not been early adopted by the company for the reporting period ended 30 June 2018.
Accounting Standards issued by the AASB that are not yet mandatorily applicable to the Group, together
with an assessment of the potential impact of such pronouncements on the Group when adopted in future
periods, are discussed below:
a. AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting
periods beginning on or after 1 January 2018).
The Standard will be applicable retrospectively and includes revised requirements for the
classification and measurement of financial instruments, revised recognition and de-recognition
requirements for financial instruments and simplified requirements for hedge accounting.
The Group does not hold any complex financial assets or liabilities. Further, the Group does not
engage in any hedge accounting and as such, the Directors do not anticipate that the adoption of
AASB 9 will have a material impact on the Group’s financial instruments.
b. AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods
beginning on or after 1 January 2018, as deferred by AASB 2015-8: Amendments to Australian
Accounting Standards – Effective Date of AASB 15).
When effective, this Standard will replace the current accounting requirements applicable to
revenue with a single, principles-based model. Except for a limited number of exceptions, including
leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as
non-monetary exchanges between entities in the same line of business to facilitate sales to
customers and potential customers.
The core principle of the Standard is that an entity will recognise revenue to depict the transfer of
promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB
15 provides the following five-step process:
i.
Identify the contract(s) with a customer
ii.
Identify the performance obligations in the contract(s)
iii. Determine the transaction price
iv. Allocate the transaction price to the performance obligations in the contract(s); and
v. Recognise revenue when (or as) the performance obligations are satisfied.
While the directors are still assessing the impact AASB 15 will have on the Group’s income
recognition under contracts for services, it is expected that there will be no change to the
recognition of sales revenue which will continue to be recognised over the life of a contract as the
Group’s performance obligations are satisfied over time rather than on deployment. These
performance obligations under their contracts are not likely to be distinct and hence will be grouped
together as part of a single contract. This has been applied to all current contracts and agreements
in place and revenue recognised on this basis. Further analysis will be completed prior to the half
year 31 December 2018 financial report being released.
c. AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019).
When effective, this Standard will replace the current accounting requirements applicable to leases
in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting
model that eliminates the requirement for leases to be classified as operating or finance leases.
The main changes introduced by the new Standard include:
i. Recognition of a right to use asset and liability for leases (excluding short term leases with
less than 12 months tenure and lease relating to low value assets)
Page 45
Tesserent Limited Financial Report 2018
ii. Depreciation of right to use assets in line with AASB 116 Property , Plant and Equipment
in profit or loss and unwinding of the liability in principal and interest components
iii. Variable lease payments that depend on an index or a rate are included in the initial
measurement of the lease liability using the index or rate at the commencement date; and
iv. Additional disclosure requirements.
The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard
to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective
application as an adjustment to opening equity on the date of initial application.
The standard will affect primarily the accounting for the Group’s operating leases. As at reporting
date the Group has non-cancellable operating lease commitments of $2,053,010, see Note 4.5.
However, the Group has not yet determined to what extent these commitments will result in the
recognition of an asset and a liability for future payments and how this will affect the Group’s result
and classification of cash flows. Some of the commitments maybe covered by the exemption for
short-term and low value leases and some commitments may relate to arrangements that will not
qualify as leases under AASB16.
2. Business Result for the Year
This section provides the information that is most relevant to understanding the financial performance of the
Group during the financial year and, where relevant, the accounting policies applied and the critical judgements
and estimates made.
2.1 Segment information
Identification of reportable segments
An operating segment is a component of an entity that engages in business activities from which it may earn
revenue and incur expenses, whose operating results are regularly reviewed by the Group’s Chief Operating
Decision Maker (CODM) in order to effectively allocate Group resources and assess performance.
The Group has identified its operating segments based on the internal reports that are reviewed and used by the
Chief Executive Officer (CEO) in the capacity of CODM. Two operating segments have been identified: IT Security
Managed Services and Software Licensing.
The CEO reviews Profit before tax. The accounting policies adopted for internal reporting to the CEO are consistent
with those adopted in the financial statements.
Page 46
2018
Revenues
Sales to external customers
Inter segment sales
Total sales revenue
Onerous provision write back
Transaction restructure fee
Research & development tax concession
Other revenue
Total revenue
Tesserent Limited Financial Report 2018
IT Security
Managed
Services
$
5,033,889
33,820
5,067,709
-
150,000
457,741
96,783
5,772,233
Software
Licensing
$
294,068
384,030
678,098
399,279
-
-
-
1,077,377
Inter
Segment
Eliminations
$
Totals
$
-
(417,850)
(417,850)
-
-
-
-
(417,850)
5,327,957
-
5,327,957
399,279
150,000
457,741
96,783
6,431,760
Profit/(loss) before income tax expense
(2,858,959)
138,132
-
(2,720,827)
Total segment assets
11,356,346
686,832
(7,384,361)
4,658,817
Total segment liabilities
2,793,901
143,220
-
2,937,121
2017
Revenues
Sales to external customers
Inter segment sales
Total sales revenue
Gain on sale of intellectual property
Gain on sale of customer contracts
Research & development tax concession
Other revenue
Total revenue
IT Security
Managed
Services
$
5,043,856
7,530
5,051,386
571,794
569,694
446,398
201,000
Software
Licensing
$
331,261
359,763
691,024
-
-
-
-
Inter
Segment
Eliminations
$
Totals
$
-
(367,293)
(367,293)
-
-
-
-
5,375,117
-
5,375,117
571,794
569,694
446,398
201,000
6,840,272
691,024
(367,293)
7,164,003
Profit/(loss) before income tax expense
(3,680,868)
454,330
-
(3,226,538)
Total segment assets
12,777,316
1,348,460
(7,137,258)
6,988,518
Total segment liabilities
2,233,724
606,511
-
2,840,235
Intersegment transactions
An internally determined transfer price is set for all intersegment sales. This price is reset quarterly and is based on
what would be realised in the event the sale was made to an external party at arm’s length. All such transactions
are eliminated on consolidation of the Group’s financial statements.
Corporate charges are allocated to reporting segments based on the segments’ overall proportion of revenue
generation within the Group. The Board of Directors believes this is representative of likely consumption of head
office expenditure that should be used in assessing segment performance and cost recoveries.
Intersegment loans payable and receivable are initially recognised at the consideration received/to be received net
of transaction costs. If intersegment loans receivable and payable are not on commercial terms, these are not
adjusted to fair value based on market interest rates. This policy represents a departure from that applied to the
statutory financial statements.
Page 47
Tesserent Limited Financial Report 2018
Consolidated
2018
$
2017
$
5,033,889
294,068
5,327,957
4,943,686
431,431
5,375,117
Revenue from external customers attributable to:
Australia
International
Total
2.2 Revenue
Recognition and measurement
The Group recognises revenue when it is probable that the economic benefit will flow to the entity and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of Goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the
goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed
as revenue are net of sales returns and trade discounts.
Rendering of services
Revenue derived through licensing arrangements for customers who subscribe to Tesserent’s security infrastructure
platform (for the provision of Security-as-a-Service) is recognised as the services are provided over the licensing
period. The company has determined that these services are provided evenly over the term of the contract.
Revenue derived from the rental of hardware by customers is recognised consistently over the licensing period, in
line with service delivery.
Revenue derived from the connectivity and related support services (including installation and setup of hardware)
is recognised at the time the service is provided. On the basis that monthly unused support services do not
accumulate, the company recognises revenue evenly over the term of the contract, in line with service delivery.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Revenue from continuing operations
Sales revenue
Other income
Transaction restructure fee1
Onerous provision writeback
Research and development tax concession
Interest
Gain on sale of intellectual property
Gain on sale of customer contracts
Other
Consolidated
2018
$
2017
$
5,327,957
5,327,957
5,375,117
5,375,117
150,000
399,279
457,741
27,803
-
-
68,980
-
-
446,398
29,387
571,794
569,694
171,613
1,103,803
1,788,886
1)
The Company entered into a transaction restructure agreement with Family Zone Cyber Security Limited (ASX:FZO) agreeing to a variation of
the existing Asset Sale Agreement. The restructure fee was recognised over the term of the restructured payment plan and has been recognised
as cash received in operating activities within the statement of cash flows.
Page 48
2.3 Loss for the year
Loss before income tax from continuing operations includes the following specific expenses
Tesserent Limited Financial Report 2018
Employee benefits expense
- Defined contribution superannuation expense
- Research and development costs
Bad and doubtful debts expense
-
Trade receivables
Occupancy costs
- Minimum lease payments
Profit on disposal of plant and equipment
2.4 Earnings per share
Consolidated
2018
2017
200,119
614,149
298,111
1,050,348
51,185
40,916
359,847
-
418,567
151,635
Basic earnings per share
Basic earnings per share is calculated by dividing the loss attributable to the owners of Tesserent Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial
year.
From continuing operations attributable to the ordinary equity holders of the
company
Total basic earnings per share attributable to the ordinary equity holders of
the company
Consolidated
2018
Cents
2017
Cents
(2.62)
(2.62)
(2.99)
(2.99)
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation
to dilutive potential ordinary shares.
From continuing operations attributable to the ordinary equity holders of the
company1
Total diluted earnings per share attributable to the ordinary equity holders
of the company1
Consolidated
2018
Cents
2017
Cents
(2.62)
(2.62)
(2.99)
(2.99)
1There are 7,000,000 options and 2,500,000 unvested deferred shares that have not been taken into account in determining diluted EPS because their effect is anti-dilutive.
Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the company used in
calculating basic earnings per share:
From continuing operations
Diluted earnings per share
Loss attributable to the ordinary equity holders of the company used in
calculating basic earnings per share:
From continuing operations
Consolidated
2018
$
2017
$
(3,095,670)
(3,464,036)
(3,095,670)
(3,464,036)
Page 49
Weighted average number of shares used as the denominator
Tesserent Limited Financial Report 2018
Consolidated
2018
Number
2017
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Weighted average number of ordinary shares used as the denominator in
calculating diluted earnings per share
118, 368,498
115,738,337
118, 368,498
115,738,337
2.5 Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving
entities or businesses under common control. The business combination will be accounted for from the date that
control is obtained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent
liabilities) assumed is recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any
change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a
financial instrument, are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
Goodwill
Goodwill recognised as part of a business combination transaction is recognised in accordance with the
accounting policy note in section 3.6.
2018
There were no business combination transactions impacting Tesserent Limited for the year ended 30 June 2018 or
in the prior year.
Page 50
Tesserent Limited Financial Report 2018
2.6 Taxation
The income tax income for the year comprises current tax income and deferred tax income.
Current tax
Current tax assets are measured at the amounts expected to be paid to be recovered from the relevant taxation
authority.
Deferred tax
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or
liability, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled and their measurement also reflects the manner in which management
expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable
items of property, plant and equipment measured at fair value and items of investment property measured at fair
value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of
the asset will be recovered entirely through sale.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that
it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be
utilised. Tax losses have not been recognised in the current year.
Offsetting balances
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that
net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred
tax assets and liabilities are offset where: (i) a legally enforceable right of set-off exists; and (ii) the deferred tax
assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of
the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
Tesserent Limited and its Australian subsidiaries have applied the tax consolidation legislation, which means that
these entities are taxed as a single entity. As a consequence, the deferred tax assets and deferred tax liabilities of
these entities have been offset in the consolidated financial statements.
i.
Reconciliation of income tax expense to prima facie tax payable
Consolidated
2018
$
2017
$
Loss from continuing operations before income tax expense
(2,720,827)
(3,226,538)
Prima facie tax rate of 27.5% (2017:27.5%)
748,227
887,298
Tax effect of amounts which are not deductible/(taxable) in calculating
taxable income:
Share based payments not deductible
Amortisation customer contracts not deductible
Impairment of goodwill
Amortisation of intellectual property not deductible
Current year tax losses not recognised
Restate temporary differences
Other non-deductible / assessable
Prior year adjustments
(2,444)
-
(213,778)
(18,628)
(680,437)
-
(195,222)
(11,911)
(46,762)
(8,966)
-
(96,312)
(773,418)
69,497
(124,744)
17,439
Page 51
Tax offset for R&D claim
Income tax expense
Income tax comprises of:
Current tax
Deferred tax
Adjustments to current tax for:
unrecognised temporary differences in prior periods
Restatement of deferred tax balances to current tax rate
Current year tax losses not recognised
Income tax expense
ii.
Deferred tax balances
Deferred tax comprises of temporary differences attributable to:
Tax losses
Share issue costs
Provisions
Intangible assets
Other
Movement in balances
Tesserent Limited Financial Report 2018
(650)
(374,843)
(161,530)
(237,498)
680,437
362,932
333,304
115,680
11,911
-
(680,437)
(374,843)
17,439
69,497
(773,418)
(237,498)
-
155,994
160,481
(104,803)
(72,053)
139,619
85,776
233,991
224,908
-
(30,213)
514,462
Tax
losses
Share
Provisions
Intangible
Other
Total
issue costs
assets
As at 1 July 2016
122,644
340,351
336,439
Charged
-
to profit or loss
(36,868)
(106,360)
(111,531)
As at 30 June 2017
85,776
233,991
224,908
-
-
-
(132,146)
667,288
101,933
(152,826)
(30,213)
514,462
Charged to
-
to profit or loss
(85,776)
(77,997)
(64,427)
(104,803)
(41,840)
(374,843)
As at 30 June 2018
-
155,994
160,481
(104,803)
(72,053)
139,619
Carried forward tax losses of $5,386,930 have not brought to account as a deferred tax asset of $1,481,406.
Based on the value of tax losses incurred, the directors’ have formed an opinion that the business was not in a
position to satisfy the criteria for recognising these losses as a deferred tax asset. These losses remain available
for the Group to use in the future.
Under normal circumstances, the benefits of deferred tax losses not brought to account can only be realised in the
future if:
• assessable income is derived of a nature, and of an amount sufficient to enable the benefit from the
deductions to be realised
• conditions for deductibility imposed by law are complied with; and
• no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
The directors on a regular basis will assess the recognition of the deferred tax assets.
Page 52
iii.
Franking credits
Tesserent Limited Financial Report 2018
Franked dividends
Franking credits available for subsequent financial years based on a tax rate
of 27.5%
iv.
Research and development
Current tax asset
Consolidated
2018
$
2017
$
-
-
25,673
25,673
25,673
25,673
Consolidated
2018
$
2017
$
361,256
765,430
The Group undertakes eligible research and development (R&D) activities and is therefore entitled to claim an R&D
offset under the R&D tax incentive as administered by The Australian Taxation Office and the Department of Industry,
Innovation and Science.
Key estimate and judgment: Taxation
The Group is subject to income taxes in Australia. Significant judgment is required in determining the provision for
income taxes. There are many transactions and calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the
period in which such determination is made.
Diversity in practice exists around the accounting treatment of refundable R&D incentives, because the Australian
Accounting Standards do not specifically address R&D incentives. The Group has decided to record R&D
refundable tax incentives as other income.
Page 53
Tesserent Limited Financial Report 2018
3. Operating Assets and Liabilities
3.1 Trade and other receivables
Recognition and measurement
Trade and other receivables include amounts due from customers for goods sold and services performed in the
ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting
period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any provision for impairment. The amount of the impairment loss is
recognised in profit or loss within impairment losses on loans and receivables. When a trade receivable for which
an impairment allowance had been recognised becomes uncollectable in as subsequent period, it is written off
against the allowance account. Subsequent recoveries of amounts previously written off are credited against the
impairment losses on loans and receivables in profit or loss.
CURRENT
Trade receivables
Provision for impairment
Other receivables
Total current trade and other receivables
Unimpaired past due loans and receivables
Past due under 30 days
Past due 30 days to under 60 days
Past due 60 days to under 90 days
Past due 90 days and over
Total unimpaired past due loans and receivables
Total unimpaired loans and receivables
Unimpaired past due as a percentage of total unimpaired loans and
receivables
Unimpaired past due 30 days and over as a percentage of total
unimpaired loans and receivables
Reconciliation of provision for impairment
Opening provision
Additional provision
Write back of provision
Receivables written off as uncollectible
Closing provision
Consolidated
2018
$
253,779
(21,185)
232,594
111,600
111,600
344,194
59,628
97,547
4,916
21,467
183,558
344,194
53%
36%
33,000
21,185
-
2017
$
382,734
(33,000)
349,734
449,834
449,834
799,568
68,516
165,708
18,746
77,038
330,008
799,568
41%
33%
13,020
19,980
(33,000)
21,185
-
33,000
Page 54
Tesserent Limited Financial Report 2018
3.2 Trade and other payables
Recognition and measurement
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial
year which are unpaid. The carrying amounts of trade and other payables are assumed to be the same as their
fair values due to their short term nature.
CURRENT
Trade payables
Sundry payables and accrued expenses
3.3 Provisions
Recognition and measurements
Consolidated
2018
$
2017
$
609,146
601,431
720,392
557,375
1,210,577
1,277,767
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the
reporting period.
Employee Benefits
The current portion of this liability includes all of the accrued annual leave and the unconditional entitlements to
long service leave where employees have completed the required period of service.
Long service leave
The liability for long service leave is measured as the present value of expected future payments to be made in
respect of services provided by employees up to the end of the reporting period using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted to their net present value at the end of the
reporting period using corporate bond rates.
Retirement benefit obligations
The Group makes payments to employees’ superannuation funds in line with the relevant superannuation
legislation. Contributions made are recognised as expenses when they arise.
Bonus schemes
The Group recognises a liability and an expense for bonuses on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where
contractually obliged or where there is a past practice that has created a constructive obligation.
Page 55
Tesserent Limited Financial Report 2018
Onerous contracts
The Group has previously recognised a provision for contractual services to be provided to the Group which were
taken up as part of business combination transactions in the prior year. The Group is contractually obliged to
make payment for these services within 12 months of the end of the current financial year.
Consolidated
CURRENT
Employee benefits
Onerous contracts
NON-CURRENT
Employee benefits
Onerous contracts
Make good - premises
Lease incentive
Movement in provisions
2018
$
269,266
-
269,266
74,420
-
75,000
215,697
365,117
2017
$
231,904
414,560
646,464
34,352
1,005
75,000
96,183
206,540
Employee
benefits
Onerous
contracts
Make good
premises
Lease
incentive
Opening balance
266,256
415,565
75,000
Recognised in profit or loss during period
77,430
(415,565)
-
Closing balance
3.4 Contingent liabilities
343,686
-
75,000
96,183
119,514
215,697
As at the reporting date, there were no material claims or disputes of a contingent nature against the Company
and its subsidiaries.
3.5 Plant and equipment
Recognition and measurement
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation
and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the
estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable
amount and impairment losses are recognised either in profit or loss. A formal assessment of recoverable amount
is made when impairment indicators are present.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net
cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash
flows have been discounted to their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or
loss during the financial period in which they are incurred.
Page 56
Tesserent Limited Financial Report 2018
Depreciation
The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the
consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are
depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the
improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Furniture & Fixtures
Leasehold improvements
Hardware employed
Plant & equipment
Depreciation Rate
10% to 100%
14.3%
66.67%
7.5% to 66.67%
Equipment leased to external parties
40%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting
period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Furniture &
Hardware
Leasehold
Equipment
Plant &
Total
Fixtures
employed
improvement
for lease
Equipment
Consolidated
2018
Opening net book value
85,836
20,370
475,886
Additions
Disposals
2,535
(783)
6,321
24,067
-
-
Depreciation charge
(16,478)
(16,509)
(65,409)
Net book amount
71,110
10,182
434,544
-
-
-
-
-
112,635
51,710
-
694,727
84,633
(738)
(56,299)
(154,695)
108,046
623,882
2018
Cost
113,300
352,272
512,033
16,177
432,984
1,426,766
Accumulated depreciation
(42,190)
(342,090)
(77,489)
(16,177)
(324,938)
(802,884)
Net book amount
71,110
10,182
434,544
-
108,046
623,882
Furniture &
Hardware
Leasehold
Equipment
Plant &
Total
Fixtures
employed
improvement
for lease
Equipment
Consolidated
2017
Opening net book value
40,497
256,129
124,510
Additions
Disposals
134,295
153,501
487,966
(77,618)
(246,013)
(122,808)
Depreciation charge
(11,338)
(143,247)
(13,782)
Net book amount
85,836
20,370
475,886
-
-
-
-
-
139,964
58,910
(20,135)
(66,104)
112,635
561,100
834,672
(466,574)
(234,471)
694,727
2017
Cost
112,062
345,952
487,966
16,177
381,272
1,343,429
Accumulated depreciation
(26,226)
(325,582)
(12,080)
(16,177)
(268,637)
(648,702)
Net book amount
85,836
20,370
475,886
-
112,635
694,727
Page 57
Tesserent Limited Financial Report 2018
3.6 Intangibles
Recognition and measurement
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their
fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment.
Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or
losses recognised in profit or loss arising from the de-recognition of intangible assets are measured as the
difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful
lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or
useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill on acquisition of subsidiaries or businesses is included in intangible assets.
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the
sum of:
i)
ii)
the consideration transferred;
any non-controlling interest (determined under either the full goodwill or proportionate interest
method); and
iii)
the acquisition date fair value of any previously held equity interest;
over the acquisition date fair value of net identifiable assets acquired.
Goodwill and intangible assets with an indefinite useful life are tested for impairment annually and are allocated to
the Group's cash-generating units or groups of cash-generating units, representing the lowest level at which
goodwill is monitored and not larger than an operating segment. Gains and losses on the disposal of an entity
include the carrying amount of goodwill related to the entity disposed of.
Impairment of assets
An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows of other assets or groups of assets (CGUs).
The Group has impaired goodwill by $777,375 and intellectual property by $67,736 in 2018 (2017: nil).
Page 58
Tesserent Limited Financial Report 2018
Reconciliation
Reconciliations of the written down values at the beginning and end of the current financial period are set out
below:
Consolidated
Goodwill
Intellectual
property
Software
Customer
contracts
Total
2018
Opening net book value
Additions
Additions – acquisitions1
Additions – capitalised
development costs
Amortisation charges
Impairment2
Balance 30 June 2018
2018
Cost
Accumulated amortisation
Net book amount
$
777,375
-
-
-
-
$
90,197
146
$
-
-
-
-
-
463,769
370,370
(122,898)
(777,375)
(67,736)
-
-
-
-
-
22,607
711,241
22,607
834,139
-
(122,898)
22,607
711,241
$
-
-
-
-
-
-
-
-
-
-
$
867,572
146
463,769
370,370
(122,898)
(845,111)
733,848
856,746
(122,898)
733,848
(1) On 5th July 2017 Tesserent IP Pty Ltd acquired a perpetual licence deed for Software IP. Terms were provided by the vendor whereby payments totalling
USD675,000 are to be paid over a 5-year period. In recognising the intangible asset value, the Company has completed a present value of the payments using a
discount rate of 15.08%. A corresponding liability has also been recognised and disclosed as current and non-current other financial liabilities. The recognised
intangible is being amortised over 5 years.
The company has undertaken a detailed review of all intangible assets at the CGU level. In conjunction with this review, the restructure of various OEM supplier
arrangements and the recently announced acquisition the goodwill capitalised on previous acquisitions has been written off.
(2)
Consolidated
Goodwill
Intellectual
property
Software
Customer
contracts
Total
2017
$
$
$
$
$
Opening net book value
777,375
82,601
3,420,197
205,589
4,485,762
Additions
Accumulated amortisation
Disposal
-
-
7,596
252,444
-
260,040
-
-
(353,111)
(29,603)
(382,714)
(3,319,530)
(175,986)
(3,495,516)
Balance 30 June 2017
777,375
90,197
2017
Cost
777,375
90,197
Accumulated amortisation
-
-
Net book amount
777,375
90,197
-
-
-
-
-
-
-
-
867,572
867,572
-
867,572
Page 59
Tesserent Limited Financial Report 2018
Impairment testing
For the purpose of impairment testing, intangible assets with indefinite lives are allocated to the consolidated
entity’s cash generating units (CGU’s) as follows:
Goodwill – software licencing
Consolidated
2018
$
-
-
2017
$
777,375
777,375
The Group tests whether there has been any impairment of the goodwill on an annual basis with the most recent
review being completed as at 30 June 2018. In conjunction with this review the performance of the CGU and
associated future cashflows, which have been impacted by the restructure of various OEM supplier arrangements,
the goodwill capitalised on previous acquisition has been written off.
Key estimate and judgment
The recoverable amount of the CGU’s is determined based on value-in-use calculations, determined by discounting
future cash flows to be generated from the continuing use of the business. Management’s determination of cash
flow projections and gross margins are based on past performance and future expectations which require the use
of assumptions.
The calculations use cash flow projections based on actuals covering year 1. The present value of future cash
flows for each CGU for years two to five have been calculated using a terminal growth rate of 2% and a pre-tax
discount rate of 21.74% has been used to determine a value in use.
3.7 Inventory
Inventory is stated at the lower of cost and net realisable value. Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the sale.
As at 30 June 2018 there had been no write downs and all inventories are stated at cost. (2017:$nil)
3.8 Other financial assets
Call option investment
Recognition and measurement
The call option represents an investment whereby the company has the right but not obligation to acquire the
underlying asset. Where this option is exercised by providing notice, the option investment is offset against the
predeterminable purchase price of the underlying asset. Where the option is exercised via notice, the
counterparty has the right to cancel the option upon notice however must refund the full cost of the option.
The call option has initially been recognised at cost less any impairment. The carrying amount of the option is
reviewed annually by the directors to ensure it is not in excess of its recoverable amount. The carrying value of the
call option investment has been assessed by the directors to represent fair value.
Where the intention of the company is to exercise the option within 12 months of the balance date, the investment
will be recorded as a current asset. If the intention is to exercise after 12 months, the investment will be recorded
as a non-current asset.
Page 60
Non-current assets
Call Option investment1
Tesserent Limited Financial Report 2018
Consolidated
2018
$
165,810
165,810
2017
$
-
-
1) During the period the company purchased a call option providing Tesserent with the right but not obligation to acquire a cyber security
business based in the United Kingdom. The option expires 21 December 2019 and if exercised prior to expiry the amount paid for the option
is offset against the purchase price of the business. If the counterparty decides not to proceed with the sale, the call option investment is
redeemed in full by the counterparty.
3.9 Other financial liabilities
Deferred settlement liability
Recognition and measurement
Deferred settlement liability is recognised when the company has a legal or constructive obligation, as a result of a
past event, for which an outflow of economic benefits will result and that outflow can be reliably measured. Future
payments are discounted to their net present value at contract commencement using a discount rate of 15.08%.
The difference between actual payments and the discounted amount is recognised as a finance cost.
Where the discounted payment is due within 12 months of the balance date, the deferred settlement liability will be
recorded as a current liability. The balance is represented as non-current.
Current
Non-current
Consolidated
2018
$
61,212
352,157
2017
$
-
-
4. Capital Management
The Group’s objective when managing capital is to:
• Safeguard their ability to continue as a going concern, so that they can provide returns to shareholders;
and
• Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
For the purpose of analysis the Group defines capital as fully paid ordinary shares.
4.1 Borrowings
Recognition and measurement
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the end of the reporting period.
The Group has no borrowings for the current year (2017:$nil)
Page 61
Tesserent Limited Financial Report 2018
4.2 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and
interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance
of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These
methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing
analysis for credit risk.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. The risk is measure using
sensitivity analysis and cash flow forecasting. The risk is not significant as the Group has an immaterial amount of
transactions denominated in foreign currency.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result
of changes in market interest rates.
The table below outlines the variance interest rate on cash at bank.
2018
2017
Weighted
average
interest rate
%
1.47
Weighted
average
interest rate
%
1.31
Balance
$
1,717,221
1,717,221
Balance
$
2,860,648
2,860,648
Cash at bank
Net exposure to cash flow interest rate
risk
Sensitivity analysis
A change of 100 basis points in interest rates at the reporting date would have increased/decreased equity and
profit/loss for the period by the amounts shown below. This analysis assumes that all other variables remain
constant. The analysis is performed on the same basis for the comparative period.
Impact on profit/loss for the period
Increase in interest rates
Decrease in interest rates
Credit risk
2018
18,863
(18,863)
2017
21,869
(21,869)
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other
security, at balance date of recognised financial assets is the carrying amount of those assets, net of any
provisions for impairment of those assets, as disclosed in consolidated statement of financial position and notes to
the consolidated financial statements.
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit
exposures to customers including receivables and committed transactions.
Page 62
Tesserent Limited Financial Report 2018
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are
written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade
receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reorganisations, and default or delinquency in payments (more than 30
days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment
allowance is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Refer to Note 3.1 for schedule of unimpaired past due
receivables.
The Group does not have any significant credit risk to any single counterparty given the large number of
customers.
Liquidity risk
Prudent liquidity risk management requires the Group to maintain sufficient liquid assets and available borrowing
facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring actual
and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Amounts presented below represent the future undiscounted principal and interest cash flows.
Maturity analysis
Consolidated – 2018
Non-interest bearing
Trade payables
Other payables
Accrued expenses
1 year or
less
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Remaining
contractual
maturities
$
609,146
60,827
540,604
$
-
-
-
$
-
-
-
$
$
-
-
-
-
-
609,146
60,827
540,604
413,369
1,623,946
Deferred settlement liability
61,212
70,443
281,714
1,271,789
70,443
281,714
Consolidated – 2017
Non-interest bearing
Trade payables
Other payables
Accrued expenses
1 year or
less
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Remaining
contractual
maturities
$
720,392
243,144
314,231
1,277,767
$
-
-
-
-
$
-
-
-
-
$
$
-
-
-
-
720,392
243,144
314,231
1,277,767
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Page 63
Tesserent Limited Financial Report 2018
4.3 Cash and cash equivalents
Recognition and measurement
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturity dates 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, and bank overdrafts.
Cash at bank
Term deposits
4.4 Contributed equity
Recognition and measurement
Consolidated
2018
$
867,221
850,000
2017
$
2,788,469
72,179
1,717,221
2,860,648
Ordinary fully paid shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options
are show in equity as a deduction, net of tax, from the proceeds.
All issued ordinary shares are fully paid. Holders of these shares are entitled to dividends as declared from time to time and
are entitled to one vote per share at General meetings of the Company. All ordinary shares rank equally with regard to the
Company’s residual assets.
2018
Shares
2017
Shares
2018
$
2017
$
Consolidated
Ordinary shares – fully paid
126,041,546
116,774,600
10,875,937
10,140,892
Movements in ordinary share capital
Date
Shares
Issue price
$
Details
2017
Balance
Shares issued to employees
Shares issued to employees
Shares issued to employees
2018
Balance
Shares issued to employees
Shares issued to employees
Shares issued to directors
Equity settled expense
1 Jul 2016
115,334,600
30 Nov 2016
8 May 2017
15 Jun 2017
500,000
700,000
240,000
116,774,600
$
0.16
0.16
0.14
9,917,792
77,500
112,000
33,600
10,140,892
116,774,600
10,140,892
23 Oct 2017
16 May 2018
18 May 2018
18 May 2018
300,000
700,000
412,086
352,000
0.16
0.91
0.075
0.07
42,000
112,000
37,500
26,400
500,000
(33,255)
50,400
126,041,546
10,875,937
Page 64
Shares issued pursuant to capital raising
4 Jun 2018
7,142,860
Capital raise costs
Shares issued to employees
21 Jun 2018
360,000
Tesserent Limited Financial Report 2018
4.5 Commitments
Information Technology and Communication (ITC) service commitments
The Group enters into contracts for the provision of ITC services with suppliers for which there are minimum spend
requirements. Service commitments contracted at the end of the reporting period but which are not recognised as
liabilities, are as follows:
Within one year
Later than one year but not later than five years
Consolidated
2018
$
580,234
823,333
1,403,567
2017
$
397,383
382,775
780,158
Lease commitments
The Group leases its offices under a non-cancellable operating lease. Commitments in relation to this lease
contracted for at the end of each reporting period but not recognised as liabilities, are as follows:
Within one year
Later than one year but not later than five years
Greater than five years
Consolidated
2018
$
2017
$
237,051
222,723
1,700,090
1,477,852
115,869
575,158
2,053,010
2,275,733
4.6 Dividends
No dividends were paid or declared for the current or prior period.
5. Other
5.1 Related party transactions
Controlled entities
The consolidated financial statements include the financial statements of Tesserent Limited and its controlled entities.
The 100% controlled entities are as follows:
Tesserent Australia Pty Ltd – acquired 15 July 2015
Tesserent Wholesale Pty Ltd – acquired 15 July 2015
Tesserent IP Pty Ltd (Previously 443 IP Pty Ltd) – acquired 15 July 2015
Tesserent UK Ltd – incorporated in the UK 20 May 2015 (dormant)
Apart from Tesserent UK Ltd all companies operate in Australia.
Page 65
Options
On 17 November 2015 the company issued the Chairman and each Non-Executive Director at that time with a total
of 7,500,000 options over unissued shares. Unvested options would lapse if the Chairman or Director resigned prior
to vesting date of the options. Details of options are set out below:
Tesserent Limited Financial Report 2018
2018
Director
Steve Bertamini
Gregory Baxter
Paul Brandling1
Russell Yardley1
Exercise price
1)
Resigned prior to option vesting date
2017
Director
Steve Bertamini
Gregory Baxter
Paul Brandling
Russell Yardley
Exercise price
Options
exercisable from
31 August 2016
500,000
500,000
500,000
1,000,000
Options
exercisable from
31 August 2017
Options
exercisable from
31 August 2018
500,000
500,000
500,000
1,000,000
500,000
500,000
-
-
$0.200
$0.240
$0.288
Options
exercisable from
31 August 2016
500,000
500,000
500,000
1,000,000
Options
exercisable from
31 August 2017
Options
exercisable from
31 August 2018
500,000
500,000
500,000
1,000,000
500,000
500,000
500,000
1,000,000
$0.200
$0.240
$0.288
The options have been valued and accounted for in accordance with the requirements of AASB 2 Share-based Payments.
During the current period, directors or parties related to the directors subscribed for shares in the company as follows:
Date
Amount Paid
Name
Number of
Shares
206,043
206,043
18,750
18,750
24/05/18
24/05/18
Steve Bertamini1
Greg Baxter1
1)
Issued as part of director fee remuneration
There were no shares subscribed for by directors or parties related to the directors in the prior year.
Payables – Loans from related parties
The Group has no loans from related parties in the current year (2017:$nil)
Key management personnel remuneration
Short-term salary/fees
Short-term-bonus
Post-employment benefits
Long term benefits
Share based payments
Consolidated
2018
$
2017
$
1,032,197
1,024,688
135,000
61,340
11,701
36,529
77,696
14,805
135,879
677,358
1,376,117
1,831,076
Page 66
Tesserent Limited Financial Report 2018
Share based payments
Equity-settled share-based compensation benefits are provided to employees and directors.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees and
directors in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently
determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of
the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting
conditions that do not determine whether the consolidated entity receives the services that entitle the employees
to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over
the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the
award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting
period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each
reporting date less amounts already recognised in previous periods.
To determine the value of options issued, an independent valuation was prepared using the Black-Scholes model.
In valuing the options a risk-free rate of 2%, a volatility rate of 40%, dividend yield of 0%, share price of $0.20 and
time to expiry of four years were used. The 40% volatility rate was determined by reference to a broad set of ASX-
listed comparable companies. The value as determined was amortised over the vesting period of the option.
Set out below are summaries of options movements during the year
2018
Grant date
Expiry
date
17 Nov 15
31 Aug 19
17 Nov 15
31 Aug 19
$
0.20
0.24
2,500,000
2,500,000
17 Nov 15
31 Aug 19
0.288
2,500,000
9 May 16
8 May 18
9 May 16
8 May 19
9 May 16
8 May 20
0.30
0.40
0.50
Total
500,000
500,000
500,000
9,000,000
Exercise
price
Balance at
the start of
Expired/
Balance at
forfeited/
the end of
the year
Granted
Exercised
other
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,500,000
2,500,000
1,500,000
1,000,000
500,000
-
-
-
500,000
500,000
2,000,000
7,000,000
Weighted average exercise price
$0.269
$0.00
$0.00
$0.291
$0.263
2017
Grant date
Expiry
date
17 Nov 15
31 Aug 19
17 Nov 15
31 Aug 19
Exercise
price
$
0.20
0.24
Balance at
the start of
the year
2,500,000
2,500,000
17 Nov 15
31 Aug 19
0.288
2,500,000
9 May 16
8 May 18
9 May 16
8 May 19
9 May 16
8 May 20
0.30
0.40
0.50
Total
500,000
500,000
500,000
9,000,000
Granted
Exercised
Expired/
Balance at
forfeited/
other
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,500,000
2,500,000
2,500,000
500,000
500,000
500,000
9,000,000
Weighted average exercise price
$0.269
$0.400
$0.00
$0.00
$0.269
Page 67
Value of deferred share rights is based on the market price of the share at rights issue date.
Set out below are summaries of deferred share rights movements during the year
Tesserent Limited Financial Report 2018
2018
Vesting
Grant date
date
9 May 16
8 May 18
9 May 16
8 May 19
24 Nov 16
3 Oct 17
24 Nov 16
3 Oct 18
24 Nov 16
3 Oct 19
24 Nov 16
15 Jun 18
24 Nov 16
15 Jun 19
Total
2017
Vesting
Grant date
date
9 May 16
8 May 17
9 May 16
8 May 18
9 May 16
8 May 19
16 Jun 16
30 Jun 17
16 Jun 16
30 Jun 18
16 Jun 16
30 Jun 19
Share
price at
grant date
Balance at
the start of
$
0.16
0.16
0.14
0.14
0.14
0.14
0.14
the year
Granted
700,000
700,000
300,000
450,000
750,000
360,000
600,000
3,860,000
-
-
-
-
-
-
-
-
Share
price at
grant date
Balance at
the start of
$
0.16
0.16
0.16
0.17
0.17
0.17
the year
Granted
700,000
700,000
700,000
250,000
500,000
1,000,000
-
-
-
-
-
-
Shares
issued
700,000
-
300,000
-
-
360,000
-
(1,360,000)
Shares
issued
(700,000)
-
-
-
-
-
Expired/
Balance at
forfeited/
the end of
other
the year
-
-
-
-
-
-
-
-
-
700,000
-
450,000
750,000
-
600,000
2,500,000
Expired/
Balance at
forfeited/
the end of
other
the year
-
-
-
-
700,000
700,000
(250,000)
(500,000)
(1,000,000)
22 Oct 16
30 Nov 16
0.155
22 Oct 16
31 Mar 17
0.155
22 Oct 16
30 Jun 17
0.155
22 Oct 16
30 Sep 17
0.155
22 Oct 16
31 Dec 17
0.155
22 Oct 16
31 Mar 18
0.155
22 Oct 16
30 Jun 18
0.155
24 Nov 16
3 Oct 17
24 Nov 16
3 Oct 18
24 Nov 16
3 Oct 19
24 Nov 16
15 Jun 17
24 Nov 16
15 Jun 18
24 Nov 16
15 Jun 19
0.14
0.14
0.14
0.14
0.14
0.14
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
(500,000)
-
250,000
750,000
250,000
250,000
250,000
750,000
300,000
450,000
750,000
-
-
-
-
-
-
-
-
-
240,000
(240,000)
360,000
600,000
-
-
(250,000)
(750,000)
(250,000)
(250,000)
(250,000)
(750,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
300,000
450,000
750,000
-
360,000
600,000
Total
3,850,000
5,700,000
(1,440,000)
(4,250,000)
3,860,000
Page 68
Tesserent Limited Financial Report 2018
5.2 Reserves
Recognition and measurement
The share-based payment reserve is used to recognise:
•
•
•
the fair value of options issued to Directors and employees which have not been exercised;
the fair value of shares issued to Directors and employees; and
other share-based payment transactions.
The cost of shares and options over shares issued to Directors and employees are measured as set out in the
related parties note in section 5.1.
Share based payment reserve
Opening balance
Share based compensation recognised during the year
Shares issued to employees
Closing balance
5.3 Parent entity information
Consolidated
2018
$
705,347
138,438
(204,400)
639,385
The individual financial statements for the parent entity show the following aggregate amounts:
Consolidated
2017
$
235,877
692,570
(223,100)
705,347
2017
$
1,798,641
5,467,177
7,265,818
164,204
164,204
8,531,645
705,347
2018
$
1,951,554
305,429
2,256,983
378,245
378,245
9,266,691
639,385
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Issued share capital
Reserves
Accumulated loss
Total equity
(8,027,338)
(2,135,378)
1,878,738
7,101,614
Included with non-current assets is a net intercompany receivable of $4,576,765 that the directors have impaired
in the current year.
Loss for the year
5,764,689
1,343,544
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2018 or 2017.
Page 69
Guarantees entered into by the parent entity
The parent entity did not have any guarantees as at 30 June 2018 or 2017.
Tesserent Limited Financial Report 2018
5.4 Remuneration of auditors
Audit and assurance services
Tax services
Total remuneration
5.5 Cash flow information
a) Reconciliation of cash flow from operating activities
Loss after tax for the year
Depreciation and amortisation
Goodwill written off
Intellectual property assets written off
Share based payments
Bad and doubtful debts
Profit on sale of plant and equipment
Profit on sale software intellectual property
Profit on sale customer contracts
Loss on sale of shares
Decrease/(increase) in trade and other receivables
Increase in prepayments
Increase in inventory
Decrease/(increase) in current tax asset
Decrease/(increase) in other assets
Decrease in deferred tax assets
(Decrease)/increase in trade and other liabilities
(Decrease)/increase in unearned income
Decrease in current provisions
Increase in non-current provision
Consolidated
2018
$
89,000
45,025
134,025
2017
$
96,000
99,400
195,400
Consolidated
2018
$
2017
$
(3,095,670)
(3,464,036)
277,594
777,375
67,736
175,938
51,185
-
-
-
-
88,260
(98,533)
(29,711)
404,174
41,370
374,843
(67,192)
(30,671)
(377,198)
158,576
617,303
-
-
692,570
40,916
(29,751)
(571,794)
(569,694)
13,446
(35,640)
(71,631)
(61,171)
(483,156)
(133,361)
197,412
527,396
771,785
(193,474)
-
Net cash outflow from operating activities
(1,218,924)
(2,752,880)
Page 70
Tesserent Limited Financial Report 2018
5.6 Events occurring after the reporting period
On 27 July 2018 the Company announced that a binding term sheet, subject to conditions precedent, had been
signed to acquire ICT company Asta Solutions Pty Ltd (Asta). Asta is an Australian based business with more
than 200 clients serviced by over 85 staff from offices in Melbourne, Sydney and Auckland. The purchase price is
4 times EBITDA and expected to result in a purchase price of $3.8m. Purchase consideration will be a
combination of cash and equity. It is anticipated that the transaction will complete no later than end of December
2018.
On the 8 July 2018 the Company announced the results of the share purchase plan(SPP), noting that $304,000
had been raised from existing shareholders who participated in the SPP. These funds have been received in full.
Apart from the matters noted above, the directors are not aware of any other significant events since the end of
the reporting period.
Page 71
Tesserent Limited Financial Report 2018
In the opinion of the Directors’ of Tesserent Limited
DIRECTORS’ DECLARATION
a)
the financial statements and notes, as set out on pages 38 to 71, are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
(iii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018
and of its performance for the year ended on that date; and
complying with Accounting Standards and the Corporations Regulations 2001 and other
mandatory professional reporting requirements; and
as stated in note 1, the consolidated financial statements also comply with International
Financial Reporting Standards
there are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable; and
the Directors’ have been given the declarations required by s 295A of the Corporations Act 2001 for
the financial year ended 30 June 2018.
the remuneration disclosures included at pages 26 to 36 of the Directors Report (Audited
Remuneration Report) for the year ended 30 June 2018 comply with section 300A of the
Corporations Act 2001
b)
c)
d)
Signed in accordance with a resolution of the Directors’ made pursuant to section 295(5) of the
Corporations Act 2001.
On behalf of the Directors,
Robert Langford
Chairman
Melbourne, 30 September 2018
Page 72
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Tesserent Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Tesserent Limited (the Company) and its subsidiaries (the Group), which
comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of
profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, and notes to the financial report, 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:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial
performance for the year ended on that date; and
(ii)
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 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
report.
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 judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. We have determined the matters described below to be the key audit matters to be communicated in our
report.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Impairment of Goodwill
Key audit matter
How the matter was addressed in our audit
Refer to Note 3.6 Intangibles of the accompanying
Our audit procedures included, amongst others:
financial statements.
• Considering the appropriateness of the
At the beginning of the financial year, the Group had
methodology applied by the Group in performing
intangible assets of $867,572, consisting of goodwill of
the impairment assessment, including the process
$777,375 and intellectual property of $90,197.
undertaken and rationale supporting the
The Group is required to perform an annual impairment
impairment recognised.
test of indefinite life intangible assets in accordance
• Evaluating the assumptions and methodologies
with Australian Accounting Standards. The assessment
used by management, in particular those relating
of impairment of the Group’s intangible asset balances
to the forecasted cash flows and discount rate.
incorporates significant judgment in respect of several
factors such as discount rates, revenue growth and cost
assumptions.
• Challenging management’s assumptions used in
the impairment assessment, including those
relating to forecast revenue, costs, capital
The impairment assessment resulted in a non-cash
expenditure, discount rate and corroborated the
impairment of goodwill of $867,572 and intellectual
key market related assumptions to external data.
property of $67,736, associated with the Software
Licensing cash-generating-unit.
• Assessing the historical accuracy of forecasting
and performed a sensitivity analysis on the
Given the level of judgment involved by the Group in
discount rate, forecasted revenue and terminal
preparing the model that assessed impairment and the
growth assumptions on the Cash Generating Unit.
quantum of the impairment charge recognised, we
determined that this was a key audit matter.
• Reviewing the adequacy of the Group’s disclosures
in the financial statements surrounding the
impairment of indefinite life intangible assets.
Going Concern
Key audit matter
How the matter was addressed in our audit
Refer to Note 1 Going concern of the accompanying
Our audit procedures included, amongst others:
financial statements.
The Group has incurred losses and negative operating
• Reviewing cash-flow forecasts and challenging
management’s assumptions around future
cash flows for the year ended 30 June 2018.
revenue, operating costs, and associated cash
The Group’s use of the going concern basis of
flows.
preparation and the associated extent of uncertainty is
• Analysing the impact of reasonable possible
a key audit matter. We used a high level of judgement
changes in cash flow forecasts and their timing by
to evaluate the Group’s assessment of its ability to
applying sensitivities to key inputs including
continue operating as a going concern.
future revenue and operating costs.
In Note 1 “Going concern” of the financial report, the
• Assessing management’s accuracy to forecast
Directors have documented their considerations and
based on previous years’ actual results and our
have determined that the going concern basis of
knowledge of the Group.
preparation is the appropriate basis of accounting.
• Considering the impact of management’s
The Group’s assessment of going concern was based on
assumption around reduction of operating costs.
future cash flow forecasts. The preparation of these
Key audit matter
How the matter was addressed in our audit
forecasts incorporated a number of assumptions and
• Sensitising cash flow forecasts based on actual
judgments. The Directors have concluded that the
results compared to budget.
range of possible outcomes considered in arriving at
this judgment does not give rise to a material
uncertainty casting significant doubt on the Group's
ability to continue as a going concern.
We assessed the Group’s forecasts, including the
Directors’ assumptions regarding the timing of future
cash flows and operating results which are uncertain by
nature. This assessment required significant audit
attention in determining the appropriate conclusion
surrounding going concern.
• Assessing the director’s ability to raise sufficient
funds to support operations based on historic
success of capital raising.
• Considering the Directors’ willingness to provide
funding, if necessary.
• Reviewing subsequent events as they pertain to
actual financial performance and cash levels of
the Group.
• Assessing the adequacy of the Group's disclosures
within the financial statements.
Other information
The directors are responsible for the other information. The other information comprises the information
contained in the Directors’ Report for the year ended 30 June 2018, but does not include the financial report and
our auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the Annual Report,
which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and 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 identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial report
or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we 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.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek
to have the matter appropriately brought to the attention of users for whom our report is prepared.
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 ability of the group to continue as
a going concern, disclosing, as applicable, matters related 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 has 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.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_files/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 21 of the directors’ report for the year ended
30 June 2018.
In our opinion, the Remuneration Report of Tesserent Limited, for the year ended 30 June 2018, complies with
section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
BDO East Coast Partnership
David Garvey
Partner
Melbourne, 1 October 2018
Tesserent Limited Financial Report 2018
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
The following additional information is required by the Australian Stock Exchange Ltd in respect of listed public
companies only. The following information is current as at 5 October 2018.
1. Shareholding
a. Distribution of shareholders
Range
Total holders
Units % of Issued capital
1 – 100
101 – 1000
1,001 – 10,000
10,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 – 10,000,000
10,00,001 – 9,999,999,999
Total
15
8
207
323
100
15
15
2
685
364
2,770
1,588,955
12,080,326
22,709,748
9,815,483
40,502,727
43,684,010
0.00
0.00
1.22
9.27
17.42
7.53
31.06
33.50
130,384,383
100.00
b. The number of shareholdings held in less than marketable parcels is 108.
c. Substantial Shareholders
Shareholder
Keith Glennan1
Robert Langford2
Number of
Ordinary Fully
Paid Shares Held
% Held of
Issued
Ordinary
Capital
28,975,720
24,275,567
22.22
18.62
1- Mr Glennan holds shares through Grand Floridian Pty Ltd and Grand Floridian
Pty Ltd
2- Mr Langford holds shares through RTSF Super Pty Ltd and T B C (Australia)
Pty Ltd
d. Voting Rights
The voting rights attached to each class of equity security are as follows:
Ordinary shares
Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or
by proxy has one vote on a show of hands.
Options
All options issued by the Company have no voting rights.
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Tesserent Limited Financial Report 2018
e. 20 Largest Shareholders – Ordinary Shares
GRAND FLORIDIAN PTY LTD
RTSF SUPER PTY LTD
T B C (AUSTRALIA) PTY LTD
PBCF INVESTMENTS PTY LTD
TRACY SMYTH
MR STEVEN MAXWELL LYNCH
Number of
Ordinary
Fully Paid
Shares Held
% Held of
Issued
Ordinary
Capital
27,000,000
20.71
16,684,010
12.80
7,591,557
5.82
6,445,455
4.94
5,302,500
4.07
4,538,707
3.48
PACRIM INVESTMENT CONSULTANTS PTY LTD
2,501,490
1.92
MR DOMINIC MARINELLI
GREG BAXTER
SPB CAPITAL LIMITED
GANT SUPER PTY LTD
JAMPLAT PTY LTD
GRAND FLORIDIAN PTY LTD
2,345,308
1.80
1,620,328
1.24
1,620,328
1.24
1,617,182
1.24
1,500,000
1.15
1,194,285
0.92
COFFS HARBOUR INVESTMENTS PTY LTD
1,118,783
0.86
MR ERIC BARTOLOMEO JANSEN + MS SANDRA LEE BLACKBURN
FAYAZ MEGHANI
MR PAUL JAMES BRANDLING
GRAND FLORIDIAN PTY LTD
NARA PARK PTY LTD
ANTONY PETER O'BRIEN
1,050,000
0.81
1,040,000
0.80
1,016,804
0.78
781,435
0.60
767,500
0.59
763,418
0.59
86,499,090
66.34
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
2. Number and class of restricted securities and securities subject to voluntary escrow
Description
Number on issue
Escrowed $0.20 Options vesting 31/08/16 expiring 31/08/19
Escrowed $0.24 Options vesting 31/08/17 expiring 31/08/19
Escrowed $0.288 Options vesting 31/08/18 expiring 31/08/19
Escrowed $0.30 Options vesting 9/05/18 expiring 8/05/19
Escrowed $0.30 Options vesting 9/05/19 expiring 8/05/20
2,500,000
2,500,000
1,000,000
500,000
500,000
3. Unquoted securities
There are 7,000,000 unquoted securities being the escrowed options set out in section 2 above and remain
unexercised. The holders of these securities include the directors, and the number of the securities each person
holds is set out in the Directors’ Report.
4. Use of cash
Since the date of listing on the ASX to the end of the reporting period Tesserent used its cash and assets readily
convertible into cash in a way consistent with its business objectives.
Page 78
Tesserent Limited Financial Report 2018
CORPORATE DIRECTORY
Directors
Robert Langford
Keith Glennan
Gregory Baxter
Non-Executive Chairman
Executive Director
Non-Executive Director
Stefano (Steve) Bertamini
Non-Executive Director
Company Secretary
Oliver Carton
E-mail: investor@tesserent.com
Registered Office
Level 5, 990 Whitehorse Road, Box Hill VIC 3128 AUSTRALIA
Principal Place of Business
Level 5, 990 Whitehorse Road, Box Hill VIC 3128 AUSTRALIA
Share Register
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street Abbotsford VIC 3067
Auditor
BDO East Coast Partnership
Collins Square, Tower 4, Level 18, 727 Collins Street, Melbourne VIC 3008
Solicitor
Kelly Hazell Quill Lawyers Pty Ltd
Level 15, 440 Collins Street Melbourne VIC 3000
Stock Exchange Listing
Tesserent Limited are listed on the Australian Securities Exchange
(ASX Code: TNT)
Page 79
Tesserent Limited Financial Report 2018
INVESTOR ENQUIRIES
Oliver Carton
Company Secretary
Phone: +61 3 9880 5559
Email: investor@tesserent.com
MEDIA ENQUIRIES
Gregor Jeffery
Marketing Manager
Phone: +61 3 9880 5507
Email: gregor.jeffery@tesserent.com
WEB
tesserent.com/investor-center
linkedin.com/company/tesserent
twitter.com/tesserent
Page 80