IKEGPS GROUP LIMITED — Audit Report / Information 2019

May 29, 2019

Contents

Independent auditor’s report……………………………………………………………………………………...………3 Consolidated statement of profit or loss and other comprehensive income…...........9 Consolidated statement of changes in equity.................................................................10 Consolidated balance sheet ..…………………………………………..………........................................11 Consolidated statement of cash flows.………………….........................................................12 Notes to the consolidated financial statements ..………….........................................13-47

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Independent auditor’s report

To the shareholders of ikeGPS Group Limited

We have audited the financial statements which comprise:

• the consolidated balance sheet as at 31 March 2019;

• the consolidated statement of profit or loss and other comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, which include significant accounting policies.

Our opinion

In our opinion, the accompanying financial statements of ikeGPS Group Limited (the Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial position of the Group as at 31 March 2019, its financial performance and its cash flows for the year then ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.

Our firm carries out other services for the Group in the areas of assurance services relating to the Company’s research and development grant and tax compliance services in respect to annual income tax returns. The provision of these other services has not impaired our independence as auditor of the Group.

Material uncertainty related to going concern

We draw attention to note 2 in the financial statements, which indicates that the Group incurred an operating cash outflow of $4.0 million for the year ended 31 March 2019, and a further investing outflow of $1.1 million relating to capitalised internal development and the purchase of property, plant and equipment. The Group also incurred a net loss of $5.1 million for the year. The cash balance at 31 March 2019 was $3.5 million. If the Group fails to achieve its FY20 business plan (particularly forecast sales growth), manage costs or obtain alternative sources of financing it may not be able to meet its obligations as they fall due. As stated in note 2, these conditions, along with other matters as set forth in note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

PricewaterhouseCoopers, PwC Centre, 10 Waterloo Quay, Wellington 6011 T: +64 4 462 7000, F: +64 4 462 7001, pwc.co.nz

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Our audit approach

Overview

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An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement.

Overall Group materiality: $363,000, which represents 5% of the 3-year average loss before tax.

We chose 3-year average loss before tax as the benchmark because, in our view, the level of ongoing losses is the benchmark against which performance of the Group is most commonly measured by users and utilisation of a 3- year average addresses the historical volatility of the benchmark.

Our key audit matter is the valuation of development assets.

Materiality

The scope of our audit was influenced by our application of materiality.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the financial statements as a whole as set out above. These, together with qualitative considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Audit scope

We designed our audit by assessing the risks of material misstatement in the financial statements and our application of materiality. As in all of our audits, we also addressed the risk of management override of internal controls including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

The financial statements are a consolidation of the Company and two subsidiaries, one based in New Zealand and one in the United States of America. The Company and both subsidiaries share one centralised group finance function.

We scoped our audit on a Group financial statement line item basis and completed audit work on Group balances at the materiality level for the Group. All audit procedures were conducted by the Group audit team.

PwC

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matter described below to be the key audit matter to be communicated in our report. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

PwC

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Key audit matter

Valuation of development assets

As disclosed in note 15, Intangible assets, the Group has $3.6 million of development assets related to the internal development of hardware and software products. Development assets are initially carried at cost. To determine whether the carrying value of the developed assets are reasonable, the Directors assessed whether any impairment indicators existed for each development asset Cash Generating Unit (CGUs) by considering, among other factors, sales achieved to date for the asset’s relevant product line(s) and the overall operating and cash performance of the entity. The Directors concluded the Group’s overall operating losses and difficulty in meeting budgeted sales levels for the Spike Business were indicators of impairment.

Management performed an impairment assessment of the overall business on a value in use basis and the Spike development assets on a value in use and fair value less costs of disposal basis. These assessments require significant judgement when identifying appropriate assumptions upon which to base the model, particularly forecasting future sales volumes . The impairment assessments were a key audit matter due to the significant judgement involved in assessing whether forecast future sales volumes would be achieved to support the conclusion on whether it is probable that future economic benefit will be generated and whether the carrying value was impaired. Based on management’s assessments, no impairment was recognised. Refer to notes 2 and 15 in the financial statements for disclosures on development assets.

How our audit addressed the key audit matter

We obtained an understanding and evaluated the Group’s processes and controls relating to the assessment of impairment indicators of development assets, the preparation and approval process of forecasts, and the execution of the impairment assessment. We completed the following audit procedures to assess the reasonableness of the impairment assessment:

• We performed procedures to evaluate and challenge the Group’s determination of CGUs. This included reviewing internal management reporting to assess the level at which the Group monitors performance, comparing CGU’s to our knowledge of the Group’s operations and reporting systems, and reconciling assets allocated to CGU’s to those totals within the general ledger.

• We obtained management’s assessment of impairment indicators and assessed whether the indicators identified were consistent with our understanding of the operations and environment of the business.

• We obtained management’s impairment assessments and tested the mathematical accuracy of the impairment models, and used our internal valuation expert to challenge and assess the appropriateness of the assumptions underlying the impairment models.

• We assessed the reasonableness of the forecast sales volumes within the Board-approved budget for the years ending 31 March 2020 to March 2023. Our assessment included completing look back procedures to evaluate the forecasting accuracy of previous forecasts against actual results to assess the reliability of historical forecasting. We also considered factors influencing forecast revenue growth, such as sales pipelines, previous growth achievements, and the Group’s strategic objectives and we performed a sensitivity analysis based on our independent determination of forecast sales volumes assumptions.

PwC

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Key audit matter	How our audit addressed the key audit
	matter
Valuation of development assets	 We assessed management’s valuation basis for
	determining the fair value less costs of disposal
	of the Spike Business, and used our internal
	valuation expert to challenge and assess the
	appropriateness of the assumptions underlying
	the fair value calculation, including
	independently determining a valuation range
	for the Spike Business.
	Whilst recognising that the impairment assessment
	is inherently judgemental and there is a level of
	subjectivity involved in valuing CGUs, there is a
	range of values which can be considered reasonable
	when evaluating the carrying value of a CGU. Based
	on the above procedures there were no matters to
	report.

Information other than the financial statements and auditor’s report

The Directors are responsible for the annual report. Our opinion on the consolidated financial statements does not cover the other information included in the annual report and we do not, and will not, express any form of assurance conclusion on other information. The directors have advised that no other information will be included in the annual report.

In connection with our audit of the consolidated financial statements, if other information is included in the annual report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of our auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact.

Responsibilities of the Directors for the financial statements

The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, 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.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are 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 ISAs (NZ) and ISAs 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 these financial statements.

PwC

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A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s website at:

https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/auditreport-1/

This description forms part of our auditor’s report.

Who we report to

This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so that we might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our audit work, for this report or for the opinions we have formed.

The engagement partner on the audit resulting in this independent auditor’s report is Christopher Ussher.

For and on behalf of:

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Chartered Accountants 30 May 2019

Wellington

PwC

Consolidated statement of profit or loss and other comprehensive income

other comprehensive income
		Year ended	31	March
		Group
		2019		2018
Continuing operations		$'000's		$'000's
Operating revenue	6	7,996		7,732
Cost of sales		(2,646)		(3,754)
Gross profit		5,350		3,978
Other income	6	102		125
Operations cost	6	(643)		(477)
Sales and marketing expenses	6	(3,226)		(3,231)
Research and engineering expenses	6	(3,210)		(3,019)
Corporate costs	6	(3,443)		(4,011)
Foreign exchange(losses)/gains		(39)		(71)
Expenses		(10,561)		(10,809)
Operating loss		(5,109)		(6,706)
Net finance income		17		(20)
Net loss before income tax		(5,092)		(6,726)
Income tax (expense)/credit	12	4		(6)
Loss attributable to owners of ikeGPS Group		(5,088)		(6,732)
Other comprehensive loss
Items that may subsequently be recognised through profit or loss
Exchange differences on translation of foreign operations		168		(31)
Comprehensive loss		(4,920)		(6,763)
Basic and diluted loss per share	21	$ (0.06)	$	(0.09)

The accompanying notes form part of, and should be read in conjunction with, these financial statements.

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p. 9

Consolidated statement of changes in equity

				Foreign
			Share based	currency
	Share	Accumulated	payment	translation
	capital	losses	reserve	reserve	Total
	$'000's	$'000's	$'000's	$'000's	$'000's
Opening balance at 1 April 2017	45,252	(34,763)	399	(252)	10,636
Loss for the year	-	(6,732)	-	-	(6,732)
Currency translation differences	-	-	-	(31)	(31)
Total comprehensive income/(loss)	-	(6,732)	-	(31)	(6,763)
Issue of ordinary shares	4,011	-	-	-	4,011
Recognition of vesting of share-based options	-	-	68	-	68
Share based payment reserve movement	-	407	(407)	-	-
Total transactions with owners	4,011	407	(339)	-	4,079
Balance at 31 March 2018	49,263	(41,088)	60	(283)	7,952
				Foreign
	Share capital	Accumulated losses	Share based payment reserve	currency translation reserve	Total
	$'000's	$'000's	$'000's	$'000's	$'000's
Opening balance at 1 April 2018	49,263	(41,088)	60	(283)	7,952
Change in accounting policy	-	274	-	-	274
Restated balance at 1 April 2018	49,263	(40,814)	60	(283)	8,226
Loss for the year	-	(5,088)	-	-	(5,088)
Currency translation differences	-	-	-	168	168
Total comprehensive income/(loss)	-	(5,088)	-	168	(4,920)
Issue of ordinary shares	5,869	-	-	-	5,869
Recognition of vesting of share-based options	-	-	188	-	188
Share based payment reserve movement	-	56	(56)	-	-
Total transactions with owners	5,869	56	132	-	6,057
Balance at 31 March 2019	55,132	(45,846)	192	(115)	9,363

The accompanying notes form part of, and should be read in conjunction with, these financial statements.

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p. 10

Consolidated balance sheet

Consolidated balancesheet
		Year ended	31	March
		Group
		2019		2018
ASSETS		$'000's		$'000's
Current assets
Cash and cash equivalents	7	3,475		2,586
Trade and other receivables	9	1,370		1,358
Prepayments		294		273
Inventory	8	1,691		1,220
Total current assets		6,830		5,437
Non-current assets
Property, plant and equipment	14	944		842
Intangible assets	15	3,604		3,928
Deferred tax asset	12	17		13
Total non-current assets		4,565		4,783
Total assets		11,395		10,220
LIABILITIES
Current liabilities
Trade and other payables	10	505		699
Employee entitlements		226		364
Contract liabilities	6	1,246		1,205
Total current liabilities		1,977		2,268
Non-current liabilities
Non-current contract liabilities	6	55		-
Total non-current liabilities		55		-
Total liabilities		2,032		2,268
Total net assets		9,363		7,952
EQUITY
Share capital	13	55,132		49,263
Share based payment reserve		192		60
Accumulated losses		(45,846)		(41,088)
Foreign currency translation reserve		(115)		(283)
Total equity		9,363		7,952

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Director Date: 30 May 2019

Director Date: 30 May 2019

NZ (New Zealand Time)

NZ (New Zealand Time)

The accompanying notes form part of, and should be read in conjunction with, these financial statements.

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p. 11

Consolidated statement of cash flows

		Year ended 31	March
		Group
		2019	2018
		$'000's	$'000's
Cash flows from operating activities
Cash receipts from customers		8,401	8,458
Cash paid to suppliers and employees		(12,422)	(11,241)
Interest paid		(14)	(26)
Net cash used in operating activities	20	(4,035)	(2,809)
Cash flows from investing activities
Purchases of property, plant and equipment		(477)	(26)
Additions to intangible assets		(603)	(1,224)
Interest received		31	6
Net cash used in investing activities		(1,048)	(1,244)
Cash flows from financing activities
Proceeds from issuance of shares on listing		5,869	4,011
Net cash from financing activities		5,869	4,011
Net (decrease)/increase in cash and cash equivalents		785	(42)
Cash and cash equivalents at 1 April		2,586	2,730
Effect of exchange rate fluctuations on cash held		104	(102)
Cash and cash equivalents		3,475	2,586

The accompanying notes form part of, and should be read in conjunction with, these financial statements.

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p. 12

Notes to the consolidated financial statements

1. Reporting Entity

ikeGPS Group Limited (the “Company”) is a limited liability company domiciled and incorporated in New Zealand, registered under the Companies Act 1993 and listed on the New Zealand Stock Exchange (“NZX”) and Australian Securities Exchange (“ASX”). The Company is an FMC reporting entity for the purposes of the Financial Markets Conduct Act 2013. The financial statements for the year ended 31 March 2019 comprise the Company and its subsidiaries (together referred to as the “Group”) which include ikeGPS Limited and ikeGPS Inc.

The principal activity of the Group is that of design, marketing and sale of integrated GPS data capture devices, related software and consulting solutions.

The financial statements were authorised for issue by the Directors on 30 May 2019.

2. Basis of preparation

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Statement of compliance

The consolidated financial statements have been prepared in accordance with the requirements of the Companies Act 1993 and Financial Reporting Act 2013.

The consolidated financial statements of the Group have been prepared in accordance with New Zealand Generally Accepted Accounting Practice (“NZ GAAP”). The Group is a for-profit entity for the purposes of complying with NZ GAAP. The consolidated financial statements comply with New Zealand equivalents to International Financial Reporting Standards (“NZ IFRS”), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply NZ IFRS. The consolidated financial statements comply with International Financial Reporting Standards (IFRS).

Basis of measurement

The financial statements have been prepared on the historical cost basis with the exception of certain financial instruments which are measured in accordance with the specific relevant accounting policy.

Critical estimates and judgments

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

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p. 13

Notes to the consolidated financial statements

2. Basis of preparation (continued)

Going concern

These financial statements have been prepared based on the Group being a going concern, which assumes the Group has the ability and intention to continue operations for a period of at least 12 months from the date of the financial statements. During the Group’s current growth phase, investment continues into increasing revenue by developing and expanding the Group’s product and service offerings. The Group has continued to incur net cash outflows from operating and investing activities during this phase. During fiscal year 2019 (FY19), the Group had cash outflows of $4,035,000 (2018: $2,809,000) relating to operations, and $1,048,000 (2018: $1,224,000) relating to capitalised internal development intangible assets and purchase of property plant and equipment for the 12 months ended 31 March 2019. The cash balance at 31 March 2019 was $3,475,000 (2018: $2,586,000). If the current level of cash outflows continued the Group would not be able to fund its operations without the need to raise additional capital or alternative funding.

The approved base business plan for fiscal year 2020 (FY20) includes the prudent management of costs while focusing effort on realising the significant sales opportunities for the entity’s products and services.

The plan takes into consideration:

• forecast sales increases of IKE Solution, focused on sales into the utilities and telecommunications companies within the United States that are deploying fiber

• continued subscription revenue associated with the IKE cloud platform

• transaction revenue from the new IKE Analyze solution

• continued prudent operational cost management

• continued focus on optimising working capital

• the ability of the Group to manage its growth activities and associated costs.

If one or more components of the plan are not realised further cost-cutting measures are available to the Group. To assess the degree of sensitivity, stress testing has been performed on the FY20 plan, reducing forecast receipts from customers by 17%. The impact being that the Group remains a going concern, albeit with reduced available cash funds. In FY19 the Group completed a Private Placement and Share Purchase Plan raising $5,869,000. The dual listing on the NZX and ASX provides the Company with the potential option to pursue capital raise opportunities from a wider market in order to among other things; expand existing business, access additional working capital, and acquire or establish new businesses. The Directors believe that additional capital could be raised should circumstances necessitate.

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p. 14

Notes to the consolidated financial statements

2. Basis of preparation (continued)

In FY19 sales by the core Utility & Communications business unit grew. The Directors acknowledge the difficulty of predicting certainty of sales due to long sales cycles associated with Enterprise level customers, however the Directors believe that the Group now has a closer understanding of the process requirements of Enterprise level sales cycles and the timing of forecasted revenue. On this basis, the Directors believe that the Group has sufficient funding tocontinue operations for at least the next 12 months from the date of authorising the financial statements, and hence consider the use of the going concern basis appropriate.

The Group’s ability to improve its financial capacity and cash flow generated from its operations cannot be assured. Should the Group fail to achieve its FY20 business plan (particularly forecast sales growth), manage costs or obtain alternative sources of financing, then this represents a material uncertainty that may cast significant doubt on the validity of the going concern assumption. The existence of this material uncertainty may result in the Group’s inability to realise its assets and settle its liabilities in the normal course of operations. These consolidated financial statements do not reflect adjustments in the carrying values of the assets and liabilities, the reported revenues and expenses, and the balance sheet classifications used, that would be necessary if the Group were unable to continue as a going concern.

Impairment

The carrying amounts of the Group’s assets were reviewed to determine whether there is any indication of impairment. The Directors concluded the Group’s operating losses as an indicator of impairment for the overall business, requiring an estimate of the Cash Generating Unit’s (CGU1) recoverable amount. Additionally, it determined that due to the low relative revenue from the Spike Business, an indicator of impairment existed requiring an estimate of the Cash Generating Unit’s (CGU2) recoverable amount of the intangible assets directly associated with the Spike Business.

CGU1 was determined to be the Group’s total intangible assets plus total property, plant & equipment. The useful life of the CGU was determined to be 6 years. A pre-tax discount rate of 12% was used to establish the net present value.

Sensitivity analysis was performed on key assumptions; Spike revenue is assumed at FY18 levels, Utilities & Communications average revenue growth rate is conservatively assumed to be 20%. Operating expenses reflect the FY20 business plan. The value in use assessment is sensitive to changes in each of these assumptions. This ‘downside scenario’ would result in the recoverable amount being in excess of the carrying value. A likely material impairment would need to be considered if any key assumption did not meet, substantially meet, or exceed that calculated.

The Directors have determined that no impairment is required as CGU1 continues to have a useful life and that the current carrying value of the CGU1 does not exceed its value in use.

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p. 15

Notes to the consolidated financial statements

2. Basis of preparation (continued)

The CGU2 was determined to be the intangible assets associated with the Spike Business totalling $1,381,000. The basis upon which CGU2 was determined has changed from that used in FY18. The assets relating to the software development kit were added to CGU2 on the basis that these assets now relate predominantly to the Spike Business.

Sensitivity analysis was performed on key assumptions; Spike revenue is assumed at FY18 levels as the Group more fully develops partner opportunities focused on the Geospatial and Enterprise application markets. An estimate of the cashflows required to market and sell the Group’s products was based on the business plan for FY20. A pre-tax discount rate of 12% was used to establish the net present value. This value in use assessment is sensitive to changes in each of these assumptions. A fair value approach, using revenue multiples to value CGU2, was also used to corroborate the output of the value in use assessment. A likely material impairment would need to be considered if any key assumption in the value in use or fair value assessments did not meet, substantially meet, or exceed that calculated.

The Directors have determined that no impairment is required as CGU2 continues to have a useful life and that the current carrying value of the CGU2 does not exceed its value in use.

Intangible Assets

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are the measurement and impairment of intangible assets.

Annually the Directors are required to assess the appropriateness of the asset’s amortisation period.

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is recognised in the profit and loss.

For the current year the Directors have assessed the useful economic lives and determined that no change is required.

The current estimated useful lives:

• ikeGPS platform – 6 years

• IKE application and features – 6 years

• Spike application and features - 6 years

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p. 16

Notes to the consolidated financial statements

2. Basis of preparation (continued)

In addition to the above, the Group makes judgments about the amount of costs to capitalise as part of the development asset. The Group’s intangible asset capitalisation policy is used to assist in making these judgements. The Group capitalises direct labour costs into its development asset. The costs applied are based on judgment as to the nature of work employees performed, and the amount of time spent on the task. This is assessed jointly by the engineering and finance functions. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are the measurement and impairment of intangible assets.

3. New and amended standards adopted by the Group

NZ IFRS 15 Revenue from Contracts with Customers

NZ IFRS 15 supersedes NZ IAS 11 Construction Contracts, NZ IAS 18 Revenue and Related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under NZ IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers.

The five-step model for recognising revenue from contracts with customers requires consideration of the following steps:

• Identifying the contract

• Identifying the individual performance obligations within the contract

• Determining the transaction price

• Allocating the transaction price to distinct performance obligations

• Recognising revenue

NZ IFRS 15 Revenue

We have provided the table below that provides the key judgements made on the application of NZ IFRS 15 across each revenue type with standardised terms and conditions. The Group has applied a practical expedient permitted by the standard; therefore, no significant financing component exists on contract liabilities less than one year.

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p. 17

Notes to the consolidated financial statements

1. New and amended standards adopted by the Group (continued)

New Business

Revenue Type	Description	Key Judgements	Outcome	Timing of revenue recognition
Hardware Device	ikeGPS sells Spike devices through direct orders and online software.	No major judgement required.	N/A	Point in time Recognised when the unit is received by the customer.

Utility & Communication

Revenue Type	Description	Key Judgements	Outcome	Timing of revenue recognition
IKE4 Solution	The IKE4 Solution is marketed to the utility & communications market as an all-in-one package which includes the IKE4 device, preconfigured IKE Field Android mobile application and online access to IKE Office - a cloud-based software platform that enables customers to measure and analyse assets captured with the IKE4 device.	The contract for an IKE4 Device, IKE Field and IKE Office is generally sold as a packaged solution. Management has determined the individual performance obligations within the contract. The total contract price is allocated to each performance obligation. Where possible management uses external comparatives to identify standalone performance obligations and respective price. Where an external comparative is not available, management’s judgement was applied.	Management has determined that the IKE4 Device, Software licence (IKE Field) and Subscription (IKE Office) are distinct performance obligations of the IKE4 Solution. In determining this management has relied on market comparables to establish standalone performance obligations.	Point in time Both the IKE4 device and IKE Field mobile application are recognised at the point in time when the device is sent to the customer. Over time IKE Office is recognised over the term of the contract.
Subscription	Customers are required to renew software subscriptions to allow continued access to the IKE Office online cloud functionality and the ability to customise and add new forms onto the IKE4 device.	Determining when each performance obligation is fulfilled.	Customers use the IKE Field and IKE Office solution to store and analyse data, customise and add new forms, for project management and to access to additional tools. Along with integration capability these performance obligations can be described as ‘stand ready’ services which can be recognised over time.	Over time Subscription software recognised over time.
IKE Analyze Solution	Providing an end to end technical solution for customers; performing pole loading analysis and make ready engineering assessments.	Determining when each performance obligation is fulfilled. Initially the customer performs data collection, the customer also receives an annual subscription to access IKE Field and Office. Once customer data is collected it is uploaded into IKE Office where IKE performs the analysis and completes requested reports.	The business is required to perform certain activities as per the scoping document for each customer. Once the activity is complete the Group will recognise the revenue.	Point in time Each transaction (completed record) is recognised when the performance obligation has been completed.

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p. 18

Notes to the consolidated financial statements

3. New and amended standards adopted by the Group (continued)

Impact of adoption

The Group has adopted the NZ IFRS 15 Revenue from Contracts with Customers from 1 April 2018 which resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. In accordance with the transition provisions in NZ IFRS 15, the Group has elected to use themodified retrospective method and has recognised the cumulative effect of applying NZ IFRS 15 as an adjustment to the opening balance of retained earnings on 1 April 2018.

The impact on the Group’s retained earnings as at 1 April 2018		2018
		$'000's
Closing retained earnings 31 March 2018		(41,088)
IKE Field decrease in contract liabilities	(ref. “a.” below)	274
Opening retained earnings 1 April 2018		(40,814)

• On adoption of NZ IFRS 15 the IKE Field portion of IKE4 transactions are recognised at a point in time. The adjustment made to retained earnings reflects the amount of revenue deferred at 31 March 2018 related to IKE Field.

NZ IFRS 9 Financial Instruments

The new NZ IFRS 9 replaces the provisions of NZ IAS 39 that relate to the recognition, classification, measurement and impairment of financial assets. The Group has applied NZ IFRS 9 retrospectively and has chosen not to restate comparatives as there was no material impact.

Classification and measurement

The classification and measurement of the Group’s financial assets and liabilities upon adoption of NZ IFRS 9 is outlined below:

	NZ IAS 39 classification	NZ IAS 39 measurement	NZ IFRS 9 classification and measurement
Financial Assets
Cash and cash equivalents	Loans and receivables	Amortised cost	Amortised cost
Trade and other receivables	Loans and receivables	Amortised cost	Amortised cost
Financial Liabilities
Trade and other payables	Other financial liabilities at amortised cost	Amortised cost	Amortised cost

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p. 19

Notes to the consolidated financial statements

3. New and amended standards adopted by the Group (continued)

Impact of adoption

For trade receivables the Group has recognised expected credit losses by applying the simplified approach permitted by NZ IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The Group has reviewed the ageing analysis of trade receivables, historical credit loss experience, individual customer characteristics, customer market segment and economic environment to determine the expected credit loss rate. This rate is applied to outstanding gross trade receivables as at 31 March 2019 to calculate the allowance for expected credit losses.

New standards not yet adopted

The following standard has been published but is not yet effective and has not been adopted by the Group.

NZ IFRS 16, ‘Leases’, replaces the current guidance in NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Under NZ IAS 17, a lessee was required to

make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet).

NZ IFRS 16 now requires a lessee to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. Included is an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees.

The Group is in the process of performing a detailed assessment of the financial impact of the standard. The application of the standard requires the Group to make several judgments. These include determining the lease term, the discount rate applicable and the underlying foreign exchange rate. We note that the Groups current lease commitments are included in note 19 Commitments and Contingencies.

The standard is effective for accounting periods beginning on or after 1 January 2019. The Group intends to adopt NZ IFRS 16 from 1 April 2019.

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p. 20

Notes to the consolidated financial statements

4. Significant accounting policies

Basis of consolidation

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group 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 over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

Transactions eliminated on consolidation

Intra-Group transactions, balances, and any unrealised gains arising from intra-Group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each the Group’s subsidiaries are measured using the currency of the primary economic environment in which the entity operates ("the functional currency").

The functional currency of the Company is NZ dollars. The functional currency of the Group's USA subsidiary is US dollars. These financial statements are presented in NZ dollars, which is the Group's presentation currency.

Transactions and balances

Foreign currency transactions are initially translated to functional currencies at the rates of exchange prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the revaluation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

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p. 21

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Group companies

The results and financial position of the US subsidiary are translated into the presentation currency as follows:

• assets and liabilities are translated at the closing rate at the date of the balance sheet;

• income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised in other comprehensive income.

When a foreign operation is sold, such exchange differences are reclassified to profit or loss in the consolidated statement of profit or loss and other comprehensive income.

Goods and Services Tax

All amounts are shown exclusive of Goods and Services Tax (GST) and other indirect taxes except for trade receivables and trade payables that are stated inclusive of GST.

Financial instruments

From 1 April 2018, the group classifies its financial assets as measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.

Amortised cost assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost.

Interest income from these financial assets is included in finance income using the effective interest rate method.

Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or loss.

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p. 22

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Financial assets are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. They include trade and other receivables, cash and cash equivalents. They are included in current assets, except for loans and receivables greater than 12 months which are included in non-current assets.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits.

Trade and other receivables

Trade and other receivables arise when the Group provides money, goods and services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the end of the reporting period which are classified as non-current assets.

They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method

Financial liabilities

Financial liabilities measured at amortised cost are non-derivative financial liabilities, including trade and other payables.

Trade and other payables

Trade and other payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

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p. 23

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment.

Depreciation methods, useful lives and residual values are reviewed and adjusted, if appropriate, at each reporting date.

Office furniture and equipment	20% - 33%
Plant and equipment	20% - 50%
IT equipment	33% - 50%

Gain and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in profit or loss.

Intangible assets

Research and development

All research costs are recognised as an expense when they are incurred.

Capitalised development costs

The Group capitalises employee and consultants’ costs directly related to development. The Group regularly reviews (at least annually) the carrying value of capitalised development costs to ensure they are not impaired. Management has reviewed the expected remaining useful life of assets and concluded that the development costs for all products are amortised over periods of 6 years to reflect the expected useful life of the assets.

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p. 24

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met:

• it is technically feasible to complete the software product so that it will be available for use;

• management intends to complete the software product and use or sell it;

• there is an ability to use or sell the software product;

• it can be demonstrated how the software product will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and

• the expenditure attributable to the software product during its development can be reliably measured.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Impairment of non-financial assets

Intangible assets under development 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. The carrying amount of the Group’s other assets are reviewed at each balance date to determine whether there is any indication of impairment or objective evidence of impairment. If any such indication exists, the assets recoverable amount is estimated.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments for the time value of money and the risks specific to the asset for which estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

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p. 25

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Impairment of financial assets

From 1 April 2018 the Group assesses impairment on a forward-looking basis, the expected credit loss associated with its financial assets carried at amortised cost. The Group will assess if there has been a significant increase in credit risk by assessing market conditions, forward looking estimates and previous financial history of counterparts.

For trade receivables the Group applies the simplified approach permitted by NZ IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

The expected credit losses on these financial assets are assessed using a provision matrix, adjusted for factors that are specific to the receivables including customers historical credit loss experience, individual customer characteristics, customer market segment and economic environment.

The Group write’s off a financial asset when there is information indicating default or delinquency in payments, the probability that they will enter bankruptcy, liquidation or other financial reorganisation and there is no real prospect of recovery.

Leased assets

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the term of the lease.

Inventory

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on a weighted average cost, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Cost comprises direct materials, direct labour and production overhead. 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.

Government grants

Government grants relate to assistance by Callaghan Innovation who manage the Business Research and Development (R&D) grants scheme on behalf of the New Zealand Government.

When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods necessary to match the grant to the costs that it is intended to compensate.

Government grants are recognised at their fair value where there is reasonable assurance that the grants will be received, and all attaching conditions will be complied with.

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p. 26

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Employee benefits

Liabilities for wages and salaries, including non-monetary benefits and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the consolidated balance sheet.

The Group recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

For defined contribution plans, the group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

Share-based payment

The Group operates an employee option scheme (equity-settled) under which employees receive the option to acquire shares at a predetermined exercise price. The options are measured at fair value at grant date using the Black Scholes model with the fair value recognised as an employee benefit expense in profit or loss with a corresponding increase in equity. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the Group revises its estimate of the number of options that are expected to vest based on the service conditions. It recognises the impact of the revision to original estimates, if any, in share-based payment reserve with a corresponding change to share based compensation reserve in equity.

Revenue

The Group derives its revenue from the sale of product and related services, subscription revenue and end to end technical pole data analysis. Revenue is recognised when performance obligations have been satisfied. A performance obligation has been satisfied when control of the good or service associated with the performance obligation has been transferred to the customer’.

Effective from 1 April 2018 the Group adopted NZ IFRS 15 Revenue from contracts with Customers. The change in accounting policies and key judgements are set out in section 3 above.

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p. 27

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

The Group has applied the modified retrospective method of adopting NZ IFRS 15. Therefore, prior year revenue is measured at fair value of the consideration received or receivable. Sale of product revenue is recognised when the products are shipped, and significant risks and rewards of ownership have been transferred or when the services are provided to the customer.

Sale of product

Revenue from the sale of product is derived from the sale of the Group’s laser measurement devices, associated software, accessories and warranty support. Revenue is recognised when

the products are shipped to the customer being the point at which control is considered to have transferred to the customer.

IKE4 rental revenue

IKE 4 rental revenue is derived from fees charged to customer on a monthly basis for the use of an IKE4 unit and for access to IKE Field and Office.

Leases of the IKE 4 unit are considered operating leases as the Group retains the significant portion of the risks and rewards of ownership Rental payments received (net of any incentives) are recognised as lease revenue in profit or loss on a straight-line basis over the period of the lease.

Subscription revenue for access to IKE Field and Office is recognised in accordance with the policy below on subscription revenue.

Subscription revenue

is recognised as the services are provided to the customers. Consideration received in advance (of the service being provided), is recognised in the balance sheet as contract liabilities.

IKE Analyze solution revenue

IKE Solution revenue is derived from our end to end pole and wire analysis solution. The complete solution offering provides mobile field devices to capture data, software to support the collection of fast standardised data, completion of pole annotation analysis, completion of pole loading analysis and performing make ready engineering analysis. Revenue is recognised when the data has been analysed and the customer requirements outlined in the engagement statement of work have been completed.

Other operating revenue

Other operating revenue includes consulting and training revenue. Revenue is recognised when the services are performed.

Consideration received prior to the service being provided is recognised in the balance sheet as deferred revenue.

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p. 28

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Finance income and expenses

Interest income is recognised as it accrues, using the effective interest method. Finance expenses comprise interest expense on borrowings, recognised using the effective interest method.

Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which

applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Earnings per share

The Group presents earnings per share (“EPS”) data for its ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of shares that would be issued on conversion of all of the dilutive potential ordinary shares into ordinary shares.

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p. 29

Notes to the consolidated financial statements

4. Significant accounting policies (continued)

Other reserves

Share-based payments reserve

The share-based payments reserve is used to recognise the grant date fair value of options issued to employees but not exercised.

Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income as described in the foreign currency translation accounting policy and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.

5. Operating segments

The CEO and senior management team are the Group’s operating decision makers. During FY19 the Group’s selling activities were focused and organised into two customer segments namely Utility & Communications and New Business. The Utility & Communications segment includes sales to companies involved in the broadband fiber roll out in the United States. New Business includes Signage, Architecture Engineering and Construction (AEC) and Geospatial.

Within the Utilities & Communications segment the Group sold the IKE4 device and corresponding annual subscription revenue. The Group also offered an end to end technical solution to customers performing make ready engineering (MRE) projects. Revenue related to this solution has increased during the period and is now reported on separately to management.

The segment reporting format reflects the Group’s management and internal reporting structure. Contribution is after allocating cost of goods sold. Reporting of overheads and balance sheet position is not undertaken at a level lower than the Group as a whole. Geographically, revenue is substantially generated in the United States.

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p. 30

Notes to the consolidated financial statements

5. Operating segments (continued)

		2019			2018
	Utility &	New		Utility &	New
	Communication	Business	Group	Communication	Business	Group
	$'000's	$'000's	$'000's	$'000's	$'000's	$'000's
Sale of product and services(Point in Time)	3,587	640	4,227	4,607	1,970	6,577
IKE4 rental	466	-	466	116	-	116
Subscription (Overtime)	1,825	36	1,862	793	-	793
Contribution	4,228	575	4,803	2,894	1,027	3,921
IKE Analyze solution (Point in Time)	1,441	-	1,441	246	-	246
Contribution	547	-	547	57	-	57
Gross Profit			5,350			3,978
Sales and marketing costs			(3,226)			(3,231)
Net attributable (other
corporate income and			(7,216)			(7,473)
expenses)
Net loss before tax			(5,092)			(6,726)

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p. 31

Notes to the consolidated financial statements

6. Revenue and expenses

Revenue

Revenue
	2019	2018
	**$'000's **	**$'000's **
Sale of product	4,058	6,504
IKE4 rental	466	116
IKE Solution	1,441	246
Subscription	1,862	715
Services	169	151
Operating revenue	7,996	7,732
Government grants	102	125
Total revenue and other income	8,098	7,857

2019 revenue restated based on the prior year revenue accounting policy

	2019
	$'000's
Subscription revenue	1,862
Adjustment to retained earnings on adoption of IFRS 15	274
Adjustment for subscription revenue recognised under prior year accounting policy	81
Subscription revenue restated under prioryear accounting policy	2,217
Sale of product	4,058
Adjustment for sale of product revenue recognised under prior year accounting policy	(155)
Sale of product revenue restated under prior year accounting policy	3,903

In the current year, no customer within a particular operating segment represented more than 10% of revenue (FY18: $1,838,000 in total, $1,045,000 in Utility & Communication segment, and $793,000 in New Business segment).

Government grants are in relation to cost subsidies from Callaghan Innovation for research and development. Under the conditions of the Callaghan Innovation grant the Group is required to submit an independent review report on the eligibility of the costs claimed. This report is outstanding at balance date but does not represent a significant unfulfilled condition.

Reconciliation of contract liability balances

Reconciliation of contract liability balances
	2019	2018
	$'000's	$'000's
Opening contract liabilities balance	1,205	150
Revenue recognised that was included in contract liabilities at the beginning of
theperiod
Decrease on adoption of IFRS 15	(274)	-
Subscription revenue recognised	(861)	(150)
Unsatisfied performance obligations for the current year	1,231	1,205
Closing contract liabilities balance	1,301	1,205

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p. 32

Notes to the consolidated financial statements

6. Revenue and expenses (continued)

Operating expenses

Operating expenses consist of operations costs, sales and marketing expenses, engineering and research expenses and corporate expenses.

research expenses and corporate expenses.
	2019	2018
	$'000's	$'000's
Audit of financial statements
Audit and review of financial statements	141	146
Other services
Other assurance services1.	6	8
Tax compliance services2.	20	28
Total other services	26	36
Total fees paid to auditor	167	182
Amortisation of development asset	975	1,204
Amortisation of patents and software	-	16
Depreciation	117	171
Total amortisation and depreciation3.	1,092	1,391
Employee benefit expense	6,158	6,503
Share-based payment	188	68
External contractors and consultants	360	243
Employee benefit expense capitalised4.	(603)	(1,224)
Operating lease expenses	370	395
Direct selling and marketing5.	1,160	906
Impairment of assets6.	-	166
Bad debt and write off expense	26	91
Other operating expenses7.	1,604	2,017
Total operating expenses	10,522	10,738

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p. 33

Notes to the consolidated financial statements

6. Revenue and expenses (continued)

Notes

1. Other assurance services comprise the review of government grant claims.

2. Tax compliance services relates to assistance to review and file the Group’s tax return.

3. All of amortisation and $117,000 of depreciation are included in engineering and research expenses. The balance of depreciation totalling to $248,000 is included in cost of sales (2018: $216,000).

4. Relates to employee benefit expense, external contractors and consultants’ expenses that are directly attributable to the development of intangible assets and have been capitalised.

5. Selling and marketing expenses includes expenses incurred mainly in relation to promotional activities which include travel, commissions and other direct marketing expenses

6. Impairment of assets in 2018 Financial Statements include IKE3 intangible assets of $83,000, Smart Measure Pro intangible assets of $42,000 and other fixed assets of $41,000. The remaining asset impairment of $125,000 is included in cost of sales.

7. Other operating expenses include corporate advisory, travel, engineering expenses, facilities and IT expenses.

7. Cash and cash equivalents

7. Cash and cash equivalents
	2019	2018
	$'000's	$'000's
Cash at bank	1,675	2,235
Call / term deposits	1,800	351
Total	3,475	2,586

An overdraft facility of NZ$250,000 with BNZ and a factoring facility of US$300,000 with Bluevine is in place. BNZ has perfected security interest in all present and after acquired property of ikeGPS Limited. On the BNZ facility there is an outstanding guarantee to another party of $75,000.

8. Inventory

8. Inventory
	2019	2018
	$'000's	$'000's
Finished goods	777	450
Components	914	770
Total inventory	1,691	1,220

Included in cost of sales is $1,139,000 (2018: $2,956,000) relating to the amount of inventory recognised as an expense in the year.

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p. 34

Notes to the consolidated financial statements

9. Trade and other receivables

	9. Trade and other receivables
	2019 2018 $'000's $'000's Trade receivables 1,268 1,151
	GST receivable 45 74
	Grants receivable 46 85
	Other receivables 11 48
	Total trade and other receivables 1,370 1,358
	The Group has $791,988 of trade receivables past due but not impaired at balance date. (2018: $299,580) 30 – 90 days 90 days + Total past due 207,697 584,291 791,988
	The Group has $791,988 of trade receivables past due but not impaired at balance date. (2018: $299,580) 30 – 90 days 90 days + Total past due 207,697 584,291 791,988

Trade receivables is net of provision for doubtful debts of $17,559.

10. Trade and other payables

10. Trade and other payables
	2019	2018
	$'000's	$'000's
Trade payables	252	302
Accrued expenses	253	397
Total trade and other payables	505	699

11. Subsidiaries

			Investment
Name of entity	Country of incorporation	Principal activity	2019	2018
ikeGPS Limited	New Zealand	Product development and business operations	1,000	1,000
ikeGPS Inc.	USA	Business operations	1,000	1,000
			2,000	2,000

ikeGPS Limited and ikeGPS Inc. are 100% (2018: 100%) owned by the Company.

All subsidiaries have 31 March balance dates.

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p. 35

Notes to the consolidated financial statements

12. Current and deferred tax

The Group’s tax expense/ (benefit) comprises:

	2019	2018
	$'000's	$'000's
Deferred tax	(4)	6
Income tax expense /(credit)	(4)	6

Prima facie income tax expense on pre-tax accounting loss from operations reconciles to the accounting loss from operations and reconciles to the income tax expense/(credit) in the financial statements as follows:

	2019	2018
	$'000's	$'000's
Net loss before income tax	(5,092)	(6,726)
Prima facie income tax credit at 28%	(1,425)	(1,883)
Non-deductible expenses	198	37
Unrecorded tax losses	1,223	1,852
Income tax expense /(credit)	(4)	6

The Group has unrecognised tax losses of $18,682,000 (2018: $16,046,000), arising from New Zealand operations available for use against future taxable profits subject to meeting the requirements of continuous ownership provision stated in the Income Tax Act 2007.

A tax asset in respect of these losses has not been recognised due to the uncertainty of when the unused tax losses can be utilised.

	2019	2018
	$'000's	$'000's
Deferred tax opening balance	13	19
Recognised through profit or loss	4	(6)
Deferred tax closing balance	17	13

Deferred tax asset relates to employee entitlements.

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p. 36

Notes to the consolidated financial statements

13. Contributed equity

Share capital

	2019	2018
	$'000's	$'000's
On issue at beginning of year	49,263	45,252
Issued under share placement	5,000	3,725
Issued under share purchase plan	1,250	387
Less listing costs offset against issue proceeds	(381)	(101)
Total share capital	55,132	49,263
Share capital on issue
	2019	2018
Fully paid total shares at beginning of year	78,450,255	64,270,910
Ordinary shares issued on settlement of options	-	-
New shares offered	12,019,312	14,179,345
Fully paid ordinary shares	90,469,567	78,450,255

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p. 37

Notes to the consolidated financial statements

14. Property, plant and equipment

Cost Balance at 1 April 2017 Additions Disposals Balance at 31 March 2018 Balance at 1 April 2018 Additions Disposals Balance at 31 March 2019 Depreciation Balance at 1 April 2017 Depreciation for the year Impairment Disposals Balance at 31 March 2018 Balance at 1 April 2018 Depreciation for the year Disposals Balance at 31 March 2019 Carrying amounts At 31 March 2018 At 31 March 2019	Plant & equipment Leasehold improvements Office furniture & equipment Development equipment Total $'000's $'000's $'000's $'000's $'000's 1,592 28 700 58 2,378
	10 - 16 - 26
	(383) - (135) (48) (566)
	1,219 28 581 10 1,838
	1,219 28 581 10 1,838
	183 - 287 10 480
	- - (156) (7) (163)
	1,402 28 712 13 2,155
	510 28 422 48 1,008
	229 - 156 2 387
	121 - 43 3 167
	(383) - (135) (48) (566)
	477 28 486 5 996
	477 28 486 5 996
	253 - 105 7 365
	- - (143) (7) (150)
	730 28 448 5 1,211
	742 - 95 5 842
	672 - 264 8 944

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p. 38

Notes to the consolidated financial statements

15. Intangible assets

Cost Balance at 1 April 2017 Additions Disposals Balance at 31 March 2018 Balance at 1 April 2018 Additions Disposals Balance at 31 March 2019 Amortisation and impairment losses Balance at 1 April 2017 Amortisation for the year Impairment Disposals Balance at 31 March 2018 Balance at 1 April 2018 Amortisation for the year Impairment Disposals Balance at 31 March 2019 Carrying amounts At 31 March 2018 At 31 March 2019	Development assets Patents and software Total $'000's $'000's $'000's 7,569 174 7,743
	1,224 - 1,224
	(324) - (324)
	8,469 174 8,643
	8,469 174 8,643
	651 - 651
	- - -
	9,120 174 9,294
	3,537 158 3,695
	1,204 16 1,220
	124 - 124
	(324) - (324)
	4,541 174 4,715
	4,541 174 4,715
	975 - 975
	- - -
	- - -
	5,516 174 5,690
	3,928 - 3,928
	3,604 - 3,604

Intangible assets are all recognised within and owned by ikeGPS Group Limited, incorporated in New Zealand.

Development assets

Additions to internally generated development assets for the year relates to the continued development of the platform, features to enhance Spike and IKE products including web and mobile applications.

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p. 39

Notes to the consolidated financial statements

16. Financial instruments and financial risk management

Financial instruments

The Group’s principal financial instruments comprise cash balances, trade and other receivables, trade and other payables and employee entitlements.

The following table shows the designation of the Group’s financial instruments:

			2019			2018
			$'000's			$'000's
					Financial
	Financial	Financial			liabilities
	Assets at	liabilities at			at	Total
	amortised	amortised	Total carrying	Loans and	amortised	carrying
	cost	cost	value	receivables	cost	value
Financial assets
Cash and cash equivalents	3,475	-	3,475	2,586	-	2,586
Trade and other receivables	1,370	-	1,370	1,285	-	1,285
Total financial assets	4,845	-	4,845	3,871	-	3,871
Financial liabilities
Employee entitlements	-	226	226	-	364	364
Trade payables	-	252	252	-	302	302
Accrued expenses	-	253	253	-	397	397
Total financial liabilities	-	731	731	-	1,063	1,063

Financial risk factors

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, foreign currency risk and interest rate risks which arise in the normal course of the Company and Group’s business. The Group uses different methods to measure and manage different types of risks to which it is exposed. Liquidity risk is monitored through the development of future rolling cash flow forecasts.

Credit risk

The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments. Financial instruments which potentially subject the Group to credit risk principally consist of cash and cash equivalents, and trade and other receivables. All cash and cash equivalents in New Zealand are held with high credit quality counterparties, being trading banks with "AA-" grade or better credit ratings, and a Moody’s A1 rating in the USA. The Group does not require collateral or security from its trade receivables. The Group performs credit checks and ageing analyses and monitoring of specific credit allowances. The Group does not anticipate any material non-performance of those customers. The total impaired trade receivables as at balance date is $17,559.

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p. 40

Notes to the consolidated financial statements

16. Financial instruments and financial risk management (continued)

At balance date 65% (2018: 85%) of the Group’s cash and cash equivalents were with one bank. The Group has no other concentrations of credit risk.

Maximum exposure to credit risk at balance date:

Maximum exposure to credit risk at balance date:
	2019	2018
	$'000's	$'000's
Cash at bank	3,475	2,586
Trade and other receivables	1,370	1,285
Total	4,845	3,871

Liquidity risk

Liquidity risk is the risk that the Group cannot pay contractual liabilities as they fall due. Group finance monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Group’s forward financing plans and commitments. Based on this the Group believes that it has sufficient liquidity to meet its obligations as they fall due for the next 12 months. The Group has an overdraft facility of NZ$250,000 and access to a US$300,000 factoring facility in place to cover potential shortfalls.

The following table sets out the undiscounted cash flows for all financial liabilities of the Group:

			2019			2018
			$'000's			$'000's
	Contractual	6 months	No stated	Contractual	6 months or	No stated
	cash flows	or less	maturity	cash flows	less	maturity
Employee entitlements	226	-	226	364	-	364
Trade payables	252	252	-	302	302	-
Accrued expenses	253	253	-	397	397	-
Total financial liabilities	731	505	226	1,063	699	364

Foreign currency risk management

The Group is exposed to foreign currency risk on its sales and a significant portion of its expenses that are denominated in USD which is different to the Group’s presentation currency. The Group currently does not hedge its exposures arising from its transactions denominated in a foreign currency.

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p. 41

Notes to the consolidated financial statements

16. Financial instruments and financial risk management (continued)

At 31 March 2019, had the local currency strengthened / weakened against the USD by 10% the pre-tax loss would have been (higher)/lower as follows:

	Carrying value of
	FX impacted	+10%	-10%
	financial instruments
	$'000's	$'000's	$'000's
Cash and cash equivalents	USD 839	(110)	140
Trade and other receivables	USD 869	(114)	145
Trade and other payables	USD 118	7	(28)
Intercompany balance foreign	USD 20,257	2,714	(3,317)

Interest rate risk management

The Group’s interest rate risk arises from its cash balances. The Group currently has no significant exposure to interest rate risk other than in relation to the amount held at the bank. A reasonably expected movement in the prevailing interest rate would not materially affect the Group’s financial statements.

17. Capital management

The capital structure of the Group consists of equity raised by the issue of ordinary shares in the Company. The Group manages its capital to ensure the entities in the Group are able to continue as a going concern. The Group is not subject to any externally imposed capital requirements.

In the current financial year, the Group completed a Private Placement and Share Purchase Plan raising $5,869,000. The Group’s aim is to maintain a sufficient capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The Group’s capital requirements are regularly reviewed by the Board of Directors.

There have been no material changes in the Group’s management of capital from the previous year.

This note should be read in conjunction with note 2; Going Concern which outlines the material uncertainty around the Group’s going concern assumption and the FY20 plan that Directors believe will enable the Group to continue operations.

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p. 42

Notes to the consolidated financial statements

18. Fair value estimation

The fair value of the Group’s financial assets and liabilities does not materially differ from their carrying value due to their short maturities.

The Group’s financial instruments are measured at amortised cost.

19. Commitments and contingencies

19. Commitments and contingencies
	2019	2018
	$'000's	$'000's
Non-cancellable operating leases
Less than one year	307	340
Between one and five years	621	95
Total	928	435

Operating leases are in relation to rented premises and photocopiers.

The Group advises there are no contingencies.

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p. 43

Notes to the consolidated financial statements

20. Cash used in operations

20. Cash used in operations
	2019	2018
	$'000's	$'000's
Loss for the year	(5,088)	(6,732)
Less investment interest received	(31)	(6)
Non-cash items included in net loss
Depreciation	365	387
Amortisation of intangible assets	975	1,220
Asset impairment	-	291
Materials write off	-	296
Debtor write off	26	91
Deferred tax expense	(4)	6
Share option expense	188	68
Write off of obsolete materials and assets	13	-
Foreign exchange (gains)/losses	26	71
	1,558	2,424
Add/(less) movement in working capital items
Decrease/(Increase) in trade and other receivables	(65)	(463)
Decrease/(Increase) in inventories	(470)	997
Decrease/(Increase) in prepayments	(22)	325
Increase/(Decrease) in trade and other payables	(182)	(551)
Increase/(Decrease) in deferred revenue	369	1,055
Increase/(Decrease) in employee entitlements	(135)	136
	(505)	1,499
Net cash used in operating activities	(4,035)	(2,809)

21. Basic and diluted earnings per share

	2019	2018
	$'000's	$'000's
Total loss for the year attributable to the owners of the parent	(5,088)	(6,732)
Ordinary shares issued	90,469,567	72,707,662
Basic loss per share	$(0.06)	$(0.09)

The potential shares are anti-dilutive in nature. The diluted loss per share is therefore the same as the undiluted EPS at ($0.06) and ($0.09) for the respective periods.

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p. 44

Notes to the consolidated financial statements

22. Share based payments

Share options are granted to directors and selected employees to retain, reward and motivate such individuals to contribute to the growth and profitability of the Group.

Options outstanding at 31 March 2019 have a contractual life from grant date of between 2.5 and 3 years. Options can be exercised at any time after vesting and unexercised options expire at the end of the contract or if the employee leaves the Group. The Group has no legal or constructive obligation to repurchase or settle the options in cash. Any share to be issued on the exercise of the option will be issued on the same terms and will rank equally in all respects with the ordinary shares in the company on issue.

Movements in the number of share options outstanding and their related average exercise prices are as follows:

		2019		2018
	Average Exercise Price	Options (’000’s)	Average Exercise Price	Options (’000’s)
At 1 April	0.50	1,155	$0.97	2,515
Granted	0.55	2,775	$0.36	600
Forfeited	0.59	(50)	$0.98	(285)
Expired	0.66	(530)	$1.08	(1,675)
	$0.52	3,350	$0.50	1,155

Out of the 3,350,000 outstanding options (2017: 1,155,000), 1,950,840 (2018: 574,993) had vested and were exercisable at 31 March 2019.

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p. 45

Notes to the consolidated financial statements

22. Share based payments (continued)

Options outstanding

Share options outstanding at the end of the year have the following expiry date and exercise price.

				2019		2018
						Term
Year		Exercise	Number of	Term remaining	Number of	remaining
Granted	Expiry date	price	options	(years)	options	(years)
2016	30-Sep-18	$0.72			80,000	0.50
2016	31-Dec-18	$0.70			100,000	0.75
2016	31-Mar-19	$0.63			375,000	1.00
2017	31-Mar-20	$0.40	400,000	1.00	400,000	2.00
2017	30-Jun-20	$0.29	200,000	1.25	200,000	2.25
2018	31-Mar-21	$0.54	1,100,000	2.00
2018	31-Mar-21	$0.54	1,400,000	2.00
2019	31-Dec-21	$0.64	250,000	2.75

Measurement of fair value

The Company determined the fair value of options issued using the Black Scholes valuation model. The significant inputs to the model were:

	2019	2018
Fair value of options issued in the year	$0.11, $0.12, $0.13, $0.19	$0.01, $0.05
Weighted average share price	$0.55	$0.40
Exercise price	$0.54 - $0.64	$0.29 - $0.40
Volatility	30%	30%
Dividend yield	Nil	Nil
Risk free interest rate	1.79% - 2.15%	2.54%

23. Related parties

23. Related parties
	2019	2018
	$'000's	$'000's
Short term benefits to directors and senior management	2,238	2,100
Share option expense directors and senior management	172	24

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p. 46

Notes to the consolidated financial statements

23. Related parties (continued)

Key management are identified as the Chief Executive Officer, Chief Technology Officer, Chief Financial Officer, Chief Operating Officer, SVP Utilities & Communication, and Directors.

24. Subsequent events

There are no subsequent events.

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p. 47

ikeGPS Group Limited

Level One, 42 Adelaide Road Mount Cook Wellington 6021 Telephone: +64 4 382 8064

Directors of ikeGPS Group Limited

Richard Gordon Maxwell Christie Bruce Harker Alex Knowles Glenn Milnes Frederick Lax William Morrow

Legal Advisers

Chapman Tripp 10 Customhouse Quay PO Box 993 Wellington 6140 Telephone: +64 4 499 5999

Auditor

PricewaterhouseCoopers PwC Centre 10 Waterloo Quay Pipitea, Wellington 6011 Telephone: +64 4 462 7000

Share Registrar

Link Market Services Limited PO Box 91976, Auckland 1142 Level 7 Zurich House 21 Queen Street, Auckland 1010 Telephone: +64 9 375 5998

Bankers

Bank of New Zealand Harbour Quays, Ground Floor, 60, Waterloo Quay, Wellington 6011 Private Bag 39806, Wellington Mail Centre, Lower Hutt 5045

www.ikegps.com