Tesserent Limited Financial Report 2018
2019 ANNUAL REPORT
TESSERENT LIMITED
AND CONTROLLED
ENTITIES
ABN: 13 605 672 928
Page 0
Tesserent Limited Financial Report 2019
Contents
DIRECTORS’ REPORT ............................................................................................................................ 1
REMUNERATION REPORT - AUDITED ................................................................................................. 8
AUDITOR’S INDEPENDENCE DECLARATION ................................................................................... 21
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 22
CONSOLIDATED STATEMENT OF FINANCIAL POSITION ............................................................... 23
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ................................................................ 25
CONSOLIDATED STATEMENT OF CASH FLOWS ............................................................................. 26
NOTES TO THE FINANCIAL STATEMENTS ....................................................................................... 27
1. Introduction to the Report .......................................................................................................... 27
2. Business Result for the Year ..................................................................................................... 30
2.1 Segment information .......................................................................................................... 30
2.2 Revenue ............................................................................................................................... 32
2.3 Loss for the year .................................................................................................................. 33
2.4 Earnings per share .............................................................................................................. 34
2.5 Business combinations ...................................................................................................... 35
2.6 Taxation ................................................................................................................................ 36
3. Operating Assets and Liabilities ............................................................................................... 39
3.1 Trade and other receivables ............................................................................................... 39
3.2 Trade and other payables ................................................................................................... 40
3.3 Provisions ............................................................................................................................ 40
3.4 Contingent liabilities ........................................................................................................... 41
3.5 Plant and equipment ........................................................................................................... 41
3.6 Intangibles ........................................................................................................................... 43
3.7 Inventory .............................................................................................................................. 45
3.8 Other financial assets ......................................................................................................... 45
3.9 Other financial liabilities ..................................................................................................... 45
4. Capital Management ................................................................................................................... 46
4.1 Borrowings .......................................................................................................................... 46
4.2 Financial risk management ................................................................................................ 46
4.3 Cash and cash equivalents ................................................................................................ 49
4.4 Contributed equity .............................................................................................................. 49
4.5 Commitments ...................................................................................................................... 51
4.6 Dividends ............................................................................................................................. 51
5. Other ............................................................................................................................................ 51
5.1 Related party transactions ................................................................................................. 51
5.2 Reserves .............................................................................................................................. 56
5.3 Parent entity information .................................................................................................... 56
Tesserent Limited Financial Report 2019
5.4 Remuneration of auditors ..........................................................................................................57
5.5 Cash flow information.................................................................................................................57
5.6 Events occurring after the reporting period .............................................................................58
DIRECTORS’ DECLARATION...............................................................................................................60
INDEPENDENT AUDITOR’S REPORT .................................................................................................61
Page 2
FY19 COMPANY HIGHLIGHTS
PIPELINE
$7.5M
Up 168% yoy
AVERAGE
CONTRACT VALUE
INCREASED FROM
$54K TO $125K
PRODUCT PORTFOLIO
17
INCREASED FROM 3 TO 17
RECEIVED
$288K
R&D TAX CONCESSION
CAPITAL RAISED
$2.5M
NEW AI CYBERSECURITY
PARTNERSHIP
DARKTRACE
STRATEGIC
ACQUISITION
RIVIUM
TOTAL CONTRACT
VALUE
$8M
CATEGORY GROWTH
SD-WAN $3.2M
CONTRACT
MANAGEMENT
RESTRUCTURE
COMPLETE
Tesserent Limited Financial Report 2019
*Excluding Customer contracts sold to FZO in FY2017.
CHAIRMAN’S LETTER TO SHAREHOLDERS
Dear Fellow Shareholder,
I am pleased to present the 2019 Annual Report for Tesserent Limited (ASX: TNT) as we reflect on a transformative
year for our Company and the steps taken towards our goal of becoming Australia’s leading cyber security provider.
Tesserent provides Security-as-a-Service to a wide range of Australian and international customers, including
education providers, corporate enterprises, and government customers. Our services
firewall,
authentication, anti-virus, anti-malware/spyware, intrusion detection, and security event management, generally
provided on a subscription basis.
include
The past year has seen Tesserent complete a period of restructure, led by our new Chief Executive Officer Julian
Challingsworth and complemented by a largely new management team. This enabled us to deliver Tesserent’s end-
to-end cyber security strategy and continue to drive our Company towards positive cash flow generation. We have
made pleasing progress on this through FY19 and we expect to deliver it over the coming 12 months.
In April, we announced the acquisition of experienced Melbourne-based enterprise security specialist Rivium Pty
Ltd, which specialises in consulting, implementation and managed services for the enterprise security solution
Splunk. This acquisition was integral to our ability to secure high quality customers spanning the government and
private sectors and we were pleased to integrate the acquisition in July to position us more strongly for FY20. Rivium
will be earnings accretive from day one, helping us to deliver on our strategy.
We continue to pursue several other acquisition opportunities that we believe will help us round out our business
offering, and we look forward to informing our Shareholders of any developments on these as they arise.
Tesserent successfully raised $2.5 million from shareholders during the year, including an oversubscribed $1.1
million private placement in March. We have used these funds to complete due diligence on several acquisition
opportunities, invest in resources to grow the business and complete a restructuring process which we expect to
create positive cash flow for the business during FY2020. We thank our shareholders, both new and existing, for
your support in these activities which has helped us deliver on our goals during the year and strengthened the
foundations on which we expect to build a profitable business in the future.
I would like to thank my fellow Directors for their support and guidance throughout the year, and our Management,
particularly our new CEO Julian Challingsworth for his efforts in FY19, where he has demonstrated a superb capacity
to lead our team despite being relatively new to the role. I also thank our staff for their dedication and hard work
during the year, which hasn’t gone unnoticed.
Tesserent is on track to achieve cashflow positivity and profitability in FY2020 and I know our team will be working
hard to achieve that.
I look forward to an exciting year ahead, and sharing that journey with you.
ROBERT LANGFORD
Chairman and Non-executive Director
Tesserent Limited
Tesserent Limited Financial Report 2019
CHIEF EXECUTIVE OFFICER’S LETTER TO SHAREHOLDERS
Dear shareholders,
While Tesserent has undergone a vast amount of change over the past 12 months, I believe we are now
recalibrated and on track to achieve our goals.
With restructuring complete and a well-rounded management team in place, we are moving towards a cash flow
positive position in FY2020 and it’s been pleasing to see the progress we’ve made in executing our strategy since
I came on board during the year.
We achieved a great deal of growth in FY19, with a solid response to our expanded product portfolio which has
grown from three products to now offer 17 products. We’ve now fully launched our Cyber360 offering which we
expect to continue this momentum, aimed at mid-level businesses and offering an end-to-end “service as a
security” offering. Our pipeline increased by 168 per cent to $7.5 million in the June quarter of FY19, compared to
the corresponding quarter in FY18, and we look forward to building on this further in the coming 12 months.
During the year, Tesserent successfully acquired, and just after year-end, integrated Melbourne-based enterprise
security specialist Rivium Pty Ltd. This will add significant capability and additional revenue to Tesserent as well
as enabling new services to be launched in FY2020. Rivium is a specialist in the Splunk solution – Splunk
captures, indexes, and correlates real-time data in a format that is searchable and from there, it can generate
graphs, reports, alerts, dashboards, and other types of visualisations. It helps customers achieve application
management, security and compliance, as well as business and web analytics.
Rivium recently placed in the top three from more than 198 teams in a Splunk Boss competition, highlighting the
depth of capability and experience Rivium’s team brings to Tesserent’s cyber security team. Acquiring Rivium was
the first step in our aggressive growth strategy to allow Tesserent to become Australia’s leading end-to-end cyber
security business, and I am pleased with the successful integration. We are excited to have brought this into
Tesserent early in FY20 and look forward to delivering it to our existing customers and our expanded offering
helping us to attract new ones.
We have developed world-class managed solutions around our partners’ technology solutions, enabling us to
provide our customers with top coverage at all times. In addition to Splunk, these partners include Palo Alto
Networks, a supplier of firewall, endpoint and cloud security solutions, and Darktrace, a leading provider of
Artificial Intelligence (AI) solutions to manage risk.
Other highlights of the year included the increase in our average total contract value from $54,000 in FY18 to
$125,000 in FY19, which represents growth of more than 130 per cent in 12 months. This was boosted by our
largest individual sale to transport company K&S Freighters with a total contract value of $3.2 million, validating
our investment in proprietary SD-WAN capabilities.
Part of our work in FY19 involved restructuring our business, which incurred one-off costs that totalled $350,000,
but I am confident that this has been short-term financial pain to deliver long-term gain. We will benefit from the
cost saving measures employed, which will deliver savings of about 15 per cent.
With this work completed, we are able to focus on building a stable growing business that is cash flow positive on
a month-by-month basis in FY20, has the capabilities to deliver end-to-end cyber security services to our
customers, is able to recruit the best and brightest candidates in the industry and which delivers strong returns for
our shareholders.
We are already showing promising signs for FY20, having completed more firewall sales in the month of July
2019 than we did in the 12 months of FY19, demonstrating the traction we are making in a world that is
increasingly in need of market-leading cyber security to protect businesses.
With several other potential acquisitions on the table, I am confident of our future success and I look forward to
reporting on our achievements during the coming year.
JULIAN CHALLINGSWORTH
Chief Executive Officer
Tesserent Limited
Tesserent Limited Financial Report 2018
ABOUT TESSERENT
1.1
ABOUT TESSERENT
Page 6
Tesserent Limited Financial Report 2019
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.
Tesserent Limited Financial Report 2019
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 1 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.
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.
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.
Tesserent Limited Financial Report 2019
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.
STEPHAN SCHEFFER
Chief Financial Officer
Stephan Scheffer is a highly qualified individual with a Bachelor of Accounting & Commerce, and MBA, an
Advanced Diploma in Tax & Company Law, a chartered accounting qualification and AICD membership. His
professional profile includes in excess of 20 years global experience in various senior financial management
and operations management positions, including experience as CFO for two mid-cap ASX Listed companies. He
has spent the vast majority of his career with companies that deliver a premium service in a high growth
environment.
MATTHEW GLENNAN
General Manager, Sales and Operations
Matthew has more than 6 years’ experience at Tesserent, formerly known as Network-Box Australia, Matt
started out as a Security Engineer with the company. His role soon developed into that of Account Executive
after only a short period of time. In May 2019 Matt was promoted to the position of General Manager Sales &
Marketing. Combining a history of technical expertise, security best practice, and customer experience, Matt’s
role is to help clients get the most out of what Tesserent can offer, by protecting their information and enabling
them to focus on their core business.
ROSS MILLER
Head of IT Security Operations
Ross has more than 30 years of technology security/cyber/risk and continuous service improvement experience.
Ross started out in a trainee position in IT operations and quickly moved through the ranks into leadership roles.
Improvement is a key area of focus for Ross, along with, people, ‘ITIL' implementations/maturity, IT
Security/Cyber/Risk, IT Operations, Service Delivery, (Lean) Six Sigma, Kaizen, problem solving,
process/quality improvement, team leadership, turning negatives into positives and optimism.
Tesserent Limited Financial Report 2019
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.
Tesserent Limited Financial Report 2019
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)
(b)
the respective roles and responsibilities
of its board and management; and
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 intends to take appropriate
action should it be of the view that there is insufficient
gender diversity within the business.
As at 30 June 2019, there were 4 females employed
representing 23.5% of total employees. There were no
women on the Board of Directors and no women as
part of the executive team.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2019
across
in senior executive positions
and
the whole
organisation (including how the
“senior
entity has defined
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
of
independent directors; and
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
Company’s operations. The Board as a whole
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2019
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)
(b)
the names of the directors considered by
the board to be independent directors;
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 Rob Langford is not an independent directors given
he is a substantial shareholder.
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.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2019
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.
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
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.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2019
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.
iii.
iv.
v.
has at least three members, a
are
of
majority
independent directors; and
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
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:
This committee was suspended during the reporting
period.
RECOMMENDATION
COMPANY’S CURRENT PRACTICE
Tesserent Limited Financial Report 2019
(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.
7.4
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.
8.1
The board of a listed entity should:
(a) have a remuneration committee which:
i.
ii.
has at least three members, a
are
of
majority
independent directors; and
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
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.
Tesserent Limited Financial Report 2019
8.3
A listed entity which has an equity-based
remuneration scheme should:
to enter
(a) have a policy on whether participants are
permitted
transactions
(whether through the use of derivatives
or otherwise) which limit the economic
risk of participating in the scheme; and
into
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.
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
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 2019.
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
Keith Glennan
Gregory Baxter
Stefano (Steve) Bertamini
Julian Challingsworth
2.
Information on Directors
Robert Langford
Qualifications
Experience
Resigned 14 November 2018
Appointed 14 November 2018
–
–
–
Non-Executive Chairman – appointed 8 February 2018
Bachelor of Applied Science in Computing
Member of the Australian Computer Society
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
Qualifications
Experience
–
–
–
Special Responsibilities
–
Managing Director up to 1 August 2018, becoming Executive
Director from that date. Resigned from the Board on 14
November 2018.
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 the CEO role. Interim CEO appointed 1 August
2018.
Directorships held in other listed entities
during the three years prior to the current
year
–
None
Page | 1
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
Gregory Baxter
Qualifications
Experience
–
–
–
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 an 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
Qualifications
Experience
–
–
–
Non-Executive Director
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 | 2
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
Directorships held in other listed entities
during the three years prior to the current
year
–
None
Julian Challingsworth
Qualifications
Experience
–
–
Chief Executive Officer – Appointed 1 August 2018
Bachelor of Business , FCPA , GAICD
– With a strong professional services and corporate
finance background, Julian has a Masters of
Organisational Consulting from Ashridge Business
School (UK), a Graduate Diploma in IT, Swinburne
University (Aust) and a Bachelor of Business,
Accounting, RMIT (Aust). Julian is a Non-Executive
Director of Online Power and Gas Pty Ltd, a
member of Chartered Accountants (CAANZ),
Fellow Australian Certified Practicing Accountants
(FCPA) and a Graduate Australian Institute of
Company Directors (GAICD)
Julian joins Tesserent after serving as 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.
Julian was a director or 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 8 member firms.
Directorships held in other listed entities
during the three years prior to the current
year
–
None
3. Directors’ Shareholdings
The table below sets out each Director’s relevant interest in shares or options of the Company at the date of this
report:
Number of ordinary
shares
Number of options
Director
Robert Langford
Keith Glennan
Julian Challingsworth
Gregory Baxter
Stefano (Steve) Bertamini
Total
24,071,282
28,761,435
1,000,000
1,406,043
1,406,043
56,644,803
4. Company Secretary
Oliver Carton BJuris LLB was appointed Company Secretary on 6 May 2015.
35,000,000
-
13,000,000
1,000,000
1,000,000
50,000,000
Page | 3
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
5. Directors’ Meetings
The table below sets out the number of meetings held during the 2019 financial year and the number of meetings
attended by each Director, 7 Board meetings were held. No Board sub-committee meetings were held.
Director
Robert Langford
Julian Challingsworth
Keith Glennan
Gregory Baxter
Stefano (Steve) Bertamini
6. Review of Operations
Principal activities
Eligible to
attend
Attended
7
6
2
7
7
7
6
2
6
6
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.
Group financial performance
The Group recorded a loss after tax of $4,372,821 for the year ended 30 June 2019 (2018: $3,095,670 loss).
Research and Development tax concessions totalling $288,330 were received in FY19. 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.
Subsequent to the end of the year the company secured a loan facility of 4 million dollars, details can be found in
Note 5.6 on page 58.
TECHNOLOGY
Tesserent has developed world class managed solutions around our partners technology platforms. By
combining the best technology platforms from the world’s leading cyber companies and our leading security
operations center (SOC) capabilities our customers are provided end to end coverage at all times.
Key technology partners include:
Palo Alto Networks is the world’s leading supplier of firewall, endpoint and cloud security products,
Tesserent works closely with the team at Palo Alto Networks and manages over 80 solutions for our
customers.
Splunk is a global leader in searching, monitoring and analyzing big data from an operations and security
perspective. Tesserent plans to launch a Splunk managed security offer in FY2020 and will apply our
leading security capability alongside the elite Splunk capabilities that the Rivium acquisition has brought
to the group. Splunk is currently used by 92 out of the Fortune 100.
DarkTrace is a leading provider of Artificial Intelligence (AI) solutions to manage risk within a customer’s
network, the platform is autonomous in learning the normal patterns of an organisation and includes an
immune system that stops threats inside your network automatically.
Tesserent SD-WAN Tesserent continues to deploy and expand on its proprietary SD-WAN solutions, as
a result we see strong business growth potential as organisations move towards this highly scalable cost-
effective solution for their network management.
Page | 4
Tesserent Limited Financial Report 2019
DIRECTOR’S REPORT
ACCELERATING GROWTH
As part of the growth strategy, Tesserent announced that it would be accelerating business growth through strategic
acquisitions; the first acquisition under the new strategy was Rivium, an elite Splunk team with a strong business
in supporting clients buy and deploy Splunk solutions.
Rivium possesses an established team that adds a Security Information Event Management (SIEM) and insider
threat capability to Tesserent’s suite of cybersecurity solutions. The company has offices across Victoria, New
South Wales, Queensland and the ACT.
Tesserent announced (in April 2019) that it would purchase 100% of the company for a consideration of $3.25m
($1.495m cash + 17.55m shares at $0.10 per share). It is estimated that an additional $760k will be paid as part of
the earnout clause of the Share Purchase Agreement, giving rise to total Goodwill of $3.509m. Tesserent continues
to actively pursue acquisition opportunities.
7. Business Strategies, Prospects and Risks for the Future Financial Years
Tesserent’s strategy includes continued focus on the following areas:
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. 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.
9. Matters Subsequent to the End of the Financial Year
On 3 July 2019 the Company completed the acquisition of Rivium (Pty) Ltd for a total price of $3.25m, to be settled in
$1.495m cash and 17.55m Shares at 10 cents per share.
Subsequent to the end of the year the company secured a loan facility of 4 million dollars with Pure Asset
Management. Further detail on both these events are included in Note 5.6 to the financial report.
Apart from the matters noted above, the directors are not aware of any other significant events since the end of the
reporting period.
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.
Page | 5
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
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.
13. Proceedings on Behalf of Company
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 2019:
Corporate and indirect Tax services
Due diligence services
Total
2019
$
63,515
146,050
209,565
2018
$
45,025
-
45,025
15. Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found
on page 21 of the financial report.
16. Options
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
18 May 2018
31 August 2019
$0.200
18 May 2018
31 August 2019
$0.240
18 May 2018
31 August 2019
$0.288
18 May 2018
8 May 2020
$0.500
1,000,000
1,000,000
1,000,000
500,000
Page | 6
Tesserent Limited Financial Report 2019
DIRECTORS’ REPORT
14 December 2018
30 November 2021
$0.100
14 December 2018
30 November 2021
$0.125
14 December 2018
30 November 2021
$0.150
14 December 2018
1 July 2020
$0.000
12 February 2019
3 December 2020
$0.050
19 February 2019
19 March 2020
$0.050
29 March 2019
19 March 2020
$0.100
29 March 2019
1 March 2020
$0.100
29 March 2019
1 March 2020
$0.125
29 March 2019
1 March 2020
$0.150
18 April 2019
19 March 2021
$0.100
18 April 2019
29 March 2021
$0.100
18 April 2019
18 April 2021
$0.075
1,000,000
1,000,000
1,000,000
13,000,000
10,000,000
22,000,000
11,300,000
100,000
100,000
100,000
1,100,000
500,000
3,000,000
67,700,000
At the date of this report, there are no unissued ordinary shares of Tesserent Limited under deferred shares.
Option and deferred shareholders 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 | 7
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
Remuneration Policy
The directors present the consolidated entity’s 2019 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
28 February 2018
Robert Langford
Non-Executive Chairman
Steve Bertamini
Non-Executive Director
Gregory Baxter
Non-Executive Director
David Buerckner
Head of Security Operations
Ross Miller
Head of Security Operations
Matthew Glennan
General Manager Sales &
Marketing
Julian Challingsworth CEO
18 April 2019
29 April 2019
1 May 2019
1 August 2018
Justin Owen
Chief Financial Officer
27 November 2018
Stephan Scheffer
Chief Financial Officer
1 December 2018
Karen Negus
Head of Marketing
2 July 2018
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.
An annual review of the Board structure will be undertaken by the Board with changes made as deemed
appropriate to the size, structure and needs of the Company.
The 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 | 8
Tesserent Limited Financial Report 2019
REMUNERATION REPORT – AUDITED
Group financial performance
The earnings of the Group for the three years ending 30 June 2019 are summarised as follows:
Financial performance1
2019
2018
2017
Sales revenue – external customers
5,260,272
5,327,957
5,375,117
Earnings before interest, tax, depreciation,
amortisation and impairment(EBITDA)
Loss after income tax
Basic loss per share (cents)
Share price at year end (cents)
(3,842,692)
(1,529,345)
(2,883,644)
(4,372,821)
(3,095,670)
(3,464,036)
(2.90)
5.00
(2.62)
6.00
(2.99)
9.00
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 Langford
Steve Bertamini
Gregory Baxter
Annual Approved Fee
$90,000
$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 2018 the Board established a Nominations and Remuneration Committee which was subsequently
disbanded in FY2019 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 CEO
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 CEO,
and the CEO assesses the performance of the individual executives against their targets. The CEO’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 $0.05, $0.10, $0.125, $0.15, $0.20, $0.24 and $0.288. Refer to tables on page 15 for options
affecting remuneration in the current and future reporting period.
At the 2018 Annual General Meeting (AGM), 90.2% of the votes received supported the adoption of the
remuneration report for the year ended 30 June 2018. The Company did not receive any specific feedback at the
AGM regarding its remuneration practices.
Page | 9
Tesserent Limited Financial Report 2019
Consolidated entity performance and link to remuneration
REMUNERATION REPORT - AUDITED
2019
Julian Challingsworth
Performance measures for Julian Challingsworth were set by the Board to reflect key measures impacting the
growth in revenue and market capitalisation. Mr Challingsworth is entitled to bonuses set as follows:
No
Definition
Rights
Date of Issue
Vesting Conditions
Options
exercisable at nil
consideration
Options
exercisable at nil
consideration
Right to acquire
2,000,000 Shares
Right to acquire
1,000,000 Shares
Within 1 month
of shareholder
approval
Within 1 month
of shareholder
approval
Options
exercisable at nil
consideration
Right to acquire
3,000,000 Shares
Within 1 month
of shareholder
approval
Options
exercisable at nil
consideration
Right to acquire
3,000,000
Shares
Within 1 month
of
shareholder
approval
Options
exercisable at nil
consideration
Right to acquire
4,000,000
Shares
Within 1 month
of
shareholder
approval
Expiry
Date
1 July
2020
Completion of acquisitions
adding in excess of $10m in
annual revenue
Subject to Series 2 Options
not vesting
1 July
2020
Completion of acquisitions
adding between $1m and
$10m in annual revenue
The Company achieving a
market capitalisation in
excess of $50m for 5
consecutive trading days
The Company achieving a
market capitalisation in
excess of $75m for 5
consecutive trading days
The Company achieving a
market capitalisation in
excess of $100m for 5
consecutive trading days
1
2
3
4
5
6
Options exercisable
at
$0.015 per
option
The number that
is 5% of amount
of capital raised
from investors
during the period
divided by $0.15
Within 1 month
of
shareholder
approval
Recipient
to manage
raising funds through
issues of capital
1 July
2020
1 July
2020
1 July
2020
1 July
2020
Page | 10
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
Matthew Glennan
Performance measures were set by the CEO to assist with alignment of business growth objectives
Incentive Item
Value of incentive
Sales: Commission on all sales other than those sales
where an existing customer contract automatically rolls
over without a new contract being signed
Sales team effectiveness: team collectively hitting 80%
of sales target
Sales hygiene: team is complying with sales pipeline
policies and key deliverables by July 1, 2019 (subject
to completion of Ethan Glessich’s deliverable being
available or other policies as mutually agreed)
Tesserent Australia P/L cash break even on a
normalised/proforma basis
Signing of 6 customer contracts for the provision of
products related to the ASD Essential Eight or key
management products
Signing of 6 customers onto three-year managed
services contracts for the provision of Darktrace
products
Signing of 5 customer contracts for the provision of
SIEM or Splunk products
2% of total contract value (TCV)
$15,000 or the option of that amount in ASX:TNT
shares at a 10% discount to the 5-day volume-
weighted average price (“VWAP”)
$15,000 or the option of that amount in ASX:TNT
shares at a 10% discount to the 5-day VWAP
$50,000 in ASX:TNT shares at a 10% discount to the
5-day VWAP
$50,000
$25,000
$25,000
Matthew did not achieve any of the bonuses in the current financial year.
There were no other performance-based remuneration measures.
2018
Keith Glennan (former KMP)
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 2019 – 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 (former KMP)
Cash bonus up to $20,000 including superannuation based on the outcome of annual performance review
with CEO – weighting 100%.
Karen Negus (former KMP)
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.
Page | 11
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
Details of Remuneration
Details of remuneration of the Directors and KMP of the Group are set out in the following tables.
2019 Directors’ Remuneration
Short Term
Post-
Employment
Long Term
Benefits
Share Based
Payments
Total
Total
Performance
Related
Options as a
% of Total
Salary/Fees
Bonus
$
$
R Langford
K Glennan1
G Baxter
S Bertamini
109,747
181,912
45,000
45,000
J Challingsworth2
170,300
Total
551,959
-
-
-
-
-
-
Super-
annuation
Long Service
Leave
$
-
25,000
-
-
15,403
40,403
$
-
-
-
-
-
-
Options/
Deferred
Options
$
160,945
-
-
-
111,319
272,264
$
%
%
270,692
206,912
45,000
45,000
297,022
864,626
-
-
-
-
-
-
59.5
-
-
-
24.8
-
1 Resigned 28 February 2019
2 Appointed 1 August 2018. J Challingsworth was issued 1 million shares in the company as a sign on bonus, with a fair value of $50,000. This is included in Share Based Payments in the table above.
There were no non-monetary benefits provided
2019 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
$
$
$
$
$
$
%
%
-
-
-
-
-
-
-
13,961
1,317
-
-
-
-
10,122
256
-
-
-
-
2,533
2,648
1,815
51,800
65
-
166,891
29,732
77,990
117,623
84,348
30,592
30,581
2,136
51,800
507,176
-
-
-
-
-
-
-
-
-
-
-
61.4
-
-
D Buerckner1
152,930
K Negus2
J Owen3
28,415
77,990
S Scheffer4
107,245
M Glennan5
R Miller6
Total
28,200
27,879
422,659
1 Resigned 18 April 2019
2 Resigned 27 July 2018
3 Resigned 28 November 20198
4 Appointed 1 December 2018
5 Appointed 1 May 2019
6 Appointed 18 April 2018
There were no non-monetary benefits provided
Director and Executive
Remuneration
Total
974,618
-
70,984
2,136
324,064
1,371,802
Page | 12
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
2018 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
60,000
$
-
$
-
$
-
$
$
(19,459)
40,541
%
-
K Glennan
269,975 135,000
23,425
4,710
-
433,110
31.2
G Baxter
R Langford
S Bertamini
P Brandling
45,000
37,500
45,000
10,274
-
-
-
-
-
-
-
976
-
-
-
-
10,151
55,151
-
37,500
10,151
55,151
(12,290)
(1,040)
Total
467,749 135,000
24,401
4,710
(11,447)
620,413
-
-
-
-
-
%
(48.0)
-
18.4
-
18.4
1,181.7
-
There were no non monetary benefits provided
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
183,000
J.Owen
K Negus
Total
175,617
205,831
564,448
$
-
-
-
-
17,385
3,496
83,408
287,289
-
-
-
175,617
19,554
3,495
63,918
292,798
36,939
6,991
147,326
755,704
Director and executive remuneration
Total
1,032,197 135,000
61,340
11,701
135,879
1,376,117
-
-
-
-
-
%
29.0
-
21.8
-
-
Page | 13
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
At risk- STI
At risk - LTI
Name
2019
2018
2019
2018
2019
2018
Non-Executive Directors:
R Langford
G Baxter
S Bertamini
Executive Director
K Glennan
J Challingsworth
100%
100%
100%
100%
100%
Other Key Management Personnel
D Buerckner
K Negus
J Owen
S Scheffer
M Glennan
R Miller
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
n/a
91%
87%
100%
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50%
n/a
9%
13%
-
n/a
n/a
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
-
-
-
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. It is envisaged that all bonuses will become effective in the 2020 financial year.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Cash bonus paid/payable
Cash bonus forfeited
2019
2018
2019
2018
Executive Director
K Glennan
Other Key Management Personnel
D Buerckner
K Negus
-
-
-
50%
-
-
-
-
-
50%
100%
100%
Page | 14
Tesserent Limited Financial Report 2019
REMUNERATION REPORT – AUDITED
Details of Share Based Compensation
Options
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
$0.240
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
$0.240
Gregory Baxter
17 Nov 15
500,000 31 Aug 18
31 Aug 19
$0.288
R Langford
14 Dec 18
1,000,000
8 Feb 18
30 Nov 21
$0.100
R Langford
14 Dec 18
1,000,000
8 Feb 19
30 Nov 21
$0.125
R Langford
14 Dec 18
1,000,000
8 Feb 20
30 Nov 21
$0.150
R Langford
12 Feb 19
10,000,000
8 Feb 19
3 Dec 20
$0.050
R Langford
19 Feb 19
22,000,000
19 Mar 19
19 Mar 20
$0.050
J Ch’ingsworth
14 Dec 18
13,000,000 14 Dec 18
1 Jul 20
$0.000
$.0539
$.0423
$.0539
$.0423
$.0520
$.0520
$.0520
$.0480
$.0500
$.0520
100
-
100
-
-
-
-
-
-
-
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 2019.
2019
Name and
grant date
S Bertamini
Balance at
1 Jul 2018
Unvested
Granted as
compensation
Vested
Exercised
Lapsed /
forfeited during
the year
% forfeited
during the
year
Balance at
30 June 2019
Unvested
17 Nov 15
500,000
G Baxter
17 Nov 15
500,000
-
-
500,000
500,000
R Langford
14 Dec 18
14 Dec 18
14 Dec 18
12 Feb 19
19 Feb 19
J Ch’sworth
14 Dec 18
14 Dec 18
14 Dec 18
14 Dec 18
14 Dec 18
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
10,000,000
22,000,000
2,000,000
1,000,000
3,000,000
3,000,000
4,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
10,000,000
22,000,000
2,000,000
1,000,000
3,000,000
3,000,000
4,000,000
Page | 15
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
Value of options granted as remuneration that have been granted, exercised or lapsed during the year.
2019
Balance
Balance
1 July 2018
Value Granted
Value Exercised
Value Lapsed
30 Jun 2019
Steve Bertamini
Gregory Baxter
Paul Brandling
$
81,424
81,424
60,255
Russell Yardley
120,509
$
-
-
-
-
R Langford
J Challingsworth
-
-
160,945
61,319
$
-
-
-
-
-
-
$
-
-
(60,255)
(120,509)
-
-
$
81,424
81,424
-
-
160,945
61,319
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
2019
AASB 2
Expense
Share price at
Grant Date
KMP
Deferred Shares
% Vested
$
Grant Date
51,800
10 May 2019
$
0.05
Vesting Date
Exercise Price
1 July 2019
0.04
25,646
24 November 2016
0.14
3 October 2018
(58,691)
24 November 2016
0.14
3 October 2019
Nil
Nil
M Glennan
1,000,000
D Buerckner
450,000
D Buerckner
750,000
100
100
0
2018
AASB 2
Expense
Share price at
Grant Date
KMP
Deferred Shares
% Vested
$
Grant Date
$
Vesting Date
Exercise Price
D Buerckner
300,000
100
12,748
24 November 2016
0.14
3 October 2017
D Buerckner
450,000
D Buerckner
750,000
K Negus
360,000
K Negus
600,000
-
-
100
-
33,916
24 November 2016
0.14
3 October 2018
36,744
24 November 2016
0.14
3 October 2019
31,056
24 November 2016
0.14
15 June 2018
32,862
24 November 2016
0.14
15 June 2019
Nil
Nil
Nil
Nil
Nil
Page | 16
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
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 2019.
2019
Rights to deferred shares
Balance
1 Jul 18
Granted
during year
Vested
Forfeited
Balance
30 Jun 19
Unvested
Maximum
value yet to
vest*
Year
granted
No.
No.
N Conolly1
2016
700,000
D Buerckner2
2017
1,200,000
K Negus3
2017
600,000
-
-
-
M Glennan
2019
-
1,000,000
No.
-
%
-
No.
%
No.
700,000
100.00
450,000
37.50
750,000
62.50
$
-
-
-
-
-
-
-
-
-
-
600,000
100.00
-
-
1,000,000
51,800
1 Nick Conolly resigned 30 November 2016. Rights to deferred shares have been forfeited due to expiry.
2 David Beurckner resigned 29 April 2019 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.
3 3 Karen Negus has resigned 2 July 2018 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.
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.
%
No.
N Conolly4
2016
1,400,000
D Buerckner
2017
1,500,000
K Negus
2017
960,000
-
-
-
700,000
50.00
300,000
20.00
360,000
37.50
-
-
-
%
-
-
-
No.
$
700,000
31,941
1,200,000
55,136
600,000
31,511
4 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 was recognised in the prior year profit or loss. The
vesting date of the deferred shares has not changed.
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, former 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
Resigned 14 November 2019
Termination by provision of two months’ notice by either the Executive or the Company
Page | 17
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
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.
Resigned 18 April 2019
Termination by provision of two months’ notice by either the Executive or the Company
Justin Owen, former Chief Financial Officer
Permanent part time contract with CFO Effect Pty Ltd commencing 1 July 2018.
Monthly retainer-based remuneration of $9,650, plus additional fee for other projects undertaken.
Resigned 27 November 2018
Termination by provision of one months’ notice by either CFO Effect Pty Ltd or the Company.
Julian Challingsworth, Chief Executive Officer
Permanent employment contract commencing 1 August 2018.
Fixed remuneration of $200,000 inclusive of superannuation.
Sales commission per table on page 10.
Issuance of 1,000,000 sign on bonus shares.
Short term bonus of $75,000 payable in shares at $0.05 each at the discretion of the Board
Termination by provision of twelve months’ notice by either the Executive or the Company.
Stephen Scheffer, Chief Financial Officer
Termination by provision of one months’ notice by either the Executive or the Company.
Full-time employment contract commencing 1 December 2018, terminating after 12 months unless
extended by mutual consent.
Fixed remuneration of $200,000 inclusive of compulsory superannuation and packaged benefits.
Issuance of $25,000 shares on 1 July 2019 subject to a 180day escrow period after allocation.
The Employee’s Employment may be terminated without cause by either the Employer or the Employee
with the provision of one month’s notice in writing or, in the case of the Employer, the period of notice
required to be given under the FW Act (whichever is greater).
Matthew Glennan, General Manager, Sales and Operations
Permanent contract commencing 7 January 2013 and updated subsequently on 10 May 2019 when
appointed to General Manager, Sales and Operations.
Fixed annual remuneration of $160,000 plus superannuation, plus allowances, plus incentives
The Employee’s Employment may be terminated without cause by either the Employer or the Employee
with the provision of one month’s notice in writing or for a period agreed to by both parties in writing.
Ross Miller, Head of Security Operations
Permanent employment contract commencing 29 April 2019.
Fixed annual remuneration of $175,200 inclusive of compulsory superannuation and packaged benefits.
The Employee’s Employment may be terminated without cause by either the Employer or the Employee
with the provision of one month’s notice in writing or, in the case of the Employer, the period of notice
required to be given under the FW Act (whichever is greater)
Page | 18
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
KMP Shareholding 2019
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
On Market
Other1
R Langford
K Glennan
G Baxter
S Bertamini
24,071,2821
28,761,435
1,406,043
1,406,043
-
-
-
-
D Buerckner
300,000
450,000
K Negus
J Owen
J Challingsworth
M Glennan
600,000
110,000
-
-
-
-
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,071,282
(28,761,435)
-
-
-
1,406,043
1,406,043
(750,000)
(600,000)
(110,000)
-
-
-
-
1,000,000
740,740
740,740
1) Represents former KMP’s who resigned during the year or KMP’s appointed during the year.
KMP Shareholding 2018
Deferred shares
Issued on
Balance at
vested as
exercise of
Beginning of
remuneration
options during
year
during year
year
Other changes during year
Balance at end
of year
On Market
Other
-
-
-
-
-
-
-
-
24,071,282
(639,114)
(2,552)2
-
50,000
(3,000,000)3
28,761,435
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
-
-
2) shares held at appointment date
3) shares held at resignation date
4) shares sold off market
5) shares received as share-ased payment for Director fee remuneration
-
-
-
-
-
-
-
-
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 | 19
Tesserent Limited Financial Report 2019
REMUNERATION REPORT - AUDITED
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 in the below
table and 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.
Related Party
Loan balances due to the entity
Loan balances payable by the entity
Greg Baxter
Stefano Bertamini
Robert Langford
-
-
-
48,750
48,750
7,500
Loan balances payable above relate to unpaid directors fees
End Remuneration Report
This directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of
Directors:
Julian Challingsworth,
Managing Director
30 September 2019
Page | 20
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 2019, 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 2019
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.
Tesserent Limited Financial Report 2019
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue from continuing operations
Other income
Software licence and connectivity fees
Employee benefits expense
Depreciation and amortisation expense
Goodwill impaired
Intellectual property assets impaired
Finance costs
Occupancy costs
Communication costs
Consulting and legal costs
Travel
Bad and doubtful debts
Call Option Investment impairment
Other expenses
Loss before income tax
Tax Benefit/(Expense)
Net loss for the year
Other comprehensive income
Total comprehensive income for the year
Basic loss per share (cents)
Diluted loss per share (cents)
Consolidated
2019
$
5,260,272
107,266
(2,279,416)
(3,140,727)
(316,993)
-
-
(57,326)
(442,872)
(445,735)
(1,463,141)
(77,032)
(39,183)
(165,809)
(1,322,124)
(9,750,358)
(4,382,820)
9,999
(4,372,821)
-
(4,372,821)
2018
$
5,327,957
1,103,803
(2,372,554)
(2,662,491)
(277,594)
(777,375)
(67,736)
(68,777)
(458,351)
(595,152)
(568,993)
(78,135)
(51,185)
-
(1,174,244)
(9,152,587)
(2,720,827)
(374,843)
(3,095,670)
-
(3,095,670)
(2.90)
(2.90)
(2.62)
(2.62)
Note
2.2
2.2
3.5,3.6
3.6
3.6
2.3
3.8
2.6
2.4
2.4
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes
Page | 22
Tesserent Limited Financial Report 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventories
Current tax asset
Other financial 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
Contract liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Other financial liabilities
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
Consolidated
Note
2019
$
2018
$
4.3
3.1
3.7
2.6
3.8
3.8
3.5
3.6
2.6
999,660
218,767
292,263
276,620
137,335
1
1,717,221
344,194
260,065
55,693
361,256
-
1,924,646
2,738,429
-
510,309
977,510
149,618
257,229
165,810
623,882
733,848
139,619
257,229
1,894,667
1,920,388
3,819,313
4,658,817
3.2
1,765,342
1,210,577
3.9
2.2
3.3
137,991
614,691
228,315
61,212
678,792
269,266
2,746,339
2,219,847
3.9
3.3
281,714
430,299
712,013
352,157
365,117
717,274
3,458,352
360,960
2,937,121
1,721,696
Page | 23
Tesserent Limited Financial Report 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
4.4
5.2
Consolidated
2019
$
2018
$
13,754,507
10,875,937
772,900
639,385
(14,166,447)
360,960
(9,793,626)
1,721,696
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Page | 24
Tesserent Limited Financial Report 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
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
Balance at 30 June 2018
Balance at 1 July 2018
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
Balance at 30 June 2019
Issued
capital
$
10,140,892
Reserves
Accumulated
losses
Total equity
$
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
-
-
-
563,900
(33,255)
138,438
735,045
10,875,937
(65,962)
639,385
-
(9,793,626)
669,083
1,721,696
10,875,937
639,385
(9,793,626)
1,721,696
-
-
-
-
-
-
(4,372,821)
-
(4,372,821)
-
(4,372,821)
(4,372,821)
2,975,933
(97,363)
(153,633)
-
-
287,148
-
-
-
2,822,300
(97,363)
287,148
2,878,570
13,754,507
133,515
772,900
-
(14,166,447)
3,012,085
360,960
The above Consolidated Statement of Changes in Equity should be read in conjunction with the
accompanying notes.
Page | 25
Tesserent Limited Financial Report 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Consolidated
Note
2019
$
2018
$
Cash flows from operations
Receipts from customers (inclusive of GST)
5,415,067
5,922,560
Payments to suppliers and employees (inclusive of GST)
(8,266,862)
(8,219,859)
Other Income
Interest received
Interest and other finance costs paid
Research & development tax concession
Proceeds from transaction restructure
(2,851,795)
(2,297,299)
26,382
15,989
-
288,330
-
-
27,804
(6,439)
844,010
150,000
Net cash outflow from operating activities
5.5
(2,521,094)
(1,281,924)
Cash flows from investing activities
Purchase of plant and equipment
Proceeds on disposal of plant and equipment
(27,776)
-
(84,633)
199,779
Purchase of intangibles – development costs capitalised
(418,453)
(370,516)
Payment of deferred settlement liability for software additions
(133,874)
(215,428)
Proceeds from deferred consideration on sale of software
-
250,000
Net cash outflow from investing activities
(580,103)
(220,798)
Cash flows from financing activities
Proceeds from issuing of shares
Payments for issuing of shares
Net cash inflow from financing activities
Net decrease in cash and cash equivalents
2,481,000
(97,364)
392,550
(33,255)
2,383,636
359,295
(717,561)
(1,143,427)
Cash and cash equivalents at the beginning of the financial year
1,717,221
2,860,648
Cash and cash equivalents at the end of the financial year
4.3
999,660
1,717,221
The above Consolidated Statement of Cash Flows should be read in conjunction with the
accompanying notes
Page | 26
Tesserent Limited Financial Report 2019
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
1. Introduction to the Report
Statement of Compliance for profit entity
These general purpose financial statements of Tesserent Limited and its controlled entities (together the ‘Company’,
‘Group’, or ‘Consolidated Entity’) 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 2019.
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 for-profit 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
Going concern
Principal place of business
Level 5
990 Whitehorse Road
Box Hill VIC 3128
For the year ended 30 June 2019 the consolidated entity has recorded a loss before income tax of $4,382,820 (2018:
loss $2,720,827) and has a net asset position of $360,960 (2018: $1,721,696). Cash outflows from operating activities
for the period ended 30 June 2019 were $2,521,094 (2018: $1,281,924).
The financial statements have been prepared on the basis that the consolidated entity is a going concern, which
contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal
course of business.
On 27/09/2019 the consolidated entity entered into 36 month term working capital facility agreement with PURE Asset
Management Pty Ltd with an interest rate of 11.5% per annum. On 28/09/2019 the consolidated entity received
$1,912,000 as a drawdown on the facility.
In addition, the consolidated entity is expecting to fund its ongoing operations as follows:
The consolidated entity has cash reserves at 30 June 2019 of $999,660 and trade receivables of $218,767.
The consolidated entity is expecting to shortly receive a research & development receivable of $137,335.
The consolidated entity is expecting an improvement in financial performed in the 30 June 2020 financial year
and the directors have approved a budget reflecting an improved financial performance.
The consolidated entity acquired Rivium Pty Ltd on 3 July 2019 and the directors have approved a budget for
FY20 that includes a positive contribution of cash flows from operating activities associated with Rivium Pty Ltd.
Based on the above, the directors have prepared a cash flow forecasts for the next 12 months from the date of signing
the financial report that indicates the consolidated entity will have sufficient cash assets to be able to meets its debts as
and when they are due. Therefore, the directors are of the opinion that the basis upon which the financial statements
are prepared is appropriate in the circumstances.
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Tesserent Limited Financial Report 2019
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
Note
Page
Judgements on accounting for intangible assets
Income Taxation
Share-based payments
Impairment of non-financial assets other than Goodwill
and other indefinite life intangible assets
Contract Liabilities
Significant accounting policies
3.6
2.6
5.1
3.6
2.2
43
36
53
43
32
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.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board (‘AASB') that are mandatory for the current reporting period.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and
measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a
business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified
dates and that are solely principal and interest. A debt investment shall be measured at fair value through other
comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect
contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset
on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss
unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity
instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other
comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as
measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For
financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in
fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting
mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment
with the risk management activities of the entity. New impairment requirements use an 'expected credit loss' ('ECL')
model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a
financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is
adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss
allowance is available.
AASB 15 Revenue from Contracts with Customers
The consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive
model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict
the transfer of promised goods or services to customers at an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based
revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This
is described further in the accounting policies below. Credit risk is presented separately as an expense rather than
adjusted against revenue. Contracts with customers are presented in an entity's statement of financial position as a
contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance
Page | 28
Tesserent Limited Financial Report 2019
and the customer's payment. Customer acquisition costs and costs to fulfil a contract can, subject to certain criteria,
be capitalised as an asset and amortised over the contract period.
The directors have assessed the impact of AASB 9 and AASB 15 and determined that it does not have a material
impact on the financial statements.
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.
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.
ii.
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.
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 consolidated entity for the reporting period ended
30 June 2019.
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:
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:
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Tesserent Limited Financial Report 2019
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)
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 $1,815,959, 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 after tax. The accounting policies adopted for internal reporting to the CEO are consistent with
those adopted in the financial statements.
Page | 30
Tesserent Limited Financial Report 2019
2019
Revenues
Sales to external customers
Inter segment sales
Total sales revenue
Research & development tax concession
Other revenue
Total revenue and other income
IT Security
Managed
Services
$
Software
Licensing
$
Inter
Segment
Eliminations
$
Totals
$
4,935,657
-
4,935,657
137,335
(30,554)
5,042,438
324,615
343,630
668,245
-
485
-
5,260,272
(343,630)
(343,630)
-
-
-
5,260,272
137,335
(30,069)
668,730
(343,630)
5,367,538
Profit/(loss) after income tax expense
(4,467,898)
95,077
Total segment assets
3,016,688
802,625
Total segment liabilities
3,294,416
163,936
-
-
-
(4,372,821)
3,819,313
3,458,352
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
IT Security
Managed
Services
$
Software
Licensing
$
Inter
Segment
Eliminations
$
Totals
$
5,033,889
33,820
5,067,709
-
150,000
457,741
96,783
294,068
384,030
678,098
399,279
-
-
-
(417,850)
(417,850)
-
-
-
-
-
5,327,957
-
5,327,957
399,279
150,000
457,741
96,783
Total revenue and other income
5,772,233
1,077,377
(417,850)
6,431,760
Profit/(loss) after 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
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 | 31
Tesserent Limited Financial Report 2019
2.2 Revenue
Recognition and measurement
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to
be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the
consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates of variable consideration and the time value of
money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-
alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each
performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services
promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent
events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are
recognised as a refund liability.
Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are
recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect
its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the
goods or services to the customer.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods,
which is generally at the time of delivery. 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.
Interest Revenue
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using
the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to the net carrying amount of the financial asset.
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Tesserent Limited Financial Report 2019
Revenue from continuing operations
Sales revenue
Other income
Transaction restructure fee1
Onerous provision writeback
Research and development tax concession
Interest
Reversal of R&D over accrual in prior year
Other
Consolidated
2019
$
2018
$
5,260,272
5,327,957
5,260,272
5,327,957
-
-
137,335
15,989
(72,925)
26,867
150,000
399,279
457,741
27,803
-
68,980
107,266
1,103,803
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.
Revenue from external customers attributable to:
Australia
International
Total
Consolidated
2019
$
2018
$
5,032,171
228,101
5,033,889
294,068
5,260,272
5,327,957
2.3 Loss for the year
Loss before income tax from continuing operations includes the following specific expenses
Employee benefits expense
Defined contribution superannuation expense
Research and development costs
Bad and doubtful debts expense
Trade receivables
Occupancy costs
Minimum lease payments
Consolidated
2019
$
192,003
315,714
2018
$
200,119
614,149
39,183
51,185
411,733
359,847
Page | 33
Tesserent Limited Financial Report 2019
2.4 Losses per share
Basic losses per share
Basic losses 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 losses per share attributable to the ordinary equity holders of the
company
Consolidated
2019
Cents
2018
Cents
(2.90)
(2.90)
(2.62)
(2.62)
Diluted losses per share
Diluted losses per share adjusts the figures used in the determination of basic losses 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 losses per share attributable to the ordinary equity holders of
the company1
1There are 67,700,000 options that have not been taken into account in determining diluted EPS because their effect is anti-dilutive.
Reconciliation of losses used in calculating earnings per share
Consolidated
2019
Cents
2018
Cents
(2.90)
(2.90)
(2.62)
(2.62)
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
Weighted average number of shares used as the denominator
Consolidated
2019
$
2018
$
(4,372,821)
(3,095,670)
(4,372,821)
(3,095,670)
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
Consolidated
2019
Number
2018
Number
150,950,488
118,368,498
150,950,488
118,368,498
Page | 34
Tesserent Limited Financial Report 2019
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.
2019
There were no business combination transactions impacting Tesserent Limited for the year ended 30 June 2019 or
in the prior year.
Page | 35
Tesserent Limited Financial Report 2019
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
2019
$
Loss from continuing operations before income tax benefit/(expense)
(4,382,820)
Prima facie tax rate of 27.5% (2018: 27.5%)
1,205,275
Tax effect of amounts which are not deductible/(taxable) in
calculating taxable income:
Share based payments not deductible
(157,313)
Impairment of goodwill
Amortisation of intellectual property not deductible
Current year tax losses not recognised
Other (non-deductible) / assessable
Prior year adjustments
Tax offset for R&D claim
Income tax benefit/(expense)
-
-
(937,009)
(113,333)
81,488
(69,109)
9,999
2018
$
(2,720,827)
748,227
(2,444)
(213,778)
(18,628)
(680,437)
(195,222)
(11,911)
(650)
(374,843)
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Tesserent Limited Financial Report 2019
Income Tax comprises of;
Current Tax Loss
Deferred Tax Movements
Adjustments to current tax for
Unrecognised temporary differences in prior periods
Current year tax losses not recognised
Income tax benefit/(expense)
ii.
Deferred tax balances
Deferred tax comprises of temporary differences attributable to:
Share issue costs
Provisions
Intangible assets
Other
937,009
71,489
(81,488)
(937,009)
9,999
165,945
168,589
(176,813)
(8,103)
149,618
680,437
362,932
11,911
(680,437)
(374,843)
155,994
160,481
(104,803)
(72,053)
139,619
Movement in balances
Tax
losses
Share
issue
costs
Provisions
Intangible
Other
Total
assets
As at 1 July 2017
85,776
233,991
224,908
-
(30,213)
514,462
Charged to
-
profit or loss
(85,776)
(77,997)
(64,427)
(104,803)
(41,840)
(374,843)
As at 30 June 2018
Charged to
-
profit or loss
As at 30 June 2019
-
-
-
155,994
160,481
(104,803)
(72,053)
139,619
9,951
8,108
(72,010)
165,945
168,589
(176,813)
63,950
(8,103)
9,999
149,618
Carried forward tax losses of $8,709,637 have not brought to account as a deferred tax asset of $2,395,150.
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. The directors are of the opinion
that 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 | 37
Tesserent Limited Financial Report 2019
iii.
Franking Credits
Franked dividends
Franking credits available for subsequent financial years based
on a tax rate of 27.5%
iv. Research and development
Current tax asset
2019
$
-
25,673
25,673
2019
$
137,335
137,335
2018
$
-
25,673
25,673
2018
$
361,256
361,256
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 | 38
Tesserent Limited Financial Report 2019
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 allowance for expected credit losses. The consolidated entity has
applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
CURRENT
Trade receivables
Allowance for expected credit losses
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 allowance for expected credit losses
Opening allowance
Additional allowance
Write back of allowance
Receivables written off as uncollectible
Closing allowance
Consolidated
2019
$
279,135
(60,368)
218,767
-
-
218,767
107,128
21,934
5,815
68,027
202,904
218,767
93%
44%
21,185
127,767
(88,584)
-
60,368
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
-
(33,000)
21,185
Page | 39
Tesserent Limited Financial Report 2019
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 year which
are unpaid. The carrying amounts of trade and other payables are assumed to be the same fair values due to their
short-term nature.
CURRENT
Trade payables
Sundry payables and accrued expenses
Consolidation
2019
2018
$
$
908,794
856,548
609,146
601,431
1,765,342
1,210,577
3.3 Provisions
Recognition and measurements
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 | 40
Tesserent Limited Financial Report 2019
Consolidated
2019
$
197,384
30,931
228,315
32,053
75,000
323,246
430,299
2018
$
269,266
-
269,266
74,420
75,000
215,697
365,117
CURRENT
Employee Benefits
Other Provisions
NON-CURRENT
Employee Benefits
Make good – premises
Lease Incentive
Movement in Provisions
Employee
Benefits
Other
Provisions
Make Good
Premises
Lease
Incentive
$
$
$
$
Opening Balance
Recognised in profit or loss during period
Closing Balance
343,686
(114,249)
229,437
-
30,931
30,931
75,000
-
75,000
215,697
107,549
323,246
3.4 Contingent liabilities
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 | 41
Tesserent Limited Financial Report 2019
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.
Consolidated
Fixtures
employed
improvement
for lease
Equipment
Furniture &
Hardware
Leasehold
Equipment
Plant &
Total
2019
Opening net book value
71,110
Additions
Disposals
635
-
10,182
18,063
-
434,544
-
-
Depreciation charge
(13,324)
(15,294)
(65,435)
Net book amount
58,421
12,951
369,109
-
-
-
-
-
108,046
9,078
-
623,882
27,776
-
(47,296)
(141,349)
69,828
510,309
2019
Cost
113,935
370,335
512,033
16,177
442,062
1,454,542
Accumulated depreciation
(55,514)
(357,384)
(142,924)
(16,177)
(372,234)
(944,233)
Net book amount
58,421
12,951
369,109
-
69,828
510,309
Furniture &
Fixtures
Hardware
employed
Leasehold
improvement
Equipment
for lease
Plant &
Equipment
Total
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
(783)
(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
Page | 42
Tesserent Limited Financial Report 2019
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.
Impairment of non-financial assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use
is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to
the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
Software
Significant costs associated with software development are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 5 years.
Page | 43
Tesserent Limited Financial Report 2019
Reconciliation
Reconciliations of the written down values at the beginning and end of the current financial period are set out
below:
Consolidated
Goodwill
2019
Opening net book value
Additions – capitalised
development costs
Amortisation charges
Impairment
Balance 30 June 2019
2019
Cost
Accumulated amortisation
Net book amount
$
-
-
-
-
-
-
-
-
Intellectual
property
$
22,607
-
-
-
Software
Total
$
711,241
418,453
$
733,848
418,453
(174,791)
(174,791)
-
-
22,607
954,903
977,510
22,607
1,252,592
1,275,199
-
(297,689)
(297,689)
22,607
954,903
977,510
Consolidated
Goodwill
Intellectual
property
Software
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
$
867,572
146
463,769
370,370
(122,898)
(122,898)
(777,375)
(67,736)
-
(845,111)
-
-
-
-
22,607
711,241
733,848
22,607
834,139
856,746
-
(122,898)
(122,898)
22,607
711,241
733,848
(1)
(2)
On 5th July 2018 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.
Page | 44
Tesserent Limited Financial Report 2019
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 2019 there had been no write downs and all inventories are stated at cost. (2018:$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 but has been written down to an
impaired value of $1. The Group has impaired the call option investment by $165,809 (2018:nil).
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.
Consolidated
2019
$
165,810
(165,809)
1
2018
$
-
-
-
-
-
165,810
165,810
Call Option Investment
Impairment Provision
Current Assets
Call Option Investment
Non-Current Assets
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
Total
Consolidated
2019
$
137,991
281,714
419,705
2018
$
61,212
352,157
413,369
Page | 45
Tesserent Limited Financial Report 2019
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 (2018:$nil)
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
2019
Cash at bank
Weighted average
interest rate
%
1.47
Net exposure to cash flow interest rate risk
Balance Weighted average
Balance
interest rate
%
1.47
$
999,980
999,980
$
1,717,221
1,717,221
Page | 46
Tesserent Limited Financial Report 2019
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
2019
10,851
2018
18,863
(10,851)
(18,863)
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.
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.
Page | 47
Tesserent Limited Financial Report 2019
1 year or
less
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Remaining
contractual
maturities
Maturity analysis
Consolidated – 2019
Non-interest bearing
Trade payables
Other payables
Accrued expenses
$
908,794
103,224
753,325
$
-
-
-
$
-
-
-
$
-
$
908,794
- 103,224
-
-
-
753,325
419,720
2,185,063
Deferred settlement liability
137,991
70,443
211,286
1,903,334
70,443
211,286
Consolidated – 2018
1 year or
less
Between
1 and 2
years
Between
2 and 5
years
Over 5
years
Remaining
contractual
maturities
Non-interest bearing
Trade payables
Other payables
Accrued expenses
$
609,146
60,827
540,604
$
-
-
-
$
-
-
-
Deferred settlement liability
61,212
70,443
281,714
1,271,789
70,443
281,714
$
$
-
-
-
-
-
609,146
60,827
540,604
413,369
1,623,946
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 | 48
Tesserent Limited Financial Report 2019
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
2019
$
999,660
-
2018
$
867,221
850,000
999,660
1,717,221
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.
Ordinary shares – fully paid
183,043,123
126,041,546
13,754,507
10,875,937
2019
Shares
2018
Shares
2019
$
2018
$
Consolidated
Movements in ordinary share capital
2018
Details
Balance
Shares issued to employees
Shares issued to employees
Shares issued to directors
Equity settled expense
Date
Shares
Issue Price
$
$
1 Jul 2017
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
Shares issued pursuant to capital raising
4 Jun 2018
7,142,860
Capital raise costs
Shares issued to employees
21 Jun 2018
Balance
360,000
126,041,546
0.140
0.160
0.910
0.075
0.070
0.140
42,000
112,000
37,500
26,400
500,000
(33,255)
50,400
10,875,937
Page | 49
Tesserent Limited Financial Report 2019
2019
Details
Date
Shares
Shares issued pursuant to capital raising
14 Aug 2018
Shares issued to employees
Shares issued to employees
Equity settled expense
Shares issued pursuant to capital raising
Capital raise costs
Equity settled expense
31 Dec 2018
12 Feb 2019
19 Feb 2019
28 Feb 2019
18 Mar 2019
4,342,837
2,950,000
300,000
1,128,000
10,000,000
18 Mar 2019
1,452,000
Shares issued pursuant to capital raising
18 Mar 2019
20,548,000
Shares issued pursuant to capital raising
22 Mar 2019
Shares issued pursuant to capital raising
25 Mar 2019
Shares issued pursuant to capital raising
28 Mar 2019
5,700,000
5,100,000
500,000
Issue Price
$
0.070
0.056
0.047
0.050
0.050
0.050
0.050
0.050
0.050
0.050
Capital raise costs
Exercise of Share Options
Capital raise costs
Shares issued to employees
28 Mar 2019
2 Apr 2019
1 May 2019
1 May 2019
Shares issued pursuant to capital raising
1 May 2019
3,600,000
Shares issued pursuant to capital raising
16 May 2019
700,000
183,043,123
240,000
0.050
440,740
0.056
0.055
0.050
$
304,000
166,500
14,130
56,400
500,000
(66,000)
72,600
1,027,400
285,000
255,000
25,000
(16,363)
12,000
(15,000)
24,902
198,000
35,000
13,754,507
Page | 50
Tesserent Limited Financial Report 2019
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
2019
$
493,909
251,255
745,164
2018
$
580,234
823,333
1,403,567
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:
Consolidated
2019
$
371,427
1,444,532
-
1,815,959
2018
$
237,051
1,700,090
115,869
2,053,010
Within one year
Later than one year but not later than five years
Greater than five years
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)
TNT Cyber Services Pty Ltd – incorporated 27 March 2019
Apart from Tesserent UK Ltd all companies operate in Australia.
Page | 51
Tesserent Limited Financial Report 2019
Options
Details of options held by Key Management Personnel at 30 June 2019 are set out below
2019 Options
KMP
No of options
Vesting and exercise date
Exercise price
Steve Bertamini
Steve Bertamini
Gregory Baxter
Gregory Baxter
Robert Langford
Robert Langford
Robert Langford
Robert Langford
Robert Langford
Julian Challingsworth
Julian Challingsworth
Julian Challingsworth
Julian Challingsworth
Julian Challingsworth
2018 Options
500,000
500,000
500,000
500,000
1,000,000
1,000,000
1,000,000
10,000,000
22,000,000
2,000,000
1,000,000
3,000,000
3,000,000
4,000,000
31 Aug 17
31 Aug 18
31 Aug 17
31 Aug 18
8 Feb 18
8 Feb 19
8 Feb 20
8 Feb 19
19 Mar 19
14 Dec 18
14 Dec 18
14 Dec 18
14 Dec 18
14 Dec 18
$0.240
$0.288
$0.240
$0.288
$0.100
$0.125
$0.150
$0.050
$0.050
$0.000
$0.000
$0.000
$0.000
$0.000
KMP
No of options
Vesting and exercise date
Exercise price
Steve Bertamini
Steve Bertamini
Gregory Baxter
Gregory Baxter
500,000
500,000
500,000
500,000
31 Aug 17
31 Aug 18
31 Aug 17
31 Aug 18
$0.240
$0.288
$0.240
$0.288
The options have been valued and accounted for in accordance with the requirements of AASB 2 Share-based
Payments.
Shares
During the current period, directors or parties related to the directors subscribed for shares in the company as follows:
2019
Date
Name
31/12/18
Julian Challingsworth1
2018
Date
Name
24/05/18
24/05/18
Steve Bertamini2
Greg Baxter2
1) Issued as part of sign bonus
2) Issued as part of director fee remuneration
Number of
Shares
1,000,000
Number of
Shares
206,043
206,043
Amount Paid
-
Amount Paid
18,750
18,750
Page | 52
Tesserent Limited Financial Report 2019
Payables – Loans from related parties
The Group has loans from related parties in the current year (2018:$nil) as follows;
Related Party
Greg Baxter
Stefano Bertamini
Robert Langford
Loan balances due to the entity
Loan balances payable by the entity
-
-
-
48,750
48,750
7,500
Loan balances payable above relate to unpaid directors fees
Key management personnel remuneration
Short-term salary/fees
Short-term-bonus
Post-employment benefits
Long term benefits
Share based payments
Share based payments
Consolidated
2019
$
974,618
-
70,984
2,136
324,064
2018
$
1,032,197
135,000
61,340
11,701
135,879
1,371,802
1,376,117
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 in 2019, an independent valuation was prepared using the Black-
Scholes model. In valuing the options, a risk-free rate of 1.40-1.97%, a volatility rate of 80%, dividend yield of
0%, share price of $0.048-0.06 and time to expiry of four years were used. The 80% 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
Page | 53
Tesserent Limited Financial Report 2019
Set out below are summaries of options movements during the year;
2019
Grant date
Expiry
date
Exercise
price
Balance at
the start of
Expired/
Balance at
forfeited/
the end of
$
the year
Granted
Exercised
other
the year
17 Nov 15
31 Aug 19
0.20
2,500,000
17 Nov 15
31 Aug 19
0.24
2,500,000
17 Nov 15
31 Aug 19
0.288
1,000,000
9 May 16
8 May 19
9 May 16
8 May 20
0.40
0.50
500,000
500,000
-
-
-
-
-
14 Dec 18
30 Nov 21
0.10
- 1,000,000
14 Dec 18
30 Nov 21
0.125
- 1,000,000
14 Dec 18
30 Nov 21
0.15
- 1,000,000
12 Feb 19
3 Dec 20
19 Feb 19
19 Mar 20
14 Dec 18
1 July 20
0.05
0.05
0.00
Total
- 10,000,000
- 22,000,000
- 13,000,000
7,000,000 48,000,000
-
-
-
2,500,000
-
1,500,000
1,000,000
-
1,000,000
- 500,000
-
- 500,000
-
-
-
-
-
-
-
-
-
1,000,000
-
-
-
-
-
1,000,000
1,000,000
10,000,000
22,000,000
13,000,000
5,000,000 50,000,000
Weighted average exercise price
$0.263
$0.1000
$0.0000
$0.0000
$0.1400
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
$0.2690
$0.0000
$0.0000
$0.2910
$0.2630
Page | 54
Tesserent Limited Financial Report 2019
Set out below are summaries of deferred share rights movements during the year
2019
Grant Date
Vesting
Date
Share
Price at
grant date
$
Balance at
the start of
the year
Granted
Shares
Issued
Expired/
forfeited/
other
Balance at
the end of
the year
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
0.16
0.16
0.14
0.14
0.14
0.14
0.14
-
700,000
-
450,000
750,000
-
600,000
-
-
-
-
-
-
-
-
450,000
-
700,000
-
-
-
750,000
-
-
-
-
-
600,000
-
-
-
450,000
-
-
-
Total
2,500,000 -
(450,000)
2,050,000
450,000
2018
Grant Date
Vesting
Date
Share
Price at
grant date
$
Balance at
the start of
the year
Granted
Shares
Issued
Expired/
forfeited/
other
Balance at
the end of
the year
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
0.16
0.16
0.14
0.14
0.14
0.14
0.14
700,000
700,000
300,000
450,000
750,000
360,000
600,000
-
-
-
-
-
700,000
-
300,000
-
-
-
-
360,000
-
Total
3,860,000
-
(1,360,000)
-
-
-
-
-
-
-
-
-
700,000
-
450,000
750,000
-
600,000
2,500,000
Page | 55
Tesserent Limited Financial Report 2019
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
Consolidated
2019
$
639,385
287,148
(153,633)
772,900
2018
$
705,347
138,438
(204,400)
639,385
5.3 Parent entity information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Issued share capital
Reserves
Accumulated loss
Total equity
2019
$
2018
$
1,013,679
1,297,219
2,310,898
(124,059)
(124,059)
13,268,555
330,304
(11,163,902)
2,434,957
1,951,554
305,429
2,256,983
378,245
378,245
9,266,691
639,385
(8,027,338)
1,878,738
Included with non-current assets is a net intercompany receivable of $12,408,143 that the directors have impaired
in the current year.
Loss for the year
14,382,458
5,764,689
Page | 56
Tesserent Limited Financial Report 2019
Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2019 or 2018.
Guarantees entered into by the parent entity
The parent entity did not have any guarantees as at 30 June 2019 or 2018.
5.4 Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by BDO ECP, the auditor of
the company
Audit services
Corporate and indirect tax services
Due diligence services
Total
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 Debts
Call Option impairment
Decrease in trade and other receivables
Increase in prepayments
Increase in inventory
Decrease in current tax asset
Decrease in other assets
Decrease in deferred tax assets
Increase/(decrease) in trade and other liabilities
Decrease in contract liabilities
Decrease in current provisions
Increase in non-current provision
Net cash outflow from operating activities
Consolidated
2019
$
93,000
63,515
146,050
302,565
2018
$
89,000
42,025
-
131,025
Consolidated
2019
$
(4,372,821)
316,993
-
-
572,047
39,183
165,809
125,427
(32,198)
(220,927)
223,921
165,810
(9,999)
545,531
(64,101)
(40,951)
65,182
(2,521,094)
2018
$
(3,095,670)
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
(1,281,924)
Page | 57
Tesserent Limited Financial Report 2019
5.6 Events occurring after the reporting period
On 3 July 2019 the Company completed the acquisition of Rivium (Pty) Ltd for a total price of $3.250m, to be
settled in $1.495m cash and 17.550m Shares at 10 cents per share. Details are as per table below:
Acquisition of Rivium Pty Ltd
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration
Representing:
Cash paid to vendor
Issued share capital
Earnout estimate in shares
$
500,392
2,526,808
3,027,200
1,495,000
772,200
760,000
3,027,200
Accounting for the Rivium Pty Ltd acquisition and any purchase price allocation will be finalised for release of the
31 December 2019 interim financial report.
Pure Asset Management Pty Ltd Financing Facility
Subsequent to the end of the year the company secured a loan facility of 4 million dollars with Pure Asset
Management.
The loan facility will be split evenly in two separate tranches of $2 million, with the first available for general
working capital and the second available for lender approved acquisition opportunities from 1 November 2019
onwards.
The Tranche One Working Capital Facility will be available for draw down upon financial close of the facility, with
an interest rate of 11.5% per annum. The Tranche Two Acquisition Facility will enable Tesserent to draw up to $2
million on 45 days’ notice at any time after November 2019 upon lender approval of the acquisition. An interest
rate of 9.90% per annum will apply to the Acquisition Facility.
Finance Facility Terms are as follows:
Amount
Term
Warrants
A$4.0m in two tranches:
Working Capital Facility: A$2.0m
Acquisition Facility: A$2.0m. Drawable from 1 November 2019, subject to Lender
approval of any target acquisition.
Working Capital Facility: 36 months from utilisation.
Acquisition Facility: 36 months from utilisation.
Associated with the Working Capital Facility, the Lender will be issued with Warrants
to acquire 15,000,000 Tesserent shares upon utilisation of the Working Capital
Facility, A further 10,000,000 Warrants may be issued subject to shareholder
approval.
Warrants associated with the Working Capital Facility will have an exercise price
which is the lower of:
A$0.08; and
The Theoretical Ex Rights Price (TERP) of any future capital raise requiring
shareholder approval to increase shares on issue in Tesserent by greater
than 15%.
Page | 58
Tesserent Limited Financial Report 2019
Warrants
In the instance the Company elects to draw the Acquisition Facility, the Company will
seek shareholder approval to entitle the Lender to be issued with Warrants equal to
the dollar amount divided by an amount equal to 125%
of the VWAP for the 30-day period ending on the Utilisation Date of the Acquisition
Facility Loan.
Warrants associated with the Acquisition Facility have an exercise price which is the
lower of:
125% of the VWAP for the 30-day period preceding the first utilization date
under the Acquisition Facility Loan; or
The TERP of any future capital raise requiring shareholder approval to
increase shares on issue in Tesserent by greater than 15%.
Covenants and
representations
The Company is required to provide certain standard representations, undertakings
and covenants in favour of the Lender.
Apart from the matters noted above, the directors are not aware of any other significant events since the end of
the reporting period.
Page | 59
Tesserent Limited Financial Report 2019
In the opinion of the Directors’ of Tesserent Limited
DIRECTORS’ DECLARATION
a)
the financial statements and notes, as set out on pages 22 to 59, 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 2019
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 2019.
the remuneration disclosures included at pages 8 to 21 of the Directors Report (Audited
Remuneration Report) for the year ended 30 June 2019 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,
Julian Challingsworth
Director
Melbourne, 30 September 2019
Page | 60
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 2019, 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 Tesserent Limited, 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 2019 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.
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.
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 report.
•
Reviewing cash-flow forecasts and challenging
The Group’s use of the going concern basis of
management’s assumptions around future
preparation and the associated extent of uncertainty is
revenue, operating costs, and associated cash
important to understanding the financial statements as
flows.
whole. Frequent discussions were held with
management about the going concern assessment and,
for these reasons, we consider it a key audit matter.
•
Analysing the impact of reasonable possible
changes in cash flow forecasts and their timing
by applying sensitivities to key inputs including
In Note 1 “Going Concern” of the financial report, the
future revenue and operating costs.
Directors have documented their considerations and
have determined that the going concern basis of
preparation is the appropriate basis of accounting.
•
Assessing management’s accuracy to forecast
based on previous years’ actual results and our
knowledge of the Group.
The Group’s assessment of going concern was based on
future cash flow forecasts. The preparation of these
forecasts incorporated a number of assumptions and
judgements. The Directors have concluded that the
range of possible outcomes considered in arriving at
this judgment does not give rise to a material
•
•
Sensitising cash flow forecasts based on actual
results compared to budget.
Assessing the validity of cash inflows from
financing activities, including receipt of funds
from financing facility disclosed in note 5.6 of
uncertainty casting significant doubt on the Group’s
the financial report.
ability to continue as a going concern.
We assessed the Group’s forecasts, including the
•
Reviewing subsequent events as they pertain to
actual financial performance and cash levels of
Directors’ assumptions regarding the timing of future
the Group.
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 adequacy of the Group’s
disclosures within the financial statements.
Revenue recognition
Key audit matter
How the matter was addressed in our audit
Refer to Note 2.2 of the accompanying financial
Our audit procedures included, amongst others:
report.
•
Understanding and documenting the processes
For the year ended 30 June 2019 the Group recognised
and controls used by the Group in recording
$5,260,272 (2018: $5,327,957) of revenue from
revenue.
contracts with customers. The Group has various
•
Assessing the Group's accounting policy for
revenue streams which are a key driver of
revenue to ensure it complies with the
performance.
Australian Accounting Standards.
•
Performing analytical procedures to understand
movements and trends in revenue for
comparisons against expectations.
Revenue recognition was identified as a key audit
matter due to the significance of revenue to the
financial report, first time adoption of AASB 15
•
•
Tracing a sample of revenue transactions to
supporting documentation.
Assessing the value of contract liabilities
Revenue from Contracts with Customers. The Group
recognised at the year end.
has contract liability arrangements with customers that
•
Assessing the adequacy of the Group's
require management estimate and judgements.
disclosures within the financial statements.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2019, but does not include the
financial report and the auditor’s report thereon, which we obtained prior to the date of this auditor’s
report, and the additional Shareholders Information, 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 accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
When we read the additional Shareholder information, 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_responsibilities/ar3.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 8 to 20 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Tesserent Limited, for the year ended 30 June 2019,
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, 30 September 2019
Tesserent Limited Financial Report 2018
INVESTOR ENQUIRIES
Oliver Carton
Company Secretary
Phone: +61 3 9880 5559
Email: investor@tesserent.com
MEDIA ENQUIRIES
Alex Belcher
Marketing Manager
Phone: +61 3 9880 5507
Email: alex.belcher@tesserent.com
WEB
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