TZ Limited
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
TZ Limited
26 073 979 272
For the year ended 30 June 2019
For the year ended 30 June 2018
2. Results for announcement to the market
Revenues from ordinary activities
Earnings loss before interest, tax, depreciation and amortisation,
adjusted for impairment ('adjusted EBITDA')
Loss from ordinary activities after tax attributable to the owners of TZ
Limited
Loss for the year attributable to the owners of TZ Limited
up
up
down
down
$
0.2% to
17,430,926
32.0%
to
(3,480,093)
62.7%
to
(4,359,688)
62.7% to
(4,359,688)
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
The loss for the consolidated entity after providing for income tax amounted to $4,359,688 (30 June 2018: $11,687,882).
The earnings before interest, tax, depreciation and amortisation ('EBITDA'), adjusted for impairment, was a loss of
$3,480,093 (30 June 2018: loss of $2,636,165).
EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the
profit under AAS adjusted for non-specific non-cash and significant items. The directors consider EBITDA to reflect the
core earnings of the consolidated entity.
Refer to 'Review of operations' in the Directors' report for further commentary on the results for the year ended 30 June
2019.
3. Net tangible assets
Net tangible assets per ordinary security
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
Reporting
Previous
period
Cents
period
Cents
(10.75)
0.50
TZ Limited
Appendix 4E
Preliminary final report
6. Dividends
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
7. Dividend reinvestment plans
Not applicable.
8. Details of associates and joint venture entities
Not applicable.
9. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued. The auditor’s report contains a
paragraph addressing material uncertainty related to going concern.
11. Attachments
Details of attachments (if any):
The Annual Report of TZ Limited for the year ended 30 June 2019 is attached.
12. Signed
Signed ___________________________
Date: 28 August 2019
John Wilson
Managing Director
Sydney
x / 2
*
y
z°*
y / 2
*
*
x
x
y / 2
y / 2
y
x / 2
y / 2
y / 2
Annual Report 2019
TZ Limited
Contents
30 June 2019
Corporate directory
Managing Director's letter
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of TZ Limited
Shareholder information
General information
2
4
6
17
18
19
20
21
22
55
56
60
The financial statements cover TZ Limited as a consolidated entity consisting of TZ Limited and the entities it controlled at
the end of, or during, the year. The financial statements are presented in Australian dollars, which is TZ Limited's functional
and presentation currency.
TZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and
principal place of business are:
Registered office
Level 11, 1 Chifley Square
Sydney NSW 2000
Principal place of business
TZ Limited and TZI Australia Pty Limited, Level 11,
1 Chifley Square, Sydney NSW 2000
Telezygology Inc., Suite 109-71, 15466 Los Gatos Blvd,
Los Gatos, CA 95032
TZI Singapore Pte Limited, Suntec Tower 2, 9 Temasek
Boulevard #29-01 Singapore 038989
TZI UK Limited, 207 Regent Street London WIB 3HH,
England UK
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 28 August 2019. The
directors have the power to amend and reissue the financial statements.
1
TZ Limited
Corporate directory
30 June 2019
Directors
Graham Lenzner
John Wilson
Thierry Denis
Mario Vecchio
Company secretary
Craig Sowden
Notice of annual general meeting
The details of the annual general meeting of TZ Limited are:
10:00am, Friday, 29 November 2019 at:
Radisson Blu Plaza Hotel
27 O’Connell Street
Sydney NSW 2000
Registered office
Level 11, 1 Chifley Square
Sydney NSW 2000
Head office Tel: +61 2 9222 8890
Principal place of business
TZ Limited and TZI Australia Pty Limited
Level 11, 1 Chifley Square, Sydney NSW 2000 Australia
Telezygology Inc., Suite 109-71, 15466 Los Gatos Blvd, Los Gatos, CA 95032
TZI Singapore Pte Limited, Suntec Tower 2, 9 Temasek Boulevard #29-01
Singapore 038989
TZI UK Limited, Third Floor, 207 Regent Street, London WIB 3HH, England UK
Share register
Auditor
Solicitors
Bankers
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Tel: 1300 787 272
Fax: +61 3 9473 2500
Grant Thornton Audit Pty Ltd
Level 17, 383 Kent Street
Sydney NSW 2000
Landerer & Company
Level 31, 133 Castlereagh Street
Sydney NSW 2000
St George Bank Limited
Level 3, 1 Chifley Square
Sydney NSW 2000
Stock exchange listing
TZ Limited shares are listed on the Australian Securities Exchange (ASX code: TZL)
Website
www.tz.net
TZ Limited's public website contains information regarding its products and the
company, including an investor services section
E-mail: info@tz.net
2
TZ Limited
Corporate directory
30 June 2019
Corporate Governance Statement
The directors and management are committed to conducting the business of TZ
Limited in an ethical manner and in accordance with the highest standards of
corporate governance. TZ Limited has adopted and substantially complied with the
ASX Corporate Governance Principles and Recommendations (Third Edition)
(‘Recommendations’) to the extent appropriate to the size and nature of its
operations.
The Corporate Governance Statement, which sets out the corporate governance
practices that were in operation during the financial year and identifies and explains
any Recommendations that have not been followed, was approved at the same time
as the annual report can be found at http://tz.net/investors/corporate-governance/
3
TZ Limited
Managing Director's letter
30 June 2019
Dear Shareholders
We’re now two years into our business transformation program, and in many ways, FY2019 has been one of our most
challenging years.
• We’ve been working hard to transition our business from a dependency on a handful of very large volume but low
margin postal supply contracts to a business supported by a substantially broader base of retained customers, across
multiple sectors, at margins that can support our path to profitability. Our low margin postal business contracts, that
generated revenues in FY2017 of around $8.5M and represented 40% of our sales, have now expired or been
terminated. Supply and service contracts with these established Postal customers including UPS, Singapore Post, Pos
Malaysia and Poste Italiane have been renegotiated at pricing that supports sustainable margins going forward.
• Behind the scenes, we have restructured our organisation and streamlined our operations to better manage overheads
and to improve our business competence. The restructuring will not only improve operational effectiveness but will
deliver savings of $1.2M in FY2020. The closing of office space in San Francisco and office and warehouse spaces in
Singapore and Malaysia will also deliver a saving of $180,000 annually. The decision to rebuild our US management
team around the appointment of experienced key senior US executives is starting to show positive results. The US
management team are now fully engaged in running the US business and have implemented many initiatives to improve
process and operations and to develop a sound base for sales growth. The investment in the US business is
commensurate with the opportunity that the US market presents for the Company. We expect the US to deliver 60% of
our business in FY2020.
• At the start of the fiscal year, the Company faced significant challenges with project implementation. This was partly due
to the large backlog of university orders and requirements to meet tight deployment deadlines in the educational sector,
but it was also compounded by the lack of project management, planning and technical capability in our US team. To
meet deployment deadlines, experienced resources were sent from Australia to support the local US team to meet
contractual obligations including managing and undertaking the substantial remedial works required for UPS. Since
then, we have established new implementation partner relationships, rebuilt our service team and reinforced our
technical competencies in areas where there were previous gaps. With our project management, service and support
structure now operating efficiently and more cost effectively through a contracted network of service partners, we are
well positioned to address the growth opportunities we see in the US market.
• To improve our market awareness, we have invested in marketing initiatives to help us to reposition ourselves in the
marketplace. Specifically, we have embraced lead generation, direct marketing and trade show participation to help to
build the sales opportunity pipeline. The launch of the new website in February 2019 and the engagement of
ReachMarkets to help us uplift our investor communications are all initiatives that we hope to raise awareness of the
Company with customers and investors. I am pleased to report that our web traffic has quadrupled over the last six
months and open rates on our direct mail at 25% and click through rates at 10% are above industry standards.
•
I am convinced that with greater market presence and awareness, we will open the doors to new opportunities that can
support our growth ambitions. We have developed relationships with many of the world’s largest brands and have built a
solid track record of technology performance. Many of our new customers ask these existing customers for references.
In fact, reference based selling accounts for a large portion of our new customer acquisitions. A customer promoting TZ
to others is the best testimony of the value that TZ can bring to the marketplace. Note that most of our competitors
outsource their HW and SW offering. As such, they are unable to meet the integration needs that so many of these
customers are seeking. Our established SW platform with its extensive API library and open integration approach,
coupled with our strong development competence in this area remains a major enabler for success and a differentiator
for the Company.
4
TZ Limited
Managing Director's letter
30 June 2019
• To further help us maintain our competitive advantage, we have continued to optimise our hardware products to improve
cost position and margins; we’ve uplifted our software solutions to industry standards for security to better support our
differentiation; and we have introduced new Platform-as-a-Service and Software-as-a-Service subscription-based
offerings to build the foundations for long tail annuity revenues. We are confident that this will yield positive results for
the Company in FY2020. We need to grow into new segments outside our traditional business. The successful
introduction of these new products to expand our offerings and increase our flexibility in being able to offer electronics
and software licensed or subscription based deals, will help us to build on our existing sales base and to better
penetrate new segments.
• From a market perspective, there are many areas that offer potential for growth. In previous years, we have only
focused at the top end of town with our enterprise Day Locker and Package Management offerings.
• New business development efforts to access the End-of-Trip and SME Day Locker opportunities have yielded good
results for TZ. In the US where we launched the Day Locker offering this fiscal year, we have built a strong pipeline
of new opportunities, successfully secured new business with MasterCard and are working with Gensler and other
architectural firms on new Day Locker opportunities. In Australia, we’ve received greater levels of acceptance of our
offerings with new business wins with Dimension Data, UTS and Federation University.
• Our Educational market in the US remains a large growth area for TZ. The volume of packages coming into
Universities for students has been increasing for years. Self-service and low-cost delivery technology is a major area
of investment in the America’s collegiate marketplace. We have strong ambitions to dominate this sector on the back
of prestigious University wins like Rutgers, Vanderbilt, Princeton, Columbia, University of Tennessee, East
Tennessee State University, etc.
• The retail sector or buying online and picking up at the store is a major driver of locker adoption globally. Delivery of
everything from groceries, medication, pet items, e-commerce, and virtually every consumer transaction has been a
major differentiation trend among retailers, restaurants, and B2B/B2C players. Convenience, cost, differentiation,
and brand are driving massive last mile delivery investments. These are long lead time opportunities but offer the
potential for large volume sales. We have been approached by many organisations to participate on RFIs and RFPs.
We await the outcome of some of these opportunities. They will start with a pilot but like the Postal sector have the
potential for a large roll-out in time.
It’s been a journey for the Company and while our numbers this year don’t readily reflect the progress we’re making, there
are many things that we can be pleased about. The business fundamentals are in place, the tailwinds are encouraging, and
the outlook is promising.
We remain singularly focused on turning the corner into profitability and to demonstrating that we have a desirable, sought
after technology offering that the market values and a business that offers the potential for sustainable growth.
___________________________
John Wilson
Managing Director
28 August 2019
Sydney
5
TZ Limited
Directors' report
30 June 2019
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of TZ Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2019.
Directors
The following persons were directors of TZ Limited during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Graham Lenzner - Chairman
John Wilson
Thierry Denis
Mario Vecchio
Mark Bouris (resigned on 20 November 2018)
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of the development of
intelligent devices and smart device systems that enable the commercialisation of hardware and software solutions for the
management, control and monitoring of business assets and the provision of associated value added services through
Telezygology Inc. and TZI Australia Pty Limited ('TZI').
All of the operations of the consolidated entity are based in Australia, the United States of America, United Kingdom and
Singapore.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
For the year ended 30 June 2019, the consolidated entity recorded operating revenue of $17.4M for the year with gross
margins of 48.7%, EBITDA* of -$3.5M and Net Loss After Tax of $4.4M.
Meaningful comparisons with the previous financial year need to take into account the significant revision of TZ’s revenue
recognition policy in compliance with the introduction of AASB 15 in FY2019. Under TZ’s previous policy, revenue was
recognised on a percentage of cost completion basis, whereas the new policy in FY2019 now recognises revenue when
performance obligations have been satisfied. A consequence of the adoption of the new policy this year was that $4.2M of
revenue previously accrued and recognised in FY2018 had to be recognised again in FY2019 to align with when the
performance obligations under those contracts were satisfied, accompanied by an adjustment to the opening Retained
Earnings balance on 1 July 2018. $4.1 million of this revenue was recognised in the second half of FY2019 although it
related to contracts that were delivered in the first half of FY2019. To allow for meaningful year-on-year comparisons of
Profit and Loss (P&L) performance, all FY2018 P&L comparatives quoted in this Directors’ Report have been adjusted
based on how FY2018 contracts would have been accounted for under the new revenue policy, unless otherwise stated.
The table below compares FY2019 results against adjusted FY2018 results. A comparison to reported FY2018 results is
available in the Statement of Profit or Loss on page 18.
Key Metrics
Operating Revenue
Gross Margin (%)
Overheads
EBITDA*
Impairment
EBIT
NPAT
Operating cash flow
Investment in product development
30 June 2019 30 June 2018 Variance
$'M
$'M
$'M
17.4
15.0
48.7%
50.3%
12.0
(3.5)
-
(3.8)
(4.4)
(3.7)
0.7
11.5
(3.9)
(7.4)
(12.7)
(13.0)
(3.5)
1.5
2.4
-
0.5
0.4
7.4
8.9
8.6
(0.2)
(0.8)
*
EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (“AAS”) and represents
the profit under AAS adjusted for non-specific non-cash and significant items. The directors consider EBITDA to
reflect the core earnings of the consolidated entity.
6
TZ Limited
Directors' report
30 June 2019
TZ Limited’s full year group revenue in FY2019 was $17.4M. This represents an increase of 15.6% on the adjusted
FY2018 revenues.
The bulk of the revenue growth has come from the large Locker supply contract to major logistics player DSV in South
Africa, who upgraded their existing 106 Locker Bank network with TZ technology and ordered an additional 200 Locker
Banks to bring their total network to 306 Locker Banks. As a consequence, revenues from this customer increased from
$1.0M last year to $3.9M this year.
The USA market had a nominal increase in revenue from $9.1M last year to $9.4M this year. Despite the lack of business
growth, the result was in line with forecast expectations. The US business experienced significant disruption last year not
only from the change in the US management team but also through the implementation challenges from the large backlog
of orders at the start of the fiscal year and the undertaking of the substantial United Parcel Service (UPS) remedial works.
Revenues in Australia were 7% down from $3.3M last year to $3.1M this year. Day Locker sales and services to retained
customers such as Westpac, KPMG and Suncorp were in line with budget. We did expect stronger performance in our data
center security business given expansion of NextDC and MacTel footprints, however delays to these infrastructure projects
have pushed out the timing of sales.
The investment and focus on lead generation and direct marketing implemented in the latter half of FY2019 is expected to
support new growth opportunities and business development in both the US and Australian geographies. The backlog of
purchase orders and committed business at the end of FY2019, that will be deployed in first half of FY2020, signals a
promising start for the new operating year.
Gross margins this year were 48.7% which is down from 50.3% last year. This year’s margin was affected by the large
rectification and remedial works undertaken and completed for UPS in the USA at a cost of approximately
$440,000. Without this abnormal cost, gross margin in FY2019 would have been 51.2%, an improvement on gross margin
on the prior year.
The consolidated entity’s overhead costs were $12.0M, an increase of 4.0% on the $11.5M recorded last year largely due
to transition costs in setting up the new management and organisational structure. At the end of FY2019, a restructure was
completed to right set the organisation which will reduce labour costs by $1.2M in FY2020.
Net operating cash outflows were $3.7M this year ($3.5M in FY2018) which were affected by the lower margins due to
UPS and the small increase in overhead costs.
The consolidated entity continued investment in product development this year but at a lower level of investment than in
previous years, as several major initiatives in the next generation device and software development have been completed
and commercialised. A total of $0.7M was invested compared to $1.5M in FY2018. The commercialisation of these new
initiatives in FY2020 should deliver reductions in the cost of goods of key hardware components and support sales to new
market segments and the migration to subscription-based annuity offerings.
The operating cash outflows and investment activities were funded through an increase in long term debt of $4.0M. To
allow for this, the size of the consolidated entity’s debenture facility was increased from $5M to $9M during the year,
leaving an available debt facility of $1M at the end of FY2019. Subsequent to year end, the debt facility has been increased
by a further $2M.
Further information about the consolidated entity's activities this past year and plans for next year can be found in the
Managing Director’s Report on page 4.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
Likely developments and expected results of operations
Further information on the future strategies is detailed in the Managing Director's report which precedes the Directors'
report and Annual Financial Statements.
7
TZ Limited
Directors' report
30 June 2019
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Graham Lenzner
Non-Executive Chairman
BEc (USyd)
Graham brings a wealth of Corporate experience to the Board as an Independent
Director. He has had a career spanning over four decades with particular emphasis
on investment management and financial markets. He was an Executive Director of
the Armstrong Jones Group for twelve years, the last four years as Joint Managing
Director until it's takeover by ING. Other previous roles include Finance and Deputy
Managing Director Aquila Steel and General Manager Finance and Investments MMI
Insurance Ltd. He has served on the Board of a number of both listed and private
companies.
Independent Non-Executive Director of 360 Capital Group Limited (ASX: TGP)
Other current directorships:
Former directorships (last 3 years): None
None
Special responsibilities:
600,000 ordinary shares
Interests in shares:
None
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
John Wilson
Managing Director
Bachelor of Engineering, Post Graduate in International Marketing
John has extensive global business experience, having spent most of his 20 year
career in the development of international businesses in Asia, Europe and the US
including establishment of major strategic alliances and partnerships, technology
licenses and driving market entry strategies through new product innovation and
commercialization. John specializes in the field of strategic business development,
innovation management and product commercialization. He has a post graduate
qualification in international marketing and has received skills development from
graduate schools in the US and in Europe in the areas of value based management
and innovation management. John successfully co-founded and built TZ from the
ground up into a global publicly listed technology company before exiting the
Company in early 2007. He returned to TZ in a consulting capacity to support the new
Board of TZ Limited in 2011. John also has significant executive management
experience having spent a decade in his earlier years working for a major
multinational manufacturing corporation in a range of senior roles across marketing,
business development, strategy development, technology management and business
unit general management.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
8,230 ordinary shares
Interests in shares:
None
Interests in options:
8
TZ Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Thierry Denis
Non-Executive Director
Ingenieur (ENSEA France), GAICD
Thierry is a technology executive with more than 20 years’ international experience in
business management, company turnaround and transformation. He built an
accomplished career with billion-dollar technology company Ingenico, leading a
diverse range of mandates across dynamically different regions and markets. Thierry
has led culture and process change, while leveraging his strong foundation expertise
in IT solutions. Thierry was successful at Ingenico in delivering revenue and profit
growth through the creation of scalable, lean and efficient business models and
engaged, empowered and high performing team environments. This accomplishment
earned him industry recognition through receipt of ‘President of the Year’ Award by
TMT News.
Non-Executive Director of Splitit Ltd (ASX: SPT)
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Chairman of the Audit and Risk Committee
200,000 ordinary shares
None
Name:
Title:
Qualifications:
Experience and expertise:
Mario Vecchio
Non-Executive Director
Electronic Engineer
Mario has run various businesses in the technology industry including sectors such as
networking, enterprise software, telecommunications and healthcare. He has had
over 35 years' experience in information technology and related markets working with
companies including Cisco Systems, Siemens, Juniper Networks and Amdocs. He
established a number of businesses since 1998 which have been involved in the
development of many technology projects for the telecommunications, healthcare and
utility industries. Mario founded Progility PLC which became public on the UK AIM
Index. Mario is currently Managing Director APJC for Big Swithch Networks Inc. His
technology experience includes networking/cloud, security solutions, GEO location
systems, voice, telecommunications, encryption technologies and wireless systems.
As a director of ASK Solutions Victoria Pty Ltd, Mario facilitated a number of
significant fund raising events for the Childrens Cancer Institute of Australia (CCIA) to
assist research projects into childhood cancers.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Chairman of the Remuneration and Nomination Committee
85,000 ordinary shares
None
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships in all
other types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships in all other types of entities, unless otherwise stated.
Company secretary
Craig Sowden is the Company Secretary and also the Chief Financial Officer of the company. Craig has over 20 years of
experience of financial and commercial experience in various listed and unlisted corporations across a diverse range of
industries. Craig joined TZ as Chief Financial Officer in October 2016 and was appointed Company Secretary in
September 2017.
9
TZ Limited
Directors' report
30 June 2019
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each director were:
Full Board
Audit and Risk Committee
Remuneration and
Nomination Committee
Attended
Held
Attended
Held
Attended
Held
Graham Lenzner
John Wilson
Thierry Denis
Mario Vecchio
Mark Bouris
11
12
12
11
3
12
12
12
12
5
2
2
2
1
1
2
2
2
2
1
2
3
2
3
2
3
3
3
3
2
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and key management personnel remuneration
arrangements for the consolidated entity and the company, in accordance with the requirements of the Corporations Act
2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's and company's executive reward framework is to ensure reward for performance
is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of
strategic objectives and the creation of value for shareholders, and conforms with the market best practice for delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
set competitive remuneration packages to attract and retain high calibre employees;
link executive rewards to shareholder value creation; and
establish appropriate demanding performance hurdles for variable executive remuneration.
The Board reviews and is responsible for the consolidated entity’s remuneration policies, procedures and practices. A
Remuneration and Nomination Committee is responsible for the remuneration policies of the consolidated entity.
The consolidated entity established a TZ Employee Incentive Scheme ('TZEIS') in 2009 to attract, retain, motivate and
reward senior executives and directors (including non-executive directors) of the company (collectively the 'Participants') by
issuing options to the Participants to allow the Participants to acquire fully paid ordinary class shares in the company upon
exercising the options. The exercise of each option entitles the holder of that option to acquire one fully paid ordinary class
share in the capital of the company.
Under the TZEIS, the number of options that may be issued to a Participant and the performance criteria and hurdles to be
met prior to the issue or exercise of such options is to be set by the board of directors of the company.
At the 2018 Annual General Meeting, the shareholders re-approved the TZEIS. Subsequent to the financial year ended 30
June 2019 in July 2019, 2,901,000 options were granted to the directors and executives as follows:
●
●
●
120,000 options were granted to each of the Non-Executive Directors
495,000 options were granted to each of the Managing Director
2,046,000 options were granted to the senior executives
10
TZ Limited
Directors' report
30 June 2019
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the
directors. Non-executive directors' fees and payments are reviewed annually by the Board. The Board considers advice
from shareholders, and takes into account the fees paid to non–executive directors of comparable companies, when
undertaking the annual review process. Non-executive directors do not receive share options or other incentives.
ASX listing rules require that the aggregate non-executive directors remuneration shall be determined periodically by a
general meeting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which
it is apportioned amongst directors is reviewed annually. The most recent determination was at the AGM held on 30
November 2006, where the shareholders approved an aggregate remuneration of $500,000.
Executive remuneration
The consolidated entity and company aims to reward executives with a level and mix of remuneration based on their
position and responsibility, which is both fixed and variable.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board, based on individual and business unit performance, the overall performance of the consolidated entity and
comparable market remunerations.
Executives can receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and adds additional value for the
executive.
The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of those
executives in charge of meeting those targets. STI payments are granted to executives based on specific annual targets
and key performance indicators ('KPI') being achieved. KPI’s can include profit contribution, customer satisfaction,
leadership contribution and product management.
The long-term incentives ('LTI') includes long service leave and share-based payments. As noted above, a Director and
Executive Equity Plan has been set up to reward executives based on long term incentive measures in the form of options
and rights. These include increase in shareholders' value relative to the entire market and the increase compared to the
consolidated entity's direct competitors.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Executives and other
employees can be issued with options and rights to acquire shares in the company. The number and the terms of the
options and rights issued are determined by the directors after consideration of the employee's performance and their
ability to contribute to the achievement of the consolidated entity's objectives. Refer to the additional information section of
the remuneration report for details of the last five years earnings and total shareholders return ('TSR').
Voting and comments made at the company's 2018 Annual General Meeting ('AGM')
At the last AGM 56.4% of the shareholders voted to adopt the remuneration report for the year ended 30 June 2018. The
company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
The key management personnel of the consolidated entity consisted of the directors of TZ Limited and the following
persons:
●
●
●
Brian Leary - President of Telezygology Inc.
Adam Forsyth - Chief Technical Officer of TZ Limited
Craig Sowden - Chief Financial Officer of TZ Limited
11
TZ Limited
Directors' report
30 June 2019
2019
Non-Executive Directors:
G Lenzner
T Denis
M Vecchio
M Bouris*
Executive Directors:
J Wilson
Other Key Management
Personnel:
B Leary
A Forsyth
C Sowden
2018
Non-Executive Directors:
M Bouris
G Lenzner*
T Denis*
M Vecchio*
P Casey *
Executive Directors:
J Wilson*/**
K Ting*
Other Key Management
Personnel:
W Leong*
A Forsyth
C Sowden
Short-term benefits
Cash salary
and fees Other
$
$
Bonus
$
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Super-
annuation
$
Employee
leave
$
Options
$
68,493
68,493
68,493
70,228
-
-
-
-
-
-
-
-
6,507
6,507
6,507
-
450,000
53,077
-
25,000
209,628
220,321
250,000
1,405,656
8,543
-
673
62,293
-
-
-
-
2,911
21,177
23,631
92,240
-
-
-
-
-
-
-
-
-
Short-term benefits
Cash salary
and fees Other
$
$
Bonus
$
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Super-
annuation
$
Employee
leave
$
Options
$
245,506
55,585
11,416
11,416
40,153
850
-
-
-
-
-
-
-
-
-
-
5,281
1,084
1,084
-
365,192
78,530
-
2,067
50,000
-
20,833
-
115,680
145,313
230,000
1,298,791
9,506
-
-
12,423
-
-
-
50,000
4,489
18,406
21,850
73,027
-
-
-
-
-
-
-
-
-
-
-
Total
$
-
-
-
-
75,000
75,000
75,000
70,228
-
528,077
221,082
-
241,498
-
-
274,304
- 1,560,189
Total
$
246,356
60,866
12,500
12,500
40,153
436,025
80,597
-
-
-
-
-
-
-
129,675
-
163,719
-
-
251,850
- 1,434,241
*
Represents remuneration from date of appointment and/or to date of resignation.
*
**
Represents remuneration from date of appointment and/or to date of resignation.
Bonus represents a discretionary cash bonus awarded on 1 August 2018 in respect of services performed during the
year ended 30 June 2017. The bonus was paid to John Wilson’s consulting company. Payment of the bonus was
subject to achievement of deliverables including securing of strategic customer relationships, conversion of targeted
sales opportunities and contracts in line with Board expectations and delivering on defined operational objectives set
by the Board. No share of the bonus was forfeited.
12
TZ Limited
Directors' report
30 June 2019
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
G Lenzner
T Denis
M Vecchio
P Casey
M Bouris
Executive Directors:
J Wilson
K Ting
Other Key Management
Personnel:
B Leary
Adam Forsyth
C Sowden
W Leong
Fixed remuneration
2018
2019
At risk - STI
At risk - LTI
2019
2018
2019
2018
100%
100%
100%
-
-
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
-
-
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
John Wilson
Managing Director and Chief Executive Office
8 September 2017
Three years
Base salary of $450,000. Notice period is 12 months in first year, 9 months in second
year and 6 months in the third year.
Brian Leary
President of Telezygology Inc
1 October 2018
2 years
Base salary of USD$200,000 and notice period of 3 months
Adam Forsyth
Chief Technical Officer
2 May 2016
No fixed term
Base salary of AU$225,000 and notice period of 1 month
Craig Sowden
Chief Financial Officer
10 October 2016
No fixed term
Base salary of AU$250,000 and notice period 2 months
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2019.
13
TZ Limited
Directors' report
30 June 2019
Options
There were no options over ordinary shares issued to directors and other key management personnel as part of
compensation that were outstanding as at 30 June 2019.
There were no options over ordinary shares granted to or vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2019.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2019 are summarised below:
2019
$
2018
$
2017
$
2016
$
2015
$
Sales revenue
Adjusted EBITDA *
Loss after income tax
17,430,926 17,388,505 21,507,189 20,785,385 15,129,251
(4,869,814)
(6,436,018)
(2,636,165)
(11,687,882)
(2,948,311)
(6,479,240)
(5,278,049)
(7,033,966)
(3,480,093)
(4,359,688)
*
Earnings before interest, tax, depreciation, amortisation and other non-operating items
The factors that are considered to affect TSR are summarised below:
2019
2018
2017
2016
2015
Share price at financial year end ($)
Basic earnings per share (cents per share)
0.09
(6.18)
0.17
(18.45)
0.02
(12.86)
0.10
(15.10)
0.09
(15.70)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
Mark Bouris
Graham Lenzner
Thierry Denis
Mario Vecchio
John Wilson
Craig Sowden
Adam Forsyth
Balance at
the start of
the year
Additions
Disposals
other*
Balance at
the end of
the year
310,469
600,000
200,000
85,000
8,230
3,500
13,230
1,220,429
-
-
-
-
-
-
3,500
3,500
-
-
-
-
-
-
-
-
(310,469)
-
-
-
-
-
-
(310,469)
-
600,000
200,000
85,000
8,230
3,500
16,730
913,460
*
Other represents no longer being designated as a KMP, not necessarily a disposal of holding.
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the consolidated entity, including their personally related parties, is set out
below:
Options over ordinary shares
Mark Bouris
Balance at
the start of
the year
Consolidation
Forfeited/
Expired
other*
Balance at
the end of
the year
500,000
500,000
-
-
-
-
(500,000)
(500,000)
-
-
14
TZ Limited
Directors' report
30 June 2019
*
Forfeited/other may represent no longer being designated as a KMP. It does not necessarily represent options that
have been forfeited.
No options were granted or exercised during the year ended 30 June 2019.
Other transactions with key management personnel and their related parties
During the year ended 30 June 2019 the consolidated entity incurred the following expenses from transactions with key
management personnel and their related parties:
●
●
Rent and serviced office expenditure, administration fees and storage costs of $67,829 (2018: $184,949) was paid to
YBR Services Pty Limited, a director related entity in which Mark Bouris is a director. Mr Bouris resigned as a
Director of TZ Limited on 20 November 2018. Therefore the amount for the financial year ended 30 June 2019
represents expenses for the period from 1 July 2018 to 20 November 2018.
Broker fees of $nil (2018: $13,436) were paid for insurance policies arranged by Yellow Brick Road Wealth
Management Pty Limited (formerly YBR General Insurance Brokers Pty Limited), a director related entity in which
Mark Bouris is a director.
As at the 30 June 2019 the consolidated entity has the following payables with key management personnel and their
related parties:
●
$nil (2018: $47,289) payable to YBR Services Pty Limited, a director related entity in which Mark Bouris is a director
for rent, serviced office expenditure and rental bond. Mr Bouris resigned as a Director of TZ Limited on 20 November
2018. Therefore YBR Services Pty Limited is no longer considered a related party at 30 June 2019.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of TZ Limited under option at the date of this report are as follows:
Grant date
15 January 2014
6 August 2019
6 August 2019
6 August 2019
Expiry date
30 June 2020
31 August 2024
31 August 2025
31 August 2026
Exercise
price
Number
under option
$6.00
$0.25
$0.40
$0.45
500,000
967,000
967,000
967,000
3,401,000
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of TZ Limited issued on the exercise of options during the year ended 30 June 2019 and up
to the date of this report.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The 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.
15
TZ Limited
Directors' report
30 June 2019
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to 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 part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 25 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
Officers of the company who are former partners of Grant Thornton
There are no officers of the company who are former partners of Grant Thornton.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Grant Thornton continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
John Wilson
Managing Director
28 August 2019
Sydney
16
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of TZ Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of TZ Limited
for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
S M Coulton
Partner – Audit & Assurance
Sydney, 28 August 2019
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
17
TZ Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Other income
Interest income
Expenses
Raw materials and consumables used
Employee benefits expense
Occupancy expense
Depreciation and amortisation expense
Impairment of assets
Communications expense
Professional and corporate services
Travel and accommodation expense
Net foreign currency exchange gains
Other expenses
Finance costs
Loss before income tax expense
Income tax expense
Note
Consolidated
2019
$
2018
$
4
5
6
6
17,430,926 17,388,505
59,436
431
166,895
9,939
(8,939,309)
(8,665,242)
(569,344)
(315,086)
-
(138,356)
(759,874)
(771,331)
70,503
(1,197,502)
(549,725)
(8,503,340)
(7,873,047)
(573,107)
(1,338,342)
(7,411,159)
(154,980)
(868,190)
(668,445)
46,153
(1,596,609)
(285,450)
(4,344,473)
(11,661,177)
7
(15,215)
(26,705)
Loss after income tax expense for the year attributable to the owners of TZ
Limited
(4,359,688)
(11,687,882)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of TZ
Limited
(665,428)
(113,804)
(665,428)
(113,804)
(5,025,116)
(11,801,686)
Cents
Cents
Basic earnings per share
Diluted earnings per share
32
32
(6.18)
(6.18)
(18.45)
(18.45)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
18
TZ Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets, accrued revenue and work in progress
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Reserves
Accumulated losses
Total equity/(deficiency)
Note
Consolidated
2019
$
2018
$
8
9
10
11
12
13
14
535,269
3,316,171
563,779
1,810,335
467,497
1,002,682
4,522,821
3,454,325
1,278,896
365,026
6,693,051 10,623,750
371,079
1,213,163
1,584,242
381,473
626,422
1,007,895
8,277,293 11,631,645
15
16
17
4,546,131
1,611,830
493,816
6,651,777
5,290,744
841,498
521,219
6,653,461
18
8,000,000
8,000,000
4,000,000
4,000,000
14,651,777 10,653,461
(6,374,484)
978,184
19
20
210,400,125 210,400,125
(3,723,340)
(212,385,841) (205,698,601)
(4,388,768)
(6,374,484)
978,184
The above statement of financial position should be read in conjunction with the accompanying notes
19
TZ Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total equity
$
204,951,076
(3,609,536) (194,010,719)
7,330,821
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(113,804)
(11,687,882)
-
(11,687,882)
(113,804)
(113,804)
(11,687,882)
(11,801,686)
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 19)
5,449,049
-
-
5,449,049
Balance at 30 June 2018
210,400,125
(3,723,340) (205,698,601)
978,184
Consolidated
Balance at 1 July 2018
Issued
capital
$
Reserves
$
Accumulated
losses
$
Total
deficiency in
equity
$
210,400,125
(3,723,340) (205,698,601)
978,184
Adjustment on adoption of AASB 15 (note 1)
-
-
(2,327,552)
(2,327,552)
Balance at 1 July 2018 - restated
210,400,125
(3,723,340) (208,026,153)
(1,349,368)
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
(665,428)
(4,359,688)
-
(4,359,688)
(665,428)
(665,428)
(4,359,688)
(5,025,116)
Balance at 30 June 2019
210,400,125
(4,388,768) (212,385,841)
(6,374,484)
The above statement of changes in equity should be read in conjunction with the accompanying notes
20
TZ Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2019
$
2018
$
20,030,338 16,218,123
(19,480,374)
9,939
(260,450)
(26,705)
(23,227,292)
431
(461,938)
(15,215)
Net cash used in operating activities
31
(3,673,676)
(3,539,467)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of intangibles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Transaction costs on shares issued
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
13
14
(153,221)
(654,056)
-
(121,712)
(1,528,644)
60,000
(807,277)
(1,590,356)
19
-
-
4,500,000
(500,000)
5,544,000
(94,875)
1,000,000
(1,000,000)
4,000,000
5,449,125
(480,953)
1,002,682
13,540
319,302
669,004
14,376
Cash and cash equivalents at the end of the financial year
8
535,269
1,002,682
The above statement of cash flows should be read in conjunction with the accompanying notes
21
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 1 July 2018. The standard introduced new classification and
measurement models for financial assets. A financial asset shall be measured at amortised cost if it is held within a
business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates
and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive
income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows
which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value.
All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or
contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these
requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the
effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the
standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI
(unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more
closely align the accounting treatment with the risk management activities of the entity. New impairment requirements use
an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method
unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime
ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime
expected loss allowance is available.
AASB 15 Revenue from Contracts with Customers
The consolidated entity has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for
revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of
promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition
model with a measurement approach that is based on an allocation of the transaction price. This is described further in the
accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue.
Contracts with customers are presented in an entity's statement of financial position as a contract liability, a contract asset,
or a receivable, depending on the relationship between the entity's performance and the customer's payment. Customer
acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over
the contract period.
Impact of adoption
AASB 9 and AASB 15 were adopted using the modified retrospective approach and as such comparatives have not been
restated. The impact of adoption on opening accumulated losses as at 1 July 2018 was as follows:
Accumulated loss as reported in the Annual report for the year ended 30 June 2018
Contract assets (AASB 15)
Accumulated losses as at 1 July 2018 on adoption of AASB 9 and AASB 15
1 July 2018
$
(205,698,601)
(2,327,552)
(208,026,153)
22
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
The adoption of these standards also resulted in the following reclassifications:
●
●
●
●
interest income is now shown on the face of profit or loss;
provision for impairment of receivables is now reclassified as allowance for expected credit loss;
accrued revenue and work in progress now reclassified as contract asset; and
customer deposits and unearned income now reclassified as contract liabilities.
The tables below highlight the impact of AASB 15 on the consolidated entity's statement of profit or loss and other
comprehensive income and the statement of financial position for the year ended 30 June 2019. The adoption of AASB 15
did not have a material impact on the consolidated entity’s statement of cash flows.
Statement of Profit or Loss and Other Comprehensive Income (Extract)
Revenue
Raw materials and consumables used
Employee benefits expense
Other expenses
Loss before income tax
Income tax expenses
Amounts
under AASB
15
$
Amounts
under AASB
118 and 111
$
Adjustments
$
17,430,926
(8,939,309)
(8,665,242)
(1,197,502)
(3,367,681) 14,063,245
(7,557,094)
(1,382,215)
(8,665,242)
-
(1,197,502)
-
(4,344,473)
(15,215)
(1,985,465)
-
(6,329,938)
(15,215)
Loss after income tax expenses
(4,359,688)
(1,985,465)
(6,345,153)
Total comprehensive loss for the year
(5,025,116)
(1,985,465)
(7,010,581)
Basic earnings per share (cents)
Diluted earnings per share (cents)
Statement of Financial Position (Extract)
Current assets
Trade and other receivables
Contract assets, accrued revenue and work in progress
Current liabilities
Trade and other payables
Contract liabilities
Net liabilities
Equity
Accumulated losses
Total equity/(deficiency)
(6.18)
(6.18)
(2.81)
(2.81)
(8.99)
(8.99)
Amounts
under AASB
15
$
Amounts
under AASB
118 and 111
$
Adjustments
$
3,316,171
563,779
-
342,086
3,316,171
905,865
4,546,131
1,611,830
-
-
4,546,131
1,611,830
(6,374,484)
342,086
(6,032,398)
(212,385,841)
(6,374,484)
342,086
342,086
(212,043,755)
(6,032,398)
23
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Going concern
These financial statements have been prepared on a going concern basis, which assumes continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
While the consolidated entity incurred losses for the financial year ended 30 June 2019, in assessing the appropriateness
of the going concern concept the following factors have been taken into consideration by the Directors:
●
The Directors are of the view the consolidated entity is on track to meet revenue targets for the 30 June 2020 financial
year. It is expected that, as the monthly revenue levels increase, the consolidated entity’s operating business units will
be in a position to contribute positive cash to the bottom line;
The Directors maintain a positive outlook on achieving profitability and positive cash flows in the 30 June 2020
financial year based on the strength of the sales pipeline; and
Availability to the consolidated entity of additional borrowings. The debenture facility with First Samuel Limited was
increased by $2 million in July 2019.
●
●
In making their assessment, the Directors acknowledge that the ability of the consolidated entity to continue as a going
concern is dependent on meeting sales and profitability forecasts, the generation of positive cash flows, the continued
support of shareholders and lenders and the raising of additional share capital as and when required in the future.
The financial statements have been prepared on the going concern basis for the above reasons. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets or to the
amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going
concern.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative financial
instruments at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity
only. Supplementary information about the parent entity is disclosed in note 29.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of TZ Limited ('company' or
'parent entity') as at 30 June 2019 and the results of all subsidiaries for the year then ended. TZ Limited and its
subsidiaries together are referred to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the consolidated entity.
24
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is TZ Limited's functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated
entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money; allocates the
transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a
manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable
consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are recognised as a refund liability.
Sale of software and hardware
Sales of software and hardware is recognised at the point of sale, which is where the customer has taken delivery of the
goods.
25
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Rendering of installation and commissioning services
Rendering of installation and commissioning services revenue is recognised at the point in time when software and
hardware has been installed.
Rendering of maintenance services
Revenue from maintenance services is typically paid in advance on an annual, quarterly or monthly basis. Revenue is
recognised over the period the customer support/hosting relates to (the coverage period). Fees received in advance of the
performance of services are deferred and recognised as contract liabilities.
Rendering of professional services
Rendering of professional services revenue is recognised when the service to the customer is completed.
Revenue recognition policy prior to the adoption of AASB 15 on 1 July 2018
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sales of non-project related software and hardware, revenue was recognised at the point of sale, which was when the
customer had taken delivery of the goods, the risks and rewards are transferred to the customer and there was a valid
sales contract. Amounts disclosed as revenue were net of sales returns and trade discounts.
Project revenue
Project revenues relating to the supply and installation of hardware and software was recognised by reference to the stage
of completion of the contracts.
Stage of completion was measured by reference to costs incurred to date as a percentage of costs for each contract.
Where the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the recoverable costs
incurred to date.
Rendering of maintenance services
Revenue from maintenance services is typically paid in advance on an annual, quarterly or monthly basis. Revenue was
recognised over the period the customer support/hosting relates to (the coverage period). Fees received in advance of the
performance of services were deferred and recognised as unearned income.
Rendering of professional services
Rendering of professional services revenue was recognised when the service to the customer was completed.
Interest revenue
Interest revenue is recognised as it 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.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
26
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Reclassification
Comparative figures in the statement of profit or loss and other comprehensive income and in the statement of financial
position have been reclassified to conform to the current year presentation.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the entity's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the entity's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade 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. Trade receivables are generally due for settlement within
30 days.
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.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Contract assets
Contract assets are recognised when the consolidated entity has transferred goods or services to the customer but where
the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial
assets for impairment purposes.
Inventories
Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of
purchase and delivery costs, net of rebates and discounts received or receivable.
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.
27
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured
at either amortised cost or fair value depending on their classification. Classification is determined based on both the
business model within which such assets are held and the contractual cash flow characteristics of the financial asset
unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it's carrying value is written off.
Impairment of financial assets
The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either
measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance
depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial
instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable
information that is available, without undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected
credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable
to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where
it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected
credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present
value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Office equipment
20 - 33%
20%
15 - 35%
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity.
Leases
Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are charged
as expenses in the period in which they are incurred. Lease incentives under operating leases are recognised as a liability
and amortised on a straight-line basis over the life of the lease term.
Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an
asset at the beginning of the lease term and amortised on a straight line basis over the expected economic life. A
corresponding liability is also established and each lease payment is allocated between such liability and interest expense.
28
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Intangible assets
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 derecognition 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.
Patents
Expenditure directly attributable to the registration of patents is capitalised at cost and is amortised over the useful life of 15
years.
Research and development costs
Research costs are expensed as incurred. Development expenditure incurred on an individual project is capitalised if the
product or service is technically feasible, adequate resources are available to complete the project, it is probable that future
economic benefits will be generated and expenditure attributable to the project can be measured reliably. Expenditure
capitalised comprises costs of materials, services, direct labour and an appropriate portion of overheads.
Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment losses, and are
amortised over the period of expected future sales from the related projects which vary from 3 to 5 years.
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.
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.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
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.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
29
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries and other employee benefits expected to be settled within 12 months of the reporting date
are measured at the amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
Employee benefits not expected to be settled within 12 months of the reporting date are measured at the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration
is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to
maturity and currency that match, as closely as possible.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions is 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, expected price volatility of the underlying share, the expected dividend yield, 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 is recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification had not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is
treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, they are treated as if they had vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award are treated as if they were a modification.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
30
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of TZ Limited, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
31
TZ Limited
Notes to the financial statements
30 June 2019
Note 1. Significant accounting policies (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early 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 2019.
The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). 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 will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases.
The consolidated entity has elected to apply the modified retrospective approach as permitted by AASB 16. The cumulative
effect of adopting AASB 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 July 2019
with no restatement of comparative information.
The consolidated entity has chosen to measure the existing operating leases at the present value of the remaining lease
payments, discounted using the consolidated entity's incremental borrowing rate at the date of initial application.
Based on the elected transition method, the consolidated entity has assessed the estimated impact of AASB 16 on the
consolidated statement of financial position on 1 July 2019 as follows:
Recognition of right-of-use assets on adoption of AASB 16
Recognition of lease liability on adoption of AASB 16
Net impact on retained earnings at 1 July 2019
1 July 2019
$
518,461
(518,461)
-
The effect on NPAT is not expected to be significant. However, EBITDA will be positively affected because the operating
lease expense will be replaced by depreciation and interest charges, which are recorded below the EBITDA line.
32
TZ Limited
Notes to the financial statements
30 June 2019
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Revenue from contracts with customers
Determining when to recognise revenues from maintenance services recognised over time is dependent on the extent to
which the performance obligations have been satisfied. For maintenance service agreements, revenue recognition requires
an understanding of the customer’s use of the related products, historical experience and knowledge of the market.
With regard to the prior year, recognised amounts of contract revenues and related receivables reflect management’s best
estimate of each contract’s outcome and stage of completion. This includes the assessment of the profitability of ongoing
contracts and the order backlog. For more complex contracts in particular, costs to complete and contract profitability are
subject to significant estimation uncertainty.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the
lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected
credit loss rate for each group. These assumptions include recent sales experience and historical collection rates.
Capitalised development costs
Distinguishing the research and development phases of a new project and determining whether the recognition
requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management
monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised
costs may be impaired.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that
may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves
fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and
assumptions.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Note 3. Operating segments
Identification of reportable operating segments
The consolidated entity operates in four operating segments being Australia, United States of America ('USA'), Europe
Middle East and Africa ('EMEA') and Asia. The principal activities of each operating segment are identical, being the sale of
hardware and software products. These segments are based on the internal reports that are reviewed and used by the
Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources.
Other segments represent the activities of the corporate headquarters.
The information reported to the CODM, on at least a monthly basis, is profit or loss and adjusted earnings before interest,
tax, depreciation and amortisation and other one off-items ('Adjusted EBITDA').
Intersegment transactions
Transactions between segments are carried out at arm’s length and are eliminated on consolidation.
33
TZ Limited
Notes to the financial statements
30 June 2019
Note 3. Operating segments (continued)
Intersegment receivables, payables and loans
Intersegment receivables, payables and loans are eliminated on consolidation.
Major customers
During the year ended 30 June 2019 1 customer (2018: 3 customers) each contributed more than 10% to the external
revenue of the consolidated entity. This 1 customer contributed 20% (2018: 3 customers contributed 46%) of the
consolidated entity's external revenue.
Operating segment information
Consolidated - 2019
Revenue
Sales to external customers
Interest
Total revenue
Adjusted EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Loss before income tax
expense
Income tax expense
Loss after income tax
expense
Consolidated - 2018
Revenue
Sales to external customers
Interest
Total revenue
Adjusted EBITDA
Depreciation and amortisation
Impairment of assets
Interest revenue
Finance costs
Loss before income tax
expense
Income tax expense
Loss after income tax
expense
Australia
$
USA
$
EMEA
$
Asia
$
Other
segments
$
Total
$
3,118,924
-
3,118,924
9,357,013
-
9,357,013
4,013,430
-
4,013,430
941,559
-
941,559
- 17,430,926
431
431
431 17,431,357
919,786
(813,253)
828,451
137,509
(4,552,586)
(3,480,093)
(315,086)
431
(549,725)
(4,344,473)
(15,215)
(4,359,688)
Australia
$
USA
$
EMEA
$
Asia
$
Other
segments
$
Total
$
3,323,479 10,145,630
-
3,323,479 10,145,630
-
3,004,866
-
3,004,866
914,530
-
914,530
- 17,388,505
9,939
9,939
9,939 17,398,444
966,797
755,006
763,905
98,761
(5,220,634)
(2,636,165)
(1,338,342)
(7,411,159)
9,939
(285,450)
(11,661,177)
(26,705)
(11,687,882)
All assets and liabilities, including taxes are not allocated to the operating segments as they are managed on an overall
group basis.
34
TZ Limited
Notes to the financial statements
30 June 2019
Note 3. Operating segments (continued)
Geographical information
Australia
United States of America
United Kingdom
Singapore
Note 4. Revenue
Geographical non-current
assets
2019
$
2018
$
1,426,290
155,945
1,129
878
353,518
651,223
1,672
1,482
1,584,242
1,007,895
Consolidated
2019
$
2018
$
Sale and service revenue
17,430,926 17,388,505
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major product lines
Sale of hardware and software
Installation and commissioning services
Maintenance and support services
Professional services
Timing of revenue recognition
Goods and services transferred at a point in time
Services transferred over time
Refer to note 3 for details of revenue disaggregated by geographical regions.
Note 5. Other income
Government grants
Royalties
Other income
35
Consolidated
2019
$
14,295,061
911,514
1,478,713
745,638
17,430,926
15,952,213
1,478,713
17,430,926
Consolidated
2019
$
2018
$
59,436
-
166,700
195
59,436
166,895
TZ Limited
Notes to the financial statements
30 June 2019
Note 6. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Office equipment
Total depreciation
Amortisation
Re-acquired right (Intevia Licence)
Patents
Development costs
Total amortisation
Total depreciation and amortisation
Impairment
Goodwill
Re-acquired right (Intevia Licence)
Patents
Development costs
Total impairment
Minimum lease payments
Defined contribution superannuation expense
Note 7. Income tax expense
Income tax expense
Current tax
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 27.5% (2018: 30%)
Current year tax losses not recognised
Difference in overseas tax rates/refunds
Income tax expense
The consolidated entity is in the process of determining its tax loss position to carry forward.
36
Consolidated
2019
$
2018
$
1,617
108,510
55,935
4,611
90,131
73,772
166,062
168,514
-
4,378
144,646
418,324
95,403
656,101
149,024
1,169,828
315,086
1,338,342
-
-
-
-
85,133
1,738,587
1,786,542
3,800,897
-
7,411,159
522,408
425,837
514,600
459,805
Consolidated
2019
$
2018
$
15,215
26,705
15,215
26,705
(4,344,473)
(11,661,177)
(1,194,730)
(3,498,353)
1,148,904
61,041
2,939,358
585,700
15,215
26,705
TZ Limited
Notes to the financial statements
30 June 2019
Note 8. Current assets - cash and cash equivalents
Cash and cash equivalents
Note 9. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses (2018: Provision for impairment of receivables)
Other receivables
Consolidated
2019
$
2018
$
535,269
1,002,682
Consolidated
2019
$
2018
$
3,216,063
(62,570)
3,153,493
4,395,850
(43,000)
4,352,850
162,678
169,971
3,316,171
4,522,821
Allowance for expected credit losses
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
0 to 3 months overdue
Movements in the allowance for expected credit losses are as follows:
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$
Allowance
for expected
credit losses
2019
$
-
6.97%
2,317,842
898,221
-
62,570
3,216,063
62,570
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Note 10. Current assets - contract assets, accrued revenue and work in progress
Contract assets
Accrued revenue
Work in progress
37
Consolidated
2019
$
2018
$
43,000
19,570
-
72,100
46,900
(76,000)
62,570
43,000
Consolidated
2019
$
2018
$
563,779
-
-
-
3,309,323
145,002
563,779
3,454,325
TZ Limited
Notes to the financial statements
30 June 2019
Note 10. Current assets - contract assets, accrued revenue and work in progress (continued)
Accrued revenue and work in progress have been reclassified to contract assets at 1 July 2018 following the adoption of
AASB 15 'Revenue from Contracts with Customers'. Refer to note 1 for further details.
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out
below:
Transfer accrued revenue and work-in-progress to contract assets on 1 July 2018
Adjustment to contract assets on adoption of AASB 15
Additions
Transfer to trade receivables
Closing balance
Consolidated
2019
$
3,454,325
(2,327,552)
563,779
(1,126,773)
563,779
Allowance for expected credit losses
The allowance for expected credit losses on contract assets for the year ended 30 June 2019 is $nil (2018: $nil).
Note 11. Current assets - inventories
Finished goods - at cost
Note 12. Current assets - other
Prepayments
Deferred expenses
Security deposits
Other deposits
Consolidated
2019
$
2018
$
1,810,335
1,278,896
Consolidated
2019
$
2018
$
210,061
74,103
62,920
120,413
100,195
101,972
62,920
99,939
467,497
365,026
38
TZ Limited
Notes to the financial statements
30 June 2019
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2019
$
2018
$
418,955
(417,586)
1,369
418,955
(415,969)
2,986
2,033,465
(1,762,212)
271,253
1,939,892
(1,653,702)
286,190
814,799
(716,342)
98,457
752,704
(660,407)
92,297
371,079
381,473
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Exchange differences
Write off of assets
Depreciation expense
Balance at 30 June 2018
Additions
Exchange differences
Depreciation expense
Balance at 30 June 2019
Plant and
Leasehold
improvements equipment
Office
equipment
$
$
$
7,597
-
-
-
-
(4,611)
2,986
-
-
(1,617)
260,752
117,312
(1,753)
10
-
(90,131)
286,190
93,573
-
(108,510)
181,318
4,401
(19,921)
931
(660)
(73,772)
92,297
59,648
2,447
(55,935)
Total
$
449,667
121,713
(21,674)
941
(660)
(168,514)
381,473
153,221
2,447
(166,062)
1,369
271,253
98,457
371,079
39
TZ Limited
Notes to the financial statements
30 June 2019
Note 14. Non-current assets - intangibles
Re-acquired right (Intevia Licence) - at cost
Less: Accumulated amortisation
Less: Impairment
Patents - at cost
Less: Accumulated amortisation
Less: Impairment
Development costs - at cost
Less: Accumulated amortisation
Less: Impairment
Other intangibles - at cost
Less: Accumulated amortisation
Less: Impairment
Consolidated
2019
$
2018
$
10,138,090 10,138,090
(8,035,887)
(2,102,203)
-
(8,035,887)
(2,102,203)
-
2,626,704
(753,358)
(1,786,542)
86,804
2,572,866
(748,980)
(1,786,542)
37,344
9,521,313
(3,893,954)
(4,501,000)
1,126,359
8,839,386
(3,749,308)
(4,501,000)
589,078
-
-
-
-
483,775
(226,645)
(257,130)
-
1,213,163
626,422
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2018
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2019
Goodwill
$
Re-acquired
right
$
Patents
$
Development
costs
$
Total
$
145,133
-
(60,000)
-
(85,133)
-
2,175,550
-
-
(18,639)
(1,738,587)
(418,324)
1,865,869
67,725
-
(14,305)
(1,786,542)
(95,403)
3,587,998
1,460,919
-
(2,841)
(3,800,897)
(656,101)
7,774,550
1,528,644
(60,000)
(35,785)
(7,411,159)
(1,169,828)
-
-
-
-
-
-
-
-
-
-
37,344
50,875
2,963
(4,378)
589,078
603,181
78,746
(144,646)
626,422
654,056
81,709
(149,024)
86,804
1,126,359
1,213,163
Impairment of goodwill during the year ended 30 June 2018
As a consequence of the sale of the Infinity Design business during the financial year ended 30 June 2018, the $85,133 of
goodwill remaining within the Infinity Design CGU after the disposal was written off.
Impairment of other intangible assets during the years ended 30 June 2019 and 30 June 2018
For the purpose of impairment testing of re-acquired rights and other intangibles the following CGUs are determined to be
those that benefit from the core patented technology and product development costs. The net carrying values of intangible
assets (excluding goodwill) allocated to those CGUs is as follows:
40
TZ Limited
Notes to the financial statements
30 June 2019
Note 14. Non-current assets - intangibles (continued)
Package Asset Delivery - PAD
Consolidated
2019
$
2018
$
1,213,163
626,422
Impairment test performed at 30 June 2019
During the year ended 30 June 2019, the recoverable value of the CGU has now been assessed on a fair value basis (less
likely costs of disposal). The fair value was determined by management, through the assistance of a third party valuations
specialists.
Impairment test results
Based on the testing performed, the recoverable amount of the CGU exceeded the carrying value and no impairment
existed at 30 June 2019.
Impairment test performed at 30 June 2018
During the year ended 30 June 2018, the recoverable amounts of the CGU's were determined based on value-in-use
calculations covering a detailed five year forecast and followed by an extrapolation of expected cash flows using the growth
rates noted below. Management consider the CGU's operate in the global markets for IXP and PAD products. The growth
rates reflect conservative estimates for each CGU noting current contracts and expansion of the same and general market
growth over the forecast period.
The key assumptions used are as follows:
IXP
Revenue growth (average) 17%
Margins (average) 48%
Discount rate 14%
PAD
Revenue growth (average) 14%
Margins (average) 53%
Discount rate 14%
Impairment test results - IXP CGU
Based on the testing performed an impairment of $425,000 was recognised for internally developed hardware & software
and re-acquired rights that support the IXP CGU. The recoverable amount for the IXP CGU was determined on a value-in-
use basis. The directors considered the requirements of AASB 136 “Impairment of Assets” and the irregular nature of
project-based IXP revenues and have assessed that the carrying value exceeded the recoverable amount. The impairment
charge represents the excess carrying value of the IXP assets at 31 December 2017, the date at which the respective
assets were fully impaired.
Impairment test results - PAD CGU
Based on the testing performed an impairment of $6,901,000 was recognized for internally developed hardware & software
and reacquired rights that support the PAD CGU. The recoverable amount for the PAD CGU was determined on a value-
in-use basis. The directors considered the requirements of AASB 136 “Impairment of Assets” and the irregular nature of
project-based PAD revenues and assessed that the carrying value exceeded the recoverable amount. The impairment
charge represents the excess carrying value of the PAD assets at 31 December 2017, the date at which the respective
assets were fully impaired. The net carrying value of the PAD CGU at 30 June 2018, represents all expenditure capitalised
from 1 January 2018 to 30 June 2018.
Impairment test sensitivity
A reasonable possible change in the key assumptions used to determine the recoverable amount of the CGU would not
cause the remaining carrying value of the CGU to exceed its recoverable amount.
41
TZ Limited
Notes to the financial statements
30 June 2019
Note 15. Current liabilities - trade and other payables
Trade payables
Employee expense payables
Goods and services tax payable
Other payables
Refer to note 22 for further information on financial instruments.
Note 16. Current liabilities - contract liabilities
Contract liabilities
Customer deposits
Unearned income
Consolidated
2019
$
2018
$
3,105,185
191,685
86,400
1,162,861
3,649,214
305,524
409
1,335,597
4,546,131
5,290,744
Consolidated
2019
$
2018
$
1,611,830
-
-
-
206,988
634,510
1,611,830
841,498
Reconciliation
Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out
below:
Transfer deferred revenue and customer deposits to contract liabilities on 1 July 2018
Payments received in advance
Transfer to revenue - included in the opening balance
Transfer to revenue - other balances
Consolidated
2019
$
841,498
1,972,659
(841,498)
(360,829)
1,611,830
Unsatisfied performance obligations
The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of
the reporting period was $1,611,830 as at 30 June 2019 ($841,498 as at 30 June 2018) and is expected to be recognised
as revenue in future periods as follows:
Within 6 months
Greater than 6 months
Consolidated
2019
$
1,323,880
287,950
1,611,830
Customer deposits and unearned income have been reclassified to contract liabilities at 1 July 2018 following the adoption
of AASB 15 'Revenue from Contracts with Customers'. Refer to note 1 for further details.
42
TZ Limited
Notes to the financial statements
30 June 2019
Note 17. Current liabilities - provisions
Employee benefits
Note 18. Non-current liabilities - borrowings
Loan - First Samuel
Refer to note 22 for further information on financial instruments.
Consolidated
2019
$
2018
$
493,816
521,219
Consolidated
2019
$
2018
$
8,000,000
4,000,000
The loan comprises of a facility from First Samuel Limited totalling $9,000,000 (2018: $5,000,000). The facility comprises of
two revolving tranches.
First tranche
The first debenture deed comprises of a $3,000,000 facility. The interest rate applicable to the facility is 90 day BBSW plus
6% per annum, payable 6 monthly in arrears. The first debenture deed matures on 31 July 2021.
Second tranche
The second debenture deed comprises of a $6,000,000 facility. The interest rate applicable to the facility is 90 day BBSW
plus 9% per annum, payable 6 monthly in arrears. The second debenture deed matures on 31 July 2021.
On 30 July 2018, the consolidated entity increased the facility with First Samuel Limited by an additional $2,000,000
providing the consolidated entity with a total secured loan facility of up to $11,000,000. The increase comprises two
revolving tranches of $1,000,000 which can be repaid and redrawn if repayments are made before the end of the term. In
total, $7,000,000 of the total Loan Facility may be redrawn if repayments are made before the end of the term. The maturity
date of the increased facility remains the same, 31 July 2021.
The loan is secured over the assets of the consolidated entity.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Loan - First Samuel
Used at the reporting date
Loan - First Samuel
Unused at the reporting date
Loan - First Samuel
Consolidated
2019
$
2018
$
9,000,000
5,000,000
8,000,000
4,000,000
1,000,000
1,000,000
43
TZ Limited
Notes to the financial statements
30 June 2019
Note 19. Equity - issued capital
Consolidated
2019
Shares
2018
Shares
2019
$
2018
$
Ordinary shares - fully paid
70,558,162 70,558,162 210,400,125 210,400,125
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Rights issue
Share consolidation (10 for 1)
Shares issued for rounding purposes
Less: share issue costs
1 July 2017
8 November 2017
14 December 2017
14 December 2017
503,983,352
201,593,707
(635,019,353)
456
-
204,951,000
5,544,000
-
-
(94,875)
$0.03
$0.00
$0.00
$0.00
Balance
Balance
30 June 2018
70,558,162
210,400,125
30 June 2019
70,558,162
210,400,125
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
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.
Share buy-back
There is no current on-market share buy-back.
Unquoted options
At 30 June 2019 there were 500,000 (2018: 1,000,000) options on issue. Each option entitles the holder to subscribe for
one fully paid share in the company at the exercise price per share at any time from the date of issue until expiry of the
options subject to various vesting dates.
Refer to note 33 for details of options issued subsequent to the financial year ended 30 June 2019.
Capital risk management
The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so
that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or company or invest in
growth was seen as value adding.
The capital risk management policy remains unchanged from the 30 June 2018 Annual Report.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
44
TZ Limited
Notes to the financial statements
30 June 2019
Note 20. Equity - reserves
Foreign currency reserve
Consolidated
2019
$
2018
$
(4,388,768)
(3,723,340)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Foreign currency translation
Balance at 30 June 2018
Foreign currency translation
Balance at 30 June 2019
Note 21. Equity - dividends
Foreign
currency
$
Total
$
(3,609,536)
(113,804)
(3,609,536)
(113,804)
(3,723,340)
(665,428)
(3,723,340)
(665,428)
(4,388,768)
(4,388,768)
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 22. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price
risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of
the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is
exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and ageing analysis for
credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and
appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
consolidated entity's operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign
currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
45
TZ Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
The consolidated entity's foreign exchange risk is managed to ensure sufficient funds are available to meet foreign
currency commitments in a timely and cost-effective manner. The consolidated entity will continually monitor this risk and
consider entering into forward foreign exchange, foreign currency swap and foreign currency option contracts if
appropriate.
Creditors and debtors as at 30 June 2019 were reviewed to assess currency risk at year end. The value of transactions
denominated in a currency other than the functional currency of the respective subsidiary was insignificant and therefore
the risk was determined as immaterial.
Price risk
The consolidated entity is not exposed to any significant price risk.
Interest rate risk
The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates
expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated entity to fair
value interest rate risk.
The consolidated entity invests surplus cash in term deposits with fixed returns. The Board makes investment decisions
after considering advice received from professional advisors.
The consolidated entity monitors its interest rate exposure continuously.
As at the reporting date, the consolidated entity had the following variable rate exposures:
Consolidated
Cash and cash equivalents
Loan - First Samuel
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
0.10%
9.72%
535,269
(8,000,000)
0.10%
7.30%
1,002,682
(4,000,000)
Net exposure to cash flow interest rate risk
(7,464,731)
(2,997,318)
An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below.
The consolidated entity has a net cash deficit totalling $7,464,731 (2018: net cash deficit $2,997,318). An official
increase/decrease in interest rates of one (2018: one) percentage point would have an adverse/favourable effect on profit
before tax of $74,647 (2018: adverse/favourable $29,973) per annum. The percentage change is based on the expected
volatility of interest rates using market data and analysts' forecasts.
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 consolidated entity has a strict code of credit, including obtaining agency credit information,
confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate
to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the
carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position
and notes to the financial statements. The consolidated entity does not hold any collateral.
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are
considered representative across all customers of the consolidated entity based on recent sales experience, historical
collection rates and forward-looking information that is available.
46
TZ Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
The consolidated entity has a concentration of credit risk exposure with 1 customer (2018: 3 customers), which as at 30
June 2019 owed the consolidated entity $650,539 (2018: $1,718,000) representing 20.2% (2018: 39.5%) of trade
receivables. Of this balance, $23,171 (2018: $187,000) was outside the customers' respective terms of trade, however
management is confident of collection and no impairment was made as at 30 June 2019. There are no guarantees against
these receivables but management closely monitors the receivable balance on a monthly basis and is in regular contact
with this customer to mitigate risk.
There is a concentration of credit risk for cash at bank and cash on deposit as most monies in Australia are held with one
financial institution, St George Bank.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Loan - First Samuel
Consolidated
2019
$
2018
$
1,000,000
1,000,000
On 30 July 2018, the consolidated entity increased the facility with First Samuel Limited by an additional $2,000,000
providing the consolidated entity with a total secured loan facility of up to $11,000,000. Refer to note 18 for further details.
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 - 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Loan - First Samuel
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
-
3,105,185
1,440,946
-
-
-
-
-
-
3,105,185
1,440,946
9.72%
747,850
5,293,981
747,850
747,850
8,063,516
8,063,516
-
9,559,216
- 14,105,347
47
TZ Limited
Notes to the financial statements
30 June 2019
Note 22. Financial instruments (continued)
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Loan - First Samuel
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
-
3,649,214
1,641,530
-
-
7.30%
292,000
5,582,744
4,175,000
4,175,000
-
-
-
-
-
-
-
-
3,649,214
1,641,530
4,467,000
9,757,744
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 23. Fair value measurement
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of
trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair
value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest
rate that is available for similar financial instruments.
Note 24. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated
entity is set out below:
Short-term employee benefits
Post-employment benefits
Consolidated
2019
$
2018
$
1,467,949
92,240
1,361,214
73,027
1,560,189
1,434,241
48
TZ Limited
Notes to the financial statements
30 June 2019
Note 25. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the
company, and its network firms:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Transfer pricing review
Corporate advisory
Independent tax advice and tax compliance
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Preparation of the tax return
Note 26. Contingent liabilities
Consolidated
2019
$
2018
$
202,647
180,000
9,500
29,912
27,250
-
-
76,300
66,662
76,300
269,309
256,300
31,978
11,883
500
-
32,478
11,883
The consolidated entity does not have any contingent liabilities at 30 June 2019 and 30 June 2018.
Note 27. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2019
$
2018
$
356,712
261,843
326,000
191,000
618,555
517,000
The consolidated entity leases various premises under non-cancellable operating leases expiring between 1 and 5 years.
All leases have annual CPI escalation clauses. The above commitments do not include commitments for any renewal
options on leases. Lease conditions do not impose any restrictions on the ability of TZ Limited and its subsidiaries from
borrowing further funds or paying dividends.
Note 28. Related party transactions
Parent entity
TZ Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 30.
49
TZ Limited
Notes to the financial statements
30 June 2019
Note 28. Related party transactions (continued)
Key management personnel
Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the
directors' report.
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Administration fees, storage and office rent paid to YBR Services Pty Limited*
Broker fees for insurance policies arranged by Yellow Brick Road Wealth Management Pty
Limited (formerly YBR General Insurance Brokers Pty Limited), a director related entity in
which Mark Bouris is a director.
Interest paid/(payable) to First Samuel Limited - an entity with significant influence
Consolidated
2019
$
2018
$
67,829
184,949
-
548,110
13,436
275,054
*
director related entity in which Mark Bouris is a director. Mr Bouris resigned as a Director of TZ Limited on 20
November 2018. Therefore the amount for the financial year ended 30 June 2019 represents expenses for the period
from 1 July 2018 to 20 November 2018.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
2019
$
2018
$
Current payables:
Rent, serviced office expenditure and remaining rental bond payable to YBR Services Pty
Limited*
Interest payable to First Samuel Limited - an entity with significant influence
-
87,937
47,289
25,092
*
A director related entity in which Mark Bouris is a director. Mr Bouris resigned as a Director of TZ Limited on 20
November 2018. Therefore, YBR Services Pty Limited is no longer considered a related party at 30 June 2019.
Loans to/from related parties
The following balances are outstanding at the reporting date in relation to loans with related parties:
Non-current borrowings:
Loan from First Samuel Limited - an entity with significant influence
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Consolidated
2019
$
2018
$
8,000,000
4,000,000
50
TZ Limited
Notes to the financial statements
30 June 2019
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity/(deficiency)
Parent
2019
$
2018
$
(7,207,512)
(11,217,433)
(7,207,512)
(11,217,433)
Parent
2019
$
2018
$
6,188,788
8,955,271
6,188,788
8,955,271
4,483,069
3,950,041
12,483,069
7,950,041
210,397,415 210,397,415
(216,691,696) (209,392,185)
(6,294,281)
1,005,230
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2019 and 30 June 2018.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1,
except for the following:
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
51
TZ Limited
Notes to the financial statements
30 June 2019
Note 30. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name
Telezygology, Inc.
PDT Holdings, Inc.
Product Development Technologies, Inc.
PDT Tooling, Inc.
TZI Australia Pty Limited
A.C.N. 156 637 704 Pty Ltd
TZI Singapore Pte Ltd
TZI UK Limited
Note 31. Cash flow information
Principal place of business /
Country of incorporation
United States of America
United States of America
United States of America
United States of America
Australia
Australia
Singapore
United Kingdom
Reconciliation of loss after income tax to net cash used in operating activities
Ownership interest
2018
2019
%
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Consolidated
2019
$
2018
$
Loss after income tax expense for the year
(4,359,688)
(11,687,882)
Adjustments for:
Depreciation and amortisation
Impairment of intangibles
Write off of property, plant and equipment
Net loss on disposal of property, plant and equipment
Foreign exchange differences
Interest accrued on borrowings
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in contract assets, accrued revenue and work in progress
Increase in inventories
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase in contract liabilities
Increase/(decrease) in employee benefits
Net cash used in operating activities
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2017
Balance at 30 June 2018
Net cash from financing activities
Balance at 30 June 2019
52
315,086
-
-
-
(763,124)
87,787
1,338,342
7,411,159
660
20,896
(96,382)
25,000
1,206,650
562,994
(531,439)
(102,471)
(832,400)
770,332
(27,403)
(120,549)
(1,645,916)
(579,550)
(158,369)
1,565,481
244,976
142,667
(3,673,676)
(3,539,467)
Loan - First
Samuel
$
4,000,000
4,000,000
4,000,000
8,000,000
TZ Limited
Notes to the financial statements
30 June 2019
Note 32. Earnings per share
Consolidated
2019
$
2018
$
Loss after income tax attributable to the owners of TZ Limited
(4,359,688)
(11,687,882)
Weighted average number of ordinary shares used in calculating basic earnings per share
70,558,162 63,358,206
Weighted average number of ordinary shares used in calculating diluted earnings per share 70,558,162 63,358,206
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(6.18)
(6.18)
(18.45)
(18.45)
For the purpose calculating the diluted earnings per share the denominator has excluded 500,000 options as the effect
would be anti-dilutive.
Note 33. Share-based payments
The TZ Employee Incentive Scheme
The TZ Employee Incentive Scheme ('TZEIS') was approved by shareholders at 2009 Annual General Meeting that was
held on 26 February 2010. It gives directors and senior executives the opportunity to participate in the plan. There were
three tranches of options and two tranches of rights granted to the directors in 2010 and three tranches of options granted
to the directors in 2014. Details of unexpired options that remain on issue at year end are set out below.
Each tranche of options had a fixed number granted with vesting periods from one to three years. Each option, when
validly exercised, entitles the holder to receive one fully paid share in the company.
Set out below are summaries of options granted under the plan:
2019
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired
Balance at
the end of
the year
15/01/2014
15/01/2014
30/06/2019
30/06/2020
$4.00
$6.00
500,000
500,000
1,000,000
-
-
-
-
-
-
(500,000)
-
(500,000)
-
500,000
500,000
Weighted average exercise price
$5.00
$0.00
$0.00
$4.00
$6.00
2018
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Consolidation
of
options
1 to 10*
Balance at
the end of
the year
Expired
26/02/2010
15/01/2014
15/01/2014
15/01/2014
30/06/2018
30/06/2018
30/06/2019
30/06/2020
$2.00
$3.00
$4.00
$6.00
1,750,000
5,000,000
5,000,000
5,000,000
16,750,000
-
-
-
-
-
(1,575,000)
(4,500,000)
(4,500,000)
(4,500,000)
(15,075,000)
(175,000)
(500,000)
-
-
(675,000)
-
-
500,000
500,000
1,000,000
Weighted average exercise price
$4.09
$0.00
$4.09
$2.74
$5.00
53
TZ Limited
Notes to the financial statements
30 June 2019
Note 33. Share-based payments (continued)
*
Following a capital restructure during the year ended 30 June 2018, all options at the date of the capital restructure
were consolidated on a 1 for 10 ratio.
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
15/01/2014
15/01/2014
30/06/2019
30/06/2020
2019
2018
Number
Number
-
500,000
500,000
500,000
500,000
1,000,000
The weighted average remaining contractual life of options outstanding at the end of the financial year was 1 year (2018:
1.5 years).
At the 2018 Annual General Meeting, the shareholders re-approved the TZEIS. Subsequent to the financial year ended 30
June 2019 in July 2019, 2,901,000 options were granted to the directors and executives as follows:
●
●
●
120,000 options were granted to each of the Non-Executive Directors (360,000 options in total)
495,000 options were granted to each of the Managing Director
2,046,000 options were granted to the senior executives.
Note 34. Events after the reporting period
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future
financial years.
54
TZ Limited
Directors' declaration
30 June 2019
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as
at 30 June 2019 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
John Wilson
Managing Director
28 August 2019
Sydney
55
Level 17, 383 Kent Street
Sydney NSW 2000
Correspondence to:
Locked Bag Q800
QVB Post Office
Sydney NSW 1230
T +61 2 8297 2400
F +61 2 9299 4445
E info.nsw@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of TZ Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of TZ Limited (the Company) and its subsidiaries (the Group), which comprises the
consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
56
Material uncertainty related to going concern
We draw attention to Note 1 in the financial statements, which indicates that the Group incurred a net loss during the year
ended 30 June 2019 and that the ability of the consolidated entity to continue as a going concern is dependent on meeting
sales and profitability forecasts, the generation of positive cash flows, the continued support of shareholders and lenders and
the raising of additional share capital as and when required in the future. As noted in Note 1, these events or conditions, along
with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast doubt on the Group’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
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.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the
matters described below to be the key audit matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Revenue recognition (Note 1 and Note 4)
Revenue recorded from sales of products and services to customers
amounted to $17,430,926 for the year ended 30 June 2019.
Our audit procedures included the following:
In determining the amount to recognise in the financial statements the
Group must apply revenue recognition accounting policies that satisfy
the requirements of AASB 15: Revenue from Contracts with
Customers.
The selection and application of appropriate accounting policies for
recognising revenue in the financial statements involves significant
management judgement, including identification of the performance
obligations in contracts, allocation of the transaction price to these
performance obligations and recognition of revenue when or as each
performance obligation is satisfied.
This area is a key audit matter given the management judgement
involved in developing and applying appropriate accounting policies
that comply with accounting standards.
Intangible assets (Note 1 and Note 14)
The Group capitalises costs incurred in the development and
enhancement of its proprietary technology. The Group capitalised
$654,056 of development costs during the year ended 30 June 2019.
AASB 138 Intangible Assets sets out the specific requirements to be
met in order to capitalise development costs. The process to measure
the amount of development costs to capitalise involves significant
management judgement in assessing whether costs meet the
recognition criteria described in AASB 138.
This area is a key audit matter due to the degree of subjectivity and
management judgement applied in assessing whether costs meet the
recognition criteria described in AASB 138.
assessing the impact of the initial adoption of AASB 15 and the
appropriateness of the Group’s revenue recognition policies, as
determined by management, for compliance with AASB 15;
performing detailed testing of a sample of revenue transactions
during the year and assessing whether revenue has been
recognised in accordance with the AASB 15, which included:
-
-
reviewing the relevant contracts with customers;
assessing management’s determination of performance
obligations within contracts and the allocation of the
transaction price to those obligations; and
reviewing documentation supporting the satisfaction of
performance obligations within customer contracts; and
assessing the adequacy of the related disclosures in the financial
statements.
Our procedures included the following:
assessing the appropriateness of the Group’s accounting policy for
research and development costs;
obtaining a list of additions to intangible assets and agreeing to the
general ledger;
agreeing a sample of additions to supporting documentation
including time records and invoices from third party suppliers and
assessing whether the amounts met the recognition criteria in
AASB 138;
assessing management’s estimate of future economic benefits
related to the costs capitalised; and
assessing the adequacy of the related disclosures in the financial
statements.
57
Impairment testing of intangible assets (Note 1 and Note
14)
At 30 June 2019 the Group had recorded intangible assets amounting
to $1,213,163.
AASB 136 Impairment of Assets requires that an entity shall assess at
the end of each reporting period whether there is any indication that
an asset may be impaired. If any indication exists, the entity shall
estimate the recoverable amount of the asset.
Management has determined that indicators of impairment were
present at 30 June 2019 and has performed impairment testing in
accordance with AASB 136. In doing so, management has estimated
the recoverable amount of the cash–generating unit (CGU) to which
the intangible assets belong based on the CGU’s fair value less costs
of disposal.
Determining fair value and costs of disposal relating to CGUs involves
a high degree of estimation and judgement by management.
We have determined this is a key audit matter due to the judgement
required by management in assessing if impairment indicators are
present and in preparing an impairment assessment to meet the
requirements of AASB 136.
Our procedures included the following:
assessing whether the impairment testing models and
methodologies used by management met the requirements of
AASB 136, with involvement of our valuation specialists;
evaluated the determination of the Group’s CGUs with respect to
the independence of cash flows generated by each CGU;
checking mathematical accuracy of the models;
assessing whether key inputs used in the models including sales
and profit margins appeared reasonable based on historical
results;
assessing the key assumptions used in the models including
discount rates and royalty rates, with involvement of our valuation
specialists;
performing sensitivity analysis over key assumptions; and
assessing the adequacy of the related disclosures in the financial
statements.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2019, but does not include the financial report and our 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 Group’s ability 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 have no realistic alternative but to do so.
58
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.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 10 to 15 of the Directors’ report for the year ended 30 June
2019.
In our opinion, the Remuneration Report of TZ Limited, for the year ended 30 June 2019 complies with section 300A of
the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
S M Coulton
Partner – Audit & Assurance
Sydney, 28 August 2019
59
TZ Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 19 August 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
of holders
of options
Number
of holders
of ordinary ordinary
shares
shares
over
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
1,458
381
116
193
65
2,213
1,807
-
-
-
2
12
14
-
J P Morgan Nominees Australia Pty Limited
Delcor Advisory Investment Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mrs Margaret Jane Watt
Mr David Frederick Oakley (DFO Investment A/C)
Bond Street Custodians Limited (SXS - D65864 A/C)
One Managed Investment Funds Limited (Technical Investing Absolute Return A/C)
Mr David Frederick Oakley
One Managed Investment Funds Limited (TI Growth A/C)
Surflodge Pty Ltd (Je Lynch Staff Super Fd A/C)
National Nominees Limited
Mr Peter Howells
Rod Investments (Vic) Pty Ltd (Gronow Super Fund A/C)
Mr Graham Lenzner + Mrs Loretta Lenzner (Lenzner Super Fund A/C)
Exelmont Pty Ltd
Zellvest Pty Ltd (No 2 Account)
Surflodge Pty Ltd
Mr Ken Tuder + Ms Thuy Le (Tuder Le S/F A/C)
One Managed Investment Funds Limited (TI Family Wealth A/C)
Citicorp Nominees Pty Limited
Ordinary shares
% of total
Number held
20,406,078
14,041,074
6,297,662
1,209,872
1,161,637
1,102,685
1,042,217
1,019,637
880,713
875,956
859,068
700,000
700,000
600,000
580,450
498,006
491,297
482,416
400,455
390,813
shares
issued
28.92
19.90
8.93
1.71
1.65
1.56
1.48
1.45
1.25
1.24
1.22
0.99
0.99
0.85
0.82
0.71
0.70
0.68
0.57
0.55
53,740,036
76.17
60
TZ Limited
Shareholder information
30 June 2019
Unquoted equity securities
Options over ordinary shares
Substantial holders
Substantial holders in the company are set out below:
J P Morgan Nominees Australia Pty Limited
Delcor Advisory Investment Group Pty Ltd
HSBC Custody Nominees (Australia) Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
3,401,000
14
Ordinary shares
% of total
Number held
20,406,078
14,041,074
6,297,662
shares
issued
28.92
19.90
8.93
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
61
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