Tesserent Limited Annual Report 2020

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FY2020 Annual Report · Tesserent Limited

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TESSERENT LIMITED AND CONTROLLED ENTITIES
ABN: 13 605 672 928

ANNUAL
REPORT
2020

Providing
world-class
cybersecurity
throughout
Australia and
around the
globe.

ABN 13 605 672 928

Annual Report 2020 Tesserent LtdContents

Chairman’s Letter

Co-Chief Executive Officer’s Letter

4 Review of Operations

About Tesserent

10 Board of Directors

12 Executive Team

14 Corporate Governance Statement

22 Directors’ Report

44 Auditors Independence Declaration

Consolidated Statement of Profit or Loss and
Other Comprehensive Income

46 Consolidated Statement of Financial Position

48 Consolidated Statement of Changes in Equity

49 Consolidated Statement of Cash Flows

Notes to and Forming Part of the
Consolidated Financial Statements

89 Directors’ Declaration

Independent Auditor’s Report

95 ASX Additional Information

98 Corporate Directory

Chairman’s Letter

Geoff Lord

Dear Fellow Shareholders,

I am pleased to present
the 2020 Annual Report for
Tesserent Limited (ASX:TNT)
(‘the Company’) that looks
back on a year that has
seen us achieve exponential
growth to become Australia’s
#1 ASX-listed cybersecurity
provider.

In FY20, we successfully executed
our Cyber 360 end-to-end go-to-
market strategy, achieved all of our
financial targets and completed
several high-value strategic
acquisitions.

Since the Board refresh in January
2020, Tesserent’s revenue has
increased significantly. Based on
acquisitions in FY20, by 30 June
2020, our annual revenue run
rate had grown to $43.8M, and
our annual revenue run rate has
continued to grow to in excess of
$100M at the time of publishing
this report.

We expect 2021 to be another
dynamic and successful year, with
several exciting opportunities for the
Group, including the strengthening
of our Cyber 360 go-to-market
strategy and potential expansion
into proprietary cyber products and
international markets.

On behalf of the Board, I would
like to thank and acknowledge
the efforts of management and
staff who have been committed to
the execution and delivery of our
business strategy. I would also like
to thank our shareholders for their
continued support as we cement our
place as Australia’s #1 ASX-listed
cybersecurity firm.

Geoff Lord
Chairman

As well as becoming Australia’s
#1 ASX-listed cybersecurity firm,
we are now the single largest
provider of cybersecurity services
in the Canberra market. This is
particularly relevant with growing
uncertainty resulting from macro
geopolitical conditions. As a result,
securing Federal, State and Local
Government departments and
agencies remains a key focus for
us in FY21.

The strong foundation we have
built over the last 12 months
provides a solid platform for
maximising shareholder value
in FY21. Delivering sustainable
underlying profitability through the
benefits of synergies and cross-sell
opportunities from complementary
acquisitions, together with building
out high-margin annual recurring
revenue streams from existing &
new delivery models will be key
drivers to achieving this.

Another key consideration in FY20
was the global COVID-19 pandemic.
Whilst the pandemic has presented
significant challenges for all of us,
it has also created opportunities as
organisations transition to secure
mobile and remote workforces.
Tesserent has been well placed
to provide leadership and support
to organisations as they navigate
through this transition.

Annual Report 2020 Tesserent LtdCo-Chief Executive Officer’s Letter

Julian Challingsworth

Kurt Hansen

Dear Fellow Shareholders,

It is our pleasure to present the
Annual Report for the 12 months
ended 30 June 2020 (FY20),
which has been a successful and
transformational year for Tesserent,
becoming Australia’s #1 ASX-listed
cybersecurity provider through the
execution of our Cyber 360 strategy.

Today, with over 150 cybersecurity
professionals, Tesserent is the
partner of choice to more than
800 Enterprise, Go vernment and
Critical Infrastructure clients.

As a result, the Group met all
financial objectives including
increasing turnover to $43.8M on
an annualised basis (with a step-
change to over $100M at the time
of writing this report) and, for the
first time in the Company’s history,
achieving operational cash flow
and earnings positivity in the June
quarter (continuing and improving
on this trend in FY21).

FY20 also saw the arrival of the
COVID-19 pandemic and the
subsequent period of uncertainty.

FY20 Company Highlights

Became ASXs largest cybersecurity firm

Became largest Canberra-based cybersecurity firm

Executed Cyber 360

$43.8M Revenue per annum run rate achieved in FY20

Achieved quarterly EBITDA profitability for the FY20
June quarter

Cash flow from operations positive during the FY20
June quarter

Tesserent responded quickly, with
a focus on supporting our people
as they transitioned to working
from home whilst continuing to
deliver uninterrupted services to
our customers.

FY21 is shaping up to be another
successful and exciting year for
Tesserent, with continued organic
growth from acquisition synergies
as well as potential opportunities
for expansion into proprietary cyber
products and international markets.

On behalf of Tesserent’s Executive
Team, we would like to thank the
staff for their commitment and
dedication, and our clients for their
continued support as we cement our
place as Australia’s #1 ASX-listed
cybersecurity firm.

Sincerely,

Julian Challingsworth
Co-CEO

Completed 3 Acquisitions:
Pure Security, Rivium, North Security

Kurt Hansen
Co-CEO

150+

Cybersecurity Professionals

800+

Customers

Review of Operations

FY20 IN REVIEW

BACKGROUND
Increasingly, organisations are coming under cyber-
attack from sophisticated state-based actors, hacktivists
and cybercriminals.

As Australia’s #1 ASX-listed cybersecurity provider,
Tesserent provides its enterprise and government
clients with a simplified end-to-end cybersecurity
solution that removes the requirement to deal with
several vendors to achieve end-to-end protection.

Tesserent utilises a range of products from
world-leading cybersecurity vendors, delivering a
comprehensive solution to prevent, detect and mitigate
potential cyber-attacks.

BOARD REFRESH
January 2020 saw a Board refresh, with the appointment
of Geoff Lord as Non-Executive Chairman, Patrick
Flannigan as Non-Executive Director and Kurt Hansen
as Executive Director.

Long-serving board members Robert Langford
and Stefano Bertamini, together with more recently
appointed Steve Caswell, departed and the Company
thanked them for their contribution to the Board and
efforts to advance the activities of the Company.

FY20 FINANCIAL OBJECTIVES ACHIEVED
Following the completion of the Rivium, Pure Security
and North Security acquisitions, all financial objectives
for FY20 were met or exceeded.

This included:

– Achieving a $43.8M revenue run rate, exceeding

the $40M target based on the June quarter revenue
annualised

– EBITDA profitable for the June quarter
– Cash Flow from Operations was positive for the

month of June

FY20 Actual Revenue by Quarter

The Company achieved total Group revenues of $22.2M
for the year despite some softening of forecast sales
resulting from the COVID-19 pandemic.

TNT continued to build its high-value recurring annuity
revenues with multi-year, locked-in Managed Security
Services (MSS), and Security Operations Centre (SOC)
contracts exceeding $11M as at 30 June 2020.

TNT also achieved EBITDA profitability for the FY20
June quarter, and operational cash flow positivity for
the first time in its history in June 2020.

POST FY20 ACTIVITIES
Strategic acquisitions remain a cornerstone of
Tesserent’s growth strategy. The underlying core
philosophy is to acquire quality cybersecurity assets
that are complementary to the Group and incrementally
Earnings Per Share (EPS) accretive. TNT sees this as
an essential element in continuing to deliver future
value to its shareholders.

The addition of recently acquired Seer Security,
Airloom, Ludus Cybersecurity and iQ3, and continued
organic growth in the first quarter of FY21 has boosted
Tesserent’s annual turnover run rate to in excess
of $100M.

Tesserent continues to cement its place as Australia’s
#1 ASX-listed cybersecurity provider, with 220
employees, across offices in Melbourne, Sydney,
Brisbane, Canberra and Singapore. TNT now provides
products and services to over 800 clients, including
multiple Federal Government departments and
critical infrastructure providers, such as electricity
distributors and hospitals.

15%

$10,964,492

25%

60%

Government

Enterprise

Critical
Infrastructure

$7,550,000

$3,531,529

$2,100,000

Figure 1: Approx. revenue by customer type including iQ3 acquisition

(announced 24 September 2020)

Annual Report 2020 Tesserent LtdINTEGRATION AND SYNERGIES
Having acquired seven businesses in the past 15 months,
organic growth potential from unlocking further cross-
selling synergies and accelerating revenue growth is
significant.

Seer Security (Canberra) and Ludus Cybersecurity are to
be fully integrated into North Security which is focussed
on serving Federal Government and is expected
to significantly benefit from the Prime Minister’s
announced $1.7B cybersecurity investment to defend
government and critical infrastructure systems.

Pure Security, with the recently integrated Rivium
business and the more recently acquired Airloom
business, will remain focussed on supporting private
enterprise and state & local government.

Future Cyber 360 capabilities that are required, such
as iQ3’s Secure Cloud Services and other potential
proprietary solutions, will be strategically positioned
to complement the above strategy.

1 July also saw Tesserent’s original Managed Security
Services Provider (MSSP) business successfully
rebranded and integrated into the Pure Security
business. The MSSP business now operates under a
single Pure Security brand. This change has opened the
way for synergy benefits, as well as increased cross-
selling and upselling opportunities via a single sales
and delivery team.

FUTURE FOCUS
Tesserent, through its Cyber 360 strategy, is focused on
continuing to build out a one-stop-shop that provides
a complete end-to-end cybersecurity solution for its
clients. A primary objective is to maximise shareholder
value by increasing earnings margins through the
growth of high-margin annuity-based income and the
inclusion of proprietary intellectual property in its
solutions.

Important goals for the remainder of this current
financial year include:

– Deliver our Cyber 360 capabilities to an increasing

GRC Consulting

–

24%

25%

22%

10%

Penetration Testing

Security
Architecture

Managed Security
Services

Security Product
Development

Security Product
Sales

Security Cloud
Services

Figure 2: Revenue by product & service type including iQ3 Secure Cloud

Services (announced 24 September 2020)

On 1 July 2020, the Company completed the first step
toward its back-office integration objectives with the
financial integration of all Group Companies onto one
system, Oracle NetSuite. Key benefits of this include:

– A single integrated financial management system

across the business,

– Ability to rapidly integrate new acquisitions into a

common core financial platform,

– Ability to optimise and lower transaction processing

costs across the expanding group.

number of Australian organisations
Integrate sales activities to maximise synergy
efficiencies and drive organic revenue through the
realisation of cross-sales

– Focus on capturing market share in three key

markets; Government (including Law Enforcement
and Defence), Smart Utilities / Smart Cities (Critical
Infrastructure) and the upper mid-market and
enterprise private sector customers.

– Continue to drive the Company’s acquisition strategy
to expand on Cyber 360 capabilities and increase
shareholder value through incremental EPS growth

– Build out high-value recurring annuity revenue

streams

– Expand proprietary intellectual property to drive

high-margin product and service offerings

– Explore International expansion opportunities with
a focus on Australia’s key Five Eyes allies, which
consists of the USA, UK, NZ and Canada.

Review of Operations

CONTINUED

Explanation of Results
FY20 saw Tesserent become Australia’s #1 ASX-listed cybersecurity firm primarily as a result of several substantial
acquisitions and important organisational changes. This has led to exponential business growth, creating shareholder
value in a number of key areas including a significant uplift in market capitalisation and share price.

As a result of these acquisitions and organisational changes, significant upfront, one-off costs were incurred (Figure 3)
without the full-year financial benefits being recognised in the FY20 statutory accounts (Figure 4). The FY20 statutory
results are therefore backward-looking and are not a current reflection of the Company’s current or go-forward
financial position.

Statutory NPAT loss

Share Based Payments and Option Expenses

NPAT loss (excluding non-cash expense)

Interest costs

Depreciation

Depreciation accelerated IP write-off (TREX)

Right of Use Asset Amortisation (AASB16)

Acquisition costs expensed

Amortisation of PPA

($000)

$7,311

$5,846

$1,465

$824

$483

$786

$600

$1,296

$441

Underlying EBITDA Loss (excluding non-cash expenses)

$1,416

Figure 3: One-off costs incurred on IP write-off and historic acquisition costs

Existing Core Business

TNT SOC, Rivium, Pure Security and North

Total

Figure 4: FY20 Actual Results for Core Business

FY20 Actual

Gross
Revenue
($000)

$20,223

EBITDA*
($000)

($4,177)

* EBITDA is Statutory NPAT, adjusted for Interest costs, Depreciation, Depreciation accelerated IP write off (TREX), Right of Use Asset Amortisation and

Amortisation of PPA, all noted in the table in Figure 3.

Had the full-year benefit of these acquisitions (Rivium, Pure Security and North) been realised, FY20 notional results
would have been materially improved. This is demonstrated in Figure 3 which shows Q4 FY20 revenue and EBITDA
annualised. The Q4 EBITDA milestone of $17.7K, whilst modest, was a significant first step on an expected, continuing
trend of growing profitability with the core business during FY21.

Existing Core Business
(Q4 Results on an annualised basis)

TNT SOC, Rivium, Pure Security and North

Figure 5: Q4 FY20 Revenue and EBITDA during the June 2020 quarter annualised

Annualised
Revenue
($000)

Annualised
EBITDA
($000)

$43,857

$71

Annual Report 2020 Tesserent LtdIn addition, the Company has announced four additional acquisitions since 30 June 2020.

New Acquisitions Announced after 30 June 2020

Seer Security (Completed)

Airloom (Completed)

Ludus Cybersecurity (Completed)

iQ3 (Announced)

Total

Revenue
($000)

EBITDA
($000)

$7,637

$27,156

$1,227

$26,000

$62,020

$2,737

$2,693

$350

$3,000

$8,780

Figure 6: FY20 Unaudited Actual Results for New Acquisitions announced post 30 June 2020. The Revenue and EBITDA represents unaudited financial results for

the entities for the 30 June 2020 financial year.

Including the new acquisitions, at the time of publishing this document, the Company:

– has a FY21 forward revenue run-rate of in excess of circa $100M
–
–
– has the ambition to get an annual turnover run rate to in excess of $150M by June 30, 2021

is cash-flow positive
is operationally profitable on a month to month basis, and

The additional acquisitions are fully funded using a combination of the Company’s Pure Asset Management Debt Facility
and existing cash reserves.

Key Highlights
– FY20 Financial Objectives achieved:

– $43.8M Revenue per annum run rate achieved in FY20
– Achieved quarterly EBITDA profitability for the FY20 June quarter
– Cash flow from operations positive during the FY20 June quarter

– Acquisitions:

– Phase 1 Acquisitions:

– Rivium (completed FY20)
– Pure Security (completed FY20)
– North Security (completed FY20)
– Seer Security (completed FY21)

– Phase 2 Acquisitions:

– Airloom (completed FY21)
– Ludus Cybersecurity (completed FY21)
–

iQ3 (SPA signed FY21)

– First Acquisition Integration milestones achieved, including:

– First cross-sales achieved
– Single Finance Platform, Oracle NetSuite, rolled out across the Group
– Rivium and the Tesserent MSSP/SOC absorbed into Pure Security

– Became ASX’s largest cybersecurity firm
– Became largest Canberra-based cybersecurity firm

About Tesserent

Annual Report 2020 Tesserent Ltd4.

Seer Security provides
specialist high-security services
and delivery capabilities to
Australian Federal Government
departments and agencies
including Defence and Law
Enforcement. Completed in
August 2020.

airloom, a Sydney-based
cybersecurity firm with a
focus on security architecture
and cloud migration services.
Completed September 2020.

Ludus Cybersecurity rounds
out Tesserent’s standing as the
largest end-to-end cybersecurity
services provider in the Canberra
market. Completed in September
2020

iQ3 Secure Cloud Services
materially complements
Tesserent’s Cyber 360 strategy
and represents a significant
step forward in Tesserent’s
ability to provide a full end-
to-end cyber service, and has
a significant presence in the
NSW Government. Completed
in October 2020.

Tesserent Today
As Australia’s #1 ASX-listed
cybersecurity provider, Tesserent’s
Cyber 360 strategy radically
simplifies cybersecurity for our
clients, helping them achieve full
end-to-end protection for their
digital assets.

Cyber 360 utilises a range of
products from world-leading
cybersecurity vendors, delivering
comprehensive, tailored solutions
to prevent, detect and mitigate
potential cyber-attacks. This
is delivered through our 150+
cybersecurity professionals across
offices in Melbourne, Sydney,
Brisbane, Canberra and Singapore.

Tesserent’s Cyber 360 strategy
provides products, services and
strategic advice to more than 800
Enterprise, Government and Critical
Infrastructure clients, including:

1. Consulting - Strategy and

Implementation

2. Governance, Risk and
Compliance (GRC)

3. Security Architecture and

Integration

4. Security Testing and Technical

Assurance

5. Identity and Access Management

(IAM)

6. Managed Security Services

(24x7)

7. Digital Forensics and Incident

Response

8. Training and Advice

History
Following its Initial Public Offering
(IPO) in 2016, Tesserent operated
primarily as a Managed Security
Services Provider (MSSP) delivering
services from its ISO-certified
Security Operations Centre (SOC)
to medium-sized enterprises,
local government and educational
institutions.

FY19 saw the introduction of
Tesserent’s new Cyber 360 strategy,
which included growth through
strategic acquisitions. A January
2020 Board refresh, which included
the appointment of Geoff Lord as
Non-executive Chairman, Patrick
Flannigan as Non-executive Director
and Kurt Hansen as Executive
Director, was a key element in
driving Tesserent’s new strategy.

Strategic acquisitions include:

Rivium specialises in consulting,
implementation and managed
services for the enterprise
security solution Splunk.
Completed in July 2019.

Pure Security complements
Tesserent’s offerings with
penetration testing, secure
application development and
security advisory services.
Completed in December 2019.

North Security brings expertise
in cybersecurity, Governance,
Risk and Compliance (GRC),
project management and
digital transformation to
Australian Federal Government
departments and agencies
including Defence and Law
Enforcement. Completed in
March 2020.

Board of Directors

Geoff Lord

Julian Challingsworth

Kurt Hansen

Gregory Baxter

Patrick Flannigan

Julian Challingsworth
Co-Managing Director and Co-Chief
Executive Officer

Kurt Hansen
Co-Managing Director and Co-Chief
Executive Officer

Kurt has over 20 years of IT industry
experience driving sales and delivery
transformation and impressive
business growth across many IT and
Security organisations in Australia
and New Zealand.

Kurt is currently the CEO at Pure
Security. Previous roles include
executive, senior management
and operational positions at Check
Point Software Technologies,
F5 Networks, AirData, Symbol
Technologies, Telstra Wholesale,
Cisco Systems, and Ericsson. Prior
to commencing his corporate career,
Kurt worked as a general service
officer in the Royal Australian
Signal Corps.

Julian joined Tesserent after serving
as Managing Director and a Partner
of The Litmus Group for over 10
years and a board member and
Partner 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
Worldwide, 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.

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 member of
Chartered Accountants (CAANZ),
Fellow Australian CPA (FCPA) and
a Graduate, Australian Institute of
Company Directors (GAICD).

Geoff Lord
Non-Executive Chairman

Geoff is the Founder and CEO of the
Belgravia Group, a privately held
investment group which since being
established in 1990 has grown to
employ more than 10,000 people in
businesses spanning sports, fitness,
leisure, clothing and more.

In addition, Geoff is the former
Founder and Chairman of UXC
Limited, one of Australia’s largest
IT services businesses. After being
founded in 2002 as a $5m business,
UXC grew under Geoff’s leadership
to be acquired in 2016 by NYSE-listed
Computer Sciences Corporation
(now DXC Technology) in a deal
valued at A$427.6m.

Other board positions held by Geoff
include the Melbourne Business
School and SME finance business
Judo Bank. He has also shown a
significant passion for sports and
clubs, having served as Chairman
of Hawthorn Football Club and
Melbourne Victory. Geoff is the
largest shareholder in Tesserent
and has acted as an advisor to the
board since early 2019.

Annual Report 2020 Tesserent LtdPatrick is currently a trustee for the
Melbourne Olympic Park Trust and
has also served as a director of the
Australian Grand Prix Corporation.

Gregory Baxter
Non-Executive Director

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).

Patrick Flannigan
Non-Executive Director

Patrick, a significant investor in
Tesserent Ltd, is former Head of
Construction and Non-Executive
Director of NBN Co, roles he
held from 2009-2011 and 2013-
2019 respectively. As Head of
Construction he oversaw the large-
scale network construction project
as it commenced its rollout across
Australia, as well as the complex
relationships associated with it.

Prior to this, Patrick co-founded
ASX-listed infrastructure provider
Service Stream Limited (ASX:SSM)
where he served as CEO from
2003-2009. More recently Patrick
founded Utility Services Group
(USG). USG employs approximately
2,000 people nationally,
servicing linear infrastructure
in the electricity, gas, water and
telecommunications sectors.

See pages 22 to 24 for further information

Executive Team

Julian Challingsworth

Kurt Hansen

Peter Fearns

Nathan Knox

Robert Silver

Nathan Knox
Head of Synergies, Tesserent

With a background in similar roles at
ASX100 Companies and Government
agencies including NBN Co, Coles
and Woolworths, Nathan is well
suited to spearhead the Company’s
synergies strategy.

Nathan commenced October 2020.

Robert Silver
CEO, Rivium

With over 25 years of experience
in the IT industry, Robert has held
a number of senior management
roles in system integration and
professional services companies
in Sydney and Melbourne. His
experience spans a broad range
of industry vendors with a strong
focus on datacentre technologies
servicing all levels of government
and commercial enterprises.
More recently, Robert has over a
decade of experience with Splunk
and operational intelligence
solutions focussing on regulatory
audit and compliance, operations
and application management and
enterprise security.

Julian Challingsworth
Co-Managing Director and Co-Chief
Executive Officer

Kurt Hansen
Co-Managing Director and Co-Chief
Executive Officer

Kurt has over 20 years of IT industry
experience driving sales and delivery
transformation and impressive
business growth across many IT and
Security organisations in Australia
and New Zealand.

Peter Fearns
Group CFO, Tesserent

Peter has over 20 years’ experience
managing finance functions
in the information technology,
infrastructure and professional
services sectors, covering both
public listed and private companies
and including extensive back-office
integration experience from previous
executive roles at UXC and ANZ
Banking Group. During his time at
UXC, Peter oversaw the integration
of 35+ separate businesses under
the UXC corporate umbrella and
is a welcome addition to the TNT
Executive Team.

Peter commences November 2020.

Annual Report 2020 Tesserent LtdGeorge Katavic

Scott Ceely

Chris Hagios

George Stewart

Craig Humphreys

George Katavic
CEO, north - security.digital

George has more than 25 years
of experience with consulting
organisations in the Federal
Government market. George
founded BCT, a specialist in Defence
and National Security consulting
which later became part of UXC
in 2006. From that time George
was responsible for building UXC
Consulting in the ACT, combining
6 disparate and small brands which
evolved into the largest Australian
owned Consulting organisation in the
ACT. With over 200 staff including
over 100 cybersecurity staff, UXC
was largest cyber consulting
organisation in the Federal Market.
Prior to his current role with north,
George was the Managing Partner
of DXC Consulting in the ACT. He
co-founded north in 2018 which has
cemented itself as a leader in the
cyber field in the ACT.

Context Information Security, before
starting Seer Security in 2016.
Scott holds a Bachelor Engineering
in Computer Engineering and a
Master of Management majoring in
Technology and Innovation.

Scott commenced July 2020.

Chris Hagios
CEO, airloom

Chris is the founder and Managing
Director of airloom. Chris has over
20 years of start-up and high growth
technology company experience
leading consulting, product,
marketing and sales teams. He
brings innovation and success in
mobile, cloud and the cybersecurity
industries with his unique business
sense, technical acumen and
vision for the future protecting
enterprise data. This has contributed
to the building of a world-class
cybersecurity team at airloom.

George commenced December 2019.

Chris commenced August 2020.

Scott Ceely
CEO, Seer Security

Scott has worked in cybersecurity
roles for over 20 years, with 13 of
those in the Australian Federal
Government. His government roles
spanned the National Intelligence
Community, the Department of
Prime Minster and Cabinet and he
also served as a diplomat at the
Embassy of Australia in Washington
DC. After leaving government, Scott
built the Asia-Pacific branch of

George Stewart
CEO, Ludus Cyber Security

George is a cybersecurity
professional with deep consulting
experience delivering offensive
security services and with an
extensive background in security
engineering. His consulting
career has spanned federal
government, defence, finance,
critical infrastructure, technology
and Fortune 50 companies.

George has held positions
including as an executive, technical
consultant, software engineer and
ICT manager.

George commenced August 2020.

Craig Humphreys
CEO, iQ3

Craig is an IT veteran having
held leadership positions in both
Australian and multi-national
organisations over the past 25 years.
He founded iQ3 in Sydney in 2010
with a strong vision to address the
dynamic landscape of IT and the
growing appetite for consuming
IT as a Service. Building a team
of professionals and establishing
a significant position delivering
Cloud services to a large number of
Government organisations, as well
as Australian and multi-national
corporate clients, saw iQ3 ranked
28th in BRW’s fast 100 in 2015. iQ3
has continued its strong growth to
date by establishing operations in
Brisbane, Melbourne and Singapore.

Craig commenced October 2020.

Corporate Governance Statement

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. 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.

b. 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.

c. Selection and Appointment of New Directors Policy – This policy ensures that the procedure when selecting and

appointing new Directors is formal and transparent.

d. 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.

e. Appointment of External Auditor Policy – This policy summarises the conditions on which the Company will select an

external auditor.

f. 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.

g. 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.

h. Shareholder Communications Policy – This policy sets out practices which the Company will implement to ensure

effective communication with its Shareholders.

i. Diversity Policy – This policy sets out the Company’s objectives for achieving diversity amongst its Board, management

and employees.

j. Audit and Risk Management Committee Charter – This policy sets out the objectives and procedures for the Audit and

Risk Management Committee when it is in operation.

k. Nominations and Remuneration Committee Charter – This policy sets out the objectives and procedures for the

Nominations and Remuneration Committee when it is in operation.

Annual Report 2020 Tesserent LtdDepartures 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:

the respective roles and responsibilities of its
board and management; and

b. those matters expressly reserved to the board

and those delegated to management.

1.2

A listed entity should:

a. undertake appropriate checks before appointing
a person, or putting forward to security holders
a candidate for election, as a director; and

provide security holders with all material
information in its possession relevant to a decision
on whether or not to elect or re-elect a director.

A listed entity should have a written agreement with
each director and senior executive setting out the terms
of their appointment.

The company secretary of a listed entity should be
accountable directly to the board, through the chair,
on all matters to do with the proper functioning of
the board.

1.3

1.4

The respective roles and responsibilities of the Board
and executives are defined in the Board Charter.

There is a clear delineation between the Board’s
responsibility for the Company’s strategy and activities,
and the day-to-day management of operations conferred
upon the Company’s officers.

The procedure for the selection of new Directors is set
out in the Selection and Appointment of New Directors
Policy. Under this policy, Shareholders are required to
be provided with all material information relevant to
making an informed decision on whether or not to elect
or re-elect a Director.

The Company has entered into a written agreement with
each Director and senior executive.

The Company Secretary, Oliver Carton, reports directly
to the Chairman of the Board. The role of the Company
Secretary is outlined in the Board Charter.

1.5

A listed entity should:

The Company has adopted a Diversity Policy.

a. have a diversity policy which includes requirements
for the board or a relevant committee of the board
to set measurable objectives for achieving gender
diversity and to assess annually both the objectives
and the entity’s progress in achieving them;

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:

ii.

the respective proportions of men and women
on the board, in senior executive positions and
across the whole organisation (including how the
entity has defined “senior executive” for these
purposes); or

if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s most
recent “Gender Equality Indicators”, as defined
in and published under that Act.

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 2020, there were 25 females employed
representing 18% of total employees. There were no
women on the Board of Directors and no women as
part of the executive team.

Corporate Governance Statement

CONTINUED

COMPANY’S CURRENT PRACTICE

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 significant changes to Board
composition with three new appointments and three
resignations.

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 with the appointment
of a Joint Managing Director, no performance evaluation
was undertaken.

The Company had established a Nominations and
Remuneration Committee.

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.

RECOMMENDATION

1.6

A listed entity should:

a. have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and

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. has at least three members, a majority of whom

are independent directors; and

ii.

is chaired by an independent director,
and disclose:

iii. the charter of the committee;

iv. 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 the individual attendances of the
members at those meetings; or

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.

Annual Report 2020 Tesserent LtdRECOMMENDATION

COMPANY’S CURRENT PRACTICE

2.2

A listed entity should have and disclose a board skills
matrix setting out the mix of skills and diversity that
the board currently has or is looking to achieve in
its membership.

2.3

A listed entity should disclose:

a. the names of the directors considered 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

c. the length of service of each director.

The Board had previously developed a skills matrix.
Given the changes to Board composition during the
period, the skills matrix has not been updated.

The Board considers that Patrick Flannigan and Greg
Baxter are independent directors. The Board considers
that Geoff Lord does not meet the ASX Corporate
Governance Council definition of Independent Director
given his significant holding of Tesserent securities.
The Board considers that Julian Challingsworth and
Kurt Hansen not independent directors given they are
employees of the Company.

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

b. disclose that code or a summary of it.

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.

Corporate Governance Statement

CONTINUED

RECOMMENDATION

COMPANY’S CURRENT PRACTICE

4.1

The board of a listed entity should:

a. have an audit committee which:

i. has at least three members, all of whom are

non-executive directors and a majority of whom
are independent directors; and

ii.

is chaired by an independent director, who is not
the chair of the board,
and disclose:

iii. the charter of the committee;

iv. 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
period and the individual attendances of the
members at those meetings; or

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.

4.2

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

b. disclose that policy or a summary of it.

The Company has established an Audit and Risk
Management Committee.

During the period the Committee did not operate 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.

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.

A listed entity should provide information about itself
and its governance to investors via its website.

The Company has a dedicated corporate governance
information section on its website.

A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors.

The Company has adopted a Shareholder
Communications Policy for Shareholders wishing
to communicate with the Board.

6.1

6.2

Annual Report 2020 Tesserent LtdRECOMMENDATION

COMPANY’S CURRENT PRACTICE

6.3

A listed entity should disclose the policies and
processes it has in place to facilitate and encourage
participation at meetings of security holders.

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.

6.4

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.

The Company has established an Audit and Risk
Management Committee.

7.1

The board of a listed entity should:

a. have a committee or committees to oversee risk,

each of which:

i. has at least three members, a majority of whom

are independent directors; and

ii.

is chaired by an independent director,
and disclose:

iii. the charter of the committee;

iv. the members of the committee; and

v. as at the end of each reporting period, the

number of times the committee met throughout
the period and the individual attendances of the
members at those meetings; or

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.

7.2

The board or a committee of the board should:

The Company complies with this Recommendation.

review the entity’s risk management framework at
least annually to satisfy itself that it continues to be
sound; and

b. disclose, in relation to each reporting period,

whether such a review has taken place.

7.3

A listed entity should disclose:

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.

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.

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.

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.

Corporate Governance Statement

CONTINUED

RECOMMENDATION

COMPANY’S CURRENT PRACTICE

The Company has established a Nominations and
remuneration Committee.

8.1

The board of a listed entity should:

a. have a remuneration committee which:

i. has at least three members, a majority of whom

are independent directors; and

ii.

is chaired by an independent director,
and disclose:

iii. the charter of the committee;

iv. 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 the individual attendances of the
members at those meetings; or

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.

8.2

A listed entity should separately disclose its policies
and practices regarding the remuneration of non-
executive directors and the remuneration of executive
directors and other senior executives.

The policies and practices regarding remuneration of
Directors is set out in the Selection and appointment
of new Directors Policy. Full details of Director
remuneration is included in annual reports.

8.3

A listed entity which has an equity-based remuneration
scheme should:

a. have a policy on whether participants are permitted
to enter into transactions (whether through the use
of derivatives or otherwise) which limit the economic
risk of participating in the scheme; and

b. 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.

Annual Report 2020 Tesserent LtdFinancial Report

FOR THE YEAR ENDED 30 JUNE 2020

22 Directors’ Report

44 Auditors Independence Declaration

Consolidated Statement of Profit or Loss and
Other Comprehensive Income

46 Consolidated Statement of Financial Position

48 Consolidated Statement of Changes In Equity

49 Consolidated Statement of Cash Flows

Notes to and Forming Part of the
Consolidated Financial Statements

89 Directors’ Declaration

Independent Auditor’s Report

95 ASX Additional Information

98 Corporate Directory

Directors’ Report

The Directors of Tesserent Limited (the “Company”) submit herewith the Directors’ Report on the Company for the
financial year ended 30 June 2020.
To comply with the provisions of the Corporations Act 2001, the Directors report as follows:

Directors
Details of the Directors of the Company in office at any time during or since the end of the financial year and at the date
of this report are:

Geoff Lord

Qualifications:

Experience:

Non-Executive Chairman (Appointed 10 January 2020)

MBA (Distinction) (Melbourne), BEc (Hons) (Monash), FIDA, ASIA

Geoff is the Founder and CEO of the Belgravia Group, a privately held investment
group which since being established in 1990 has grown to employ more than
10,000 people in businesses spanning sports, fitness, leisure, clothing and more.

In addition, Geoff is the former Founder and Chairman of UXC Limited, one of
Australia’s largest IT services businesses. After being founded in 2002 as a
$5m business, UXC grew under Geoff’s leadership to be acquired in 2016 by
NYSE-listed Computer Sciences Corporation (now DXC Technology) in a deal
valued at A$427.6m.

Other board positions held by Geoff include the Melbourne Business School and
SME finance business Judo Bank. He has also shown a significant passion for sports
and clubs, having served as Chairman of Hawthorn Football Club and Melbourne
Victory. Geoff is the largest shareholder in Tesserent and has acted as an advisor
to the board since early 2019.

Other Directorships in listed
entities:

Former Directorships in listed
entities in last 3 years:

None

Interests in Shares and options:

27,433,334 ordinary shares

2,813,750 $1.00 Converting Notes converting on or before 16 December 2021
at various conversion rates.

8,882,500 share options exercisable at $0.10 expiring 1 October 2022

6,000,000 5 year call options exercisable at $0.248 expiring 21 September 2025

10,000,000 5c options expiring 3 December 2020

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

Directors (continued)

Julian Challingsworth

Co-Managing Director and Co-Chief Executive Officer (Appointed 1 August 2018)

Qualifications:

Experience:

Bachelor of Business, MSc , 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 member of Chartered Accountants (CAANZ),
Fellow Australian CPA (FCPA) and a Graduate, Australian Institute of Company
Directors (GAICD).

Julian joined Tesserent after serving as Managing Director and a 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 Worldwide, 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.

Other Directorships in listed
entities:

Former Directorships in listed
entities in last 3 years:

None

Interests in Shares and options:

8,000,000 ordinary shares

Kurt Hansen

Qualifications:

Experience:

Performance Rights provide rights to shares as follows:

2,000,000 upon achieving share price of $0.20 for no less than 60 consecutive days

2,000,000 upon achieving share price of $0.25 for no less than 60 consecutive days

2,000,000 upon achieving share price of $0.30 for no less than 60 consecutive days

Co-Managing Director and Co-Chief Executive Officer (Appointed 12 December 2019)

Grad. Dip. Engineering

Kurt has over 20 years of IT industry experience driving sales and delivery
transformation and impressive business growth across many IT and Security
organisations in Australia and New Zealand.

Kurt was CEO at Pure Security at acquisition date. Previous roles include
executive, senior management and operational positions at Check Point Software
Technologies, F5 Networks, AirData, Symbol Technologies, Telstra Wholesale,
Cisco Systems, and Ericsson. Prior to commencing his corporate career, Kurt was
a general service officer in the Royal Australian Signal Corps.

Other Directorships in listed
entities:

Former Directorships in listed
entities in last 3 years:

None

Interests in Shares and options:

8,531,686 ordinary shares

Performance Rights provide rights to shares as follows:

2,000,000 upon achieving share price of $0.20 for no less than 60 consecutive days

2,000,000 upon achieving share price of $0.25 for no less than 60 consecutive days

2,000,000 upon achieving share price of $0.30 for no less than 60 consecutive days

for the year ended 30 June 2020Directors’ Report

Directors (continued)

Gregory Baxter

Qualifications:

Experience:

Non-Executive Director (Appointed 16 November 2016)

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).

Other Directorships in listed
entities:

Former Directorships in listed
entities in last 3 years:

None

Interests in Shares and options:

3,906,042 ordinary shares

4,500,000 unlisted share options

Patrick Flannigan

Qualifications:

Experience:

Other Directorships in listed
entities:

Former Directorships in listed
entities in last 3 years:

Interests in Shares and options:

Non-Executive Director (Appointed 20 January 2020)

BBus. (Victoria University), FAIDC, FAIM

Patrick, a significant investor in Tesserent Ltd, is former Head of Construction and
Non-Executive Director of NBN Co, roles he held from 2009-2011 and 2013-2019
respectively. As Head of Construction he oversaw the large-scale network
construction project as it commenced its rollout across Australia, as well as the
complex relationships associated with it.

Prior to this, Mr Flannigan co-founded ASX-listed infrastructure provider Service
Stream Limited (ASX:SSM) where he served as CEO from 2003-2009. More recently
Mr Flannigan founded Utility Services Group (USG). USG employs approximately
2,000 people nationally, servicing linear infrastructure in the electricity, gas, water
and telecommunications sectors.

Mr Flannigan is currently a trustee for the Melbourne Olympic Park Trust and has
also served as a director of the Australian Grand Prix Corporation.

None

1,000,000 $1.00 converting options converting on or before 16 December 2021
at various conversion rates.

6,000,000 converting note share options exercisable at $0.10 on the basis of
6 options for every Converting Note expiring 1 October 2022.

3,000,000 5 year call options exercisable at $0.248 expiry 21 September 2025

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

Directors (continued)

Robert Langford

Non-Executive Chairman (Appointed 14 November 2018, retired 4 December 2019)

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.

Stefano (Steve) Bertamini

Non-Executive Director (Appointed 16 November 2015, retired 29 November 2019)

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.
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 joining the Company Steve held a number of executive roles within banking
and finance.

Steve Caswell

Non-Executive Director (Appointed 19 September 2019, retired 29 November 2019)

Company Secretary

Oliver Carton

Qualifications:

Experience:

Steve is an experienced Chief Executive Officer and Director working largely in the
management consulting industry. Steve established an IT Consulting company of
12 in 1995 taking it to 300 employees and to a NASDAQ listing. He is experienced
in Strategic Planning, Corporate Governance, Business Planning, and Business
Transformation having worked across organisations such as Mobil Oil (globally),
Adacel Ltd, Brightstar Pty Ltd and Software Consulting Services Pty Ltd. Steve’s
qualifications include: BSc (Monash), Grad. Dip. Mgt. (RMIT), Dip. Ed. (Rusden State
College), GAICD.

Company Secretary

BJurisLLB. Appointed as Company Secretary on 6 May 2015.

Oliver Carton is a lawyer with over 30 years’ experience in a variety of corporate
roles. He is currently a director or company secretary of a number of listed,
unlisted and not for profit entities such as the Melbourne Symphony Orchestra and
Australian Mines Ltd (ASX: AUZ). He currently runs his own consulting business and
was previously a Director of the Chartered Accounting firm KPMG. Prior to that, he
was a senior legal officer with ASIC.

for the year ended 30 June 2020Directors’ Report

Meeting of Directors
The following table sets out the number of meetings of the Company’s Directors during the year ended 30 June 2020
and the number of meetings attended by each Director.

Director

Geoff Lord

Julian Challingsworth

Kurt Hansen

Patrick Flannigan

Gregory Baxter

Robert Langford (resigned 4 December 2019)

Steve Bertamini (resigned 29 November 2019)

Steve Caswell (resigned 29 November 2019)

Board Meeting

Entitled to
attend

Attended

There were no committees or sub-committees sitting during the year.

Principal Activities
Tesserent provides a range of Internet security services including Internet Security-as-a-Service, security penetration
testing, consulting and software licencing. 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. 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.

Operating Results and Financial Position
The Group recorded a loss after tax of $7,311,949 for the year ended 30 June 2020 (2019: $4,372,821 loss). The Group
incurred significant expenditure in completing acquisitions of 3 companies. In addition, the Group wrote off its
“T-Rex” development expenditure ($786,243) during the year. The acquisitions resulted in an increase in total assets
to $43,278,102 including Goodwill of $15,964,917 and Intangible assets (including acquired Customer contracts and
relationships) of $7,618,948.
During the year the Group issued equity of $15,730,099 after costs, as well as converting notes of $9,433,750 before
costs to provide working capital and capital for the acquisitions. These issues raised cash of $4,924,383 for the
issue of equity, before costs, and $8,995,000 from converting notes before costs. The Group also secured a financing
facility of $5 million to provide working capital and cash reserves to complete acquisitions. The facility matures in
2022 and interest is charged at 9.9% on the capital element of $3,000,000 and 11.5% on the working capital element of
$2,000,000.
As a result of the acquisitions and the equity, the Group’s net assets at 30 June 2020 were $16,507,462.
More detailed discussion of the Group’s results are provided in the Review of Operations preceding the Directors Report.

Dividends
During the year, the Company did not pay, or propose to pay, any dividends.

Significant Change in State of Affairs
In July 2019 the Group completed the acquisition of Rivium Pty Ltd, a Melbourne-based security firm specialising in the
reselling of Splunk Security software. The deal was completed with a cash payment of $1.495 million and the issue of
17,550,000 ordinary shares. A further issue of “earn out” shares was agreed based on Rivium EBITDA.
The Company issued 34,557,557 ordinary shares at $0.045 in July to fund the acquisition, raising $1.555 million.
A further 5,555,556 shares were issued later in July.
Also in July the Company issued 7,250,000 ordinary shares at $0.045 in order to raise working capital, plus a further
735,556 ordinary shares for employee and contractor payments.
In September the Company issued 1,000,000 ordinary shares on the conversion of executive options, and
1,590,000 ordinary shares to settle payments to consultants.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

Significant Change in State of Affairs (continued)
In September the Company also secured a finance facility with Pure Asset Management Pty Ltd for up to $4million. The
facility was split into two $2million tranches, the first to provide working capital, the second to fund an acquisition. The
second tranche was increased to $3million upon the agreement to acquire Pure Security Pty Ltd. 15 million warrants
converting into ordinary shares at $0.08 each were issued as a cost of the facility on 25 October 2019.
In October, the Company subsequently completed the acquisition of Pure Security Pty Ltd, a cybersecurity company
offering complimentary services to Tesserent. The agreed price was $8 million in cash, 50 million ordinary shares, and
a deferred payment of $1 million.
The Company also issued 1 million ordinary shares on conversion of executive options, and 600,000 ordinary shares as
consideration for services received.
In December the Company issued 185,185 ordinary shares as an employee payment, 6,583,333 ordinary shares to
Non-Executive Directors, 3,000,000 employee share options, 3,291,666 Non-Executive Director share options and
10,000,000 replacement Director Performance rights, plus another 10,000,000 warrants as described above.
In late December the Company issued 104,000,000 ordinary shares as part of the acquisition of Pure Security Pty Ltd.
The Company also issued 8,395,000 Converting Notes, issued at $1 each, and issued with 50,370,000 Converting Note
Options. The Converting Notes are convertible before 16 December 2021 at various converting rates. The options are
convertible into shares at $0.10 on the basis of 6 options for 1 share, with an expiry date of 1 October 2022. At the same
time 49,586,777 acquisition warrants were issued, and 10,000,000 Joint Managing Director Options were issued.
On 7 and 8 January the Company issued 3,798,169 ordinary shares for contractor services, plus 438,750 converting
notes, plus 2,632,500 Converting Note options, for broker services provided.
On 22 January 2020 the Company issued 20,198,112 ordinary shares on the conversion of share options. 12,400,000
ordinary shares were issued to contractors for services, and 1,000,000 ordinary shares were issued to employees.
A further 15,000,000 ordinary shares were issued on conversion of Converting Notes, at $0.05 per share.
At the same time 300,000 Converting Notes were issued for $1 each, convertible on equal terms with the earlier issued
Converting Notes. 1,800,000 Converting Note options were issued attached to the Converting Notes.
On 31 January 2020 11,294,448 ordinary shares were issued at $0.05 on the conversion of share options. A further
200,000 Converting Notes were also issued at $1 each, with 1,200,000 Converting Note options attached, same terms
as previously issued.
On 6 February 2020 the Company issued 8,120,223 ordinary shares on the exercise of share options at $0.05 each. On
21 February 2020 a further 4,400,000 ordinary shares were issued on the exercise of $0.05 options.
On 2 March 2020 the Company issued 950,000 ordinary shares on the exercise of $0.05 share options, and 16,500,000
ordinary shares on the conversion of 825,000 Converting Notes.
On 10 March 2020 the Company issued 1,624,999 ordinary shares on the exercise of $0.05 share options, and 2,000,000
ordinary shares on the conversion of 100,000 Converting Notes. On 13 March 2020 a further 3,152,778 ordinary shares
were issued on the exercise of $0.05 share options.
On 26 March the Company announced the completion of the acquisition of north BDT, a cybersecurity consulting firm
with significant contracts in Canberra with the Australian Federal Government. The consideration agreed in the deal
was a cash payment of $1.25 million and the issue of 20 million ordinary shares. Further payments of $2.07 million
were deferred over 4 payments, and an “earn-out” payable in cash and shares based on north BDT’s EBITDA.
On 9 April 2020 20,000,000 ordinary shares were issued on exercise of 1,000,000 Converting Notes. A further 2,000,000
ordinary shares were issued on exercise of 100,000 Converting Notes on 1 May 2020.
There were no other significant changes in the composition of the Company and the Group other than those noted above.

After Balance Date Events
On 20 July 2020 the Group announced it had signed an agreement with its existing debt provider, PURE Asset
Management (“PAM”) to secure an additional $15 million facility, replacing the existing $5 million facility. An improved
rate of 8.9% per annum is included in the facility.
On 23 July 2020 the Group announced completion of its acquisition of Seer. The value of the consideration agreed
is $5 million in cash and the issue of 76,923,077 ordinary shares (6,923,077 being subject to shareholder approval).
The cash payment will be split between a payment on completion of $2.5 million, $1.25 million 13 months after
completion and the final payment 25 months after completion. The acquisition was completed on 4 August, and the first
tranche of cash issued to the vendor and 70,000,000 ordinary shares issued to the vendor, escrowed for 12 months.
Shareholder approval for the issue of the remaining 6,923,077 ordinary shares was obtained at a General Meeting on
16 September 2020. Due to the proximity of the acquisition to the release of the financial statements, the Group has not
yet completed the purchase price allocation for the acquisition.

for the year ended 30 June 2020Directors’ Report

After Balance Date Events (continued)
On 28 July the Group announced the issue of 100,000 convertible notes at $1 each, converting into 2,000,000 ordinary
shares, and 11,100,000 $0.10 converting note options.
On 20 August 2020 the Group announced the issue of 1,200,000 $0.10 converting note options.
On 26 August 2020 the Group announced the acquisition of Airloom, a Sydney-based cybersecurity firm. The acquisition
was fully funded through its PAM finance facility, with the consideration for the acquisition being $6 million and the
issue of 40 million ordinary shares, at 30 VWAP, subject to shareholder approval. $5million is payable on completion,
with the remaining $1million payable upon achievement of set milestones. The acquisition was completed on
11 September 2020. Due to the proximity of the acquisition to the release of the financial statements, the Group has not
yet completed the purchase price allocation for the acquisition.
On 28 August the Group announced the acquisition of Ludus Cybersecurity for $536k in cash and 4.31 million ordinary
shares issued at 22.41 cents, subject to shareholder approval. The acquisition was completed on 11 September 2020.
Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet completed the
purchase price allocation for the acquisition.
On 2 September the Group issued 750,000 $0.10 converting note options, 2,000,000 Joint Managing Director Options and
25,000,000 Acquisition Warrants.
On 8 September 2020 the Group issued 24,586,777 Acquisition warrants at $0.0605.
On 21 September 2020 the Group issued 12,071,720 Converting Notes and 2,000,000 Joint Managing Director options.
On 24 September 2020 the Group announced the acquisition of iQ3, a secure cloud provider headquartered in Sydney.
Consideration is $8.6 million in cash and the issue of 34.6 million issued at $0.2496 per share. The cash component is
to be paid in instalments, $4.3 million on completion, and 4 deferred payments of $1.07 million made quarterly over
12 months. Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet
completed the purchase price allocation for the acquisition.
On 24 September 2020 the Group announced the issue of 105,000 converting notes at $1 each, 4,000,000 Joint Managing
Director options and 1,458,334 Pure facility options.
Other than the above, the Board is not aware of any other matter or circumstance not otherwise dealt with in these
financial statements that has significantly or may significantly affect the operation of the Company, the results of those
operations, or the state of affairs of the Company in subsequent financial years.

Likely Developments and Expected Results of Operations
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 Australia and internationally, through increased sales and
marketing;
assessing acquisition opportunities; and
on-going research and development.

–
–

Further information on expected results of operations is included in the Review of Operations preceding the Directors Report.

Indemnity and Insurance of Officers
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.

Indemnity and Insurance of Auditor
The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a
premium in respect of a contract to insure the auditor of the Company or any related entity.

Environmental Issues
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.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

Shares under Option or Issued on Exercise of Options
At the date of this report the Company had shares under option as follows: -

Description

Chairman options

NED options

Call options

Employee options

Broker options

Employee options

Warrants issued to Pure Asset
Management Pty Ltd

Acquisition warrants

Converting notes

Converting note options

Call options

MD Replacement options

Date of expiry

Exercise price

Number
on issue

Number
escrowed

Escrow date

30 Nov 2021

3 Dec 2020

1 Mar 2022

22 Jul 2021

19 Mar 2021

29 Mar 2021

22 Jul 2021

18 Apr 2021

29 Nov 2022

30 Sep 2022

6 Dec 2022

$0.10

1,000,000

$0.125

1,000,000

$0.15

$0.10

1,000,000

$0.125

1,000,000

$0.15

1,000,000

$0.05

10,000,000

$0.10

$0.125

$0.15

$0.05

$0.10

$0.05

$0.075

100,000

300,000

1,100,000

500,000

455,000

3,000,000

1,000,000

$0.10

1,000,000

$0.125

1,000,000

$0.08

25,000,000

49,586,777

6,558,750

1 Oct 2022

$0.10

56,002,200

16 Dec 2021

$0.075

1,000,000

3 Oct 2021

$0.0

10,000,000

172,802,727

Nil

N/A

Share options do not provide the holder with the same rights as shareholders. Share options do not provide the rights
to participate in rights issues, dividends, or enable the holder to vote at General Meetings.

Proceedings on Behalf of the Company
No person has applied for leave of the Court under Section 327 of the Corporations Act 2001 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
proceedings during the year.

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the Director and executive remuneration arrangements for
the Company, in accordance with the requirements of the Corporations Act 2001 and its Regulations.

A. Principles Used to Determine the 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 is undertaken by the Board with changes made as deemed appropriate to the
size, structure and needs of the Company.
ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general
meeting. The maximum annual aggregate remuneration is $250,000, not including various payments such as out of
pocket expenses and share based payments, and this was set prior to listing via the IPO in 2016.
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 Committee / Board to review KMP packages annually by reference to the Group’s performance,

remuneration should include an appropriate mix of fixed and performance-based components,
components of remuneration should be understandable, transparent and easy to communicate; and

executive performance and comparable information from industry sectors.

The Board sets out to link remuneration polices with the achievement of financial and personal objectives.

Components of remuneration
The Non-executive directors in place during the year agreed to take no cash salary, instead agreeing to take shares
and/or options in lieu of director fees. This includes director fees outstanding from 2019. All equity issued to Directors
during the year was subject to shareholder approval.
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 Co-Managing
Directors (MD) / Co-Chief Executive Officers (CEO) 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
Co-CEOs 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
Co-CEOs, and the Co-CEOs assesses the performance of the individual executives against their targets. The Co-CEOs’
recommendations were presented to the Nominations and Remuneration Committee and now the Board for approval.
The Board, at its discretion, may pay cash bonuses or bonuses settled in shares or options, to Executive Directors or
other KMPs. No cash bonuses were paid in the current financial year other than a sign-on cash bonus to Kurt Hansen
(2019: Nil) as part of his sign-on fee on acquisition of Pure Security Group.
The Board has implemented a Director Option Plan. The Option Plan is aimed at incentivising the Directors in retaining
key strategic skills. The Director Plan currently covers Executive Directors. The options have been granted to the
Executive Directors vesting over three years with exercising prices of $0.05, $0.075, $0.10, $0.125 and $0.15. Refer to
tables on page 36 for options affecting remuneration in the current and future reporting period.

Engagement of remuneration consultants
During the year, the Company did not engage any remuneration consultants.

Voting and comments made at the Company’s 29 November 2019 Annual General Meeting (‘AGM’)
At the 29 November 2019 AGM, 87.83% of the votes received supported the adoption of the remuneration report for the
year ended 30 June 2019. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)

B. Details of Remuneration
Details of the remuneration of the Directors, other key management personnel (defined as those who have the authority
and responsibility for planning, directing and controlling the major activities of the Company) are set out in the tables
on pages 33 to 35.

Key Management Personnel - Directors and Executives
The key management personnel (“KMP”) of the Company consisted of the following Directors and executives during the year:

Non-Executive Directors

Position

Geoff Lord

Gregory Baxter

Patrick Flannigan

Robert Langford

Non-Executive Chairman (Appointed 10 January 2020)

Non-Executive Director

Non-Executive Director (Appointed 20 January 2020)

Non-Executive Chairman (Appointed 14 November 2018, Retired 4 December 2019)

Stefano Bertamini

Non-Executive Director (Appointed 16 November 2015, Retired 29 November 2019)

Steve Caswell

Non-Executive Director (Appointed 19 September 2019, retired 29 November 2019)

Julian Challingsworth

Co-Chief Executive Officer and Director

Kurt Hansen

Co-Chief Executive Officer and Director (Appointed 12 December 2019)

Other Key Management Personnel

Ross Miller

Matthew Glennan

Stephan Scheffer

Matthew Phillips

George Katavic

Robert Silver

Head of security operations (resigned 8 June 2020)

General Manager Sales & Marketing (resigned 7 February 2020)

Chief Financial Officer

General Manager Sales & Marketing (Appointed 16 March 2020)

Managing Director (Appointed upon acquisition 31 March 2020)

Chief Executive & Director of Rivium Pty Ltd (Appointed upon acquisition 3 July 2019)

Key Management Personnel – Service Agreements

Employment contracts – Julian Challingsworth
The key terms of the contract are as follows:
– Position of CEO, contract commencing 1 August 2018
– Salary of $225,000 per annum, plus superannuation and other Short and Long Term benefits;
–
– Short term bonus of $75,000 payable in shares at $0.05 each at the discretion of the Board
– Agreement can be terminated in writing by either party providing twelve months’ notice.

1,000,000 ordinary shares issued upon signing contract

Employment contracts – Kurt Hansen (contract is with PS & C Ltd)
The key terms of the contract are as follows:
– Position of CEO of Pure Security Group (PS&C Ltd), contract commencing 28 July 2017;
– Salary of $350,000 per annum, short and long term incentives;
– Short term bonus of $150,000 payable on achievement of set KPIs;

EBITDA targets agreed on an annual basis (40%)
Revenue growth target within agreed range (20%)
Retention of key talent (20%)

Management of key relationships (10%)

Achieve strategic goals (10%)

for the year ended 30 June 2020

Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)
– Long-term performance rights of up to 2% of issued capital.
– Agreement can be terminated in writing by Mr Hansen providing six months’ notice.
– Agreement can be determined in writing by the Company providing nine months’ notice
– Mr Hansen received a sign on fee of $200,000 upon completion of the Pure Security Group acquisition and was

awarded performance rights in Tesserent with KPIs attached.

Employment contracts – Ross Miller
The key terms of the contract are as follows:
– Position of Head of Security Operations, contract commencing 29 April 2019;
– Salary of $175,200 per annum, inclusive of 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).

Employment contracts – Matthew Phillips
The key terms of the contract are as follows:
– Position of Head of Managed Services, contract commencing 16 March 2020;
– Salary of $160,000 per annum, inclusive of 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.

Employment contracts – Stephan Scheffer
The key terms of the contract are as follows:
– Position of CFO, contract commencing 17 February 2020;
– Salary of $220,000 per annum, plus superannuation and other benefits;
– Variable incentive of $30,000 applicable from 1st July 2020.
– Agreement terminates 6 months after signing, unless extended by mutual consent. The agreement was extended

for 3 months at its termination date.

Employee contracts – George Katavic
The key terms of the contract are as follows:
– Position of Managing Director, north, contract commencing 23 March 2020;
– Salary of $273,972 per annum, plus superannuation and other benefits;
– Performance rights based on the share price performance;
– Termination is with 4 weeks’ notice.

Employee contracts – Robert Silver
The key terms of the contract are as follows:
– Position of Chief Executive - Rivium, contract commencing 7 July 2019;
– Salary of $130,000 per annum, plus superannuation and other benefits;
– Commission of 10% of gross margin on sales and 5% of total services sales.
– Termination is with 2 weeks’ notice.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)

Details of Remuneration for the year ended 30 June 2020
The individual remuneration for key management personnel of the Company during the year was as follows:

Short term employment
benefits

Long-term
benefits

Post
employment

Equity based
payments

Salary and
Fees
$

Cash Bonus
$

Long-Service
Leave

Superannua-
tion
$

Shares
$

Options
$

Total
$

Non – Executive
Directors

G Lord1

R Langford2

G Baxter3

P Flannigan4

S Bertamini5

S Caswell6

Sub-Total

Executive Directors

J Challingsworth

K Hansen7

Sub-Total

Other KMP

S Scheffer

M Glennan8

R Miller9

M Phillips10

G Katavic11

R Silver12

Sub-Total

Total

–

45,000

–

12,500

57,500

199,883

332,953

532,836

199,734

304,386

158,347

90,055

68,484

235,965

1,056,971

–

200,000

–

1,647,307

200,000

–

3,764

16,127

19,891

4,297

–

10,997

–

15,294

35,185

–

150,000

19,633

214,633

–

13,500

163,500

–

26,000

19,633

240,633

18,115

50,630

68,745

142,900

97,400

157,219

37,481

521,881

734,591

240,300

194,700

1,256,472

18,861

24,702

14,279

7,120

6,507

22,416

93,885

162,630

22,500

86,500

–

245,392

11,601

–

427,189

172,626

97,175

85,988

258,381

109,000

512,800

11,601

1,286,751

225,934

2,783,856

1. Appointed 10 January 2020. No director fees paid or accrued during the year.
2. Retired 4 December 2019. Salary and fees were settled with the issue of shares and options.
3. No director fees paid or accrued during the year.
4. Appointed 20 January 2020. No director fees paid or accrued during the year.
5. Retired 29 November 2019. No director fees paid or accrued during the year.
6. Appointed 19 September 2019. Retired 29 November 2019. Salary and fees were settled with the issue of shares and options.
7. Appointed 12 December 2019. Kurt Hansen received a bonus of $200,000 as part of his sign-on fee upon the acquisition of Pure Security Group.
8. Resigned 7 February 2020.
9. Resigned 8 June 2020.
10. Appointed 8 March 2020.
11. Appointed upon acquisition 31 March 2020.
12. Appointed upon acquisition 3 July 2019.

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)

Details of Remuneration for the period ended 30 June 2019
The individual remuneration for key management personnel of the Company during the period was as follows:

Short term employment
benefits

Long-term
benefits

Post
employment

Equity based
payments

Salary and
Fees
$

Cash Bonus
$

Long-Service
Leave

Superannua-
tion
$

Shares
$

Options
$

Total
$

Non – Executive
Directors

R Langford

K Glennan1

G Baxter

S Bertamini

Sub-Total

Executive Directors

J Challingsworth2

Sub-Total

Other KMP

D Buerckner1

K Negus1

J Owen1

S Scheffer3

M Glennan3

R Miller3

Sub-Total

Total

109,747

181,912

45,000

381,659

170,300

152,930

28,415

77,990

107,245

28,200

27,879

422,659

974,618

–

256

1,815

2,136

–

25,000

–

25,000

–

10,372

–

120,119

206,912

45,000

10,372

417,031

15,403

50,000

61,319

297,022

13,961

1,317

–

10,122

2,533

2,648

30,581

70,984

–

51,800

–

51,800

101,800

–

166,891

29,732

77,990

117,623

84,348

30,592

507,176

71,691

1,221,229

1. Resigned during the 2019 year
2. Appointed 1 August 2018. J Challingsworth was issued 1 million shares as a sign on bonus, with a fair value of $50,000.
3. Appointed during the year

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)

Bonuses included in remuneration
The proportion of remuneration linked to performance and the fixed proportion are as follows:

2020

2019

Fixed
remuneration

At risk – STI

At risk – LTI

Fixed
remuneration

At risk – STI

At risk – LTI

Non-Executive Directors

G Lord

R Langford

K Glennan

G Baxter

P Flannigan

S Bertamini

S Caswell

Executive Directors

J Challingsworth

K Hansen

Other KMP

D Buerckner

K Negus

J Owen

S Scheffer

M Glennan

R Miller

M Phillips

G Katavic

R Silver

–

21%

–

48%

42%

55%

–

91%

77%

100%

–

27%

–

79%

–

52%

58%

18%

–

23%

–

95%

100%

–

100%

–

63%

–

100%

39%

100%

–

37%

–

61%

–

Kurt Hansen received a cash bonus as part of his sign-on fee upon the acquisition of Pure Security Pty Ltd. No other
cash bonuses were paid or payable during the year, nor were any cash bonuses foregone.

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)

C. Share Based Compensation

Ordinary shares
Details of shares issued to Directors and other key management personnel as part of compensation during the year
ended 30 June 2020 are set out below:

Name

R Langford

S Caswell

J Challingsworth

K Hansen

S Scheffer

M Glennan

Date

Issue price

2 December 2019

3,333,334

23 July 2019

16 September 2019

180,000

90,000

16 September 2019

1,000,000

16 December 2019

2,000,000

16 December 2019

2,000,000

23 Jul 2019

555,556

22 January 2020

1,000,000

10,158,890

0.0450

0.0523

0.0455

0.0487

0.0405

0.0865

150,000

9,405

4,095

45,500

97,400

22,500

86,500

512,800

Options and performance rights
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

Vesting and
exercise date

Expiry date

Exercise price

Value
per option
at grant date

% vested

R Langford

14 Dec 18

1,000,000

8 Feb 18

30 Nov 21

14 Dec 18

1,000,000

8 Feb 19

30 Nov 21

14 Dec 18

1,000,000

8 Feb 20

30 Nov 21

J Challingsworth1

14 Dec 18

13,000,000

J Challingsworth1

2 Dec 19

10,000,000

1 Jul 20

3 Oct 21

M Glennan

K Hansen

23 Jul 19

300,000

23 Jul 19

22 Jul 21

2 Dec 19

1,000,000

29 Nov 19

29 Nov 22

2 Dec 19

1,000,000

29 Nov 20

29 Nov 22

2 Dec 19

1,000,000

29 Nov 21

29 Nov 22

2 Dec 19

10,000,000

3 Oct 21

$0.100

$0.125

$0.150

$0.000

$0.050

$0.075

$0.100

$0.125

$0.000

$0.052

$0.049

$0.042

$0.049

1. 13,000,000 Performance rights previously granted were cancelled and 10,000,000 performance rights issued in their place.
2. Performance rights vest on the satisfaction of various market conditions.

100%

–

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.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)
The table below shows a reconciliation of options and rights held by each KMP from the beginning to the end of FY 2020.

KMP

G Lord1

G Lord2

R Langford

G Baxter

S Bertamini

J Challingsworth3

M Glennan4

K Hansen

Balance at
1 July 2019

Granted during
the year

Other change

Exercised

10,000,000

–

1,000,000

–

14,250,000

2,777,778

2,632,500

–

1,666,667

833,333

791,666

2,000,000

1,000,000

3,000,000

4,000,000

–

1,000,000

2,000,000

300,000

–

(300,000)

–

300,000

(300,000)

1,000,000

(1,000,000)

1,000,000

(1,000,000)

1,000,000

(1,000,000)

1,000,000

2,000,000

–

(833,333)

(791,666)

–

Lapsed/
forfeited
during the
year

Balance at
30 June 2020

–

10,000,000

14,250,000

(2,777,778)

–

2,632,500

1,000,000

(1,666,667)

–

(2,000,000)

(1,000,000)

(3,000,000)

(4,000,000)

–

1,000,000

2,000,000

–

1,000,000

2,000,000

1. G Lord was appointed to the Board during the year. His opening share option holding was 10,000,000.
2. During the year Belgravia Group Pty Ltd was issued share options for services provided in capital raising. Mr Lord is a director of Belgravia Group

Pty Ltd.

3. 13,000,000 Performance rights previously granted were cancelled and 10,000,000 performance rights issued in their place.
4. M Glennan resigned during the year and the other movement reflects that fact.

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)
Value of options and performance rights granted as remuneration that have been granted, exercised or lapsed during
the year.

KMP

J Challingsworth

K Hansen

Value of
options
granted during
the year
$

124,557

Value of
options
exercised
during the
year
$

Value of
options lapsed
during the
year
$

–

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:
No deferred shares were granted during the current year.

2019
KMP

M Glennan

D Buerckner

Deferred
shares

% vested

AASB 2
Expense
$

Grant date

Share price at
Grant Date
$

Vesting date

Exercise price
$

1,000,000

450,000

750,000

100

51,800 10 May 2019

25,646 24 Nov 2016

(58,691) 24 Nov 2016

0.05

0.14

1 Jul 2019

3 Oct 2018

3 Oct 2019

0.04

Nil

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)

D. Additional Information

Relationship between remuneration policy and Company performance
The remuneration policy has been tailored to increase goal congruence between shareholders, directors and
executives. The chosen method to achieve this aim is providing shares and share options to link future benefits
to the performance of the Company’s share price. The Company believes this policy will be effective in increasing
shareholder’s wealth. The earnings of the Company for the reporting periods to 30 June 2020 are summarised below,
along with details that are considered to be factors in shareholder returns:

Sales revenue – external customers ($)

5,375,117

5,327,957

5,260,272

20,223,216

Earnings before interest, tax and depreciation, amortisation
and impairment (EBITDA) ($)

Loss after income tax ($)

(2,883,644)

(1,529,345)

(3,842,692)

(5,019,951)

(3,464,036)

(3,095,670)

(4,372,821)

(7,311,949)

30 June 2017

30 June 2018

30 June 2019

30 June 2020

Basic loss per share (cents)

Share price at year end (cents)

(2.99)

9.00

(2.62)

6.00

(2.90)

5.00

(2.02)

8.00

The Company listed in 2016 and consequently so 2016 information is not disclosed.
Specific performance measures have been set out by the Board as follows:

2020

Julian Challingsworth and Kurt Hansen
Performance measures for Julian Challingsworth and Kurt Hansen were set by the Board to reflect key measures
impacting the growth in revenue and market capitalisation. Mr Challingsworth and Mr Hansen are entitled to bonuses
set as follows:

No Definition

Rights

Date of Issue

Vesting Conditions

Expiry Date

Options exercisable
at nil consideration

Right to acquire
1,000,000 Shares

16 Dec 2019

Share price $0.075 for no less than
60 consecutive days

3 October 2021

Options exercisable
at nil consideration

Right to acquire
1,000,000 Shares

16 Dec 2019

Share price $0.10 for no less than
60 consecutive days

3 October 2021

Options exercisable
at nil consideration

Right to acquire
2,000,000 Shares

16 Dec 2019

Share price $0.15 for no less than
60 consecutive days

3 October 2021

Options exercisable
at nil consideration

Right to acquire
2,000,000 Shares

16 Dec 2019

Share price $0.20 for no less than
60 consecutive days

3 October 2021

Options exercisable
at nil consideration

Right to acquire
2,000,000 Shares

16 Dec 2019

Share price $0.25 for no less than
60 consecutive days

3 October 2021

Options exercisable
at nil consideration

Right to acquire
2,000,000 Shares

16 Dec 2019

Share price $0.30 for no less than
60 consecutive days

3 October 2021

Shareholder approval was obtained on 29 November 2019.
There were no other performance based measures.

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)

E. Additional Information in relation to key management personnel shareholdings

Ordinary shares held in Tesserent Limited (number) 30 June 2020

Non-Executive Directors

G Lordi

R Langfordii

G Baxter

S Bertaminiiii

S Caswelliv

Executive Directors

J Challingsworth

K Hansenv

Other KMP

S Scheffer

M Glennan

G Katavic

M Phillipsvi

R Silver

Balance
1 July 2019

Shares issued
as remunera-
tion during
year

Issued on
exercise of
options during
year

On-market

changes Other changes

Balance
30 June 2020

17,600,000

–

2,777,778

7,055,556

–

27,433,334

24,285,567

3,333,334

–

(23,267,344)

(4,351,557)

–

1,620,328

–

90,000

270,000

1,000,000

3,000,000

600,000

2,000,000

–

555,556

640,740

1,000,000

–

833,334

1,666,666

–

4,120,327

791,666

1,583,333

(3,995,327)

1,188,253

(1,548,253)

–

1,602,112

(555,556)

–

(640,740)

(1,000,000)

–

4,000,000

4,202,112

–

6,774,641

–

6,774,641

–

200,000

12,535,965

–

12,535,965

–

47,456,963

10,158,890

4,402,778

7,942,886

(10,695,137)

59,266,380

(i) G Lord held 17,600,000 ordinary shares on appointment.
(ii) R Langford resigned during the year. Other changes relate to the balance held upon resignation.
(iii) S Bertamini resigned during the year. Other changes relate to the balance held upon resignation.
(iv) S Caswell held 90,000 ordinary shares upon appointment.
(v) K Hansen held 600,000 ordinary shares upon appointment.
(vi) M Phillips held 200,000 ordinary shares upon appointment.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

REMUNERATION REPORT (AUDITED) (continued)
Share options and performance rights held in Tesserent Limited (number) 30 June 2020

Balance
1 July 2019

Granted as
payment for
Remuneration

Options

converted Other changes

Balance
30 June 2020

Vested and
exercisable

Non-Executive Directors

G Lord1 2

R Langford3

G Baxter4

S Bertamini5

P Flannigan6

Executive Directors

J Challingsworth7

K Hansen

Other KMP

S Scheffer

M Glennan

10,000,000

3,000,000

–

13,000,000

10,000,000

–

10,000,000

–

300,000

3,300,000

(2,777,778)

19,660,278

26,882,500

–

(3,000,000)

(833,333)

833,333

(791,666)

791,666

–

6,000,000

–

(13,000,000)

10,000,000

–

3,600,000

1,600,000

–

26,300,000

23,300,000

(4,402,777)

11,285,277

56,482,500

34,482,500

1. G Lord held 10,000,000 share options upon appointment.
2. Other changes are amounts paid in settlement of bills for services provided by Belgravia Strategic Equities Pty Ltd, a company Mr Lord is a

director of.

3. R Langford resigned during the year. Other changes relate to the balance at resignation.
4. G Baxter was received 833,333 share options when acquiring shares in a capital raise.
5. S Bertamini received 791,666 share options when acquiring shares in a capital raise.
6. P Flannigan was appointed during the year.
7. During the year My Challingsworth had 13,000,000 performance rights cancelled and replaced by 10,000,000 performance rights.

Converting notes held in Tesserent Limited (number) 30 June 2020

Non-Executive Directors

G Lord

P Flannigan

Balance
1 July 2019

Issued during
year under
subscription

Issued to
settle expense

Converted

Balance
30 June 2020

Interest

–

2,375,000

438,750

6,000,000

–

8,375,000

438,750

–

2,813,750

6,000,000

8,831,750

96,546

205,873

303,329

for the year ended 30 June 2020Directors’ Report

REMUNERATION REPORT (AUDITED) (continued)

F. Loans from KMP
There were no loan balances with Key Management Personnel at 30 June 2020.

G. Other Transactions with KMP
Fees were paid to Belgravia Group Pty Ltd, a company that Mr G Lord is a director of and owns an interest in, for the
provision of services to in capital raising. The amounts paid were $513,750. The fees were paid for by the issue of
1,500,000 ordinary shares issued at $0.05 per share plus the issue of convertible notes.
There were no other transactions with Key Management Personnel.

This concludes the remuneration report, which has been audited.

Non-Audit Services
During the year, BDO Audit Pty Ltd, the Company’s auditor, and its predecessor firm, BDO East Coast Partnership, has
performed certain other services in addition to their statutory duties. The Directors are satisfied that the provision
of these non-audit services by the auditor (or by another person or firm on the auditor’s behalf) is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001. Details of amounts paid or
payable for non-audit services is outlined in Note 32 of the financial statements:

Corporate and indirect tax services

Due diligence services

Tax compliance

2020
$

2019
$

327,924

118,000

41,750

487,674

63,515

146,050

–

209,565

The Directors are of the opinion that the services outlined in Note 32 to the financial statements do not compromise the
external auditor’s independence for the following reasons:
– All non-audit services have been reviewed and approved by the Board to ensure that they do not impact the integrity

and objectivity of the auditor, and

– None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Profession and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company,
acting as an advocate for the Company or jointly sharing economic risks and rewards.

Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
included at page 44 of the Annual Report.

Auditor
Effective 23 December 2019 the previous auditor, BDO East Coast Partnership resigned as auditor and BDO Audit Pty
Ltd was appointed as the Company’s new auditor. The appointment of BDO Audit Pty Ltd will be ratified at the next AGM.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Report

Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors support the
principles of Corporate Governance. The Company continued to follow best practice recommendations as set out by
the ASX Corporate Governance Council. Where the Company has not followed best practice for any recommendation,
explanation is given in the Corporate Governance Statement. The Company’s Corporate Governance statement is
available on the Company’s website at https://www.tesserent.com/.

Rounding of amounts
The Company is of a kind referred to in the Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to “rounding off”. Amounts in this report have been rounded off in accordance with
that Corporations Instrument to the nearest dollar.

Signed in accordance with a resolution of the Directors made pursuant to s.298 (2) of the Corporations Act 2001.
On behalf of the Directors

Mr J Challingsworth

Co-Managing Director and Co-CEO

30 September 2020

for the year ended 30 June 2020
Auditors Independence Declaration

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 2020, 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
Director

BDO Audit Pty Ltd

Melbourne, 30 September 2020

BDO Audit Pty Ltd ABN 33 134 022 870 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 Audit Pty Ltd 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.

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd

Consolidated Statement of Profit or Loss
and Other Comprehensive Income

Continuing operations

Revenue

Other income

Software licence and connectivity fees

Administration expenses

Employee benefits expense

Bad and doubtful debts

Communication costs

Consulting and legal costs

Depreciation and amortisation expense

Occupancy costs

Advertising and promotion

Other expenses

Finance costs

Travel

Impairment

Loss before income tax

Income tax benefit

Net Loss for the year

Other Comprehensive income/(loss)

Other comprehensive loss net of tax

Total comprehensive loss attributable to members

Basic loss per share (cents per share)

Diluted loss per share (cents per share)

Note

2020
$

2019
$

20,223,216

5,260,272

175,510

107,266

(5,456,301)

(2,279,416)

(771,734)

(540,316)

(13,880,173)

(2,905,727)

(280,804)

(39,183)

(704,658)

(445,735)

(3,461,497)

(1,463,141)

(1,523,187)

(316,140)

(249,386)

(442,872)

(198,744)

(75,797)

(236,516)

(941,864)

(823,952)

(178,864)

(57,326)

(77,032)

(786,243)

(165,809)

(28,852,059)

(9,750,358)

(8,153,333)

(4,382,820)

841,384

9,999

(7,311,949)

(4,372,821)

–

(7,311,949)

(4,372,821)

(2.02)

(2.90)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes.

for the year ended 30 June 2020Consolidated Statement of Financial Position

as at 30 June 2020

Note

2020
$

2019
$

Current Assets

Cash and cash equivalents

Trade and other receivables

Prepayments

Inventories

Other asset

Current tax asset

Total Current Assets

Non-Current Assets

Plant and equipment

Intangibles

Goodwill

Other Asset

Deferred tax assets

Right of use assets

Other non-current assets

Total Non-Current Assets

Total Assets

Current Liabilities

Trade and other payables

Other financial liabilities

Lease liabilities

Other liabilities

Provisions

Total current liabilities

Non-Current Liabilities

Other financial liabilities

Lease liabilities

Other liabilities

Borrowings

Provisions

Deferred tax liability

Total Non-Current Liabilities

Total Liabilities

Net Assets

7(a)

4,349,619

7,422,720

1,381,921

63,616

779,888

288,288

999,660

218,767

292,264

276,620

–

137,335

14,286,052

1,924,646

862,719

7,618,949

15,964,917

158,402

510,309

977,510

–

149,618

3,920,481

–

466,582

257,229

28,992,050

1,894,666

43,278,102

3,819,312

7,468,588

1,765,342

4,713,959

1,046,478

2,651,341

842,917

137,991

34,158

614,691

194,157

16,723,283

2,746,339

686,281

3,489,468

128,501

3,636,860

214,166

67,548

–

666,071

430,299

1,440,176

–

10,047,357

712,013

26,770,640

3,458,352

16,507,462

360,960

Annual Report 2020 Tesserent LtdConsolidated Statement of Financial Position

as at 30 June 2020

Equity

Issued capital

Converting notes

Reserves

Accumulated losses

Total Equity

Note

2020
$

2019
$

29,484,606

13,754,507

6,531,698

–

1,840,523

772,900

(21,349,365)

(14,166,447)

16,507,462

360,960

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Consolidated Statement of Changes In Equity

Issued
capital
$

Converting
notes
$

Reserves
$

Accumulated
losses
$

Total
$

At 1 July 2018

Loss for the year

Other comprehensive income

Total comprehensive loss for the year

Transactions with owners in their capacity as
owners:

Issue of shares

Capital raising costs

Share based payments

Total transactions with owners and other
transfers

As at 30 June 2019

10,875,937

–

2,975,933

(97,363)

–

2,878,570

13,754,507

At 1 July 2019

13,754,507

Impact of AASB 16 Leases, net of tax

Loss for the year

Other comprehensive income

Total comprehensive loss for the year

Transactions with owners in their capacity
as owners:

Issue of shares

Issue of convertible notes

Capital raising costs

Share based payments

Shares issued as part of business combination

Distributions to convertible note holders

Options expired

Deferred tax

Total transactions with owners and other
transfers

639,385

(9,793,626)

1,721,696

–

(4,372,821)

–

(4,372,821)

(153,633)

–

287,148

133,515

–

2,822,300

(97,363)

287,148

3,012,085

772,900 (14,166,447)

360,960

772,900 (14,166,447)

360,960

49,284

(7,311,949)

–

(7,262,665)

–

4,924,382

–

9,433,750

(329,964)

(450,744)

1,628,481

6,732,200

–

1,781,131

–

(323,692)

4,924,382

9,433,750

(780,708)

3,409,612

6,732,200

–

323,692

–

(403,439)

403,439

(310,069)

15,730,099

6,531,698

1,067,623

79,747

23,409,167

As at 30 June 2020

29,484,606

6,531,698

1,840,523 (21,349,365) 16,507,462

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Shares issued on conversion of convertible notes

2,775,000

(2,775,000)

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdConsolidated Statement of Cash Flows

Cash flows from operating activities

Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive of GST)

Other income

Interest received

Interest and other finance costs paid

Research and development tax concession

Income tax paid

Note

2020
$

2019
$

23,311,819

5,415,067

(26,170,479)

(8,266,862)

166,081

9,429

(415,940)

26,382

15,989

–

288,330

(150,953)

–

Net cash (used in) operating activities

7(b)

(3,250,043)

(2,521,094)

Cash flows from investing activities

Purchase of plant and equipment

Development costs capitalised

Business acquisitions net of cash acquired

Net cash (used in) investing activities

Cash flows from financing activities

Proceeds from issue of shares

Cost of issuing shares

Proceeds from borrowings

Proceeds from converting notes

Cost of issuing convertible notes

Payments of lease liabilities

Payment of deferred settlement liability

Net cash (used in) / provided by financing activities

Net (decrease) / increase in cash held

Cash and cash equivalents at the beginning of the year

(72,501)

(27,776)

(82,465)

(418,453)

(10,171,138)

–

(10,326,104)

(446,229)

4,924,382

2,481,000

(187,630)

(97,364)

4,920,000

8,995,000

(11,994)

(751,386)

–

(962,266)

(133,874)

16,926,106

2,249,762

3,349,959

(717,561)

999,660

1,717,221

Cash and cash equivalents at the end of the year

7(a)

4,349,619

999,660

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

for the year ended 30 June 2020Notes to and Forming Part of the Consolidated
Financial Statements

1. BASIS OF PREPARATION
These financial statements are general purpose financial
statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting
Interpretations and the Corporations Act 2001, as
appropriate for–profit oriented entities.
The financial statements cover Tesserent Limited (“the
Company”) and its controlled entities as a consolidated
entity (“the Group”) for the year ended 30 June 2020.
The Company is a company limited by shares that are
publically traded on the Australian Stock Exchange,
incorporated and domiciled in Australia.
Separate financial statements for Tesserent Limited
as an individual entity are no longer presented as a
consequence of a change to the Corporations Act 2001,
however limited financial information for Tesserent
Limited as an individual entity is included in Note 31.
Except for the Statement of Cash Flows, the financial
statements have been prepared on the accruals basis.
The financial statements were authorised for issue by
the Directors on 30 September 2020.
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.

(a) Basis of Preparation of the Financial Statements

Compliance with IFRS
The financial statements comply with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).

Historical Cost Convention
The financial statements have been prepared under the
historical cost convention, modified where appropriate
by the measurement of fair value of selected non–
current assets. All amounts are presented in Australian
dollars unless otherwise noted.

(b) Comparatives
Where necessary, comparative information has been
reclassified and repositioned for consistency with
current year disclosures.

(c) Going concern
For the year ended 30 June 2020 the Group made a net loss
for the year of $7,311,949 (2019: $4,372,821) and had cash
outflows from operations of $3,250,043 (2019: $2,521,094).
Current liabilities exceeded current assets by $2,437,231.
The group’s cash reserves amounted to $4,349,619 and
trade and other receivables amounted to $7,422,720, whilst
current trade and other payables amounted to $7,368,588.

Subsequent to the financial year the Group secured
additional debt funding on its PAM facility of $10 million
with a maturity of 48 months from drawdown. The Group
have completed further business combinations since the
year end, using a mixture of cash and equity as detailed
in Note 35. The businesses acquired will add to the
cash flows of the Group. The cash consideration will be
financed via the existing debt facility the Group.
Management has considered the impacts of Government
restrictions in response to the COVID–19 pandemic.
The measures taken have impacted how the Group’s
employees operate and how the Group operates. Whilst
this has proven disruptive, the Group has continued to
trade and is able to meet ongoing customer contract
obligations, and source and service new sales contracts.
The Group’s supply chain has also been disrupted but not
to the extent that the Group is unable to deliver products
and services. Management has fully considered the
impact of the pandemic when considering the Group’s
ability to continue as a going concern.
The Group budgets and cash flow forecasts take
into account expected trading performance and the
Directors believe that the Group will continue to meet
its obligations as and when they fall due, with positive
forecast operational cash flows contributing to cash
reserves. The Group does not expect to require any
additional debt funding other than the additional PAM
funding facility (refer Note 22 and Note 35), and expects
to raise additional funding through the exercise of share
options as the Group’s share price continues to perform
on the Australian Stock Exchange.
On the basis of this information, the Directors have a
reasonable expectation that the business has adequate
resources to continue in operational existence for the
foreseeable future. Accordingly, the Directors continue
to adopt the going concern basis in preparing this
financial report.

(d) 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 judgements

Note

Revenue recognition

Income taxes
Impairment of intangible assets
Impairment of goodwill
Valuation of Right–of–use assets and
depreciation charges
Estimation of lease liabilities, right–of–use
assets and interest charges
Borrowing costs
Share based payments

Business combinations

6
13
14

19
22
25

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

1. BASIS OF PREPARATION (continued)

(e) Significant accounting policies
The significant accounting policies adopted in the
preparation of the financial statements are set out
below. Other significant policies are contained in the
notes to the financial statements to which they relate.
The financial statements are for the Group consisting of
Tesserent Limited (company) and its controlled entities.

(i) Principles of consolidation
The consolidated financial statements incorporate all of
the assets, liabilities and results of the parent Tesserent
Limited and all of the subsidiaries. Subsidiaries are
entities the parent controls. A list of the subsidiaries is
provided in Note 27.
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.

(f)

New, Revised or Amending Accounting
Standards and Interpretations Adopted
The Company has adopted all of the new and revised
Standards and Interpretations issued by the Australian
Accounting Standards Board (“AASB”) that are relevant
to its operations and effective for the year.
The following Accounting Standards and Interpretations
are most relevant to the consolidated entity:

AASB 16 ‘Leases’
The Group has adopted AASB 16 from 1 July 2019. The
standard replaces AASB 117 ‘Leases’ and for lessees
eliminates the classifications of operating leases
and finance leases. Except for short–term leases
and leases of low–value assets, right–of–use assets
and corresponding lease liabilities are recognised
in the statement of financial position. Straight–line
operating lease expense recognition is replaced with

a depreciation charge for the right–of–use assets and
an interest expense on the recognised lease liabilities
(included in finance costs).
The group has adopted AASB 16 using the modified
retrospective approach from 1 July 2019, as such has not
restated comparatives for the 2019 reporting period, as
permitted under the specific transitional provisions in
the standard. The reclassifications and the adjustments
arising from the new leasing rules are therefore
recognised in the opening Statement of Financial
Position on 1 July 2019.
In the earlier periods of the lease, the expenses associated
with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However,
EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results improve as the operating expense
is now replaced by interest expense and depreciation in
profit or loss. For classification within the statement of
cash flows, the interest portion is disclosed in operating
activities and the principal portion of the lease payments
are separately disclosed in financing activities. For lessor
accounting, the standard does not substantially change
how a lessor accounts for leases.
The impact on the financial performance and position of
the consolidated entity from the adoption of AASB 16 is
detailed below:

Right of use assets
A right–of–use asset is recognised at the
commencement date of a lease. The right–of–use asset
is measured at cost, which comprises the initial amount
of the lease liability, adjusted for, as applicable, any
lease payments made at or before the commencement
date net of any lease incentives received, any initial
direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be
incurred for dismantling and removing the underlying
asset, and restoring the site or asset.
Right–of–use assets are depreciated on a straight–
line basis over the unexpired period of the lease or
the estimated useful life of the asset, whichever is
the shorter. Where the consolidated entity expects to
obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful
life. Right–of use assets are subject to impairment or
adjusted for any re–measurement of lease liabilities.
The consolidated entity has elected not to recognise a
right–of–use asset and corresponding lease liability for
short–term leases with terms of 12 months or less and
leases of low–value assets. Lease payments on these
assets are expensed to profit or loss as incurred.

Lease liabilities
A lease liability is recognised at the commencement date
of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the
term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined,
the consolidated entity’s incremental borrowing rate.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

1. BASIS OF PREPARATION (continued)
Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend
on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option
when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable
lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding right–of use asset, or to profit or loss if the carrying amount
of the right–of–use asset is fully written down.

Impact on transition
On transition to AASB 16, the Group recognised the right–of–use assets and lease liabilities. The impact on transition is
summarised below.

Right–of–use assets

Lease liabilities
Reverse lease incentive
Deferred tax asset
Accumulated losses

1 July 2019
$

1,262,441

(1,666,308)
332,540
120,611
49,284

When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease
payments using its incremental borrowing rate at 1 July 2019. The weighted average rate applied is 4.00%.

Lease liability recognised as at 1 July 2019

Being:
– Current lease liabilities
– Non–current lease liabilities

Operating lease commitments disclosed at 30 June 2019

Add: adjustments for liability discounted using the incremental borrowing rate at an initial date of
application and adjustments as a result of different treatment of extension and termination options
Lease liability recognised at 1 July 2019

1 July 2019
$

371,427
1,294,881
1,666,308

1,815,959

(149,651)
1,666,308

(g) New, Revised or Amending Accounting Standards and Interpretations Not Yet Adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June
2020. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and
Interpretations.

(h) Rounding of amounts
The Company is of a kind referred to in the Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to “rounding off”. Amounts in this report have been rounded off in accordance with
that Corporations Instrument to the nearest dollar.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

ADJUSTMENTS TO PRELIMINARY FINANCIAL STATEMENTS

2.
On 31 August 2020 the Group released its unaudited Appendix 4E Preliminary Financial Statements, with a reported
loss after tax of $7,854,426 and net assets of $18,861,523. Subsequent to filing the report the Group has identified a
number of adjustments that impact the result. The adjustments and impacts are as follows:

Reported in the Appendix 4E Preliminary Report
Additional accrual of consulting and other advisor fees
Accrual of credit note
Remove sale and related costs of contracted sale with future performance obligations
Reverse share–based payment expense related to share options issued attaching to equity
instruments
Share based payment previously not recognised
Amendment to Goodwill arising from adjustment to value of consideration
paid in business combinations

Final Audited Financial Report

Loss after tax
$

Net assets
$

(7,854,426)
(190,000)
(81,000)
(60,260)

18,861,523
(190,000)
(81,000)
(60,261)

911,218
(37,481)

–
–

–

(2,022,800)

(7,311,949)

16,507,462

In addition the cash flow statement was recast to ensure accuracy and the following amendments noted:

Cash used in operations
Cash used in investing activities
Cash from financing activities

Appendix 4E
Preliminary
Report
$

Final Audited
Financial
Report
$

(2,239,757)
(11,350,124)
16,939,840

(3,250,043)
(10,326,104)
16,926,106

3,349,959

The differences resulted from the mis–allocation of equity receipts to operating receipts, and the omission of cash
acquired in Business Combinations in investing activities.

3. OPERATING 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. Three operating segments have been identified: Pure Security Group,
North and IT Security Managed Services. In previous financial periods two Operating Segments were identified. These
have been amalgamated into the IT Security Managed Services segment.
The CEO reviews Profit before tax. The accounting policies adopted for internal reporting to the CEO are consistent with
those adopted in the financial statements.

2020
Revenues from contracts

Managed services
Software sales
Consulting
Penetration testing
Inter segment sales
Total sales revenue
Other revenue
Total revenue and other income

Pure Security
Group
$

–
1,503,191
3,800,361
5,272,660
–
10,576,212
53,645
10,629,857

North
$

–
–
4,072,561
–
–
4,072,561
65,326
4,137,887

IT Security
Managed
Services
$

5,574,443
–
–

247,793
5,822,236
56,539
5,878,775

Inter Segment
$

Total
$

–
–
–

5,574,443
1,503,191
7,872,922
5,272,660
–
20,223,216
175,510
(247,793) 20,398,726

(247,793)
(247,793)
–

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

3. OPERATING SEGMENTS (continued)

2020
Revenues from contracts

EBITDA
Depreciation and amortisation
Impairment – intangible asset
Finance expense
Share–based payments expense

Pure Security
Group
$

543,129
(790,744)
–
(102,772)
–

North
$

797,595
(69,796)
–
(8,073)
–

IT Security
Managed
Services
$

(4,892,696)
(662,647)
(786,243)
(713,107)
(1,467,979)

Inter Segment
$

Total
$

–
–
–

(3,551,972)
(1,523,187)
(786,243)
(823,952)
(1,467,979)

Profit /(loss) before income tax expense

(350,387)

719,726

(8,522,672)

–

(8,153,333)

Income tax benefit
Loss after income tax
Total segment assets
Included in non–current assets:

Acquisition of other non–current assets
– Property plant and equipment
–
– Goodwill
Total segment liabilities

Intangible assets

2019
Revenues

Sales to external customers

Inter–segment sales
Total sales revenue
Research & development tax concession
Other revenue
Total revenue and other income

EBITDA and share based payments

Depreciation and amortisation
Impairment
Finance expense
Share–based payments expense
Profit/(loss) before income tax

Income tax benefit

Loss after income tax
Total segment assets

Included in non–current assets:
Acquisition of other non–current assets

Property plant and equipment
Intangible assets

Total segment liabilities

27,392,938

10,724,210

5,160,954

525,957
5,882,000
11,263,562
10,077,793

39,493
2,155,000
4,701,355
2,892,590

23,084
82,465
–
13,800,257

841,384
(7,311,949)
43,278,102

588,534
8,119,465
15,964,917
26,774,640

–

–
–
–
–

Software
Licensing (i)
$

Inter
Segment
Eliminations
$

Totals
$

IT Security
Managed
Services (i)
$

4,935,657

–
4,935,657
137,335
(30,554)
5,042,438

(3,366,575)

(316,140)
(165,809)
(57,326)
(572,047)
(4,477,897)

324,615

343,630
668,245
–
485
668,730

95,077

–
–
–
–
95,077

3,016,688

802,625

27,776
418,453

–
–

3,294,416

163,936

–

5,260,272

(343,630)
(343,630)
–
–
(343,630)

–

–
–
–
–
–

–

–
–

–

–
5,260,272
137,335
(30,069)
5,367,538

(3,271,498)

(316,140)
(165,809)
(57,326)
(572,047)
(4,382,820)

9,999

(4,372,821)
3,819,313

27,776
418,453

3,458,352

(i) The two operating segments identified in the 2019 financial report have been incorporated into the IT Security Managed Services operating

segment in the current financial year.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

3. OPERATING SEGMENTS (continued)

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.

Geographical information
All sales and operations are Australian based.

Major customers
During the year ended 30 June 2020, approximately $4,072,561 (2019: $nil) of the consolidated entity’s external revenue
was derived from sales to the Australian Government through the North segment.

4. REVENUE

Revenue from contracts

Managed Services
Software licences
Consulting fees

Penetration testing

Sales revenue

Other income

Government grant income

Research and development tax concessions

Interest
Reversal of R&D overaccrual in previous periods

Other

Other income

Significant accounting policy

2020

2019

5,574,443
1,503,191
7,872,922

5,272,660

5,260,272
–
–

–

20,223,216

5,260,272

100,000

–

137,335

8,106
–

67,404

175,510

15,989
(72,925)

26,867

107,266

Revenue from contracts with customers – General principles
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.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

4. REVENUE (continued)
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.

Revenue from contracts – Managed 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 performance obligation identified in the
sales contract are performed. Related costs of the performance obligations are recognised on completion of the
performance obligation. Costs arising from incomplete performance obligations are capitalised into contract assets.
Revenue invoice for incomplete performance obligations is recognised as a liability in unearned revenue.
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.

Revenue from contracts – Consulting services
Revenue from the sale of consulting services is recognised as performance obligations set out in the contract of sale
are performed as outlined above. Where no contract is in place revenue is recognised as the service is consumed by the
customer. Unbilled consulting services are recognised as work in progress. Services invoiced in advance of completion
are recorded as a liability as unearned income.

Revenue from contracts – Sale of Splunk software licences
Splunk software licences income is recognised on an agency basis. The Group sells the licence and bills customers the
full cost, including its agency fee. The related cost of the Splunk licence is offset against the Splunk software licence
income recognised.

Revenue from services – Penetration Testing
Revenue from Penetration Testing is recognised as performance obligations set out in the contract of sale are
performed as outlined above. Penetration testing contracts involve performance obligations that are completed in
timelines provided within the contract. Revenue is allocated to performance obligations based on costs associated with
the performance obligation and relative value to the customer. Unbilled penetration testing services are recognised as
work in progress. Services invoiced in advance of completion are recorded as a liability as unearned income.

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.

Critical accounting estimates and assumptions
When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the
consolidated entity is considered to be the point of delivery of the goods and services to the customer, as this is deemed
to be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded
access. The Group’s revenue is derived from the provision of software licences, hardware and consulting services, over
multiple periods. In applying the requirements of AASB 15 Revenue from Contracts with Customers the Groups has had
to make assumptions around future billing and completion of future performance obligations.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

5. EXPENSES
Loss before income tax from continuing operations includes the following specific expenses:

Employee benefits expense

Defined contributions superannuation costs
Research and development costs
Bad and doubtful debts expense
Trade and other receivables
Leases
Minimum lease payments (AASB 117)

Finance costs
Interest and finance charges paid/payable on borrowings
Interest and finance charges paid/payable on lease liabilities
Other finance costs
Finance costs expensed

Depreciation
Property plant and equipment

Amortisation
Intangible assets
Right of use asset
Amortisation expense

Depreciation and amortisation expense

Impairment

Call option investment

Intangible assets

6. INCOME TAX EXPENSE

(a) Income tax expense

Current tax expense

Deferred tax movements

(b) Reconciliation of income tax expense to prima facie tax on accounting loss

Loss before income tax expense

Tax expense at Australian tax rate of 27.5%

Tax effect of amounts relating to

– Share based payments
– Current year tax losses not recognised
– Other (non–deductible)/assessable items
– Prior year adjustments
– Tax offset for R&D claim
Tax benefit

2020

2019

1,076,856
–

192,003
315,714

280,804

39,183

–

411,733

604,145
139,447
80,360
823,952

53,100
–
4,226
57,326

231,567

141,349

691,783
599,837
1,291,620

1,523,187

174,791
–
174,791

316,140

–

165,809

786,243

–

165,809

2020
$

2019
$

–

(841,384)

–

(9,999)

(8,153,333)

(4,382,820)

(2,241,167)

(1,205,275)

215,363

467,415

728,288

157,313

937,009

113,333

(11,283)

(81,487)

–

(841,384)

69,108

(9,999)

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

6. INCOME TAX EXPENSE (continued)

Deferred tax assets comprise temporary differences attributable to:

Share issue costs

Provisions

Intangible assets

Right of use assets and liabilities

Other

Movement in deferred tax balances

Share issue
costs

Provisions

Intangible
assets

Right of use
assets and
liabilities

As at 1 July 2018

155,994

160,481

(104,803)

Charged to profit or loss

9,951

8,108

(72,010)

2020
$

2019
$

(217,177)

755,612

165,945

168,589

(2,028,493)

(176,813)

175,949

(126,067)

(8,103)

–

(1,440,176)

149,618

Other

Total

(72,053)

139,619

63,950

(8,103)

–

9,999

149,618

120,613

–

As at 30 June 2019

AASB 16 adjustment

Acquired upon business
combination

–

165,945

168,589

(176,813)

–

120,613

Charged to profit or loss

(72,312)

122,182

358,715

464,841

(2,210,395)

40,484

14,852

(547,194)

(2,252,264)

417,947

841,384

Charged through equity

Overprovision in previous years

(310,810)

–

(310,810)

11,283

As at 30 June 2020

(217,177)

755,612

(2,028,493)

175,949

(126,067)

(1,440,176)

(d) Tax losses

Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at 27.5%

13,059,668
3,591,409

8,709,637
2,395,150

Carried forward tax losses have not brought to account as a deferred tax asset. 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.

(e) Franking credits

Franking credits available for subsequent financial years based on a tax rate of 27.5%

25,673
25,673

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

6. INCOME TAX EXPENSE (continued)

(f) Current tax asset
Research and tax concession (30 June 2019 financial year)
Tax paid on account

2020
$

2019
$

137,335
150,953
288,288

137,335
–
137,335

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.

Significant accounting policy
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.

Critical accounting estimates and assumptions
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.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

7. CASH AND CASH EQUIVALENTS

(a) Cash and cash equivalents

Cash at bank

2020
$

2019
$

4,349,619

999,660

Significant Accounting Policies
Cash and cash equivalents include cash on hand and at banks, short–term deposits with an original maturity of three
months or less held at call with financial institutions, and bank overdrafts.

Financial Instrument Risk Management
The main risks arising from cash and cash equivalents is interest rate risk. The Directors manage risk by monitoring
levels of exposure to interest rate and consider cash requirements in relation to ongoing cash flow budgets.

Interest Rate Risk
Exposure to interest rate risk arises on financial instruments whereby a future change in interest rates will affect
future cash flows of variable rate financial instruments. At 30 June 2020, the Company cash and cash equivalents was
held in variable rate bank accounts. The risk attached to the interest income for the year ended 30 June 2020 was not
considered significant.

Credit Risk
The Group banks with reputable institutions with credit worthiness appropriate to mitigate credit risk associated to the
bank deposits. Credit risk is managed by the Board in accordance with its policy.

Fair value
The fair value of the cash balances approximates fair value due to the short–term nature of the deposits.

(b) Reconciliation of operating cash flows to operating result

Operating loss after income tax:

Share based payments
Depreciation and amortisation
Impairment of non–current assets
Bad debts
Loss on disposal of non–current asset
Non–cash finance charges
Change in net operating assets and liabilities:
(Increase) / decrease in receivables
(Increase) / decrease in inventories
(Increase) / decrease in contract assets
(Increase) / decrease in current tax asset
(Increase) / decrease in other assets
(Increase) / decrease in deferred tax balances
Increase / (decrease) in trade and other payables
Increase / (decrease) in contract liabilities
Increase / (decrease) in unearned income
Increase / (decrease) in provisions

2020
$

2019
$

(7,311,949)

(4,372,821)

1,467,979
1,523,187
786,243
280,804
4,860
386,894

(1,652,527)
213,004
(401,159)
(150,953)
(174,775)
(851,926)
1,132,958
(633,349)
1,988,055
142,611

572,047
316,993
165,809
39,183
–
–

125,427
(220,927)
–
223,921
133,612
(9,999)
545,531
(64,101)
–
24,231

Net cash inflow/(outflow) from operating activities

(3,250,043)

(2,521,094)

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

8. TRADE AND OTHER RECEIVABLES

Trade receivables

Allowance for expected credit losses

Other receivables
Total trade and other receivables

Amounts past due that are unimpaired:

Past due (30 to 60 days)
Past due (60 to 90 days)
Past due (90 to 120 days)
Past due (over 120 days)
Total past due and unimpaired
Total unimpaired receivables
Unimpaired past due as a percentage of total unimpaired receivables
Unimpaired past due 30 days and over as a percentage of unimpaired receivables

Reconciliation of allowance for expected credit losses

Opening allowance
Provision on debtors acquired in business combination
Additional allowance
Write back of allowance
Receivables written off as uncollectible
Closing allowance

2020
$

2019
$

7,421,303

(81,417)
7,339,886

279,135

(60,368)
218,767

82,834
7,422,720

–
218,767

1,327,755
770,439
230,804
597,828
2,926,826
7,339,886
40%
22%

2020
$

60,368
19,482
341,172
(60,368)
(279,237)
81,417

107,128
21,934
5,815
68,027
202,904
218,767
93%
44%

2019
$

21,185
–
127,767
(88,584)
–
60,368

Significant Accounting Policies
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.

Financial Instrument Risk management
The main risk arising from trade and other receivables is Credit Risk. 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 reporting 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.
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.
The Group does not have any significant credit risk to any single counterparty given the large number of customers.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

8. TRADE AND OTHER RECEIVABLES (continued)

Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the consolidated entity. The maximum exposure to credit risk for trade and other receivables is the carrying amount,
net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements. The consolidated entity does not hold any collateral. The entity considers a receivable as impaired
once all efforts to recover an amount have been exhausted, including referring to debt collection or statutory action
where appropriate.

9. PREPAYMENTS

Connectivity services
Subscriptions
Other
Prepayments

Prepaid cost of goods sold relate mostly to prepaid connectivity costs.

10. INVENTORIES

Inventory

2020
$

2019
$

1,008,027
279,696
94,198
1,381,921

66,180
207,400
18,684
292,264

2020
$

2019
$

63,616

276,620

Significant Accounting Policies
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 2020 there had been no write downs and all inventories are stated at cost. (2019:$nil).

11. OTHER ASSETS

Current
Other assets
Non–current
Other assets

2020
$

2019
$

779,888

158,402

–

Other assets are contract amounts to be invoiced by the Group to a customer in relation to sale of software licensing,
in particular, Splunk software. The Group is an agent in relation to the sale of Splunk software and licensing. Contract
assets relate to amounts that the Company will invoice in the future from prior software and licensing sales. Related
Contract liabilities are contained in Note 20.

Significant Accounting Policies
Contract assets are recorded in accordance with the Group’s revenue recognition accounting policy outlined in Note 4.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

12. PLANT AND EQUIPMENT

2020

Cost

Accumulated dep’n

Net book value

Opening net book value

Additions through business
combinations

Additions

Disposals

Depreciation charge

Net book value

2019

Cost

Accumulated dep’n

Net book value

Opening net book value

Additions

Disposals

Depreciation charge

Net book value

Furniture &
Fittings
$

Hardware
employed
$

Leasehold
improvement
$

Plant &
equipment
$

Motor
vehicles
$

Total
$

157,157

374,758

908,732

594,138

3,475

2,038,260

(70,718)

(367,341)

(267,981)

(469,089)

(412)

(1,175,541)

86,439

58,421

20,723

23,506

(1,007)

(15,204)

86,439

7,417

12,951

640,751

369,109

125,049

69,828

3,063

–

862,719

510,309

–

399,444

4,423

–

91,367

45,596

–

(2,487)

(1,063)

3,475

515,009

–

73,525

(4,557)

(9,957)

(125,315)

(80,679)

(412)

(231,567)

7,417

640,751

125,049

3,063

862,719

Furniture &
Fittings
$

Hardware
employed
$

Leasehold
improvement
$

Equipment for
lease
$

Plant &
equipment
$

Total
$

113,935

370,335

512,033

16,177

442,062

1,454,542

(55,514)

(357,384)

(142,924)

(16,177)

(372,234)

(944,233)

58,421

71,110

635

–

12,951

10,182

18,063

–

369,109

434,544

–

(13,324)

(15,294)

(65,435)

58,421

12,951

369,109

–

69,828

108,046

9,078

–

510,309

623,882

27,776

–

(47,296)

(141,349)

69,828

510,309

Significant Accounting Policies

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.

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.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

12. PLANT AND EQUIPMENT (continued)
The depreciation rates used for each class of depreciable assets are:

Class of fixed asset
Furniture and fittings
Hardware employed
Leasehold improvements

Plant & equipment
Motor vehicle

Depreciation rate
10% to 100%
66.67%%
14.3%

7.5% to 66.67%
20%

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.

13. INTANGIBLES

2020

Cost
Accumulated impairment (i)

Accumulated depreciation
Net book value
Opening net book value
Capitalised development costs
Additions through business combinations
Amortisation charge
Impairment (i)
Net book value

2019

Cost
Accumulated dep’n
Net book value
Opening net book value
Additions – capitalised development costs
Amortisation charge
Net book value

Customer
contracts and
relationships

8,037,000
–

(440,658)
7,596,342
–
–
8,037,000
(440,658)

7,596,342

Intellectual
property
$

Software
(T–Rex)
$

Total

22,607
–

–
22,607
22,607
–
–
–
–
22,607

2,112,432
(786,243)

10,172,039
(786,243)

(1,326,189)
–
954,903
82,465
–
(251,125)
(786,243)
–

(1,766,847)
7,618,949
977,510
82,465
8,037,000
(691,783)
(786,243)
7,618,949

Intellectual
property
$

Software
(T–Rex)
$

22,607
–
22,607
22,607
–
–
22,607

1,252,592
(297,689)
954,903
711,241
418,453
(174,791)
954,903

Total

1,275,199
(297,689)
977,510
733,848
418,453
(174,791)
977,510

(i)

Impaired software asset relates to the IT Security Managed Services segment (Note 3)

Significant Accounting Policies

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.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

13. INTANGIBLES (continued)

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.
The carrying value of Group’s “T–Rex” development asset has been fully impaired on the basis that the Group will not be
developing the software any further and do not expect to generate sufficient income in the future to support its carrying
value.

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.

Critical accounting estimates and assumptions

Cost of Customer contracts and relationships
The carrying value of the Customer contracts and relationships acquired through business combinations were valued in
accordance with the AASB 3 Business combinations and AASB 138 Intangibles. No cost had previously been attributed
to the intangible assets as they related to internally generated intangible assets that were not easily measurable.
The carrying values of the assets have been included in the CGUs in which they reside, which have been tested for
impairment in accordance with AASB 136 Impairment. The critical accounting estimates and assumptions used in the
impairment review are outlined in Note 14 Goodwill.

Amortisation of Customer contracts and relationships
The ability to sell security solutions and consulting relies heavily on the relationships with customers and performance
of solutions when in place. Accordingly, the ability to cultivate positive relationships is expected to provide a basis for
the generation of future revenue from the renewal of licence fees, upgrades and the upsale of different solutions. The
Group used an independent valuer to consider the Purchase Price Allocation in the business combination.
The attrition rate of the relationships have been estimated by management to determine the amortisation rate of
the Customer contracts and relationships. The estimate is based on past experience and expected impacts of the
market maturing and both customers and supplying being more stable. Accordingly management has estimated an
amortisation period of 10 years for customer contracts and relationships.

14. GOODWILL
Goodwill acquired through business combinations has been allocated to the following cash–generating units

Pure Security Group
North Group

2020
$

2019
$

11,263,562
4,701,355
15,964,917

–
–
–

In addition to the above, the Group also has a Tesserent Managed Services CGU. No goodwill or intangible assets are
attributable to this CGU at 30 June 2020. Pure Security Group includes Rivium and Pure Security acquired during the
year. Refer to Note 26 for Business Combinations.

Significant Accounting Policies

Recognition and measurement
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

14. GOODWILL (continued)
Goodwill on acquisitions of subsidiaries represents the excess of the consideration transferred, the amount of any non–
controlling interest in the acquiree and the acquisition–date fair value of any previous equity interest in the acquiree
over the fair value of the net identifiable assets acquired.
Gains and losses on the disposal of subsidiaries, joint ventures and associated companies include the carrying amount
of goodwill relating to the entity sold.

Impairment of non–financial assets
Goodwill and other 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.

Critical accounting estimates and assumptions
The recoverable amount of the consolidated entity’s goodwill has been determined by a value–in–use calculation using
a discounted cash flow model, based on a 12 month projection period approved by the Board and management and
extrapolated for a further 4 years using steady growth rates, risk based discount rates and a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash–generating units is most sensitive.

Input

Forecast period

Projections

CGU Carrying value of net assets

Revenue growth rate – post year 1

EBITDA as % of revenue

Discount rate (post–tax)

Discount rate (pre–tax)

Terminal growth rate

Estimated value in use

Pure Security Group

North

5 years from 1 July 2020

Base case

$17,315,145

Base case

$7,831,620

10% per annum

10.1%

14.45%

20.76%

2.50%

12.5%

14.45%

19.31%

2.50%

$20,359,421

$15,547,078

The discount rates reflect management’s estimate of the time value of money and the consolidated entity’s weighted
average cost of capital adjusted for the Pure Security Group CGU and North CGU, the risk free rate and the volatility of
the share price relative to market movements.
Management believes the projected 10% revenue growth rate is justified for the North CGU based on experience and
forecasts of the growth of the market for cyber security services and the Group’s share of the market. Compared
to revenue growth, management have estimated an increase in operating costs and overheads at a consistent rate,
whereby the expected EBITDA% of 12.5% is consistent over the 5 year period.
Management believes the projected 10% revenue growth rate for the Pure Security Group CGU is justified based on
experience and forecasts of the growth of the market for cyber security services and the Group’s share of the market.
Compared to the revenue growth, management have estimated an increase in operating costs and overheads at a
consistent rate, whereby the expected EBITDA% of 10.1% is consistent over the 5 year period.
Based on the value in use estimates using a discounted cash flow model, the carrying values of the CGUs, and the
Goodwill therein, are not impaired.

Sensitivity
As noted above, the directors have made judgements and estimates in respect of impairment testing of goodwill.
Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The
sensitivities that management has considered are as follows:

North Group
The value in use estimate exceeds the carrying value of the CGUs by a significant amount. It is therefore not considered
particularly sensitive to the variances in inputs.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

14. GOODWILL (continued)

Pure Security Group
A variance in a number of inputs would result in a reduction of the value in use estimate to a level below that of the
carrying value of the CGU. The most notable sensitivities were as follows:
– A reduction in the revenue growth rate;
– A reduction in the estimated EBITDA;

If Revenue growth reduced from 10% to 9% and EBITDA reduced to 9.4% then there would be an impairment. Any
impairment would in the first instance be applied to the Goodwill balance.
As part of the sensitivity analysis for the Pure Security Group CGU, management have sensitised the Base Case
assumptions outlined above as follows, using a pre–tax discount rate of 20.75% and a terminal growth rate of 2.5%
across all scenarios, and a probability weighting to a range of outcomes:

Approach

Base case

Scenario 1

Scenario 2

Scenario 3

Scenario 4

Scenario 5

Probability weighted value in use calculation

CGU carrying value of net assets

Revenue
Growth

EBITDA % Probability %

Value in use

10%

10.1%

50% 21,874,800

9.4%

8.7%

8.0%

7.4%

6.7%

20% 15,732,700

15% 13,307,900

10% 11,004,600

8,818,800

6,746,500

17,536,000

17,315,145

Management concluded the recoverable amount resulting from the value in use methodology is appropriate in
supporting the carrying value of the Pure Security Group CGU and no impairment was recognised during the year
ended 30 June 2020.

15. RIGHT OF USE ASSETS

Right of use asset – building leases

Cost
Accumulated amortisation

Cost as at 1 July 2019
Accumulated amortisation at 1 July 2019

Additions from business combinations
Amortisation charge

2020
$

2019
$

5,337,191
(1,416,710)
3,920,481
2,079,314
(816,873)
1,262,441
3,257,877
(599,837)
3,920,481

–
–
–
–
–
–

–
–

Building leases comprise office and operational workspace leased on long term leases. Included in the cost are leases
acquired on business combinations as follows:

Pure Security Group
North

2020
$

2,715,956
541,921
3,257,877

2019
$

–
–
–

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

15. RIGHT OF USE ASSETS (continued)

Significant Accounting Policies
A right–of–use asset is recognised at the commencement date of a lease. The right–of–use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where
included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right–of–use assets are depreciated on a straight–line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right–of use assets are
subject to impairment or adjusted for any re–measurement of lease liabilities.
The consolidated entity has elected not to recognise a right–of–use asset and corresponding lease liability for
short–term leases with terms of 12 months or less and leases of low–value assets. Lease payments on these assets
are expensed to profit or loss as incurred.

Critical accounting assumptions and estimates
The Group has applied the principles required by AASB 16 in estimating the cost of the Right of Use asset. To do this
the Group has estimated the Net Present Value of all future lease payments relating to each Right of Use asset. The
estimate of Net Present Value necessarily requires the estimate of a borrowing rate to apply to the lease payments.
In estimating the borrowing rate, the Group has used 4%, equating to the borrowing costs relating to the PAM facility.
This estimate of the cost impacts the carrying value and the depreciation charge during the year. An adjustment to the
borrowing rate would change both the carrying value of the asset and the depreciation charge for the year.
In preparing the estimates to value Right of Use assets, options to extend the lease have not been included in the
calculation as it is not probable that leases will be extended under existing terms.

16. OTHER NON–CURRENT ASSETS

Security bonds and deposits
Other

17. TRADE AND OTHER PAYABLES

Trade payables
Accruals and other payables

2020
$

2019
$

465,360
1,222
466,582

256,007
1,222
257,229

2020
$

2019
$

3,188,747
4,279,841
7,468,588

908,794
856,548
1,765,342

Significant Accounting Policies
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services
provided to the Group prior to the end of the financial year that are unpaid and arise when the Company becomes
obliged to make future payments in respect of the purchase of these goods and services.

Financial Instrument Risk Management
The main risks arising from trade and other payables is liquidity risk. The Directors manage risk by monitoring levels of
obligations arising from liabilities and commitments and consider cash requirements in relation to ongoing cash flow budgets.

Liquidity Risk
All payables are current and payable within 30 days. Accordingly, management has ensured that the Company has
sufficient cash resources to meet the liabilities as and when they are due.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

18. OTHER FINANCIAL LIABILITIES

Deferred settlement liability – current
Deferred settlement liability – non–current

Significant Accounting Policies

2020
$

4,713,959
686,281
5,400,240

2019
$

137,991
214,166
352,157

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 reporting date, the deferred settlement liability will be
recorded as a current liability. The balance is represented as non–current. Details of deferred settlement liabilities are
outlined in Note 26 Business Combinations.

19. LEASE LIABILITIES

Current
Non–current

Included in the above are liabilities arising from non–cancellable operating leases:

Property leases

Lease liability on premises – current
Lease liability on premises – non–current

Movement in Lease Liabilities

Balance at 1 July 2019
Adoption of AASB 16
New and Modified Leases
Acquired in a business combination (Note 26)
Cash payments
Interest expense

2020
$

1,046,478
3,489,468
4,535,946

2019
$

34,158
67,548
101,706

2020
$

2019
$

1,009,163
3,489,468
4,498,631

2020
$

101,706
1,666,308
–
3,370,992
(751,386)
148,316
4,535,936

–
–
–

2019
$

–
–
109,784
–
(10,454)
2,376
101,706

Significant Accounting Policies
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease
payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an
index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when
the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

19. LEASE LIABILITIES (continued)
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding right–of use asset, or to profit or loss if the carrying amount
of the right–of–use asset is fully written down.

Critical Accounting Estimates and Assumptions

Lease term
The lease term is a significant component in the measurement of both the right–of–use asset and lease liability. Judgement is
exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying
asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included
in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an
extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered
may include the importance of the asset to the consolidated entity’s operations; comparison of terms and conditions to
prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and
disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension
option, or not exercise a termination option, if there is a significant event or significant change in circumstances.
Options to extend lease terms have not been included in the estimate of the lease liability as it is not probable that
leases will be extended on existing terms.

Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such
a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary
to obtain an asset of a similar value to the right–of–use asset, with similar terms, security and economic environment.

20. OTHER LIABILITIES

Current

Deferred revenue

Other liabilities1

Total

2020
$

2019
$

2,362,771

614,691

288,570

–

2,651,341

614,691

128,501

–

2,779,842

614,691

1. other liabilities are contract amounts to be paid by the Group in relation to the sale of software and licensing, in particular, Splunk Software. The
Group is an agent in relation to the sale of Splunk Software and licensing. Contract liabilities relate to amounts that the Group will be required to
pay to Splunk in the future from prior software and licensing sales. See Note 11 for contract assets.

Significant Accounting Policies
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.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

21. PROVISIONS

Current
Employee benefits
Non–current
Employee benefits
Make good on premises
Lease incentive
Total non–current provisions
Total provisions

Significant Accounting Policies

2020
$

2019
$

842,917

194,157

499,412
166,659
–
666,071
1,508,988

32,053
75,000
323,246
430,299
624,456

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. 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.

22. BORROWINGS

Non–current

Loan facility
Fair value of attaching warrants1
Transaction costs1

Amortisation of finance component (warrants and transaction costs)

2020
$

2019
$

5,000,000
(1,448,400)
(137,500)
3,414,100
222,760
3,636,860

–
–
–
–
–
–

1. The fair value of long–term borrowings are based on cash flows discounted using effective market discount rates available to the Group. Finance

costs of $1,585,900 have been recognised to be amortised over the life of the borrowings, which in effect discounts the face value of the borrowings
of $5 million. The effective interest rate method is a method of calculating the amortised cost of a financial liability and allocating interest expense
over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of
the financial liability or, where appropriate, shorter period.

2. On 20 July 2020 the Group announced it had signed an agreement with its existing debt provider, PURE Asset Management (“PAM”) to secure an additional

$15 million facility, replacing the existing $5 million facility. An improved rate of 8.9% per annum is included in the facility.

Significant Accounting Policies
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.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

22. BORROWINGS (continued)

Critical accounting estimates and assumptions
The fair value of long–term borrowings are based on cash flows discounted using effective market discount rates
available to the Group. Finance costs of $1,585,900 have been recognised to be amortised over the life of the
borrowings, which in effect discounts the face value of the borrowings of $5 million. The effective interest rate method
is a method of calculating the amortised cost of a financial liability and allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability or, where appropriate, shorter period.

23. ISSUED CAPITAL

(a) Issued capital

2020

Number of
shares

2019

Number of
shares

Ordinary shares – fully paid (no par value)

511,834,114

29,484,606 183,043,123

13,754,507

(b) Reconciliation of issued capital

Balance

1 July 2018

126,041,546

10,875,937

Date

Shares issued

Price
$

Shares issued pursuant to capital raising

Shares issued to employees

Equity settled expense

Shares issued pursuant to capital raising

Capital raise costs

Equity settled expense

Shares issued pursuant to capital raising

Capital raise costs

Exercise of share options

Capital raise costs

Shares issued to employees

Shares issued pursuant to capital raising
Shares issued pursuant to capital raising

Shares issued pursuant to capital raising

14 Aug 2018

4,342,837

31 Dec 2018

2,950,000

12 Feb 2019

300,000

19 Feb 2019

1,128,000

28 Feb 2019

10,000,000

18 Mar 2019

1,452,000

18 Mar 2019

20,548,000

22 Mar 2019

5,700,000

25 Mar 2019

5,100,000

28 Mar 2019

500,000

28 Mar 2019

0.070

0.056

0.047

0.050

2 Apr 2019

240,000

0.050

1 May 2019

440,740

1 May 2019
16 May 2019

3,600,000
700,000

30 Jun 2019
11 Jul 2019

183,043,123
40,111,113

0.056

0.055
0.050

0.045

0.044

0.040

0.045

0.042

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

(16,362)

12,000

(15,000)

24,902

198,000
35,000

13,754,507
1,805,000

772,200

250,000

45,000

23,333

9,000

Share issued as consideration in business combination

11 Jul 2019

17,550,000

Shares issued pursuant to capital raising

Shares issued to employees

Equity settled expense

23 Jul 2019

6,250,000

23 Jul 2019

1,000,000

23 Jul 2019

555,556

180,000

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

23. ISSUED CAPITAL (continued)

Equity settled expense

Shares issued to employees

Equity settle expense

Conversion of options

Equity settled expense

Shares issued to employees

Equity settled expense

Equity settles expense

Date

Shares issued

16 Sep 2019

1,500,000

16 Sep 2019

1,000,000

16 Sep 2019

90,000

17 Oct 2019

600,000

18 Oct 2019

1,000,000

25 Oct 2019

1,500,000

2 Dec 2019

1,583,333

2 Dec 2019

185,185

2 Dec 2019

3,333,334

2 Dec 2019

1,666,666

Shares issues as consideration in business combination

16 Dec 2019 100,000,000

Price
$

0.050

0.045

0.050

0.045

0.049

0.045

0.050

0.048

75,000

45,000

4,500

30,000

50,000

75,000

71,250

9,074

163,333

75,000

5,000,000

96,000

0.050

0.085

0.050

0.048

0.050

1,009,906

620,000

750,000

85,000

564,722

406,011

220,000

47,500

825,000

100,000

81,250

157,639

960,000

1,000,000

212,354

100,000
(329,964)
29,484,606

8 Jan 2020

3,798,169

0.0595

225,991

16 Dec 2019

2,000,000

16 Dec 2019

2,000,000

22 Jan 2020

20,198,112

22 Jan 2020

12,400,000

22 Jan 2020

15,000,000

22 Jan 2020

1,000,000

31 Jan 2020

11,294,448

6 Feb 2020

8,120,223

21 Feb 2020

4,400,000

2 Mar 2020

950,000

2 Mar 2020

16,500,000

10 Mar 2020

2,000,000

10 Mar 2020

1,624,999

13 Mar 2020

3,152,778

Shares issued as consideration in business combination

9 Apr 2020

20,000,000

Conversion of convertible note

Equity settled payment

Conversion of convertible note
Cost of issuing equity
As at 30 June 2020

9 Apr 2020

20,000,000

9 Apr 2020

4,247,075

27 Apr 2020

2,000,000
–
511,834,114

Significant Accounting Policies
Issued capital is recognised at the fair value of the consideration received by the Company. Any transaction costs arising
on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received. Ordinary
share capital bears no special terms or conditions affecting income or capital entitlements of the shareholders.
Share based payments settled in issued capital are outlined in Note 25.

Shares issued to employees

Conversion of options

Equity settled payments

Conversion of options

Equity settled expense

Conversion of convertible note

Shares issued to employees

Conversion of options

Conversion of convertible note

Conversion of convertible notes

Conversion of options

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

23. ISSUED CAPITAL (continued)

Terms and conditions of issued capital

Ordinary shares
Fully paid ordinary shares carry one vote per share and carry rights to dividends.
Ordinary shareholders are entitled to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. Every ordinary shareholder present at a meeting
in person or by proxy is entitled to one vote on a show of hands or by poll.
At 30 June 2020, there were no partly paid shares outstanding. Ordinary shares have no par value. The Company
does not have a limit on number of shares authorised.

Escrow
At 30 June 2020, there were no ordinary shares were in voluntary escrow (2019: nil).

Capital Management
The Company considers its capital to comprise its ordinary share capital and accumulated losses.
In managing its capital, the Company’s primary objective is to ensure its continued ability to provide a consistent return
for its equity shareholders through capital growth. To achieve this objective, the Company seeks to maintain a gearing
ratio that balances risks and returns at an acceptable level and to maintain a sufficient funding base to enable the
Company to meet its working capital and strategic investment needs. During the exploration and evaluation phase of
operations the Company does not anticipate utilising any loan funding and will rely upon capital raisings.

24. EQUITY - CONVERTING NOTES

Converting notes issued

Cost of issuing converting notes

Distributions on converting note

Notes converted to equity

2020
$

2019
$

9,433,750

(450,744)

323,692

(2,775,000)

6,531,698

–

Tesserent has borrowed under a convertible note with a face value of $9,433,750 with the following terms:
– Conversion during year one to 160,000,000 ordinary Tesserent shares at $0.05 per share.
– Conversion during year two to 113,266,666 ordinary Tesserent shares at $0.075 per share.
– Automatic conversion at the end of two to 84,950,000 ordinary Tesserent shares at $0.10 per share.
–
–

1 option to be issued for every for 3.33 shares subscribed for (exercisable at $0.10)
Interest rate of 8% (cash) or 10% if paid in shares (at the Company’s discretion).

As the above conversion feature results in the conversion of a fixed amount of the stated principal into a fixed number
of shares, it satisfies the “fixed for fixed” criterion and, therefore, it is classified as an equity instrument.
The convertible notes are unsecured.

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

25. EQUITY - RESERVES

Share based payment reserve

Movement in reserve

Opening balance

Share based compensation recognised during the year

Shares issued to employees

Share options expired during the year

Deferred tax

Closing balance

2020
$

2019
$

1,840,523

772,900

1,781,131

639,385

287,148

–

(153,633)

(403,439)

(310,069)

–

1,840,523

772,900

(a) Nature and Purpose of Reserves
Share based payment reserve
The reserve is used to record the value of equity instruments issued to employees and directors as part of their
remuneration, and other parties as part of compensation for their services.

(b) Share based payments
Share based payments incurred during the period are as follows:

Description

Share options granted prior years

Share options granted during year:

– Employees

– Contractors

Performance rights expense granted during year

PAM loan facility

Share options issued as cost of capital

Total share-based payments

Expense

Liabilities

Cost of capital
raised

188,128

9,419

5,483

62,367

–

1,448,400

–

265,397

1,448,400

–

67,334

1,781,131

In addition to share options and performance rights the Group issued ordinary shares as payments, as follows:

Description

Payment to employees

Payment to contractors to settle invoices

Settlement of director fees incurred during year

Issued to settle accrued fees

Issued to settle cost of issuing capital

Total value of shares issued as payments

Expense

Liabilities

Cost of capital
raised

517,741

643,341

41,500

–

350,900

–

1,202,582

350,900

–

75,000

1,628,482

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

25. EQUITY - RESERVES (continued)

Valuation
The Group has issued share options and performance rights during the year. The options were valued using a
Black-Scholes option pricing model. During the year the following share options were issued with the following inputs:

No. issued
Grant date
Expiry date
Share price at grant date (cents)
Vesting period (days)
Exercise price (cents)
Volatility
Risk free rate
Dividend yield
Early exercise multiple
Value per option

Total cost
Cost recognised
Future costs

No. issued

Grant date

Expiry date

Share price at grant date (cents)

Vesting period (days)

Vesting condition

Exercise price (cents)

Volatility

Risk free rate

Dividend yield

Early exercise multiple

Value per option

Total cost

Cost recognised

Future costs

Share Options

Tranche AU10

Tranche BU11

Tranche CU12

Tranche EU09

OP06

1,000,000
2/12/2019
29/11/2022
4.90
1093
7.50
80.00%
0.70%
0.00%
2.50
1.90

1,000,000
2/12/2019
29/11/2020
4.90
363
10.00
80.00%
0.70%
0.00%
2.50
0.60

1,000,000
2/12/2019
29/11/2022
4.90
1093
12.50
80.00%
0.70%
0.00%
2.50
1.40

300,000
23/7/2019
22/7/2021
4.20
730
5.00
80.00%
0.90%
0.00%
2.50
1.50

1,000,000
8/1/2020
16/12/2021
4.30
708
7.50
90.00%
0.80%
0.00%
2.50
1.30

$18,600
$3,609
$14,991

$5,500
$3,212
$2,288

$13,400
$2,599
$10,801

$4,630
$2,183
$2,447

$13,425
$3,299
$10,126

Performance rights

I.1 PPR2

I.2 PR2

I.3 PPR2

I.4 PR2

I.5 PR2

I.6 PR2

2,000,000

4,000,000

16/12/2019

3/10/2021

4.80

292

4.80

292

4.80

292

4.80

292

4.80

292

4.80

292

Market1

Market2

Market3

Market4

Market5

Market6

–

80.00%

0.80%

0.00%

2.50

1.70

0.80%

0.00%

2.50

0.90

0.80%

0.00%

2.50

0.30

0.80%

0.00%

2.50

0.10

$46,648

$20,411

$26,237

$32,244

$13,210

$19,034

$35,311

$13,040

$22,271

$21,810

$7,506

$14,304

0.80%

0.00%

2.50

0.10

$14,712

$4,842

$9,870

0.80%

0.00%

2.50

0.00

$10,532

$3,358

$7,174

Market conditions for performance rights are as follows:
1. Share price achieving $0.075 for no less than 60 consecutive days
2. Share price achieving $0.100 for no less than 60 consecutive days
3. Share price achieving $0.150 for no less than 60 consecutive days
4. Share price achieving $0.200 for no less than 60 consecutive days
5. Share price achieving $0.250 for no less than 60 consecutive days
6. Share price achieving $0.300 for no less than 60 consecutive days

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd

NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

25. EQUITY - RESERVES (continued)

Escrow
No share options or shares issued in relation to share based payments were escrowed at 30 June 2020.

Significant Accounting Policies - share based payments
Equity-settled share-based payments to employees and others providing similar services are measured at the fair
value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Company’s estimate of equity instruments that will eventually vest, with a
corresponding increase in equity. At the end of each reporting period, the Company revises its estimate of the number
of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-
settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value
of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are
measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the
counterparty renders the service.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured
initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of
settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for
the year.

Critical accounting estimates and assumptions
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.
An independent valuation was prepared for each tranche of options and rights granted during the year. The values were
estimated using the Black-Scholes option valuation model. The inputs used in the model to estimate the values are
identified in the tables above. The key estimates used in the model are the volatility, which is estimated with reference
to a broad set of ASX listed comparable companies, and the risk-free rate, which is estimated with reference to
Government bond rates.
The expense recognised for options granted prior to 1 July 2019 is $188,128. The cost recognised reflects the
amortisation of the expense over the vesting period of the options granted and is based upon an independent valuation
that was prepared. The valuation was prepared using the Black Scholes valuation model and the key inputs were
as follows:
Risk free rate
Volatility

1.40 -1.97%

80%

for the year ended 30 June 2020
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

25. EQUITY - RESERVES (continued)

Option movements
Set out below are summaries of options movements during the year:

Expiry date

Exercise price Balance 1 July

Granted

Exercised

2020

Grant date

17 Nov 15

14 Dec 18

23 Jul 19

2 Dec 19

8 Jan 20

16 Dec 19

Total

2019

Grant date

17 Nov 15

9 May 16

14 Dec 18

Total

31 Aug 19

30 Nov 21

1 Jul 20

22 Jul 21

29 Nov 20

29 Nov 22

16 Dec 21

3 Oct 20

31 Aug 19

8 May 19

8 May 20

30 Nov 21

1 Jul 20

–

0.24

1,000,000

13,000,000

0.288

0.10

0.125

0.15

0.05

0.10

0.075

0.125

0.075

0.000

–

300,000

1,000,000

2,000,000

18,000,000

14,300,000

$0.1400

$0.0100

0.20

0.24

2,500,000

0.288

1,000,000

500,000

0.40

0.50

0.10

0.125

0.15

0.05

–

1,000,000

13,000,000

7,000,000

16,000,000

$0.263

$0.1000

Expired/
forfeited/
other

(1,000,000)

Balance
30 June

–

1,000,000

(13,000,000)

–

300,000

1,000,000

2,000,000

(15,000,000)

17,300,000

–

$0.01400

Expired/
forfeited/
other

Balance
30 June

(2,500,000)

–

(1,500,000)

1,000,000

–

1,000,000

(500,000)

–

1,000,000

13,000,000

(5,000,000) 18,000,000

–

$0.1400

–

Weighted average exercise price

Expiry date

Exercise price Balance 1 July

Granted

Exercised

Weighted average exercise price

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

26. BUSINESS COMBINATIONS
During the year Tesserent Group completed the acquisitions of Rivium Pty Ltd, Pure Security Pty Ltd and north BDT.
Details of the acquisitions were as follows:

Rivium
On 1 July 2019, TNT Cyber Services Pty Ltd a subsidiary of Tesserent Limited acquired 100% of the ordinary shares
of Rivium Pty Ltd for total consideration of $3,250,000. The consideration is comprised of an initial cash payment of
$1,495,000, additional cash paid due to working capital adjustments of $283,217, issued share capital of $772,200 (being
17,550,000 ordinary shares issued at $0.044 per share) and contingent consideration estimated as $699,583. Contingent
consideration is in the form of “earn out” shares calculated as a multiple of EBITDA.
At the date of acquisition, the directors determined it was probable that the deferred consideration would be realised
and therefore recognised the maximum exposure as it’s fair value.
The contingent consideration estimate is based on the “earn-out” clause in the Share Purchase Agreement (“SPA”)
that states:
–

If the EBITDA (as defined within the SPA) for Financial Year (“FY”) 2020 exceeds the EBITDA for FY 2019 Tesserent
will issue to the vendors shares equal to the absolute value of the amount FY2020 exceeds FY2019.
If the EBITDA for FY2021 exceeds the EBITDA for FY2020 then Tesserent will issue shares equal to 50% of
the increase.

–

Shares issued to settle the contingent consideration will be valued at the 90 day Volume Weighted Average Price
(“VWAP”). There is no maximum earn-out stipulated by the SPA. The Group estimated contingent consideration based
on historical EBITDA. There is no limit set on the earn-out consideration
Rivium is one of Australia’s most experienced specialists in consulting, implementation and managed services for the
enterprise security solution Splunk and brings high profile customers spanning the government and private sectors.
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.
Prior to executing the Share Purchase Agreement, Tesserent has satisfactorily completed a comprehensive financial,
tax and legal due diligence process to ensure that there is strong strategic, cultural and operational alignment between
the two organisations.
During the year Rivium contributed revenues of $1,565,532 and a net profit after tax of $290,592. The acquisition was
completed on 1 July 2019 and therefore Rivium contributed for the whole of the financial year.

Pure Security
On 10 December 2019, TNT Cyber Services Pty Ltd a subsidiary of Tesserent Limited acquired 100% of the Cyber
Security Consulting business in PS&C Limited, which included the following entities for consideration of $14,000,000:
– Hacklabs Pty Ltd
– Securus Global Consulting Pty Ltd
– Certitude Pty Ltd
– Pure Hacking Pty Ltd
– PS&C Security Pty Ltd

The consideration was made up of $8,000,000 in cash paid, issued capital of $5,000,000 (measured at 50,000,000
ordinary shares issued at $0.10 per share) and deferred consideration of $1,000,000. The deferred consideration
was paid post-year end after making adjustments for working capital and other offsets, including a working capital
adjustment to consideration of $75,967. The payment amounted to $883,151.
The Pure Security Group acquisition will see Tesserent become Australia’s largest listed dedicated cybersecurity
business, with more than 90 cybersecurity professionals that have served more than 600 customers in the last 3
years. The integration of the Pure Security business will give Tesserent full cybersecurity capabilities including
security advisory, penetration testing, deployment and management of security infrastructure and secure application
development. As a result of the proposed acquisition Tesserent’s customer footprint will expand across Australia, Asia
and the UK.
During the year the Pure Security Group contributed revenues of $9,064,327 and a net loss after tax of $301,353. The
contribution covered 7 months. Had the acquisition been completed on 1 July 2019 the Pure Security Group would have
contributed $9,501,404 in revenue and losses of $3,324,554.
As at the reporting date the Purchase Price Allocation remains provisional

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

26. BUSINESS COMBINATIONS (continued)

north BDT
On 26 March 2020 Tesserent announced the completion of the acquisition of 100% of the share capital of north BDT
consultancy business for a total consideration of $6,779,293. Consideration includes:
–
– deferred payments of $2.079 million;
–

the issue of 20 million ordinary shares in Tesserent (“Consideration shares”) at an issue price of $0.048 per share,
subject to 12 months voluntary escrow;

cash payment of $1.25 million;

– An earn out payment equal to twice the increase in EBITDA between FY19 and FY20. FY19 EBITDA has been agreed

at $766k. The earn out will be paid out in the following proportions:
• 37.5% payment of cash;
• 62.5% to be issued as Shares in the Company (“Earn out shares”).
• There is no set limit on the value of the “earn-out”

North’s team of management consultants and cybersecurity experts are highly trained in providing ICT services to the
Australian Government agencies. They bring significant knowledge in building ICT and cybersecurity businesses. The
TNT group now boasts a team of 140+ staff servicing approximately 700+ customers. The acquisition gives Tesserent
access to north’s government and private client base in Canberra and provides the Company an opportunity to leverage
north’s existing relationships to enable cross-sales opportunities into TNT’s other business units.
In the 3 months since acquisition north BDT contributed revenues of $4,137,887 and a profit after tax of $1,052,327. Has
north BDT contributed its full year result it would have contributed revenues of $12,391,402, and a profit for the year of
$1,286,072.

Details of acquisitions:

Cash

Trade and other debtors

Plant and equipment

Contract assets

Right of use assets

Trade and other creditors

Contract liabilities

Lease liabilities

Employee benefit provisions

Deferred tax liabilities

Net assets acquired

Goodwill

Rivium
Fair value
$

Pure Security
Fair value
$

north
Fair value
$

Total
$

440,700

76,161

57,001

573,862

1,247,800

3,965,827

1,338,705

6,552,332

2,619

472,898

39,492

515,009

537,131

–

875,745

1,412,876

–

2,715,956

541,921

3,257,877

(1,163,991)

(2,495,277)

(1,502,679)

(5,161,947)

(435,729)

–

(435,729)

–

(2,803,838)

(567,154)

(3,370,992)

(190,017)

(736,837)

(60,827)

(987,681)

(286,632)

(1,166,366)

(799,266)

(2,252,264)

151,881

28,524

(77,062)

103,343

2,050,119

9,213,443

4,701,355

15,964,917

Customer contracts and relationships

1,048,000

4,834,000

2,155,000

8,037,000

Represented by:

Cash paid

Issued capital

Deferred consideration1

3,250,000

14,075,967

6,779,293

24,105,260

1,495,000

8,000,000

1,250,000

10,745,000

772,200

5,000,000

960,000

6,732,200

699,583

1,000,000

4,071,089

5,770,672

Working capital adjustment to consideration1

283,217

75,967

498,204

857,388

3,250,000

14,075,967

6,779,293

24,105,260

1. Deferred consideration remains outstanding at year end. The payment to Pure Security Group included adjustments for working capital and other

transactions offset

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

26. BUSINESS COMBINATIONS (continued)

Rivium
Fair value
$

Pure Security
Fair value
$

north
Fair value
$

Total
$

Acquisition costs expensed to profit or loss

–2

1,237,701

57,830

1,295,531

2. Rivium acquisition costs were incurred and expensed in 2019. Costs amounted to $130,000.

Cash used to acquire businesses:

Acquisition date fair value of total consideration transferred
Less: cash and cash equivalents
Net cash used
Deferred consideration payments made during the year

1,495,000
(440,700)
1,054,300
283,217

8,000,000
(76,161)
7,923,839
–

1,250,000
(57,001)
1,192,999
535,299

10,745,000
(573,862)
10,171,138
818,516

1. Deferred consideration in relation to the Pure Security Group acquisition was paid post year end.
2. Contingent consideration is payable in instalments.

Significant Accounting Policies – Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the
proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms, economic conditions, the
consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition- date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing
investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is
less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference
is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of
the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer
receives all the information possible to determine fair value.

Critical Accounting Estimates and Assumptions
Business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and
contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available
information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting
is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and
liabilities, depreciation and amortisation reported.
As noted in the descriptions above contingent consideration is subject to estimates where the amounts are based on
“earn-out” clauses that require the estimation of future liabilities based on future estimates of EBITDA. Where results
vary there will be adjustments to the estimate. Any variances to these estimates will be recorded in profit or loss.
At balance date, acquisition accounting had been finalised for Rivium and North only.

for the year ended 30 June 2020
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

27. INTERESTS IN SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned
subsidiaries in accordance with the accounting policy described in Note 1:

Name

Pure Security Managed Services Pty Ltd1

Tesserent Wholesale Pty Ltd1

Tesserent IP Pty Ltd1

Tesserent Cyber Services Pty Ltd

Tesserent UK Ltd (dormant)2

Rivium Pty Ltd3

Pure Security Pty Ltd4

Certitude Pty Ltd4

Hacklabs Pty Ltd4

Securus Global Pty Ltd4

Pure Hacking Pty Ltd4

north BDT5

Principal place of business /
Country of incorporation

Australia

Incorporated 20 May 2015

1. Acquired 15 July 2015. Previously called Tesserent Australia Pty Ltd.
2.
3. Acquired 3 July 2019
4. Acquired 10 December 2019
5. Acquired 26 March 2020

28. LOSS PER SHARE

Basic loss per share

Diluted loss per share

Net loss from continuing operations attributable to the owners of Tesserent Ltd used in
calculation of basic and diluted earnings per share.

Ownership interest

2020
%

100.00

2019
%

100.00

–

2020
Cents

2.02

2019
Cents

2.90

(7,311,949)

(4,372,821)

Number

Basic

Weighted average number of ordinary shares outstanding during the year used in the
calculation of basic loss per share

361,882,054 150,950,488

Diluted

Weighted average number of ordinary shares and convertible redeemable cumulative
preference shares outstanding and performance rights during the year used in the
calculation of basic loss per share

361,882,054 150,950,488

The Company made losses during the current and comparative years and, consequently, there is no dilutive in effect.

29. DIVIDENDS
No dividends were proposed or paid during the year.

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd

NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

30. RELATED PARTY DISCLOSURES

(a) Key Management Personnel Compensation
The aggregate compensation of the key management personnel of the Company is set out below:

Short term employment benefits

Post-employment benefits

Long term benefits

Share based payments

2020
$

1,847,307

162,630

35,185

738,734

2019
$

974,618

70,984

2,136

173,491

2,783,856

1,221,229

Refer to the Remuneration Report in the Director’s Report for detailed compensation disclosures on key
management personnel.

(b) Loan balances
There were no loan balances due to or from related parties owed by the Group as at 30 June 2020 or 30 June 2019.

(c) Other transactions
The following transactions with related parties were recorded during the year:
Fees were paid to Belgravia Group Pty Ltd, a company that Mr G Lord is a director of and owns an interest in, for the
provision of services to in capital raising. The amounts paid were $513,750. The fees were paid for by the issue of
1,500,000 ordinary shares issued at $0.05 per share plus the issue of convertible notes to the value $438,750.

(d) Controlled Entities
Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 27 of this report.

(e) Parent Entity
The parent entity in the consolidated entity is Tesserent Limited.
The parent entity in the wholly-owned group is Tesserent Limited.
The ultimate Australian parent entity is Tesserent Limited.

31. PARENT ENTITY INFORMATION

Statement of financial position

Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Total liabilities

Issued capital

Reserves

Convertible notes

Accumulated losses

Loss for the year

2020
$

2019
$

515,493

26,911,473

1,013,679

1,297,219

27,426,966

2,310,898

7,990,348

(124,059)

906,354

–

(8,896,702)

(124,059)

34,350,347

13,268,555

2,167,948

6,531,698

330,304

(24,519,729)

(11,163,902)

18,530,264

2,434,957

15,420,894

14,382,458

for the year ended 30 June 2020
NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

32. REMUNERATION OF AUDITORS - BDO
Remuneration for audit and review of the financial reports of the Company:

Auditors of the Company:

Audit services

Corporate and indirect tax services

Due diligence services

2020
$

2019
$

327,924

41,750

118,000

487,674

93,000

63,515

146,050

302,565

It is the Company’s policy to engage BDO on assignments additional to their statutory audit duties where BDO’s
expertise and experience with the Company are important. During the year, the Company engaged BDO in providing
services in relation to tax compliance services and due diligence work.
* The BDO entity performing the audit of the Group transitioned from BDO East Coast Partnership to BDO Audit Pty Ltd
on 23 December 2019. The disclosures include amounts received or due and receivable by BDO East Coast Partnership,
BDO Audit Pty Ltd and their respective related entities.

33. COMMITMENTS FOR EXPENDITURE

Capital Commitments
The Group has no commitments at 30 June 2020.

34. CONTINGENT LIABILITIES
There are no other matters which the Group considers would result in a contingent liability as at the date of this report.

35. EVENTS OCCURRING AFTER REPORTING DATE
On 20 July 2020 the Group announced it had signed an agreement with its existing debt provider, PURE Asset
Management (“PAM”) to secure an additional $15 million facility, replacing the existing $5 million facility. An improved
rate of 8.9% per annum is included in the facility.
On 23 July 2020 the Group announced completion of its acquisition of Seer. The value of the consideration agreed is
$5 million in cash and the issue of 76,923,077 ordinary shares (6,923,077 being subject to shareholder approval). The
cash payment will be split between a payment on completion of $2.5 million, $1.25 million 13 months after completion
and the final payment 25 months after completion. The acquisition was completed on 4 August, and the first tranche of
cash issued to the vendor and 70,000,000 ordinary shares issued to the vendor, escrowed for 12 months. Shareholder
approval for the issue of the remaining 6,923,077 ordinary shares was obtained at a General Meeting on 16 September
2020. Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet completed
the purchase price allocation for the acquisition.
On 28 July the Group announced the issue of 100,000 convertible notes at $1 each, converting into 2,000,000 ordinary
shares, and 11,100,000 $0.10 converting note options.
On 20 August 2020 the Group announced the issue of 1,200,000 $0.10 converting note options.
On 26 August 2020 the Group announced the acquisition of Airloom, a Sydney-based cybersecurity firm. The acquisition
was fully funded through the PAM finance facility, with the consideration for the acquisition being $6 million and the
issue of 40 million ordinary shares, at 30 VWAP, subject to shareholder approval. $5million is payable on completion,
with the remaining $1 million payable upon achievement of set milestones. The acquisition was completed on 11
September 2020. Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet
completed the purchase price allocation for the acquisition.
On 28 August the Group announced the acquisition of Ludus Cybersecurity for $536k in cash and 4.31 million ordinary
shares issued at 22.41 cents, subject to shareholder approval. The acquisition was completed on 11 September 2020.
Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet completed the
purchase price allocation for the acquisition.
On 2 September the Group issued 750,000 $0.10 converting note options, 2,000,000 Joint Managing Director Options and
25,000,000 Acquisition Warrants.
On 8 September 2020 the Group issued 24,586,777 Acquisition warrants at $0.0605.
On 21 September 2020 the Group issued 12,071,720 Converting Notes and 2,000,000 Joint Managing Director options.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

35. EVENTS OCCURRING AFTER REPORTING DATE (continued)
On 24 September 2020 the Group announced the acquisition of iQ3, a secure cloud provider headquartered in Sydney.
Consideration is $8.6 million in cash and the issue of 34.6 million issued at $0.2496 per share. The cash component is
to be paid in instalments, $4.3 million on completion, and 4 deferred payments of $1.07 million made quarterly over
12 months. Due to the proximity of the acquisition to the release of the financial statements, the Group has not yet
completed the purchase price allocation for the acquisition.
On 24 September 2020 the Group announced the issue of 105,000 converting notes, 4,000,000 Joint Managing Director
options and 1,458,334 Pure facility options.
Other than the above, the Board is not aware of any other matter or circumstance not otherwise dealt with in these
financial statements that has significantly or may significantly affect the operation of the Company, the results of those
operations, or the state of affairs of the Company in subsequent financial years.

36. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES

Financial Instruments

Initial Recognition and Measurement
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual
provisions to the instrument. For financial assets, this is the date that the company commits itself to either the
purchase or sale of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument
is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss
immediately. The Company has no financial instruments classified as “at fair value through profit or loss”.

Classification and subsequent measurement
The Company classifies its financial instruments based on the purpose for which the instruments were acquired.
Management determines the classification of its financial instruments at the time of initial recognition. The Company’s
principal financial instruments comprise receivables, payables, cash and short-term deposits.
At the reporting date, the Company’s financial instruments were classified within the following categories.

Cash and cash equivalents – financial assets at amortised cost.
See Note 7.

Receivables at amortised cost
See Note 8.

Financial Liabilities at amortised cost
Financial liabilities include trade payables and other creditors.
All of the Company’s financial liabilities are recognised and subsequently measured at amortised cost, using the
effective interest rate method.
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating
interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of
the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the
expected life of the instrument to the net carrying amount at initial recognition.

Impairment of financial assets at amortised cost
The Company considers all financial assets for recoverability and impairment. Where there are indicators of
impairment the Company will review the carrying amount of the financial asset and estimate its recoverable amount.
The Company will take all available action to recover the full amounts of financial assets, and once all efforts are
exhausted the Company will record an impairment. Any impairment is recorded in a separate allowance account. Any
amounts subsequently written off are offset against the impairment allowance.

Derecognition
Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of
financial position.
Financial liabilities are derecognised when it is extinguished (ie when the obligation in the contract is discharged,
cancelled or expires). The difference between the carrying amount of the financial liability derecognised and the
consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in
profit or loss.

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

36. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)
A financial asset is derecognised when the holder’s contractual rights to its cash flows expires, or the asset is
transferred in such a way that all the risks and rewards of ownership are substantially transferred.
All of the following criteria need to be satisfied for derecognition of financial asset:
the right to receive cash flows from the asset has expired or been transferred;
–
all risk and rewards of ownership of the asset have been substantially transferred; and
–
the Company no longer controls the asset (ie the Company has no practical ability to make a unilateral decision to
–
sell the asset to a third party).

On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount
and the sum of the consideration received and receivable is recognised in profit or loss.

Financial Risk Management
The Company manages its exposure to key financial risks, including interest rate and currency risk in accordance with
the Company’s financial risk management policy. The objective of the policy is to support the delivery of the Company’s
financial targets whilst protecting future financial security.
The main risks arising from the Company’s financial instruments are interest rate risk, credit risk and liquidity risk.
The Company manages its risk informally at Board level. The Board monitors levels of exposure to interest rate and
credit risk by banking with reputable banks. Liquidity risk is monitored through the development of future rolling cash
flow forecasts.
The Board reviews and agrees policies for managing each of these risks informally.
Primary responsibility for identification and control of financial risks rests with the Board of Directors (‘the Board’).
The Board reviews and agrees policies for managing each of the risks identified below, including interest rate risk,
credit allowances, and future cash flow forecast projections. The company does not hedge its risks.
The carrying amounts and net fair values of the Company’s financial assets and liabilities at reporting date are:

Financial Assets

Cash and cash equivalents

Trade and other receivables

Non-Traded Financial Assets

Financial Liabilities at amortised cost

Trade and other payables

Other financial liabilities

Lease liabilities

Borrowings

2020
Carrying Value
$

2020
Fair Value
$

2019
Carrying Value
$

2019
Fair Value
$

4,349,619

7,422,720

999,660

218,767

999,660

218,767

11,772,339

1,218,427

7,468,588

1,765,342

5,400,240

4,535,946

3,636,860

352,157

101,706

–

352,157

101,706

–

Non-Traded Financial Liabilities

21,041,634

2,219,205

Risk Exposures and Responses

Interest Rate Risk
Exposure to interest rate risk arises on financial instruments whereby a future change in interest rates will affect
future cash flows or the fair value of the fixed rate financial instruments. The Company is also exposed to earnings
volatility on floating rate instruments. At reporting date, the Company’s exposure to interest rate risk was wholly
related to cash and cash equivalents and is disclosed in Note 7.
Interest rate risk is managed by monitoring the level of floating rate which the Group is able to secure. It is the policy
of the Group to keep the majority of its cash in accounts with floating interest rates.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdNOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

36. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)

Sensitivity Analysis
During the current year the interest paid was $823,951. Much of the interest relates to the PAM facility and is based on
a fixed rate, and interest on lease liabilities. As such, management does not consider sensitivity to interest rates to be a
useful measure of risk to the result or the overall financial statements.

Foreign Exchange Risk
The Group trades with foreign entities, in particular suppliers of software licences. However, prices from US software
suppliers are largely billed in Australian dollars or bought and sold through third parties who are responsible for the
exchange rate risk.

Liquidity Risk
Liquidity Risk is the risk that the Company, although Statement of Financial Position solvent, cannot meet or generate
sufficient cash resources to meet its payment obligations in full as they fall due, or can only do so at materially
disadvantageous terms.
The Board manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual
cash flows and matching the maturity profiles of financial assets and liabilities.

Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash
flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in
the statement of financial position.

Consolidated - 2020

Non-derivatives

Non-interest bearing

Trade payables

Other financial liabilities

Other liabilities

Interest-bearing - fixed rate

Borrowings

Lease liability

Total

Weighted
average
interest rate
%

1 year or less
$’000

Between 1 and
2 years
$’000

Between 2 and
5 years
$’000

Over 5 years
$’000

Remaining
contractual
maturities
$’000

–

7,468,588

4,713,959

2,651,341

–

686,281

128,501

–

9.90%

11.50%

–

3,000,000

2,000,000

1,046,478

949,883

1,315,008

15,880,366

1,764,665

6,315,008

783,949

–

for the year ended 30 June 2020NOTES TO AND FORMING PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS

36. FINANCIAL RISK MANAGEMENT, OBJECTIVES AND POLICIES (continued)

Consolidated - 2019

Non-derivatives

Non-interest bearing

Trade payables

Other financial liabilities

Other liabilities

Interest-bearing - fixed rate

Lease liability

Total non-derivatives

Weighted
average
interest rate
%

1 year or less
$’000

Between 1 and
2 years
$’000

Between 2 and
5 years
$’000

Over 5 years
$’000

Remaining
contractual
maturities
$’000

–

1,765,342

137,991

614,691

–

214,166

–

8.87%

34,158

67,458

2,552,182

281,624

–

The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually
disclosed above.

Credit Risk
Credit risk arises from the financial assets of the Company, which comprise cash and cash equivalents and trade
and other receivables. The Company’s exposure to credit risk arises from potential default of the counter party, with
maximum exposure equal to the carrying amount of these instruments. Exposure at reporting date in relation to cash
and cash and cash equivalents is discussed in Note 7.
Credit risk relating to trade and other receivables is discussed in Note 8. The Group has no significant concentrations
of credit risk in any one customer.

Fair Value
The Company does not carry any of its financial assets at fair value after initial recognition.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdDirectors’ Declaration

In the opinion of the Directors of Tesserent Limited (the “Company”):
(a) The financial report of the Company is in accordance with the Corporations Act 2001, including:

ii.

Giving a true and fair view of the Company’s financial position as at 30 June 2020 and of its performance
for the year ended on that date; and
Complying with the Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;

(b)

there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable;

The financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board, as described in Note 1(a) to the financial statements; and
This declaration has been made after receiving the declarations required by section 295A of the Corporations Act
2001 from the Chief Executive Officer for the financial year ended 30 June 2020.

Signed in accordance with a resolution of the Directors made pursuant to section 295(5) of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.

Julian Challingsworth

Co-Managing Director and Co-CEO

30 September 2020
Melbourne

for the year ended 30 June 2020

Independent Auditor’s Report

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 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.

In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:

(i)

Giving a true and fair view of the Group’s financial position as at 30 June 2020 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 (including Independence Standards) (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.

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd

Independent Auditor’s Report

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.

Impairment assessment of Goodwill and Intangible Assets

Key audit matter

How the matter was addressed in our audit

Refer to Note 13 Intangible Assets and Note 14
Goodwill of the accompanying financial report

The Group has material finite and indefinite life
intangible assets including customer contracts
and relationships, intellectual property, software
and goodwill. Finite life intangible assets are
required to be tested for impairment where there
is an indicator of impairment. Indefinite life
intangibles are required to be tested at least
annually for impairment in accordance with
Australian Accounting Standards.

Intangible assets and goodwill are allocated to
the cash generating units (CGU’s) set out in Note
14. The Group has completed an impairment
assessment for each CGU at 30 June, which
covers the intangible assets and goodwill in Note
13 and Note 14.

Management assessed the ongoing trading
conditions of the Group and formed the opinion
that the software intangible asset in the Pure
Managed Services CGU is impaired. As at 30 June
2020, a $0.8m impairment has been recognised
against the software asset.

This is a key audit matter because the
impairment assessment process is complex and is
required to be carried out at the level of the
lowest identifiable cash generating units. The
assessment requires significant judgement and
includes assumptions that are based on future
operating results, discount rates and the broader
market conditions in which the Group operates.
The degree of estimation of uncertainty was
heightened as a result of COVID-19.

Our procedures, amongst others, included:

• Assessed management’s CGU allocations in
order to ensure that they reflect how
financial information is reported to the Chief
Operating Decision Maker in accordance with
AASB 136 Impairment of Assets.

• Assessed the Group’s cash flow forecasts

including consideration of the discount and
growth rates used.

• Tested the integrity and mathematical

accuracy of the value-in-use discounted cash
flow models.

• Engaging our valuation experts to assist in

assessing the discount rate, revenue growth
rate and terminal growth rate applied to
each CGU.

• Performed a sensitivity analysis to identify
whether a reasonable variation in the
assumptions could cause the carrying value
of the CGU assets to exceed their
recoverable amount which would indicate a
further impairment.

• Evaluating management’s ability to forecast
future cash flows by comparing forecast cash
flows to actual performance.

• Reviewing the market capitalisation of the

Group in comparison to the carrying value of
the assets.

• Evaluating the adequacy of the disclosures
relating to intangible assets in the financial
report, including those made with respect to
judgments and estimates.

for the year ended 30 June 2020

Independent Auditor’s Report

Revenue Recognition

Key audit matter

How the matter was addressed in our audit

Refer to Note 4 Revenue of the accompanying
financial report.

The Group’s management focuses on revenue as a
key driver by which performance is measured.
The Group has various revenue streams which are
material to the financial report.

The Group generates revenue from managed
services, software licences, consulting and
penetration testing. Each revenue stream has
different contracts and performance obligations.

This is a key audit matter because the Group’s
revenue recognition process is complex and
involves estimates and significant judgement by
management. Revenue recognition was significant
to our audit due to its complexity and amount of
audit attention required.

Our procedures, amongst others, included:

• Reviewed the Group’s revenue recognition
policies to ensure they complied with
Australian Accounting Standards.

• Engaged IFRS technical experts to ensure
Management’s recognition of software
license income is in line with Australian
Accounting Standards.

• Engaged IFRS technical experts to ensure
Management’s revenue recognition for a
sample of managed service contracts is in
line with Australian Accounting Standards.

• Performed substantive procedures on a

sample of revenue transactions to supporting
documentation.

• Performed substantive analytical procedures
comparing revenue recorded on a monthly
and annual basis comparing to budget and
prior year. Supporting evidence and
explanations were obtained for variances
from our expectations.

• Tested of cut-off of revenue around year end

to ensure revenue is recognised in the
correct accounting period.

Consolidation and Financial Reporting

Key audit matter

How the matter was addressed in our audit

Refer to note 1 of the accompanying financial
report.

The Group comprises multiple subsidiaries,
including three significant new acquisitions during
the year.

This has been considered a key audit matter due
to:

• The Group consolidation consisting of multiple
wholly-owned subsidiaries using different ERP
systems due to three significant new
acquisitions during the year.

• Consequently, financial data from multiple
ERP systems is required to be consolidated.

Our procedures, amongst others, included:

• Evaluating Management’s processes and
controls in respect of the consolidated
financial reporting.

• Reviewing the consolidation and performing
detailed testing on the inputs, adjustments
and eliminations recorded.

• Re-performing and testing the mathematical

accuracy of the consolidation using a
consolidation software tool.

• Agreeing management’s consolidation to the

audited underlying trial balances.
• Assessing the relevance and adequacy of
disclosures within the financial report.

for the year ended 30 June 2020Annual Report 2020 Tesserent Ltd

Independent Auditor’s Report

• The timing and manual nature of performing
the consolidation increases the risk of error.

• There were multiple iterations of the

consolidation reviewed by the audit team
which required significant audit attention.

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 2020, but does not include the
financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.

In preparing the financial report, the directors are responsible for assessing the 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.

for the year ended 30 June 2020

Independent Auditor’s 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:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 30 to 42 of the directors’ report for the
year ended 30 June 2020.

In our opinion, the Remuneration Report of Tesserent Limited, for the year ended 30 June 2020,
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 Audit Pty Ltd

David Garvey
Director

Melbourne 30 September 2020

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdASX Additional Information

As at 28 September 2020

The shareholder information set out below was applicable as at 28 September 2020.

A. Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:

SPREAD OF HOLDINGS

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

TOTAL

Number of
Holders

Number of
Units

% of Total
Issued Capital

416

154,360

2,359

7,508,013

1,480

11,987,168

3,334

117,318,683

774 628,288,541

0.02

0.98

1.57

15.33

82.10

8,363 765,256,765

100.00

Based on the price per security, number of holders with an unmarketable holding: 1,142, with total 1,559,345, amounting
to 0.2% of Issued Capital.

B. Distribution of Equity Securities – Share Options
Analysis of numbers of equity security holders by size of holding:

SPREAD OF HOLDINGS

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

TOTAL

Number of
Holders

Number of
Units

% of Total
Issued Capital

–

150,000

1.00%

14,925,000

99.01%

15,075,000

100.00%

ASX Additional Information

As at 28 September 2020

C. Equity Security Holders
Twenty largest quoted equity security holders.

The names of the twenty largest holders of quoted equity securities are listed below:

NAME

SCOTT CEELY

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED

EMPRESIO PTY LTD

C14N PTY LTD

BELGRAVIA STRATEGIC EQUITIES PTY LTD

BNP PARIBAS NOMINEES PTY LTD

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

MR ROBERT ANTHONY SILVER

SANDHURST TRUSTEES LTD

CHRIS HAGIOS

CITICORP NOMINEES PTY LIMITED

JOHN GEORGOPOULOS

UBS NOMINEES PTY LTD

LINFIELD FC PTY LTD

MR ROBERT WILLIAM PROWSE + MRS STEPHANIE MARY PROWSE

CRITERION SOLUTIONS PTY LTD

JULIAN GORDON CHALLINGSWORTH

KAGE CAPITAL PTY LIMITED

G & N LORD SUPERANNUATION PTY LTD

XERT SERVICES PTY LIMITED

Ordinary
Shares
Number Held

% of Issued
Shares

46,153,846

30,892,573

22,900,000

20,000,000

16,000,000

13,906,087

12,958,779

12,535,965

11,885,403

11,013,333

9,565,708

9,150,400

8,710,002

8,162,112

7,756,831

7,692,308

7,000,000

6,479,800

6,433,334

6,242,000

6.03%

4.04%

2.99%

2.61%

2.09%

1.82%

1.69%

1.64%

1.55%

1.44%

1.25%

1.20%

1.14%

1.07%

1.01%

0.91%

0.85%

0.84%

0.82%

Totals: Top 20 holders of ORDINARY FULLY PAID SHARES (Total)

275,438,481

As at 28 September 2020, the 20 largest shareholders held ordinary shares representing 35.99% of the issued
share capital.

Annual Report 2020 Tesserent LtdASX Additional Information

As at 28 September 2020

D. Substantial Shareholders
Substantial holders in the Company are set out below:

NAME

SCOTT CEELY

E. Voting Rights
The voting rights attached to ordinary shares are set out below:

Share Options
Number Held

% of Issued
Share Options

46,153,846

6.03

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.

F. SHARE BUY BACK
There is no current on-market share buy-back.

G. ESCROWED SHARES
The following share sunder escrow are on issue:

ORDINARY SHARES UNDER ESCROW UNTIL 8 APRIL 2021 - 20,000,000

ORDINARY SHARES UNDER ESCROW UNTIL 31 JULY 2021 - 76,923,078

ORDINARY SHARES ESCROWED TO 30 November 2020 - 9,925,335

ORDINARY SHARES ESCROWED TO 29/02/21 - 9,925,333

ORDINARY SHARES ESCROWED TO 1/09/21 – 9,925,332

H. Use of Cash
Cash and assets readily convertible to cash held by the Company at the time of admission to the Australian Stock
Exchange are being used in a way consistent with its business objectives as set out in the listing prospectus.

Corporate Directory

Non-Executive Chairman

Board of Directors
Geoff Lord
Julian Challingsworth Co-Managing Director
Co-Managing Director
Kurt Hansen
Non-Executive Director
Gregory Baxter
Non-Executive Director
Patrick Flannigan

Company Secretary
Oliver Carton
Email: investor@tesserent.com

Registered Office
Level 5, 990 Whitehorse Road
Box Hill, VIC 3128, Australia

Principal Place of Business
Level 5, 990 Whitehorse Road
Box Hill, VIC 3128, Australia

Share Registry
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street, Abbotsford VIC 3067

Auditor
BDO Audit Pty Ltd
Collins Square, Tower Four
Level 18 727 Collins Street, Melbourne VIC 3000

Stock Exchange Listing
Tesserent Limited shares are listed on the Australian Securities Exchange, code TNT.

for the year ended 30 June 2020Annual Report 2020 Tesserent LtdT E S S E R E N T AU S T R A LI A P T Y LT D

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