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READCLOUD LIMITED Interim / Quarterly Report 2021
65670_rns_2021-11-29_46e08915-4472-4bd1-9d65-1300af48792d.pdf
Interim / Quarterly Report
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ReadCloud Limited ABN 44 136 815 891
Financial Report for the quarter ended 30 September 2021
ReadCloud Limited Contents 30 September 2021
| Corporate directory | 2 |
|---|---|
| Directors' report | 3 |
| Auditor's independence declaration | 20 |
| Consolidated statement of profit or loss and other comprehensive income | 21 |
| Consolidated statement of financial position | 22 |
| Consolidated statement of changes in equity | 23 |
| Consolidated statement of cash flows | 24 |
| Notes to the consolidated financial statements | 25 |
| Directors' declaration | 57 |
| Independent auditor's report to the members of ReadCloud Limited | 58 |
| Shareholder information | 62 |
1
ReadCloud Limited Corporate directory 30 September 2021
| Directors | Mr Cristiano Nicolli (Non-Executive Chairman)Mr Paul Collins (Non-Executive Director)Mr Guy Mendelson (Non-Executive Director)Mr Lars Lindstrom (Managing Director and Chief Executive Officer)Mr Darren Hunter (Executive Director and Chief Information Officer) |
|---|---|
| Company secretary | Ms Melanie Leydin |
| Registered office | 284 Bay StreetBrighton VIC 3186Phone: +61 3 9078 4833 |
| Principal place of business | 284 Bay StreetBrighton VIC 3186Phone: +61 3 9078 4833 |
| Share register | Boardroom LimitedLevel 12, 225 George StreetSydney NSW 2000Phone: 1300 737 760; +61 2 9290 9600 |
| Auditor | PKF Melbourne Audit & Assurance Pty LtdLevel 12, 440 Collins StreetMelbourne VIC 3000 |
| Stock exchange listing | ReadCloud Limited shares are listed on the Australian SecuritiesExchange (ASX code: RCL) |
| Website | www.readcloud.com |
| Corporate Governance Statement | Refer to the Company's Corporate Governance statement at:www.readcloud.com/investors#corporate-governance |
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as 'ReadCloud' or the 'Group') consisting of ReadCloud Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the quarter ended 30 September 2021.
Change in financial year-end
In October 2021 the Company announced a change of financial year-end from 30 June to 30 September. Previously, ReadCloud has reported on a 30 June year-end financial year, with half-year reporting as at 31 December annually. The key School purchasing period for ReadCloud software and course content is from October to March . This results in ReadCloud's key revenue period being split over two financial reporting periods, making it more difficult for investors to interpret the Company's reported results.
The Company considers a change in financial year-end to 30 September for full year and 31 March for half year results will improve the clarity of the Company's results. This will also provide timelier disclosure of information relating to sales, operational and financial progress and performance.
Management believes it can provide greater transparency to the market by reporting the Company's half-year results to 31 March annually. At this time the majority of Full-Curriculum eBook sales will have been recorded and the student enrolment process for the VET-in-schools programs will have concluded.
The Company has previously released an annual report for the year ended 30 June 2021. This financial report covers the quarter ended 30 September 2021 with comparative financial information for the 12-month period ended 30 June 2021. Looking forward, the 1H22 period will be the 6 months ending 31 March 2022 (with comparatives being for the 6 months ended 31 March 2021) and the FY22 period will be the 12 months ending 30 September 2022 (with comparatives being for the 12 months ended 30 September 2021).
. Directors
The following persons were Directors of ReadCloud Limited during the whole of the financial period and up to the date of this report, unless otherwise stated:
Mr Cristiano Nicolli - Non-Executive Chairman Mr Paul Collins - Non-Executive Director Mr Guy Mendelson - Non-Executive Director Mr Lars Lindstrom - Managing Director and Chief Executive Officer Mr Darren Hunter - Executive Director and Chief Information Officer
Principal activities
ReadCloud is a leading provider of software solutions, including eBooks, to schools within Australia. ReadCloud's proprietary eBook reader delivers digital content to students and teachers with extensive functionality, including the ability to make commentary in, and import third party content into eBooks.
Students and teachers can share notes, questions, videos and weblinks directly inside the eBooks turning the eBook into a place for discussion, collaboration and social learning, substantially improving learning outcomes. ReadCloud sources content for its solutions from multiple publishers so that together with its reseller channel partners, ReadCloud is able to deliver the Australian school curriculum in digital form in all States, on one platform.
ReadCloud also provides digital Vocational Education and Training ("VET") course materials and services to schools through its subsidiaries Australian Institute of Education and Training Unit Trust ("AIET"), PKY Media Pty Ltd (trading as College of Sound and Music Production) and Ripponlea Institute Pty Ltd, which collectively offer over 50 VET courses and Auspicing services to schools across Australia.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Review of operations
Key operational highlights for the 2021 September quarter included:
- strong retention and recommitment of existing schools across the Company's three sales channels (VET in schools, Direct Full-Curriculum and Reseller Full-Curriculum) for the 2022 school year;
- new school signings for the 2022 school year across all three sales channels;
- cross selling of VET courses across the existing customer base;
- continued investment in the ReadCloud platform; and
- identification of potential new revenue generating opportunities on the back of increasing interest in the ReadCloud platform.
A key focus for the Company in the 2021 September and current quarters is the retention and recommitment of existing school customers across the Company's three sales channels and new school signings for the 2022 school year. Management has been pleased with progress to date:
- the majority of existing schools across the three sales channels have already recommitted for 2022 school year; and
- new schools have signed up for the 2022 school year across all three sales channels.
The Company continues to partner with Full-Curriculum Resellers that offer a one-stop-shop solution to schools wanting a combination of eBooks and physical books/stationary. Two new Full-Curriculum Resellers were signed up in the 2021 September quarter and joint marketing of the ReadCloud platform to their existing schools as well as promoting the joint offering more widely has already borne fruit with new school singings.
Following the acquisitions of Registered Training Organisations PKY Media Pty Ltd (trading as College of Sound and Music Production, "COSAMP", acquired in October 2020) and Ripponlea Institute Pty Ltd (acquired in June 2021), the ReadCloud VET Group (comprising Australian Institute of Education and Training, COSAMP and Ripponlea Institute) is now the largest Private operator of VET-in-Schools in Australia by scope of courses offered.
Of the three ReadCloud RTO's collective schools, 85% of those school customers used only one of ReadCloud's VET providers in 2021. A substantial cross selling opportunity exists over the coming years to deliver a wider range of courses to existing school customers who, in general, prefer to deal with fewer RTOs to reduce the administrative compliance burden. Cross selling has already been achieved this selling season and management expects the number of school customers using more than one of ReadCloud's RTOs for the 2022 school year will be substantially higher.
Platform update
Investment in the ReadCloud platform is seen as a core part of our growth strategy in that it delivers increased levels of automation, streamlines the user experience and continues to provide a strong differentiator in the market. Investment in the platform continued in the 2021 September quarter, with:
- various back-end systems used by the three ReadCloud VET Group RTO's being unified and the ReadCloud eReader integrated for the delivery of VET course materials. This has been a precursor to the November 2021 launch of a newly developed VET-In-Schools platform that comprises a complete end-toend digital process from school compliance monitoring and student enrolment portal to students accessing their course materials (via the ReadCloud eReader), students completing assessments online in the ReadCloud Hub and teachers being able to mark student assessments online;
- further improvements to the sales quoting, onboarding and invoicing system for the Direct Full-Curriculum business, greatly enhancing the scalability of this business where more schools can be on-boarded with the same level of customer support; and
- further investment in the Company's proprietary eReader platform to improve user experience and remove pain points for our customers.
Financial results
The September quarter is typically the lowest revenue quarter for both of the Company's operating segments (eBook solutions and Vocational Education and Training, "VET"), with the vast majority of Full-Curriculum eBook sales occurring in the months of December to March each year (coinciding with the commencement of the school year) and the majority of revenue for the VET segment occurring in the months of February to April (coinciding with the peak enrolment period for VET-in-school enrolments).
The Company recorded a loss for the 2021 September quarter of $1,674,344 and an underlying loss before interest taxation, depreciation and amortisation ('Underlying EBITDA'*) of $1,400,481. This is compared to the Company's reviewed result for the prior corresponding period (2020 September quarter), the audited result for the year ended 30 June 2021 and proforma result for the year ended 30 September 2021 in the table below.
| Consolidated | |||||||
|---|---|---|---|---|---|---|---|
| $ | Quarter ended 30 September | Year ended | |||||
| 30 September | 30 June | ||||||
| 2021 | 2020 | 2021 | 2021 | ||||
| (audited) | (reviewed) | (proforma) | (audited) | ||||
| Sales & fee revenue | 134,412 | 318,088 | 6,988,396 | 7,172,072 | |||
| Other revenue | 88,906 | 174,533 | 429,677 | 515,304 | |||
| Total revenue | 223,318 | 492,621 | 7,418,073 | 7,687,376 | |||
| Less operating expenses: | |||||||
| Advertising and marketing | (81,665) | (12,218) | (183,618) | (114,172) | |||
| Employment expenses | (1,103,999) | (687,532) | (3,789,844) | (3,373,377) | |||
| Legal & compliance | (19,192) | (20,937) | (85,288) | (87,033) | |||
| Professional services expenses | (155,570) | (72,521) | (474,920) | (391,871) | |||
| Publisher and bookseller fees expense | (47,685) | (194,518) | (2,904,162) | (3,050,995) | |||
| Telephone, internet & data hosting | (25,124) | (18,879) | (96,609) | (90,364) | |||
| Travel expenses | (8,604) | (4,020) | (96,642) | (92,059) | |||
| Other expenses | (181,842) | (97,554) | (554,816) | (470,527) | |||
| Finance costs | (6,105) | (2,826) | (17,537) | (14,257) | |||
| Add net interest expense / (revenue) | 5,987 | 2,466 | 16,354 | 12,833 | |||
| Underlying EBITDA* | (1,400,481) | (615,918) | (769,009) | 15,553 | |||
| Less: | Depreciation and amortisation | (257,679) | (198,748) | (987,467) | (928,536) | ||
| Share based payments | (10,197) | (18,951) | (50,849) | (59,603) | |||
| Transactioncostsincurredon | |||||||
| business acquisition (expensed)and one-off ASX fees | - | - | (144,830) | (144,830) | |||
| Net interest (expense) | (5,987) | (2,466) | (16,354) | (12,833) | |||
| Income tax expense | - | - | (21,122) | (21,122) | |||
| Reported (statutory) net loss after tax | (1,674,344) | (836,083) | (1,989,632) | (1,151,371) |
* EBITDA and underlying EBITDA are non-statutory financial measures which are not prescribed by Australian Accounting Standards (AAS). They represent the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and certain other specified items. The Directors consider that EBITDA and underlying EBITDA reflect core earnings of the entity consistent with internal reporting.
Comprehensive commentary on the Company's financial results for the year ended 30 June 2021 was contained in the 2021 Annual Report that was released to the ASX on 30 August 2021. Revenues and significant expenses for the 2021 September quarter are discussed below.
Revenue
September 2021 quarter Sales and fee revenue for the VET segment was slightly higher than for the prior corresponding quarter ($0.10 million versus $0.08 million), albeit the September quarter falls outside of the normal revenue cycle for this segment.
Sales and fee revenue for the full-curriculum segment was $0.20 million lower than the prior corresponding quarter ($0.03 million versus $0.23 million) as a result of later processing of "Year 11 & 12 headstart" orders this year (eBooks ordered for 2021 Year 10 and Year 11 students starting 2022 subjects in Term 4 of the 2021 school year). The generation of these sales orders and eBook provisioning was deliberately delayed until after the commencement of Term 4 this year to enable greater accuracy of sales quoting and provisioning with the benefit of updated school timetables (avoiding significant subsequent reconciliation work). As a result, eBook sales related to "Year 11 & 12 headstart" orders from schools have pushed into the months of October and November 2021 (eBook sales for these months are significantly higher than in the corresponding months in 2020).
Other revenue for the 2021 September quarter was $0.08 million lower than the prior comparable quarter due to the receipt of Federal government grants (cashflow boost) in the September 2020 quarter.
Operating expenses
The PKY Media and Ripponlea Institute businesses (that were acquired in October 2020 and June 2021 respectively) were not part of the Group in the 2020 September quarter. In the 2021 September quarter the Company incurred operating costs of $0.40 million in respect of these businesses (2020 September quarter: $nil), Significant Operating expenses are discussed in further detail below.
Advertising and marketing expense
Increased investment in advertising and marketing was made in the 2021 September quarter ($0.08 million versus $0.01 million for the prior corresponding quarter), largely in relation to an extensive national marketing campaign to promote the ReadCloud VET Group to both the existing school customer base (cross-selling opportunities) and new schools.
Depreciation and amortisation expense
2021 September quarter Depreciation and amortisation expense was $0.26 million (2020 September quarter: $0.20 million), with the increase due to more capitalised software development costs from previous financial periods commencing amortisation during the period and the depreciation and amortisation of property, plant & equipment and intangible assets acquired in connection with the acquisition of PKY Media.
Employment costs
2021 September quarter Employment expenses were $1.10 million (2020 September quarter: $0.69 million), with the increase mainly due to employment costs associated with PKY Media and Ripponlea Institute acquisitions ($0.29 million) and additional annual leave accrued by employees (additional expense of $0.05 million for the 2021 September quarter compared to the prior corresponding quarter).
Professional services expenses
2021 September quarter Professional services expenses were $0.16 million (2020 September quarter: $0.07 million), with the increase due to the costs associated with the requirement for the production of a 30 September 2021 audited financial report ($0.04 million) and consultants (compliance and recording studio consultants) engaged by PKY Media and Ripponlea Institute during the 2021 September quarter.
Publisher and bookseller fees expense
The decrease in Publisher and bookseller fees expense for the 2021 September quarter ($0.05 million versus $0.19 million for the prior corresponding quarter) was due to delayed "Year 11 & 12 headstart" orders for the full-curriculum segment as discussed above.
Other expenses
2021 September quarter other expenses were $0.18 million (2020 September quarter: $0.10 million), with the increase mainly due to additional expenses associated with PKY Media and Ripponlea Institute.
Funding
As at 30 September 2021 the Company had a strong balance sheet with cash at bank of $4.47 million and zero debt. The end of the September quarter each year is typically near the low point of the Company's cash cycle, with the March and June quarters in each year being the strongest for sales and cash receipts. The Company is well capitalized to pursue growth initiatives.
Outlook
Management is confident that its strategies to accelerate growth in its three sales channels, which to date have yielded high customer retention rates, new school signings and confirmed cross sales between the three ReadCloud RTO's, will result in strong revenue growth in FY22 (year ending 30 September 2022). Management estimate that ReadCloud will have well over 600 school customers for 2022.
Global Victoria recently selected ReadCloud for participation in a number of Virtual Trade Expo events across South East Asia and the United Kingdom. The learnings so far suggest that there may be a gap in certain overseas markets for ReadCloud's platform and in particular the ability to encrypt and protect publishers' eBooks. As such, ReadCloud is making an investment in exploring and quantifying a Distributor/Reseller model in a number of overseas markets.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial period.
Matters subsequent to the end of the financial period
On 1 October 2021 the Company issued 1,447,370 fully-paid ordinary shares as deferred consideration for the acquisitions of PKY Media Pty Ltd and Ripponlea Institute Pty Ltd.
No other matter or circumstance has arisen since 30 September 2021 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group's likely developments and expected results of operations are as follows:
- continue in the provision of eBook solutions to secondary schools across Australia;
- continue to source content so that, with its reseller partners and publisher agreements, the Company is able to deliver the Australian secondary school curriculum in digital form in all States;
- carry on providing Vocational Education and Training courses and services to enable secondary schools across Australia to offer their students nationally accredited VET qualifications; and
- continue to pursue partnerships with educational content publishers and booksellers looking for a secure digital delivery solution.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on Directors
| Name:Title:Qualifications:Experience and expertise: | Cristiano NicolliNon-Executive ChairmanBachelor Management & Business Studies, FAICDCris has an extensive career as an influential leader and highly successfulbusinessman in the technology sector. From 2010 to 2016, Cris was theGroup Managing Director and CEO of ASX-listed IT services company UXCLimited. During his 13 years with UXC, Cris was instrumental in leading thegrowth of UXC's IT-services business from $60 million annual revenue to$750 million (via both organic growth and acquisitions) and employing 3,000staff. Under Cris' leadership, UXC became widely recognised as the largestand one of the most respected ASX-listed IT companies in Australia. Crisoversaw the acquisition of UXC by global IT firm CSC in late 2016 for inexcess of $400 million. |
|---|---|
| Other current directorships: | Cris is currently Non-Executive Chairman of Playside Studios Limited (ASX:PLY), Australia's largest publicly listed video game developer, a NonExecutive Director of ASX/NZX listed Vista Group International Limited (ASX:VGL), a leading provider of software and cloud solutions to the global filmindustry, and a Non-Executive Director of ASX listed international IT servicesprovider Empired Limited (ASX: EPD).Playside Studios (ASX: PLY) Non-Executive Chairman since October 2020 |
| Vista Group International Limited (ASX/NZX: VGL) Non-Executive Directorsince February 2017Empired Limited (ASX: EPD) Non-Executive Director October 2018 to 15thNovember 2021 | |
| Former directorships (last 3years):Interests in shares: | Other Levels Limited (ASX: OLV) Non-Executive Director January 2018 toAugust 2020625,000 fully paid ordinary shares |
| Name:Title: | Paul CollinsNon-Executive Director |
| Qualifications:Experience and expertise: | BSc Applied Science (Computer Science), GAICDPaul commenced his career with IBM in 1982. After 3 years he started his ownconsulting business working in a state government agency and largecorporations primarily in software development and implementation roles. Thisincluded 7 years at IOOF in the Development Manager's role. Over the last 20years, Paul has been extensively involved in the start-up and subsequent ASXlisting of 2 successful FinTech companies. A co-founder of IWL in 1997, Paulwas an Executive Director of the company from its inception, through its listingin 1999 before leaving in 2004. Later in 2004, Paul was a co-founder andExecutive Director of Managed Accounts Ltd which listed on the ASX in 2014(ASX:MGP). Paul chaired the Audit and the Risk and Compliance Committeesof MGP from 2009 until 2016. |
| Other current directorships: | Integrated Payment Technologies Ltd (ASX:IP1) Non-Executive Directorsince October 2018 |
| Former directorships (last 3years): | None |
| Interests in shares: | 1,185,411 fully paid ordinary shares |
| Name:Title:Qualifications:Experience and expertise: | Guy MendelsonNon-Executive DirectorB. BusGuy has a strong working knowledge of ReadCloud and its managementhaving been a member of the ReadCloud Advisory Board for three years priorto the Company's IPO in February 2018. Guy's previous Board experience |
| Other current directorships:Former directorships (last 3years): | includes being a BPAY Board Director for four years and a Brotherhood of StLaurence Audit and Risk Committee member for the past 8 years. Guy hasextensive strategic and commercial experience at an executive level with 20years' experience working for ANZ Bank running various businesses. He iscurrentlyManagingDirector,BusinessOwnersPortfoliowithinANZresponsible for the growth and profitability of this business segment.NoneNone |
|---|---|
| Interests in shares: | 1,435,318 fully paid ordinary shares |
| Name:Title:Qualifications:Experience and expertise: | Lars LindstromManaging Director and Chief Executive OfficerMasters in Business Administration & Corporate LawLars co-founded ReadCloud in 2009 and has extensive tech startupexperience. Previously a Partner in LundXY Global Ventures (the first investorin Skype) and the CFO/Co–Founder of Nyhedsavisen which within one yearbecame the most read newspaper in Denmark publishing over 500,000 copiesdaily. Lars spent his first 10 years working in investment banking/M&A workingfor Deutsche Bank and Rothschild in Melbourne. |
| Other current directorships:Former directorships (last 3years): | NoneNone |
| Interests in shares: | 8,664,128 fully paid ordinary shares |
| Name:Title:Experience and expertise: | Darren HunterExecutive Director and Chief Information OfficerDarren commenced his career in IT in 1984. Following a number of varied andsenior roles he cofounded IWL, a financial planning and online stockbrokingsoftware provider in 1997. IWL was listed on the ASX in 1999 and providedWestpac and National Australia Bank with their online broking capabilities.Darren's role was that of CIO and group strategy. IWL grew into an ASX 300company with over 500 employees and was eventually acquired by CBA for$373 million. He commenced with ReadCloud in 2015 in the role of ChiefInformation Officer. |
| Other current directorships:Former directorships (last 3years): | NoneNone |
| Interests in shares: | 7,084,880 fully paid ordinary shares |
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Ms Melanie Leydin, BBus (Acc. Corp Law) CA FGIA
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute of Chartered Accountants, Fellow of the Governance Institute of Australia and is a Registered Company Auditor. She graduated from Swinburne University in 1997, became a Chartered Accountant in 1999 and since February 2000 has been the principal of Leydin Freyer. The practice provides outsourced company secretarial and accounting services to public and private companies across a host of industries including but not limited to the Resources, technology, bioscience, biotechnology and health sectors.
Melanie has over 25 years' experience in the accounting profession and over 15 years as a Company Secretary. She has extensive experience in relation to public company responsibilities, including ASX and ASIC compliance, control and implementation of corporate governance, statutory financial reporting, reorganisation of companies and shareholder relations.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the period ended 30 September 2021, and the number of meetings attended by each Director were:
| Full Board | Audit and Risk Committee | Remuneration andNomination Committee | ||||
|---|---|---|---|---|---|---|
| Attended | Held | Attended | Held | Attended | Held | |
| Cristiano Nicolli | 3 | 3 | 1 | 1 | - | - |
| Paul Collins | 3 | 3 | 1 | 1 | - | - |
| Guy Mendelson | 3 | 3 | 1 | 1 | - | - |
| Lars Lindstrom | 3 | 3 | - | - | - | - |
| Darren Hunter | 3 | 3 | - | - | - | - |
Remuneration report (audited)
The remuneration report details the key management personnel ("KMP") remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including all directors. The KMP of the Group during the quarter ended 30 September 2021 consisted of the following Directors and executives:
- Mr Cristiano Nicolli Non-Executive Chairman
- Mr Paul Collins Non-Executive Director
- Mr Guy Mendelson Non-Executive Director
- Lars Lindstrom Managing Director and Chief Executive Officer
- Mr Darren Hunter Executive Director and Chief Information Officer
- Mr Luke Murphy Chief Financial Officer
- Mr Joshua Fisher Chief Product Officer
The experience and expertise of each of the Directors and the Company Secretary are contained earlier in the Director's report and for other KMP is described below.
| Name:Title:Qualifications:Experience and expertise: | Luke MurphyChief Financial OfficerB.Comm, CA ANZ, AGIA, ICSALuke is a Chartered Accountant (previously with KPMG and Deloitte) andChartered Company Secretary with over 20 years' equity capital marketsexperience advising companies on capital raising, mergers and acquisitionsand investor relations, complemented by experience as Chief Financial Officerof rapidly growing technology companies. |
|---|---|
| Name: | Joshua Fisher |
| Title: | Chief Product Officer |
| Qualifications: | MBA (Executive), AGSM |
| Experience and expertise: | Josh is a marketing practitioner with over fifteen years' experience spanning |
both the client and agency side (B2B and B2C), together with SME experience, having successfully run an innovative Australian cosmetic company – Rationale Skincare. Josh's experience spans education, financial services, FMCG and consumer goods.
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
References to performance rights and options issued to KMP in this remuneration report are to securities issued by the Company that convert into fully-paid ordinary shares in the Company.
Principles used to determine the nature and amount of remuneration
The objective of the Group'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 it is considered to conform to the market best practice for the delivery of reward. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
- Remuneration is competitive to allow the Company to attract and retain the best talent
- Drivers and outcomes of remuneration align with shareholder outcomes
- Remuneration outcomes are closely aligned with performance of the Group
• Remuneration structure is simple and transparent
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel.
The Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Group.
The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it should seek to enhance shareholders' interests by:
- having economic profit as a core component of plan design
- focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
- attracting and retaining high calibre executives
Additionally, the reward framework should seek to enhance executives' interests by:
- rewarding capability and experience
- reflecting competitive reward for contribution to growth in shareholder wealth
- providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate.
Non-executive directors' remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration.
Non-executive directors may receive equity-based incentives, such as options and/or performance rights, where it is determined that this is an appropriate means of incentivising those directors by aligning their interests with the interests of shareholders.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components.
The executive remuneration and reward framework has the following components:
- base pay and non-monetary benefits
- 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 Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations.
Executives may 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 Group and provides additional value to the executive.
The long-term incentives ('LTI') include long service leave, performance rights and options. Details of performance rights and options issued to KMP as part of their remuneration are set out below.
Group performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the Group, by way of the issue of performance rights and options, details of which are as follows. Each performance right will convert to one fully paid ordinary share in the Company following achievement of the relevant performance condition. Each option will convert into one fully paid ordinary share in the Company following both the achievement of the relevant vesting condition (being continued employment until the relevant vesting date) and payment of the relevant exercise price. Refer to the section "Additional Information" below for details of the earnings and total shareholders return for the period since ASX listing.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in part to the adoption of performance-based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years.
Details of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
| Short-term benefits | Postemploymentbenefits | Longtermbenefits | Sharebasedpayments | ||||
|---|---|---|---|---|---|---|---|
| Cashsalaryand fees | Annualleaveaccrued | Non-monetary | Superannuation | LongserviceLeave | Equitysettled | Total | |
| 3 Months to 30September 2021 | $ | $ | $ | $ | $ | $ | $ |
| Non-ExecutiveDirectors: | |||||||
| Cristiano Nicolli | 13,636 | - | - | 1,364 | - | - | 15,000 |
| Paul Collins | 10,227 | - | - | 1,023 | - | - | 11,250 |
| Guy Mendelson | 12,500 | - | - | - | - | - | 12,500 |
| Executive Directors: | |||||||
| Lars Lindstrom | 59,091 | 9,000 | - | 5,909 | 750 | - | 74,750 |
| Darren Hunter | 59,091 | 9.000 | - | 5,909 | 750 | - | 74,750 |
| Other Key ManagementPersonnel: | |||||||
| Luke Murphy | 45,455 | 5,500 | - | 4,545 | 2,682 | 850 | 59,032 |
| Joshua Fisher | 45,455 | 4,021 | - | 4,545 | 577 | - | 54,598 |
| 245,455 | 27,521 | - | 23,295 | 4,759 | 850 | 301,880 |
| Short-term benefits | termbenefits | basedpayments | |||||
|---|---|---|---|---|---|---|---|
| Cashsalaryand fees | Annualleaveaccrued | Non-monetary | Superannuation | LongserviceLeave | Equitysettled | Total | |
| 12 Months to 30 June2021 | $ | $ | $ | $ | $ | $ | $ |
| Non-ExecutiveDirectors: | |||||||
| Cristiano Nicolli | 42,618 | - | - | 4,049 | - | - | 46,667 |
| Paul Collins | 45,479 | - | - | 4,321 | - | - | 49,800 |
| Guy Mendelson | 46,667 | - | - | - | - | - | 46,667 |
| Executive Directors: | |||||||
| Lars Lindstrom | 237,443 | 9,018 | - | 22,557 | 4,485 | - | 273,503 |
| Darren Hunter | 237,443 | 7,191 | - | 22,557 | 4,485 | - | 271,676 |
| Other Key ManagementPersonnel: | |||||||
| Luke Murphy | 158,295 | 6,868 | - | 15,038 | 2,307 | 25,622 | 208,130 |
| Joshua Fisher | 210,305 | - | - | 19,979 | 3,450 | - | 233,734 |
| 978,250 | 23,077 | - | 88,501 | 14,727 | 25,622 | 1,130,177 |
The proportion of remuneration linked to performance and the fixed proportion are as follows:
| Fixed remuneration | At risk - STI | At risk - LTI | ||||
|---|---|---|---|---|---|---|
| 2021 for 3 | 2021 for 12 | 2021 for 3 | 2021 for 12 | 2021 for 3 | 2021 for 12 | |
| Name | months* | months** | months* | months** | months* | months** |
| Non-Executive Directors: | ||||||
| Cristiano Nicolli | 100% | 100% | - | - | - | - |
| Paul Collins | 100% | 100% | - | - | - | - |
| Guy Mendelson | 100% | 100% | - | - | - | - |
| Executive Directors: | ||||||
| Lars Lindstrom | 100% | 100% | - | - | - | - |
| Darren Hunter | 100% | 100% | - | - | - | - |
| Other Key ManagementPersonnel: | ||||||
| Luke Murphy | 99% | 88% | - | - | 1% | 12% |
| Joshua Fisher | 100% | 100% | - | - | - | - |
* 3 Months to 30 September 2021
** 12 months to 30 June 2021
Service agreements
Remuneration and other terms of employment for KMP are formalized in service agreements. Details of these agreements are as follows:
| Name:Title:Term of agreement:Details: | Cristiano NicolliChairmanNo fixed term.Annual fee of $60,000 including statutory superannuation. |
|---|---|
| Name:Title:Term of agreement:Details: | Paul CollinsChairmanNo fixed term.Annual fee of $45,000 including statutory superannuation. |
| Name:Title:Term of agreement:Details: | Guy MendelsonNon-Executive DirectorNo fixed term.Annual fee of $50,000 including Committee chair fees. |
| Name:Title:Term of agreement:Details: | Lars LindstromManaging Director and Chief Executive OfficerNo fixed term. The Company may terminate the agreement by giving ninemonths' notice and may make payment in lieu of all or part of the notice period.The employee may terminate his employment by giving 3 months' notice.Base salary of $260,000 per annum, inclusive of superannuation. |
| Name:Title:Term of agreement:Details: | Darren HunterExecutive Director and Chief Information OfficerNo fixed term. The Company may terminate the agreement by giving ninemonths' notice and may make payment in lieu of all or part of the notice period.The employee may terminate his employment by giving 3 months' notice.Base salary of $260,000 per annum, inclusive of superannuation. |
| Name:Title:Term of agreement:Details: | Luke MurphyChief Financial OfficerNo fixed term. The Company may terminate the agreement by giving twomonths' notice and may make payment in lieu of all or part of the notice period.The employee may terminate his employment by giving two months' notice.Base salary of $200,000 per annum, inclusive of superannuation. The employeehas also been issued options by the Company, details of which are disclosedelsewhere in this remuneration report. |
| Name:Title:Term of agreement:Details: | Joshua FisherChief Product OfficerNo fixed term. The Company may terminate the agreement by giving ninemonths' notice and may make payment in lieu of all or part of the notice period.The employee may terminate his employment by giving three months' notice.Base salary of $200,000 per annum, inclusive of superannuation. |
KMP 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 KMP as part of compensation during the quarter ended 30 September 2021.
Options issued during the period
There were no options over ordinary shares granted to Directors and other KMP as part of compensation during the quarter ended 30 September 2021.
Details of options issued as part of compensation during the quarter ended 30 September 2021 and prior years and held by Directors and other KMP as at the date of this report are as follows:
| Class | KMP Holders | Vesting conditions |
|---|---|---|
| Options over ordinary shares,exercisable at $0.41 pershare and expiring on 17 July2022 | Luke Murphy – 360,000 | 100% of these Options have vested |
| Options over ordinary shares,exercisable at $0.34 pershare and expiring on 12 July2022 | Luke Murphy – 150,000 | 100% of these Options have vested |
| Options over ordinary shares,exercisable at $0.20 pershare and expiring on 7February 2022 | Luke Murphy – 75,000 | 100% of these Options have vested |
Options vested or lapsed during the period During the quarter, the following options vested to KMP (no options held by KMP lapsed during the period):
| Class | KMP Holder |
|---|---|
| Options over ordinary shares, exercisable at $0.41 pershare and expiring on 17 July 2022 | Luke Murphy – 120,000 |
| Options over ordinary shares, exercisable at $0.34 per | Luke Murphy – 75,000 |
| share and expiring on 12 July 2022 |
Performance rights issued during the period
There were no performance rights granted to or held by Directors and other KMP as part of compensation during the quarter ended 30 September 2021.
Additional information
The earnings of the Group for the three years to 30 June 2021 and the quarter ended 30 September 2021 are summarized below:
| 2021(3 months*)$ | 2021(12 months**)$ | 2020(12 months**)$ | 2019(12 months**)$ | |
|---|---|---|---|---|
| Sales revenue | 134,412 | 7,172,072 | 6,956,136 | 4,316,479 |
| Underlying EBITDA | (1,400,481) | 15,553 | (161,141) | (421,960) |
| Loss after income tax | (1,674,344) | (1,151,371) | (981,984) | (1,630,423) |
* 3 Months to 30 September 2021
** 12 months to 30 June
The factors that are considered to affect total shareholder return ('TSR') are summarised below:
| 30 September | 30 June | 30 June | 30 June | |
|---|---|---|---|---|
| 2021 | 2021 | 2020 | 2019 | |
| Share price at financial period end ($) | 0.24 | 0.33 | 0.28 | 0.32 |
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial period by each Director and other KMP, including their personally related parties, is set out below:
| Balance atthe start ofperiod | Additions | Disposals /other | Balance atthe end ofthe period | |
|---|---|---|---|---|
| Ordinary shares | ||||
| Cristiano Nicolli | 125,000 | - | - | 125,000 |
| Paul Collins | 1,185,411 | - | - | 1,185,411 |
| Guy Mendelson | 1,435,318 | - | - | 1,435,318 |
| Lars Lindstrom | 8,534,128 | - | - | 8,534,128 |
| Darren Hunter | 7,084,880 | - | - | 7,084,880 |
| Luke Murphy | 75,000 | - | - | 75,000 |
| Joshua Fisher | 5,013,610 | - | 5,013,610 | |
| 23,453,347 | - | - | 23,453,347 |
Option holding
The number of options over ordinary shares in the Company held during the financial period by each Director and other KMP, including their personally related parties, is set out below:
| Balance atthe start ofthe period | Received aspart ofremuneration | Acquired | Exercised | Expired/forfeited/other | Balance atthe end ofthe period | |
|---|---|---|---|---|---|---|
| Options over ordinary shares | ||||||
| Cristiano Nicolli | - | - | - | - | - | - |
| Paul Collins | - | - | - | - | - | - |
| Darren Hunter | - | - | - | - | - | - |
| Luke Murphy | 585,000 | - | - | - | - | 585,000 |
| 585,000 | - | - | - | - | 585,000 |
| Options over ordinary shares | Unvested | Vested andexercisable | Balance atthe end ofthe period |
|---|---|---|---|
| Luke Murphy | - | 585,000 | 585,000 |
| - | 585,000 | 585,000 |
Loans
The Group has not made, guaranteed or secured, directly or indirectly, any loans in respect of KMP (or their close family members or controlled entities).
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of the Company under option at the date of this report are as follows:
| Grant date | Expiry date | Exerciseprice | Numberunder option |
|---|---|---|---|
| 13 March 2018 | 07 February 2022 | $0.200 | 75,000 |
| 28 May 201821 September 2018 | 07 May 202217 July 2022 | $0.330$0.410 | 300,000360,000 |
| 9 January 2019 | 14 December 2021 | $0.350 | 180,000 |
| 12 July 201913 July 2020 | 12 July 20222 July 2023 | $0.340$0.280 | 250,000100,000 |
| 30 March 2021 | 9 March 2025 | $0.430 | 300,000 |
1,565,000
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 under performance rights
At the date of this report there are no unissued ordinary shares of the Company under performance rights. No ordinary shares of the Company were issued on the exercise of performance rights during the quarter ended 30 September 2021 or since this date.
Shares issued on the exercise of options
During the quarter ended 30 September 2021 no ordinary shares of the Company were issued on the exercise of options.
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.
The Company has 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 Group has not, during or since the end of the financial period, indemnified or agreed to indemnify the auditor of the Group or any related entity against a liability incurred by the auditor.
During the financial period, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any related entity.
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 Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group 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 period by the auditor are outlined in note 21 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial period, 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 21 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 Group, acting as advocate for the Group or jointly sharing economic risks and rewards.
Officers of the Group who are former partners of PKF Melbourne Audit & Assurance Pty Ltd
There are no officers of the Group who are former partners of PKF Melbourne Audit & Assurance Pty Ltd.
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
PKF Melbourne Audit & Assurance Pty Ltd 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
__________________________
Cristiano Nicolli Chairman
30 November 2021
AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF READCLOUD LIMITED
In relation to our audit of the financial report of ReadCloud Limited for the financial period ended 30 September 2021, I declare to the best of my knowledge and belief, there have been:
- (a) no contraventions of the auditor independence requirements of the Corporations Act 2001; and
- (b) no contraventions of any applicable code of professional conduct.
PKF Steven Bradby Melbourne, 30 November 2021 Partner
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000
T: +61 3 9679 2222 F: +61 3 9679 2288 www.pkf.com.au
Liability limited by a scheme approved under Professional Standards Legislation
PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.
ReadCloud Limited Consolidated statement of profit or loss and other comprehensive income 30 September 2021
| Consolidated | ||||
|---|---|---|---|---|
| Note | Quarter ended30 September2021 | Year ended30 June 2021 | ||
| $ | $ | |||
| Revenue | ||||
| Sales revenue | 5 | 134,412 | 7,172,072 | |
| Other income | 5 | 88,906 | 515,304 | |
| Total revenue | 223,318 | 7,687,376 | ||
| Expenses | ||||
| Advertising and marketing | (81,665) | (114,172) | ||
| Depreciation and amortisation expense | 6 | (257,679) | (928,536) | |
| Employment expenses | 6 | (1,103,999) | (3,373,377) | |
| Legal & compliance | (19,192) | (129,563) | ||
| Professional services expenses | (155,570) | (494,171) | ||
| Publisher and bookseller fees expense | (47,685) | (3,050,995) | ||
| Share-based payments | 6 | (10,197) | (59,603) | |
| Telephone, internet & data hosting | (25,124) | (90,364) | ||
| Travel expenses | (8,604) | (92,059) | ||
| Other expenses | (181,842) | (470,527) | ||
| Finance costs | (6,105) | (14,258) | ||
| Loss before income tax expense | (1,674,344) | (1,130,249) | ||
| Income tax expense | 7 | - | 21,122 | |
| Loss after income tax expense for the period attributable to the Owners ofReadCloud Limited | (1,674,344) | (1,151,371) | ||
| Other comprehensive income for the period, net of tax | - | - | ||
| Total comprehensive income for the period attributable to the Owners of | ||||
| ReadCloud Limited | (1,674,344) | (1,151,371) | ||
| Cents | Cents | |||
| Basic earnings / (loss) per share | 28 | (1.42) | (1.04) | |
| Diluted earnings / (loss) per share | 28 | (1.42) | (1.04) |
ReadCloud Limited Consolidated Statement of financial position 30 September 2021
| Consolidated | ||||
|---|---|---|---|---|
| Note | 30 September2021 | 30 June 2021 | ||
| $ | $ | |||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 4,471,184 | 6,295,556 | ||
| Trade and other receivables | 8 | 787,073 | 887,705 | |
| Prepayments | 126,089 | 59,927 | ||
| Total current assets | 5,384,346 | 7,243,188 | ||
| Non-current assets | ||||
| Non-current deposits | 40,563 | 40,563 | ||
| Property, plant and equipment | 9 | 239,868 | 267,675 | |
| Intangible assets | 10 | 8,108,809 | 8,038,723 | |
| Right-of-use assets | 11 | 258,019 | 300,603 | |
| Total non-current assets | 8,647,259 | 8,647,564 | ||
| Total assets | 14,031,605 | 15,890,752 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 12 | 651,107 | 627,330 | |
| Employee entitlements | 13 | 337,182 | 247,273 | |
| Provision for income tax | 88,797 | 112,190 | ||
| Borrowings | 14 | - | 462,837 | |
| Contract liabilitiesContingent consideration | 1516 | 517,0541,000,000 | 299,830550,000 | |
| Lease liabilities | 11 | 173,090 | 171,079 | |
| Total current liabilities | 2,767,230 | 2,470,539 | ||
| Non-current liabilities | ||||
| Employee entitlements | 13 | 85,135 | 82,777 | |
| Lease liabilitiesContingent consideration | 1116 | 112,916- | 156,966450,000 | |
| Total non-current liabilities | 198,051 | 689,743 | ||
| Total liabilities | 2,965,281 | 3,160,282 | ||
| Net assets | 11,066,324 | 12,730,470 | ||
| EquityContributed equity | 17 | 17,408,754 | 17,408,754 | |
| Reserves | 18 | 456,848 | 446,650 | |
| Accumulated losses | (6,799,278) | (5,124,934) | ||
| Total equity | 11,066,324 | 12,730,470 | ||
ReadCloud Limited Consolidated statement of changes in equity 30 September 2021
| Issuedcapital | Share basedpaymentsreserve | Retainedprofits | Total equity | |
|---|---|---|---|---|
| Consolidated | $ | $ | $ | $ |
| Balance at 1 July 2020 | 11,385,848 | 407,513 | (3,994,029) | 7,799,332 |
| Loss after income tax expense for the yearOther comprehensive income for the year, net of tax | -- | --- | -(1,151,371)- | -(1,151,371)- |
| Total comprehensive income for the year | - | - | (1,151,371) | (1,151,371) |
| Transactions with Owners in their capacity as Owners:Contributions of equity (net of transaction costs)Share-based payments (note 29)Lapse of options | 6,022,906-- | -59,603(20,466) | --20,466 | 6,022,90659,603- |
| Balance at 30 June 2021 | 17,408,754 | 446,650 | (5,124,934) | 12,730,470 |
| Consolidated | Issuedcapital$ | Share basedpaymentsreserve$ | Retainedprofits$ | Total equity$ |
|---|---|---|---|---|
| Balance at 1 July 2021 | 17,408,754 | 446,650 | (5,124,934) | 12,730,470 |
| Loss after income tax expense for the periodOther comprehensive income for the period, net of tax | -- | --- | -(1,674,344)- | -(1,674,344)- |
| Total comprehensive income for the period | - | - | (1,674,344) | (1,674,344) |
| Transactions with Owners in their capacity as Owners:Share-based payments (note 29) | - | 10,197 | - | 10,197 |
| Balance at 30 September 2021 | 17,408,754 | 456,848 | (6,799,278) | 11,066,324 |
The above statement of changes in equity should be read in conjunction with the accompanying notes.
ReadCloud Limited Consolidated statement of cash flows 30 September 2021
| Consolidated | |||
|---|---|---|---|
| Note | Quarter ended30 September2021$ | Year ended30 June 2021$ | |
| Cash flows from operating activities | |||
| Receipts from customers (inclusive of GST) | 523,086 | 6,918,920 | |
| Payments to suppliers (inclusive of GST) | (1,555,831) | (7,519,664) | |
| Research and development tax incentive refund | - | 390,673 | |
| Interest income | 118 | 1,425 | |
| Income tax | (23,391) | - | |
| Other Government grant income | - | 117,500 | |
| Net cash used in operating activities | 27 | (1,056,018) | (91,146) |
| Cash flows from investing activities | |||
| Payment for purchase of business, net of cash acquired | - | (2,044,220) | |
| Payments for property, plant and equipment | 9 | (1,363) | (45,394) |
| Payments for software development | 10 | (149,042) | (642,568) |
| Purchase of intangible assets | 10 | (106,968) | (67,297) |
| Net cash used in investing activities | (257,373) | (2,799,479) | |
| Cash flows from financing activities | |||
| Repayment of lease liabilities | (42,039) | (189,326) | |
| Interest paid on lease liabilities and borrowings | (6,105) | (12,570) | |
| Proceeds from issue of shares | 17 | - | 6,044,099 |
| Share issue transaction costs | - | (21,193) | |
| Repayment of borrowings | (462,837) | (22,438) | |
| Net cash from financing activities | (510,981) | 5,798,572 | |
| Net increase/(decrease) in cash and cash equivalents | (1,824,372) | 2,907,947 | |
| Cash and cash equivalents at the beginning of the financial period | 6,295,556 | 3,387,609 | |
| Cash and cash equivalents at the end of the financial period | 4,471,184 | 6,295,556 |
Note 1. General information
The financial statements cover the consolidated entity (referred to as the "Group"), consisting of ReadCloud Limited (the "Company" or "parent entity") and the entities it controlled at the end of, or during the quarter ended 30 September 2021. The financial statements are presented in Australian dollars, which is ReadCloud Limited's functional and presentation currency. ReadCloud Limited is a listed public company limited by shares, incorporated and domiciled in Australia.
A description of the nature of the Group'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 on the date of the Directors' Declaration, in accordance with a resolution of the Directors.. The Directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
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.
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 Group'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 3.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 25.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of ReadCloud Limited ('Company' or 'parent entity') as at 30 September 2021 and the results of all subsidiaries for the period then ended. ReadCloud Limited and its subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Company has control. The Company controls an entity when the Company 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 Company. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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 Company.
Note 2. Significant accounting policies (continued)
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. 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 noncontrolling interest in the acquiree and the fair value of the consideration transferred and the fair value of any preexisting 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.
Where the Company 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 Company 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.
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 Group'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 noncurrent.
A liability is classified as current when: it is either expected to be settled in the Group'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.
Note 2. Significant accounting policies (continued)
Deferred tax assets and liabilities are always classified as non-current.
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 commences from the time the asset is available for its intended use.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their expected useful lives of 2-4 years.
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date to ensure it is not in excess of the asset's recoverable amount. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset's employment and subsequent disposal. The expected net cash flows have not been discounted in determining recoverable amounts.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
In accordance with AASB 16 Leases the Group, as lessee, is required to recognise its leases in the statement of financial position. The only exceptions are short-term (less than 12 months) leases and leases of low-value assets. The lease liability is measured as the present value of the unavoidable future lease payments to be made over the lease term (refer Note 11 Leases).
Determination of lease liabilities and ROUA
In calculating the value of each lease liability, future lease payments include known fixed percentage increases but exclude variable consumer price index (CPI) increases, as estimations of future increases are prohibited by the standard (CPI lease payment increases are taken into account via a re-measurement of the lease liability as and when the increase occurs). The net present value of the unavoidable future lease payments are discounted using the Group's incremental borrowing rate, as none of the leases have an implicit interest rate.
An ROUA is recognised at the commencement date of a lease. The ROUA is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. The ROUA is depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either in the principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Note 3. 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
Note 3. Critical accounting judgements, estimates and assumptions (continued)
expectations of future events, management believes to be reasonable under the circumstances. Where relevant, current assessment incorporated a consideration of uncertainties associated with COVID-19. 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.
Capitalised software development costs
The Group capitalises software development costs associated with the ReadCloud platform in accordance with the accounting policy described in Note 10. Initial capitalisation of costs is based on management's judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a key commercial milestone enabling the project to proceed. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project and the expected period of benefits.
Share-based payments
The grant date fair value of share-based payments is recognised as an expense with a corresponding increase in equity, over the period that the recipients unconditionally become entitled to the awards. The Group follows the guidelines of AASB 2 Share-based payment and takes into account all performance conditions in estimating the probability and expected timing of achieving these performance conditions. Accordingly, the expense recognised over the vesting period may vary based upon information available and estimates made at each reporting period, until the expiry of the vesting period.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group 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 Group 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.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
Note 4. Operating segments
Identification of reportable operating segments
Segment information is based on the information that management uses to make decisions about operating matters and allows users to review operations through the eyes of management. Operating segments represent the information reported to the chief operating decision makers (CODM), being the executive management team, for the purposes of resource allocation and assessment of segment performance.
The Group's reportable segments under AASB 8 are as follows:
- the provision of eBook solutions to secondary schools across Australia; and
- the provision of Vocational Education and Training courses and services.
Consistent with information presented for internal management reporting purposes, segment performance is measured by underlying EBITDA contribution, where underlying EBITDA (a non-statutory financial measure not prescribed by Australian Accounting Standards – "AAS") represents the profit under AAS adjusted for Interest, Tax, Depreciation and Amortisation and certain other specified items.
The information reported to the CODM is on a monthly basis.
Note 4. Operating segments (continued)
Consolidated – Quarter ended 30 September 2021
| eBook solutions | VocationalEducation andTraining | Unallocatedpublic companycosts | Total | |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Sales revenue | 34,513 | 99,899 | - | 134,412 |
| Other income | 88,906 | - | - | 88,906 |
| Total revenue | 123,419 | 99,899 | - | 223,318 |
| Underlying EBITDA | (563,258) | (737,979) | (99,244) | (1,400,481) |
| Depreciation and amortisation | (196,088) | (61,591) | - | (257,679) |
| Share based paymentsand one off ASX fees | (2,006) | (8,191) | - | (10,197) |
| Net interest revenue | (1,665) | (4,323) | - | (5,987) |
| Income tax benefit / (expense) | - | - | ||
| Reported (statutory) net loss after tax | (763,017) | (812,083) | (99,244) | (1,674,344) |
| Total segment assets | 7,212,788 | 6,818,817 | 14,031,605 | |
| Total segment liabilities | (2,070,643) | (894,638) | (2,965,281) |
Consolidated – Year ended 30 June 2021
| eBook solutions | VocationalEducation and | Unallocatedpublic company | ||
|---|---|---|---|---|
| Training | costs | Total | ||
| $ | $ | $ | $ | |
| Sales revenue | 3,915,960 | 3,256,112 | - | 7,172,072 |
| Other income | 447,804 | 67,500 | - | 515,304 |
| Total revenue | 4,363,764 | 3,323,612 | - | 7,687,376 |
| Underlying EBITDA | (397,395) | 730,313 | (317,366) | 15,552 |
| Depreciation and amortisation | (717,959) | (210,577) | (928,536) | |
| Share based payments | (46,283) | (13,320) | (59,603) | |
| Transaction costs incurred on | (144,830) | - | (144,830) | |
| business acquisitions (expensed) | ||||
| Net interest revenue / (expense) | (6,362) | (6,470) | (12,833) | |
| Income tax benefit / (expense) | - | (21,122) | (21,122) | |
| Reported (statutory) net loss after tax | (1,312,829) | 478,824 | (317,366) | (1,151,371) |
| Total segment assets | 8,339,989 | 7,550,763 | 15,890,752 | |
| Total segment liabilities | (2,025,604) | (1,134,678) | (3,160,282) |
Major customers
During the quarter ended 30 September 2021 approximately 9% (12 months to 30 June 2021: 5%) of the Group's external revenue was derived from sales to one direct school customer.
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June 2021$ | |
| Sales revenue | ||
| eBook Sales | 40,982 | 3,518,276 |
| Licence Fee | 55 | 488,937 |
| Auspicing fees | 76,927 | 3,067,523 |
| Sales & fees - other | 16,448 | 97,336 |
| 134,412 | 7,172,072 | |
| Other income | ||
| Government grants - R&D | 88,788 | 396,379 |
| Interest revenue calculated using the effective interest method | 118 | 1,425 |
| Other revenue | - | 117,500 |
| 88,906 | 515,304 | |
| Revenue | 223,318 | 7,687,376 |
The Group's total sales revenue is recognised according to the following timing:
| ConsolidatedQuarter ended | ||
|---|---|---|
| 30 September | Year ended | |
| 2021$ | 30 June 2021$ | |
| Goods transferred at a point in time | 57,430 | 3,615,611 |
| Services transferred over time | 76,982 | 3,556,460 |
| Revenue | 134,412 | 7,172,072 |
Accounting policy for revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised with reference to the completion by the Group of specific performance obligations of contracts with customers, as described below.
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: 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 any 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.
Note 5. Revenue (continued)
Revenue is recognised to depict the transfer of eBooks and licencing services to customers in an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. All contracts (either written, verbal or implied) are identified, together with the separate performance obligations within the contract and the transaction price is determined. Adjustments are made for the time value of money excluding credit risk and the transaction price is allocated to the separate performance obligations on a basis of relative standalone selling price of each distinct service/good. The estimation approach is taken if no distinct observable prices exists and revenue is recognised when each performance obligation is satisfied.
Credit risk is presented separately as an expense, rather than adjusted to revenue. For goods, the performance obligation is satisfied when the customer takes control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, the Group selects an appropriate measure of progress to determine how much revenue is recognised as the performance obligation is satisfied. Contracts with customers are presented in the Group'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.
Interest
Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument.
eBook sales revenue
Revenue from eBook sales is recognised at the time of the eBook purchase.
Software licence fee revenue
The Group receives revenue for acquisition and use of software applications associated with eBook sales. The software revenue is recognised at the time of sale and the maintenance component is recognised as revenue over the period of the licence.
Auspicing fees
The Group receives revenue for the provision of auspicing services to secondary schools that enables these schools to offer their students nationally accredited Vocational Education and Training courses under the auspices of one of the Group's Registered Training Organisation ("RTO") licences (there are three RTO licences held by the Company's subsidiaries Australian Institute of Education and Training, PKY Media Pty Ltd and Ripponlea Institute Pty Ltd). The fees for those services that relate to the pre-approval of a school to operate under the RTO licence and the provision of course materials are recognised at the time of sale, whilst fees for those components that relate to the maintenance of software services, ongoing compliance monitoring and the issuing of certificates to students are recognised at the end of the relevant contract.
Government grants
The Research and Development Tax Incentive is recognised as a government grant as described in Note 7, Income tax.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
The timing of revenue recognition for the Group's key revenue streams as they relate to specific performance obligations are outlined in the table below:
Note 5. Revenue (continued)
| Revenue stream | Revenue recognition pattern |
|---|---|
| Software license fees | |
| Performance obligation 1 - Accessibility and usage of | Point in time (upon a customer purchasing software) |
| ReadCloud's software | |
| Performance obligation 2 - Maintenance/support | Over time, which usually relates to a school year |
| eBooks sales | Point in time (upon a customer purchasing an eBook) |
| Auspicing fees | |
| Performance obligation 1 – the pre-approval of a school | Point in time (upon customer entering into a contract) |
| to offer a nationally-recognised VET qualification under | |
| the auspices of one of the Group's RTO licences and | |
| set-up of a school, classes and students (including | |
| provision of all course resources) to enable VET course | |
| delivery | |
| Performance obligation 2 - ongoing service / | Over time, which usually relates to a school year |
| maintenance and compliance monitoring | |
| Performance obligation 3 – issue of certificates to | Over time, which usually relates to the school year |
| students | |
| Training & student fees | |
| Performance obligation 1 – provision of access to | Point in time (upon customer commencing a VET |
| online course materials | qualification) |
| Performance obligation 2 – marking of student | Over time, which usually relates to a school year |
| assessments and issue of certificates / statements of | |
| attainment | |
| Studio services | |
| One performance obligation, being the provision of | Point in time (upon control over audio files being |
| sound recording services | transferred to the customer) |
Note 6. Expenses
| Consolidated | ||
|---|---|---|
| Quarter ended | ||
| 30 September | Year ended | |
| 2021 | 30 June 2021 | |
| $ | $ | |
| Loss before income tax includes the following specific expenses: | ||
| Depreciation | ||
| Plant and equipment | 17,391 | 55,842 |
| Leasehold improvements | 11,779 | 34,416 |
| Right of use assets | 42,584 | 190,024 |
| 71,754 | 280,282 | |
| Amortisation | ||
| Software development | 150,119 | 567,083 |
| Registered Training Organisation licence | 10,197 | 40,788 |
| Intellectual property in Vocational Education & Training coursematerials | 25,608 | 40,383 |
| 185,924 | 648,254 | |
| Total depreciation and amortisation | 257,678 | 928,536 |
| Employee benefits expense excluding superannuation | 1,001,265 | 3,042,327 |
| Defined contribution superannuation expense | 102,734 | 331,050 |
| Total Employment expenses | 1,103,999 | 3,373,377 |
| Share-based payments expense | 10,197 | 59,603 |
Note 7. Income tax expense
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June 2021$ | |
| Income tax expense | - | 21,122 |
| Numerical reconciliation of income tax expense/(benefit) and tax at the statutoryrate | ||
| Loss before income tax expense | (1,674,344) | (1,130,248) |
| Tax at the statutory tax rate of 25.00% (27.5% at 30 June 2021) | (418,586) | (310,818) |
| Share based payments | 2,549 | 15,497 |
| Non-assessable R&D tax incentive | (22,197) | (103,058) |
| Non-deductible R&D expenditure subject to incentive | 13,767 | 69,459 |
| Non-deductible expenses – entertainment | 498 | - |
| Non-assessable income - ATO Cash flow boost | - | (22,750) |
| Other net non-deductible expenditure | - | 4,333 |
| Impact of change in tax rate | 7395 | - |
| Recognition of and movement in temporary differences | 102,710 | 99,899 |
| Unrecognised income tax losses carried forward | 313,864 | 268,560 |
| Income tax expense | - | 21,122 |
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June 2021$ | |
| Deferred tax liability comprises temporary differences attributable to:Provisions, accruals and other amounts not yet deductibleCapitalised software costs deductedUnused income tax losses | (334,302)655,516(321,214) | (269,233)621,862(352,629) |
| Total deferred tax liability | - | - |
| Deferred tax assets not recognised | 579,533 | 268,560 |
The above deferred tax asset (potential tax benefit) has not been recognised in the statement of financial position as the recovery of this benefit is uncertain.
Accounting policy for income tax
The income tax expense/(benefit) for the period is the tax payable on the current period's taxable income based on the current income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.
Note 7. Income tax expense (continued)
- i. Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit.
- ii. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.
- iii. Current and deferred tax balances relating to amounts recognised directly in other comprehensive income and equity are also recognised directly in other comprehensive income and equity, respectively.
- iv. The Research and Development Tax Offset is recognised as a government grant in profit before tax to match the expense/(benefit) with the costs for which it is intended to compensate. It is recognised in the period when there is a reasonable expectation that the Group will be able to realise the expense/(benefit).
- v. The carrying value of recognised deferred tax assets is reviewed at each reporting date.
Note 8. Current assets - trade and other receivables
| Consolidated30 September | ||
|---|---|---|
| 2021$ | 30 June 2021$ | |
| Trade receivablesLess provision for doubtful debts | 320,531(17,970) | 491,981- |
| 302,561 | 491,981 | |
| R&D tax incentive receivable | 484,512 | 395,724 |
| 787,073 | 887,705 |
Refer to note 20 for further information on financial instruments.
Allowance for expected credit losses
The Group 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.
The Group has no receivables which are considered impaired. The ageing of receivables are as follows:
| Consolidated30 September | ||
|---|---|---|
| 2021$ | 30 June 2021$ | |
| 0 to 3 months | 141,530 | 344,494 |
| 3 to 6 months | 118,471 | 147,487 |
| Greater than 6 months | 60,530 | - |
| 320,531 | 491,981 |
Accounting policy for trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.
The recoverability of trade receivables is reviewed on an ongoing basis. Amounts which are determined not to be recoverable are written off by reducing the carrying amount to its recoverable amount, and the difference is charged to the statement of profit or loss in that period.
A provision for impairment of trade receivables is recognised where there is objective evidence that the Group is unable to collect part or all of the amounts due. Factors such as previous trading relationship, financial position, and probability of recoverability are considered when determining the extent the debtor is impaired.
Accounting policy for goods and services tax
Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.
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 ATO is included with other receivables or payables in the statement of financial position.
Note 9. Non-current assets – Property, plant & equipment
| Consolidated | ||
|---|---|---|
| 30 September2021$ | 30 June2021$ | |
| Computer & office equipment - at cost | 249,507 | 248,144 |
| Less: Accumulated depreciation | (129,756) | (112,365) |
| 119,751 | 135,779 | |
| Leasehold improvements - at cost | 178,541 | 178,541 |
| Less: Accumulated depreciation | (58,424) | (46,645) |
| 120,117 | 131,896 | |
| 239,868 | 267,675 |
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out below:
| Consolidated | Computer & officeequipment$ | Leaseholdimprovements$ | Total$ |
|---|---|---|---|
| Balance at 1 July 2020 | 77,173 | 34,212 | 111,385 |
| Additions | 35,295 | 10,100 | 45,395 |
| Additions through business combinations | 79,153 | 122,000 | 201,153 |
| Depreciation expense | (55,842) | (34,416) | (90,258) |
| Balance at 30 June 2021 | 135,779 | 131,896 | 267,675 |
| Additions | 1,363 | - | 1,363 |
| Depreciation expense | (17,391) | (11,779) | (29,170) |
| Balance at 30 September 2021 | 119,751 | 120,117 | 239,868 |
Please refer to Note 2 for Property, plant and equipment accounting policy.
Note 10. Non-current assets - intangibles
| Consolidated | ||
|---|---|---|
| 30 September2021$ | 30 June2021$ | |
| Goodwill - at cost | 5,400,553 | 5,400,553 |
| Software - at costLess: Accumulated amortisation | 4,351,392(2,086,771)2,264,621 | 4,202,350(1,936,652)2,265,698 |
| Registered Training Organisation LicencesLess: Accumulated amortisation | 150,000(63,805)86,195 | 150,000(53,609)96,391 |
| Intellectual property in Vocational Education & Training course materialsLess: Accumulated amortisation | 469,265(111,824)357,441 | 362,297(86,216)276,081 |
| 8,108,809 | 8,038,723 |
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out below:
| Consolidated | Software atcost$ | Goodwill$ | RegisteredTrainingOrganisationlicence$ | Intellectualpropertyin coursematerials$ | Total$ |
|---|---|---|---|---|---|
| Balance at 1 July 2020 | 2,190,213 | 2,213,929 | 37,179 | 9,167 | 4,450,488 |
| Additions | 642,568 | - | - | 67,297 | 709,865 |
| Additions through business combinations | - | 3,186,624 | 100,000 | 240,000 | 3,526,624 |
| Amortisation expense | (567,083) | - | (40,788) | (40,383) | (648,254) |
| Balance at 30 June 2021 | 2,265,698 | 5,400,553 | 96,392 | 276,081 | 8,038,724 |
| Additions | 149,042 | - | - | 106,968 | 256,010 |
| Amortisation expense | (150,119) | - | (10,197) | (25,608) | (185,924) |
| Balance at 30 September 2021 | 2,264,621 | 5,400,553 | 86,195 | 357,441 | 8,108,809 |
Accounting policy for Goodwill
The acquisition date net fair values of identifiable assets, liabilities and contingent liabilities and corresponding goodwill in relation to the acquisition of Ripponlea Institute Pty Ltd (acquired on 8 June 2021) are provisional as at 30 September 2021. It is anticipated that these will be finalised prior to 31 March 2022.
Goodwill arises on the acquisition of a business. It is recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired at date of acquisition.
Goodwill is not amortised. Instead, it is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Note 10. Non-current assets – intangibles (continued)
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. 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.
Accounting policy for internally developed software
Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years. Internally generated intangibles, excluding internally developed software, are not capitalised and the related expenditure is reflected in the statement of profit or loss in the period in which the expenditure is incurred.
An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate:
- the technical feasibility of completing the intangible asset so that it will be available for use or sale;
- its intention to complete and its ability to use or sell the asset;
- how the asset will generate future economic benefits;
- the availability of resources to complete the development; and
- the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Expenditure so capitalised is amortised when the asset is available for use over the period of expected benefit from the related project. The useful life of the capitalised development costs is estimated to be 5 years.
Impairment of non-financial assets
Non-financial assets other than goodwill 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.
The Group assesses impairment of non-financial assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined.
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.
Goodwill has been allocated to the Vocational Education and Training segment cash-generating unit (CGU). The recoverable amount of the CGU is determined based on a value-in-use model. The model uses a discount rate of 12.0% (30 June 2021: 11.0%), based on the weighted average cost of capital adjusted to reflect an estimate of specific risks assumed in the cash flow projections. Those projections are based on the financial budget for the 12 months immediately following the reporting date, cash flows beyond 12 months extrapolated through a 4-year outlook utilising annual growth rates based on current and forecast trading conditions and the growth objectives of business plans, and a terminal value growth rate of 2.0% (30 June 2021: 2.0%).
The Board has reviewed and is comfortable with the significant assumptions determined by Management and utilised in the value-in-use calculations. Upon applying the test to purchased goodwill, it is concluded that no impairment has occurred. Considering the early stage of the Group's business and operating cash outflows during the year, Management applied the value-in-use model to assess the recoverable amount of all intangibles on a Group-wide basis, again concluding that the carrying value of goodwill and other intangibles does not exceed their value-in-use, and no impairment charge is required.
Note 10. Non-current assets – intangibles (continued)
Sensitivity analysis on the key assumptions employed in the value-in-use calculations has been performed by Management. The sensitivities applied were decreasing sales and associated cost of goods sold by 15% throughout the model period (whilst holding operating costs stable), increasing the weighted average cost of capital by 8 percentage points (to 20%) and reducing the terminal value growth to nil. This has concluded that any reasonable possible change in valuation parameters would not cause the carrying amount of the CGU to exceed its recoverable amount.
Note 11. Leases
A. Expenses
Expenses from transactions not recognised as leases:
| Consolidated | |||
|---|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June2021$ | ||
| Rental expense relating to leases of low-value assets | 1,530 | 5,931 | |
| B.Cash flows | |||
| ConsolidatedQuarter ended30 September2021$ | Year ended30 June2021$ | ||
| Total cash outflow for leases:Office leasesPhotocopying equipment | 44,868- | 169,62531,482 | |
| 44,868 | 201,107 | ||
| C.Right-of-use assets | |||
| Consolidated | |||
| 30 September2021$ | 30 June2021$ | ||
| Right-of-use assets – Office leasesLess: Accumulated depreciation | 495,739(237,720)258,019 | 555,890(255,287)300,603 | |
| Right-of-use assets – Photocopying equipmentLess: Accumulated depreciation | --- | 70,993(70,993)- |
Balance at end of financial period 258,019 300,603
Note 11. Leases (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial period are set out below:
| Office leases | PhotocopyingEquipment | Total | |
|---|---|---|---|
| $ | $ | $ | |
| Opening balance at 1 July 2020 | 259,717 | 30,426 | 290,143 |
| Additions (new leases) | 64,002 | - | 64,002 |
| Additions through business combinations | 136,482 | - | 136,482 |
| Depreciation charge | (159,598) | (30,426) | (190,024) |
| Balance at 30 June 2021Additions | 300,603- | -- | 300,603- |
| Disposals – at cost | (60,151) | (70,993) | (131,144) |
| Write-back of accumulated depreciation ondisposals | 60,151 | 70,993 | 131,144 |
| Depreciation charge | (42,584) | - | (42,584) |
| Balance at 30 September 2021 | 258,019 | - | 258,019 |
D. Lease liabilities
| Consolidated | ||||
|---|---|---|---|---|
| 30 September2021$ | 30 June2021$ | |||
| CurrentNon-current | 173,090112,916 | 171,079156,966 | ||
| Balance at end of financial period | 286,006 | 328,045 | ||
Refer to note 20 for further information on financial instruments.
Additional information
Accounting policies relative to leases
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.
Note 11. Leases (continued)
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
For the purpose of calculating unavoidable future lease payments, only the current term of each property lease has been considered because all property locations reflect office locations with no installed critical infrastructure which are therefore viewed as readily replaceable. In addition, the Group does not expect to continue the lease arrangement for equipment past the maturity of the current lease.
The Group has adopted the practical expedient available within AASB 16 to not recognise low value assets within the above lease calculations. These assets relate to telephony equipment and are expensed when costs are incurred.
Weighted average lease term
The average unavoidable office lease term, weighted by the outstanding lease liability as 30 September 2021, is 2.02 years (30 June 2021: 2.21 years).
Note 12. Current liabilities - trade and other payables
| Consolidated30 September | |||
|---|---|---|---|
| 2021$ | 30 June 2021$ | ||
| Trade payables | 290,811 | 276,246 | |
| Accrued expenses | 53,500 | 31,999 | |
| GST receivable | (42,808) | (32,695) | |
| Other payables | 349,604 | 351,780 | |
| 651,107 | 627,330 |
Refer to note 20 for further information on financial instruments.
Accounting policy for trade and other payables
Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to the Group prior to the end of the reporting period that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Note 13. Employee entitlements
| Consolidated | |||
|---|---|---|---|
| 30 September2021$ | 30 June2021$ | ||
| Annual leave (current) | 337,182 | 247,273 | |
| Long service leave (non-current) | 85,135 | 82,777 |
Accounting policy for employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly 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
The liability for annual leave and long service leave 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 using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Note 14. Current liabilities - Borrowings
| Consolidated | ||
|---|---|---|
| 30 September2021$ | 30 June2021$ | |
| Bank loan | - | 462,837 |
Since 30 June 2021 the Group has repaid the bank loan from Commonwealth Bank of Australia that was assumed with the acquisition of Ripponlea Institute Pty Ltd in full.
Accounting policy for 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.
Note 15. Current liabilities – Contract liabilities
| Consolidated | |||
|---|---|---|---|
| 30 September2021$ | 30 June 2021$ | ||
| Unearned revenue - software | 27,405 | 27,405 | |
| Unearned revenue - distribution agreement | 100,000 | 100,000 | |
| Unearned revenue – auspicing fees | 389,649 | 172,425 | |
| 517,054 | 299,830 |
Unearned revenue - distribution agreement
Under a distribution agreement with an authorised reseller the Group receives minimum guarantee funds from the reseller in advance of it distributing the Group's products to end users in the following calendar year. The minimum guarantee funds are deferred as unearned and accounted as revenue in the next calendar year.
Unearned revenue – Software licence fees and Auspicing fees
Refer to note 5 for further information on the timing of revenue recognition in relation to these revenue streams.
Note 16. Contingent consideration
| 30 September | Consolidated | |||
|---|---|---|---|---|
| 2021$ | 30 June 2021$ | |||
| CurrentNon-current | 1,000,000- | 550,000450,000 | ||
| 1,000,000 | 1,000,000 |
There were no business combinations during the quarter ended 30 September 2021. During the previous year ended 30 June 2021, the Company made the following acquisitions:
i. The Company acquired PKY Media Pty Ltd (trading as College of Sound and Music Production, "COSAMP") with effect from 28 October 2020 for a total consideration of $1,450,000. Headquartered in Melbourne, COSAMP provides nationally accredited Vocational Education and Training ("VET") programs for the music industry to over 180 secondary schools throughout Australia. The acquisition expands ReadCloud's product offering and market presence in the VET-in-schools market, a key strategic focus for the Group together with in-school education eLearning software solutions. Goodwill of $1,337,670 was recognised on acquisition representing the value of COSAMP's brand, reputation and relationships in the VET-in-schools market.
Contingent consideration comprises up to $400,000 of ReadCloud shares, which is contingent on PKY Media achieving defined revenue targets for the 12-month periods ending 30 June 2021 and 30 June 2022. The revenue target for the period ended 30 June 2021 was achieved in full, resulting in the issue of $250,000 of ReadCloud shares (657,896 shares) to the vendors of PKY Media on 1 October 2021. Measurement of the contingent consideration liability as at 30 September 2021 in respect of the PKY Media acquisition is based on current expectations of PKY Media achieving the maximum revenue performance hurdle for the 12-month period ending 30 June 2022 also.
ii. The Company acquired Ripponlea Institute Pty Ltd ("Ripponlea Institute") with effect from 8 June 2021 for a total consideration of $2,300,000. Ripponlea Institute is a Registered Training Organisation ("RTO") and the national market leader in VET-in-Schools courses for Applied Languages, a key vertical in the VET sector. It provides programs to 70 secondary schools throughout Australia. It also offers the Certificate IV in Training and Assessment ("TAE"), a required qualification for all teachers of VET across the entire sector. Goodwill of $1,848,955 was recognised on acquisition representing the value of Ripponlea Institute's brand, reputation
Note 16. Contingent consideration (continued)
and relationships in the VET-in-schools market. The values identified in relation to the acquisition of Ripponlea Institute are provisional as of 30 September 2021 and are expected to be finalised prior to 31 March 2022.
Contingent consideration comprises up to $600,000 of ReadCloud shares, which is contingent on Ripponlea Institute achieving defined revenue targets for the 12-month period ending 30 June 2021 and 30 June 2022. The revenue target for the period ended 30 June 2021 was achieved in full, resulting in the issue of $300,000 of ReadCloud shares (789,474 shares) to the vendor of Ripponlea Institute on 1 October 2021. Measurement of the contingent consideration liability as at 30 September 2021 in respect of the Ripponlea Institute acquisition is based on current expectations of Ripponlea Institute achieving the maximum revenue performance hurdle for the 12-month period ending 30 June 2022 also.
Details of contingent consideration are as follows:
| Consolidated30 September | |||
|---|---|---|---|
| 2021$ | 30 June 2021$ | ||
| Contingent consideration - PKY Media | |||
| contingent consideration due within one year | 400,000 | 250,000 | |
| contingent consideration due in greater than one year | - | 150,000 | |
| 400,000 | 400,000 | ||
| Contingent consideration – Ripponlea Institute | |||
| contingent consideration due within one year | 600,000 | 300,000 | |
| contingent consideration due in greater than one year | - | 300,000 | |
| 600,000 | 600,000 | ||
| 1,000,000 | 1,000,000 |
Note 17. Equity - contributed equity
| 30 September2021Shares | 30 June 2021Shares | Consolidated30 September2021$ | 30 June 2021$ | ||
|---|---|---|---|---|---|
| Ordinary shares - fully paid | 118,317,551 | 118,317,551 | 17,408,754 | 17,408,754 | |
| Movements in ordinary share capital | |||||
| Details | Date | Shares | Issue price | $ | |
| Balance | 30 June 2020 | 98,055,556 | 11,385,848 | ||
| Shares issued pursuant to exercise of optionsShares issued pursuant to exercise of optionsShares issued pursuant to exercise of optionsShare issue transaction costs | Jul-Dec 2020Jan-Feb 2021 | 17 December 2020 | 19,826,99560,000375,000 | $0.30$0.35$0.20 | 5,948,09921,00075,000(21,193) |
| Balance | 30 June 2021 | 118,317,551 | 17,408,754 | ||
| Shares issued | Jul-Sept 2021 | - | - | - | |
| Balance | 30 September 2021 | 118,317,551 | 17,408,754 |
Note 17. Equity - contributed equity (continued)
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment.
Accounting policy for issued capital Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Note 18. Equity – reserves
| Consolidated30 September | |||
|---|---|---|---|
| 2021$ | 30 June 2021$ | ||
| Share-based payments reserve | 456,848 | 446,650 |
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial period are set out below:
| ConsolidatedShare based | |||
|---|---|---|---|
| payments reserve$ | Total$ | ||
| Balance at 1 July 2020Share based paymentsLapse of options | 407,51359,603(20,466) | 407,51359,603(20,466) | |
| Balance at 30 June 2021Share based payments expense | 446,65010,197 | 446,65010,197 | |
| Balance at 30 September 2021 | 456,848 | 456,848 |
Note 19. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial period.
Note 20. Financial instruments
Financial risk management objectives
The Group's activities may 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 Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.
The Group's principal financial instruments comprise cash and cash equivalents. The main purpose of these financial instruments is to finance the Group's operations. The Group has various other financial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period, the Group's policy that no trading in financial instruments shall be undertaken.
There are no major risks arising from the entity's financial instruments. Minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks.
A summary of the Group's financial assets and liabilities is as follows:
| Consolidated | |||
|---|---|---|---|
| 30 September | |||
| 2021$ | 30 June 2021$ | ||
| Financial assets | |||
| Cash and cash equivalents | 4,471,183 | 6,295,556 | |
| Trade and other receivables | 787,073 | 887,705 | |
| 5,258,256 | 7,183,261 | ||
| Financial liabilities | |||
| Trade and other payables | 651,107 | 627,330 | |
| Lease Liabilities | 276,006 | 318,045 | |
| Borrowings | - | 462,837 | |
| 927,113 | 1,408,212 | ||
Accounting policy for financial instruments
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 and other receivables are initially recognised at their face value, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group which at period-end are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition, and accordingly they are measured at their face value.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk.
Note 20. Financial instruments (continued)
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group is not exposed to any significant interest rate risk.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including, where required, obtaining agency credit information, confirming references and setting appropriate credit limits. 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 Group does not hold any collateral.
The Group 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 Group based on recent sales experience, historical collection rates and forward-looking information that is available.
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 Group 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 Group 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.
Remaining contractual maturities
The following tables detail the Group'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.
Note 20. Financial instruments (continued)
| Weighted | Between | Between | Remaining | |||
|---|---|---|---|---|---|---|
| Consolidated – | average | 1 and 2 | 2 and 5 | Over 5 | contractual | |
| 30 September 2021 | interest rate | 1 year or less | years | years | years | maturities |
| % | $ | $ | $ | $ | $ | |
| Non-derivatives | ||||||
| Non-interest bearing | ||||||
| Trade and other | - | 651,107 | - | - | - | 651,107 |
| payables | ||||||
| Interest bearing | ||||||
| Lease liabilities | 3.74% | 180,405 | 46,842 | 51,700 | - | 278,947 |
| Total non-derivatives | 831,512 | 46,842 | 51,700 | - | 930,053 | |
| Weighted | Between | Between | Remaining | |||
| Consolidated – 30 June | average | 1 and 2 | 2 and 5 | Over 5 | contractual | |
| 2021 | interest rate | 1 year or less | years | years | years | maturities |
| % | $ | $ | $ | $ | $ | |
| Non-derivatives | ||||||
| Non-interest bearing | ||||||
| Trade and other | - | 627,330 | - | - | - | 627,330 |
| payables | ||||||
| Interest bearing | ||||||
| Lease liabilities | 3.74% | 180,005 | 83,298 | 60,512 | - | 323,815 |
| Borrowings | ||||||
| Total non-derivatives | 4.85% | 462,8371,270,172 | -83,298 | -60,512 | -- | 462,8371,413,982 |
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 21. Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below:
| ConsolidatedQuarter ended | |||
|---|---|---|---|
| 30 September2021$ | Year ended30 June 2021$ | ||
| Short-term employee benefits | 272,976 | 1,001,327 | |
| Post-employment benefits | 23,295 | 88,501 | |
| Long-term benefits | 4,759 | 14,727 | |
| Share-based payments | 850 | 25,622 | |
| 301,880 | 1,130,177 |
Note 22. Remuneration of auditors
During the financial period the following fees were paid or payable for services provided by PKF Melbourne Audit & Assurance Pty Ltd, the auditor of the Group:
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Yearended 30June 2021$ | |
| Audit services - PKF Melbourne Audit & Assurance Pty LtdAudit or review of the financial statements | 33,877 | 70,500 |
| Non-audit services - PKF Melbourne Corporate Pty LtdPayroll tax and GST advice | 3,900 | - |
| 37,777 | 70,500 |
Note 23. Contingent liabilities
The Group has no contingent liabilities as at 30 September 2021 (30 June 2021: $Nil).
Note 24. Related party transactions
Parent entity ReadCloud Limited is the parent entity.
Key management personnel
Disclosures relating to key management personnel are set out in note 20 and in the remuneration report included in the Directors' report.
Transactions with related parties There were no transactions with related parties during the current and previous financial period.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to / from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 25. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
| Parent | ||||
|---|---|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June 2021$ | |||
| Loss after income tax | (862,261) | (1,630,196) | ||
| Total comprehensive income | (862,261) | (1,630,196) |
Statement of financial position
| Parent | ||||
|---|---|---|---|---|
| 30 September | ||||
| 2021$ | 30 June 2021$ | |||
| Total current assets | 4,741,684 | 5,823,201 | ||
| Total assets | 13,647,788 | 14,774,989 | ||
| Total current liabilities | (1,982,667) | (3,301,446) | ||
| Total liabilities | (3,232,468) | (3,422,415) | ||
| Net assets | 10,415,320 | 11,352,574 | ||
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
With the exception of guarantees in respect of PKY Media Pty Ltd and Ripponlea Institute Pty Ltd (up to a maximum of $0.5 million each), the parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 September 2021 (30 June 2021: no guarantees in relation to the debts of subsidiaries other than in respect of PKY Media Pty Ltd up to a maximum of $0.5 million).
Contingent liabilities
The parent entity had no contingent liabilities as at 30 September 2021 (30 June 2021: none).
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 September 2021 (30 June 2021: none).
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following:
- Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
- Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment.
Note 25. Parent entity information (continued)
Interests in subsidiaries
The parent entity, ReadCloud Limited, consolidates the following wholly owned subsidiaries:
- Australian Institute of Education and Training
- PKY Media Pty Ltd
- Ripponlea Institute Pty Ltd
Note 26. Events after the reporting period
On 1 October 2021 the Company issued 1,447,370 fully-paid ordinary shares as deferred consideration for the acquisitions of PKY Media Pty Ltd (657.896 shares) and Ripponlea Institute Pty Ltd (789,474 shares).
No other matter or circumstance has arisen since 30 September 2021 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Note 27. Reconciliation of loss after income tax to net cash used in operating activities
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June2021$ | |
| Loss after income tax expense/(benefit) for the period | (1,674,344) | (1,151,371) |
| Adjustments for:Depreciation and amortisationShare-based paymentsInterest paid on lease liabilities | 257,67910,1976,105 | 928,53659,60314,258 |
| Change in operating assets and liabilities:Decrease/(increase) in trade and other receivablesDecrease/(Increase) in prepaymentsIncrease/(decrease) in trade and other payablesIncrease/(decrease) in income tax payableIncrease in employee benefitsIncrease in unearned revenue | 90,518(66,164)33,891(23,391)92,267217,224 | (12,001)(3,982)189,82221,123111,142(248,276) |
| Net cash used in operating activities | (1,056,018) | (91,146) |
Note 28. Earnings per share
| Consolidated | ||
|---|---|---|
| Quarter ended30 September2021$ | Year ended30 June2021$ | |
| Loss after income tax attributable to the Owners of ReadCloud Limited | (1,674,344) | (1,151,371) |
| Number | Number | |
| Weighted average number of ordinary shares used in calculating basic earningsper share | 118,317,551 | 110,715,618 |
| Weighted average number of ordinary shares used in calculating diluted earningsper share | 118,317,551 | 110,715,618 |
| Cents | Cents | |
| Basic earnings / (loss) per shareDiluted earnings / (loss) per share | (1.42)(1.42) | (1.04)(1.04) |
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the Owners of ReadCloud Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the financial period.
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.
The options and performance rights that have been granted by the Company, as set out below, have not been included in the weighted average number of ordinary shares for the purpose of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 "Earnings per Share".
Options issued under the Group's employee share plan (refer Note 29) 1,565,000
Description Number on issue
Note 29. Share-based payments
An employee share plan has been established by the Group, whereby the Group may, at the discretion of the Nomination and Remuneration Committee, grant options over ordinary shares in the Company or performance rights over ordinary shares in the Company to certain key management personnel and employees of the Group. The options and performance rights are issued for nil consideration and are granted in accordance with performance guidelines established by the Nomination and Remuneration Committee.
Set out below are summaries of options granted under the plan:
30 September 2021
| Grant date | Expiry date | Exerciseprice | Balance atthe start ofthe period | Granted | Exercised | Expired/forfeited/Other | Balance atthe end ofthe period |
|---|---|---|---|---|---|---|---|
| 13/03/2018 | 7/02/2022 | $0.20 | 75,000 | - | - | - | 75,000 |
| 28/05/2018 | 7/05/2022 | $0.33 | 300,000 | - | - | - | 300,000 |
| 21/09/2018 | 17/07/2022 | $0.41 | 360,000 | - | - | - | 360,000 |
| 9/01/2019 | 14/12/2021 | $0.35 | 180,000 | - | - | - | 180,000 |
| 12/07/2019 | 12/07/2022 | $0.34 | 250,000 | - | - | - | 250,000 |
| 13/07/2020 | 2/07/2023 | $0.28 | 100,000 | - | - | - | 100,000 |
| 30/03/2021 | 9/03/2025 | $0.43 | 300,000 | - | 300,000 | ||
| 1,565,000 | - | - | - | 1,565,000 | |||
| Weighted average exercise price | $0.360 | - | - | - | $0.360 |
30 June 2021
| Grant date | Expiry date | Exerciseprice | Balance atthe start ofthe year | Granted | Exercised | Expired/forfeited/Other | Balance atthe end ofthe year |
|---|---|---|---|---|---|---|---|
| 13/03/2018 | 7/02/2022 | $0.20 | 75,000 | - | - | - | 75,000 |
| 28/05/2018 | 7/05/2022 | $0.33 | 300,000 | - | - | - | 300,000 |
| 21/09/2018 | 17/07/2022 | $0.41 | 360,000 | - | - | - | 360,000 |
| 9/01/2019 | 14/12/2021 | $0.35 | 240,000 | - | (60,000) | - | 180,000 |
| 12/07/2019 | 12/07/2022 | $0.34 | 450,000 | - | - | (200,000) | 250,000 |
| 13/07/2020 | 2/07/2023 | $0.28 | - | 100,000 | - | - | 100,000 |
| 30/03/2021 | 9/03/2025 | $0.43 | - | 300,000 | 300,000 | ||
| 1,800,000 | 400,000 | (435,000) | (200,000) | 1,565,000 | |||
| Weighted average exercise price | $0.320 | $0.390 | $0.220 | $0.340 | $0.360 | ||
The weighted average remaining contractual life of options outstanding as at 30 September 2021 was 1.24 years (30 June 2021: 1.49 years).
There were no options or performance rights granted under the plan as part of compensation during the period ended 30 September 2021. At both the commencement and the end of the financial period there were no unissued ordinary shares of the Company under performance rights.
Accounting policy for 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.
Note 29. Share-based payments
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods.
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 has 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 Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group 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, it is treated as if it has 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 is treated as if they were a modification.
ReadCloud Limited Directors' declaration 30 September 2021
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 2 to the financial statements;
- the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 September 2021 and of its performance for the financial period ended on that date; and
- there are reasonable grounds to believe that the Group 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
__________________________ Cristiano Nicolli Chairman
30 November 2021
Report on the Financial Report
Auditor's Opinion
We have audited the accompanying financial report of ReadCloud Limited (the Company) and its controlled entities (collectively the Group), which comprises the consolidated statement of financial position as at 30 September 2021, and the consolidated statements of profit or loss and other comprehensive income, changes in equity, and cash flows for the period then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the Directors' Declaration of the Company and the Group comprising the Company and the entities it controlled at the period's end or from time to time during the period.
In our opinion, the accompanying financial report of of ReadCloud Limited 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 September 2021 and of its financial performance for the period 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
| Key audit matter – Capitalisation of softwaredevelopment costs as intangible assets | How our audit addressed this matter |
|---|---|
| As disclosed in note 10 of the financial report, thecarrying amount of the Group's internally developedsoftware is $2,264,621 (2020: $2,265,698). Theaccounting policy in respect of this asset is alsooutlined in Note 10.Judgement is required in determining developmentexpendituresthatshouldbecapitalised.Such | Our procedures included, but were not limited to, the following:•testing, on a sample basis, of development expenditureincurred during the period for compliance with AASB 138and the Group's accounting policy;•assessing evidence of Management's conclusion of theeconomic feasibility of the products relying on theapplication of the software, including board approvedbudgets, historical sales levels and marketing and |
| judgements include consideration of matters such asgeneration of future economic benefits and distinctionbetweendevelopmentofnewsoftwareandmaintenanceorupgradeofexistingsoftware.Capitalised development costs are then amortisedover the estimated useful life of the asset, presentlyjudged to be five years. | business development plans;•assessing the reasonableness of estimated useful life offive years and the calculation of amortisation;•assessing whether any indicators exist of impairment,such as evidence of adverse market or internal conditions,and product or revenue underperformance; |
| Capitalised software is considered a Key AuditMatter due to the judgements applied in the amountof expenditure capitalised and the specific criteriathat have to be met for capitalisation, in accordancewith AASB 138 Intangible Assets. | •assessingandchallenging,withreferencetoManagement'srecoverabilityanalysis,thattherecoverable amount of the asset from its continuing usesupports its carrying amount; and•the appropriateness of related disclosures in Note 10. |
PKF Melbourne Audit & Assurance Pty Ltd ABN 75 600 749 184 Level 12, 440 Collins Street, Melbourne, Victoria 3000
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PKF Melbourne Audit & Assurance Pty Ltd is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms
Key audit matter – Recoverability of goodwill and other intangible assets
How our audit addressed this matter
As disclosed in Note 10 of the financial report, the carrying amount of goodwill and related acquired intangibles allocated to the VET CGU is $5,844,188 (2020: $5,773,026). Internally developed software is carried at $2,264,621 (2020: $2,265,698). Relevant accounting policies are also disclosed in Note 10.
The carrying amount of goodwill and related acquired intangible assets is considered with reference to the Group's analysis of future cash flows using a value-in-use (VIU) model, applied to the VET CGU.
The Group's early stage of maturity anticipates the continuing investment of cash resources to enable cash positive operating activities. Net operating cash outflows during the period are an indicator of impairment of internally developed software, causing the Group to extend its VIU model to consider this asset, which is utilised Group-wide.
The Group's VIU models are internally developed, using a range of internal and external data, and forward-looking assumptions and judgements that may not materialise as expected.
The key assumptions in the VIU model include:
- preparation of forecast cash flows, incorporating forecast growth rates during the forecast period;
- determination of a terminal growth factor; and
- determination of a discount rate.
Our assessment of Management's evaluation of the recoverable amount of intangibles in accordance with the requirements of AASB 136 Impairment of Assets is a Key Audit Matter.
Our procedures included, but were not limited to, assessing and challenging:
- the reasonableness of the budget for the financial period to 30 September 2022 as approved by the Directors, comparing to current actual results, and considering trends, strategies and outlooks;
- the testing of inputs used in the VIU model, including the approved budget;
- the determination of the discount rate applied in the VIU model, comparing to available industry data;
- the short to medium term growth rates applied in the forecast cash flow, considering historical results including the growth achieved from services to new client schools and their student population, and available industry data;
- the arithmetic accuracy of the VIU model;
- the appropriateness of CGU determination;
- Management's sensitivity analysis around the key drivers of the cash flow projections, to consider the likelihood of such movements occurring, sufficient to give rise to impairment; and
- the appropriateness of the disclosures including those relating to sensitivities in assumptions used in note 10.
Other Information
The Directors are responsible for the Other Information. Other Information comprises the information included in the Group's financial report for the period ended 30 September 2021 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, accordingly, we do not express any form of assurance conclusion thereon, with the exception of our opinion on the Remuneration Report.
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 the Other Information, we are required to report that fact. We have nothing to report in this regard.
Directors' Responsibilities for the Financial Report
The Directors of the Company are responsible for:
- preparing the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001;
- implementing necessary internal control 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; and
- in preparing the financial report, 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 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
- 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 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 aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
- Conclude on the appropriateness of the Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
- Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Directors, we determine those that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Auditor's Opinion
We have audited the Remuneration Report included in the Directors' Report for the period ended 30 September 2021.
In our opinion, the Remuneration Report of the Company for the period ended 30 September 2021 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.
PKF Steven Bradby Melbourne, 30 November 2021 Partner
The shareholder information set out below was applicable as at 18 November 2021.
Distribution of equity securities
| Numberof holdersof ordinary shares | Numberof holdersof voluntarilyescrowed shares | Numberof holdersof unquotedemployee options |
|---|---|---|
| - | ||
| - | ||
| - | ||
| 2 | ||
| 80 | 3 | 4 |
| 1,908 | 1 | 6 |
| - | ||
| 116862364486444 | ----- |
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
| % of totalquoted shares | ||
|---|---|---|
| Number held | issued | |
| Citicorp Nominees Pty Ltd | 17,615,174 | 14.71% |
| UBS Nominees Pty Ltd | 11,695,118 | 9.77% |
| Mr Lars Peder Lindstrom | 8,454,128 | 7.06% |
| J P Morgan Nominees Australia Pty Limited | 6,546,528 | 5.47% |
| Brindle Holdings Pty Ltd <o'connor a="" c="" f="" s=""></o'connor> | 5,760,000 | 4.81% |
| Mr Jonathan Brett Isaacs | 4,301,667 | 3.59% |
| Hunmar Holdings Pty Ltd | 3,817,786 | 3.19% |
| National Nominees Limited | 3,587,862 | 3.00% |
| Sandhurst Trustees Ltd | 3,194,444 | 2.67% |
| Mr Darren Hunter | 2,750,000 | 2.30% |
| Ms Kimberley Juanita Therese Marshall | 2,510,920 | 2.10% |
| Ms Natanya Pesha Fisher | 2,026,955 | 1.69% |
| Mr Nicholas Mardling | 1,800,000 | 1.50% |
| BNP Paribas Nominees Pty Ltd | 1,634,462 | 1.36% |
| Mr Joshua Fisher | 1,500,000 | 1.25% |
| Mrs Natanya Pesh Fisher & Mr Joshua Luke Fisher | 1,486,655 | 1.24% |
| Mr Guy Samuel Mendelson | 1,435,318 | 1.20% |
| Mr Raymond Jowett & Ms Claudia Gardiner | 1,034,702 | 0.86% |
| Ms Nicole Sharp | 968,375 | 0.81% |
| HSBC Custody Nominees (Australia) Limited | 830,607 | 0.69% |
| 82,950,701 | 69.26% |
ReadCloud Limited Shareholder information 30 September 2021
Unquoted equity securities
Number Number
| on issue | of holders | ||
|---|---|---|---|
| Employee options with various exercise prices and expiry dates | 1,565,000 | 6 | |
| The following persons hold 20% or more of unquoted equity securities: | |||
| Name | Class | Number held | |
| Mr Luke Murphy | Unquoted options | 585,000 | |
| Mr Peter Wiseman | Unquoted options | 400,000 |
Substantial holders
Substantial holders in the Company are set out below:
| Ordinary shares | |
|---|---|
| % of totalshares | |
| 12,877,044 | 10.75% |
| 12,877,044 | 10.75% |
| 8,664,128 | 7.23% |
| 7,327,549 | 6.12% |
| 7,084,880 | 5.92% |
| 6,834,545 | 5.71% |
| Number held issued |
* Represents the relevant interests of these shareholders in the shares of the Company
Voting rights
The voting rights attached to ordinary shares are set out below:
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.
Annual General Meeting
ReadCloud Limited advises that its Annual General Meeting will be held on or around 18 February 2022. The time and other details relating to the meeting will be advised in the Notice of Meeting to be sent to all Shareholders and released to ASX immediately upon dispatch. The Closing date for receipt of nomination for the position of Director is 30 December 2021. Any nominations must be received in writing no later than 5.00pm (Melbourne time) on 30 December 2021 at the Company's Registered Office. The Company notes that the deadline for nominations for the position of Director is separate to voting on Director elections. Details of the Directors to be elected will be provided in the Company's Notice of Annual General Meeting in due course.