Half-year Report to 31 December 2018

Interim Consolidated Statement of Cash Flows

			Consolidated
			2018	2017
FOR THE HALF-YEAR ENDED 31 DECEMBER 2018		Note	A$	A$
Operating activities
Receipts from customers (inclusive of GST)			16,532,376	10,682,150
Payments to suppliers and employees (inclusive of GST)			(36,279,681)	(29,147,129)
Government Grants received			460,000	450,000
Interest received			170,133	2,309
Interest paid			(156,826)	(41,691)
Income tax paid			(115,484)	(28,404)
Payments received for research and development costs			-	4,700,825
Net cash flows used in operating activities			(19,389,482)	(13,381,940)
Investing activities
Purchase of plant and equipment			(249,100)	(740,154)
Payments for intangible assets			(262,166)	(182,378)
Purchase of held to maturity financial assets			-	(1,913)
Proceeds from held to maturity financial assets			66,959	-
Net cash flows used in investing activities			(444,307)	(924,445)
Financing activities
Proceeds from receipt of subscription monies			607,365	7,184,081
Cost of capital raising			-	(95,727)
Proceeds from borrowings			3,124,063	3,175,417
Repayment of borrowings			(209,196)	(110,544)
Net cash flows from financing activities			3,522,232	10,153,227
Net decrease in cash and cash equivalents			(16,311,557)	(4,153,158)
Net foreign exchange differences			386,183	164,909
Cash and cash equivalents at 1 July			42,786,447	21,438,025
Cash and cash equivalents at 31 December		6	26,861,073	17,449,776

 

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

 

 

Notes to the interim consolidated financial statements

1.    Corporate information, basis of preparation and accounting policies

Corporate information

The interim consolidated financial statements of Seeing Machines Limited and its subsidiaries (collectively, the Group) for the half-year ended 31 December 2018 were authorised for issue in accordance with a resolution of the directors on 15 March 2019.

Seeing Machines Limited (the parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the AIM market of the London Stock Exchange.

Basis of preparation and accounting policies

The interim consolidated financial statements are prepared in accordance with AASB 134 Interim Financial Reporting in order to fulfil the reporting requirements of Rule 18 of the London Stock Exchange's AIM Rules for Companies issued July 2016.

The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 30 June 2018.

Changes in accounting policy

The accounting policies adopted in the preparation of the half year financial report are consistent with those applied in the annual financial report, except for the adoption of new standards effective as of 1 July 2018.

During the current period, the Group initially applied AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers.

Several other amendments and interpretations apply for the first time in the current financial year, but do not have an impact on the half year financial report of the Group. These are as follows:

•      AASB Interpretation 22 Foreign Currency Transactions and Advance Considerations

•      AASB 2017-1 Amendments to Australian Accounting Standards - Transfer of Investment Property

•      AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share-based Payment Transactions

•      Annual Improvements 2014-2016 Cycle and Other Amendments

 

A number of new accounting standards (including amendments and interpretations) have been issued but are not yet effective. The Group has not elected to early adopt any of these new standards in these financial statements. These pronouncements are not expected to have a material impact on the Group's results or financial position.

 

a.    AASB 9 Financial instruments

 

In the current half year, the Group has applied AASB 9 Financial Instruments and the related consequential amendments to other AASBs. AASB 9 replaces the provisions of AASB 139 Financial Instruments: Recognition and Measurement in relation to financial instruments and hedge accounting. AASB 9 introduces new requirements for the classification and measurement of financial assets and financial liabilities and impairment for financial assets. The key change to the Group's accounting policies arising from this standard is in relation to the impairment of financial assets (mainly receivables). AASB 9 effectively moves from an 'incurred losses' model to an 'expected losses' model, which requires a forward-looking assessment of potential default events and losses over the life of these assets.

 

 

 

Details of these new requirements as well as their impact on the Group's financial statements are described below.

 

The Group has applied AASB 9 retrospectively using the modified retrospective method of transition.

The date of initial application is 1 July 2018. The adoption of AASB 9 has resulted in an expected credit loss on the opening balance of financials assets of $92,807 against the Group's trade receivables as at 1 July. The increase in the allowance was debited to opening retained earnings at 1 July 2018.  The comparative figures have not been restated.

 

Classification and measurement of financial assets

 

All recognised financial assets that are debt in nature are required to be subsequently measured at amortised cost or fair value on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets.

 

Specifically:

·      Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at amortised cost;

·      Financial assets that are held within a business model whose objective is both to collect the contractual cash flows and to sell the instruments, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measured at fair value through other comprehensive income (FVTOCI);

·      all other financial assets are subsequently measured at fair value through profit or loss (FVTPL).

 

Despite the above, the Group may irrevocably elect to present subsequent changes in the fair value of particular equity instruments in other comprehensive income. The Group may also irrevocably designate a financial asset that meets the amortised cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

 

When a financial asset that is debt in nature, is measured at FVTOCI, is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. In contrast, for an equity instrument designated as measured at FVTOCI, the cumulative gain or loss previously recognised in other comprehensive income is not subsequently reclassified to profit or loss.

 

Financial assets which are debt in nature that are subsequently measured at amortised cost or at FVTOCI are subject to impairment.

 

As the Group does not hedge contracts and does not have any financial assets carried at fair value, the implementation of AASB 9 did not have any material impact.

 

Impairment of financial assets

 

In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model as opposed to an incurred credit loss model under AASB 139. The expected credit loss model requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognised.

 

As the Group does not experience material credit losses, the impact of incorporating forward looking factors did not result in a material impact to the impairment of financial assets

 

 

 

Classification and measurement of financial liabilities

 

The application of AASB 9 has had no impact on the classification and measurement of the Group's financial liabilities.

 

b.    AASB 15 Revenue from contracts with customers

 

AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations.  The new Standard has been applied as at 1 July 2018 using the modified retrospective approach. Under this method, any cumulative effect of initial application is recognised as an adjustment to the opening balance of retained earnings at 1 July 2018 and comparatives are not restated. 

Revenue of the Group arises mainly from the sale and licencing of Driver (or Operator) Monitoring System ("DMS") hardware and software, after-sales monitoring and consulting services.

To determine whether to recognise revenue, the Group follows a 5-step process:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied.

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. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of goods is recognised when there is persuasive evidence, usually in the form of an executed sales agreement at the time of delivery of the goods to customer, indicating that there has been a transfer of control to the customer, no further work or processing is required, the quantity and quality of the goods has been determined, the price is fixed and generally title has passed (for shipped goods this is the bill of lading date). Revenue is recognised to the extent the Group does not expect significant reversal.

Licence fees

Revenue from licence fees is recognised when there is persuasive evidence, usually in the form of a licence agreement at the time of delivery of the goods to customer, indicating that there has been a transfer of risks and rewards to the customer. Licences granted to customers are perpetual licences for use of intellectual property (usually in the form of software) with no further work or processing required by the Group.

Rendering of services

Revenue from support and consultancy, including monitoring services, is recognised by reference to the stage of completion of a contract or contracts in progress at reporting date or at the time of completion of the contract and billing to the customer. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract which is determined by a set quotation with the customer. As the contracts are reasonably short, there is only a small amount outstanding at reporting date, as such the level of judgement required is minimal. Revenue is only recognised to the extent the Group expects no significant reversals.

Interest revenue

Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Agreements with multiple deliverables

Where the Group enters into agreements for the provision of both goods and services as part of a single arrangement, each deliverable that is considered to have a value to the customer on a standalone basis is accounted for separately. The consideration from the arrangement is allocated to each deliverable based on the relative stand-alone selling prices of those deliverables. In the absence of a stand-alone selling price, the deliverable is measured based on the best estimate of the stand-alone selling price. The price of each component is set in order to achieve a margin on that component of the sale consistent with that which would be achieved if the Group sold each item separately.

Paid Research

The Group receives funding for research activities. These are typically multi-year agreements where the Group is paid after the achievement of certain milestones. Revenue is recognised once the milestone has been achieved.

Research and development refundable tax offset

Any refundable tax offset receivable under the government's research and development scheme is brought to account as accrued income when it is deemed virtually certain that the cash refund will be received by the Group and the value of the refund can be measured reliably. The refundable tax offset is recognised as grant income during the financial year to the extent that research and development costs have been expensed in the financial year. Any refundable tax offset related to research and development costs capitalised in the financial year is deferred and recognised in the relevant year, per the matching principle, proportionate to the amortisation of these costs.

Timing of Revenue Recognition

Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers.  

If the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due.

Impact of Adoption of AASB 15

In accordance with the transition guidance, AASB 15 has only been applied to contracts that are incomplete as at 1 July 2018.

The adoption of AASB 15 has not had a material impact on the Group's financial position or performance and there has been no adjustment to the opening balance of retained earnings at 1 July 2018 as a consequence of the adoption of this standard.

 

In accordance with AASB 15 the Group has provided disaggregated revenue information in addition to segment information at Note 3 to better enable users of the financial statements to understand how revenue is generated.

 

2.    Going concern basis of accounting

The financial report has been prepared on the going concern basis. The Group has made a loss for the half year of A$24,683,205 (2017: loss of A$16,711,460). The Group has accumulated losses of A$120,215,993 (30 June 2018: A$95,439,981). The balance of cash and cash equivalents at 31 December 2018 is A$26,861,073 (30 June 2018: A$42,786,447). The ability of the Group to continue as a going concern is dependent on the Group's ability to meet its debts as and when they fall due.

The Group has prepared cash flow forecasts for the next twelve months that show that the Group will be able to meet its debts as and when they fall due by reducing existing levels of expenditure. Notwithstanding this forecast, the Group continues to evaluate the potential of raising additional capital to meet its ongoing working capital requirement.  If the Group is unable to obtain such funding or reduce its expenditure the Group may be unable to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the company cease as a going concern.

 

3.    Segment and revenue information

An operating segment is a component of the entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's operational decision makers to make decisions about resources to be allocated to the segment and to assess its performance and for which discrete financial information is available. Management also considers other factors in determining operating segments such as the level of segment information presented to the board of directors.

Operating segments that meet the qualitative criteria as prescribed by AASB 8 Operating Segments are reported separately. However, an operating segment that does not meet the qualitative criteria is still reported separately where information about the segment would be useful to users of the financial statements.

 

 

 

Segment revenue based on operating segment

For management purposes, the Group is organised into key business units based on its products and services.

		Segment Revenue		Segment Profit
FOR THE HALF YEAR ENDED 31 DECEMBER		Dec 2018 A$	Dec 2017 A$	Dec 2018 A$	Dec 2017 A$
Revenue
Automotive		4,661,645	6,882,223	1,649,287	2,994,458
Off-Road		4,552,722	1,324,732	2,219,430	1,007,743
Fleet		4,248,970	5,868,572	(8,675,620)	(10,142,280)
Aviation		120,633	121,011	9,625	(456,036)
Scientific Advances		460,000	450,000	(61,830)	133,055
Total		14,043,970	14,646,538	(4,859,108)	(6,463,059)
Total other income		678,787	328,470	678,787	328,470
Total research & development expense	5			(20,452,884)	(10,576,871)
Total consolidated revenue - (Loss)		14,722,757	14,975,008	(24,633,205)	(16,711,460)

 

Disaggregation of revenue

In the following tables, revenue segments have been disaggregated by type of goods or services which also reflects the timing of revenue recognition.

 

FOR THE HALF YEAR ENDED 31 DECEMBER 2018	Automotive	Off-Road	Fleet	Aviation	Scientific Advances	Total
	A$	A$	A$	A$	A$	A$
Revenue Types
Sales at a point in time
Hardware and Installations	1,303,507	11,277	1,798,386	83,633	-	3,196,803
Non-recurring Engineering	3,358,138	-	-	-	-	3,358,138
Paid Research	-	387,414	20,219	37,000	460,000	904,633
Sales over time
Driver Monitoring	-	-	2,430,365	-	-	2,430,365
Licensing	-	4,154,031	-	-	-	4,154,031
Total Revenue	4,661,645	4,552,722	4,248,970	120,633	460,000	14,043,970

 

 

 

 

 

FOR THE HALF YEAR ENDED 31 DECEMBER 2017	Automotive	Off-Road	Fleet	Aviation	Scientific Advances	Total
	A$	A$	A$	A$	A$	A$
Revenue Types
Type of goods or service
Hardware and Installations	2,213,243	-	4,690,580	121,011	-	7,024,834
Non-recurring Engineering	4,668,980	-	-	-	-	4,668,980
Paid Research	-	217,593	850	-	450,000	668,443
Sales over time
Driver Monitoring	-	-	1,177,142	-	-	1,177,142
Licensing	-	1,107,139	-	-	-	1,107,139
Total Revenue	6,882,223	1,324,732	5,868,572	121,011	450,000	14,646,538

 

4.    Other income

	Consolidated
FOR THE HALF YEAR ENDED 31 DECEMBER	Dec 2018 A$	Dec 2017 A$
Research and Development refundable tax offsets	121,493	121,493
Gain on disposal of investment	39,488	-
Other income	15,931	-
	176,912	121,493

 

5.    Research and development expenses

The total research and development expenses in H1FY19 of A$20,452,884 includes A$7,455,230 in relation to a non-cash expense, resulting from a one-off performance award.

In June 2018 the Group made a one-off conditional award of performance rights in respect of 63,176,250 ordinary shares to certain key staff members. This one-off Award was in recognition of the significant contribution, expertise, experience and performance of those individuals over recent years, significantly contributing to the Group's current achievements, as well as retaining this talent for future delivery of current projects and winning new programs. The performance rights issued pursuant to the award will vest annually in three equal tranches (subject to continued employment) with the first having vested in October 2018. In the case of the two founders included in this group of individuals, Seeing Machines' Chief Technology Officer and Chief Scientific Officer, the Award was accelerated to vest in three tranches starting in October 2018, and to be fully vested by 1 April 2019.

In accordance with the requirements of AASB 2 Share-based Payments the shares are valued at grant date with that value being amortised over the vesting period.

The balance of research and development expense relates to ongoing investment in the group's core technology.

6.    Cash and cash equivalents

	Consolidated
AS AT 31 DECEMBER	Dec 2018 A$	June 2018 A$
For the purpose of the Statement of Cash Flows, cash and cash equivalents comprise the following:
Cash at bank and in hand	26,861,073	42,786,447
	26,861,073	42,786,447

 

7.    Trade and other receivables

	Consolidated
AS AT 31 DECEMBER	Dec 2018 A$	June 2018 A$
Current
Trade receivables	14,506,706	20,272,066
Provision for expected credit losses	(271,419)	-
Deferred finance income	(811,334)	(937,864)
	13,423,953	19,334,202
Customer units to be returned	706,897	-
Receivables subject to financial guarantee (refer Note 10)	1,056,075	-
Other receivables	481,028	423,446
	15,667,953	19,757,648

8.    Inventories

	Consolidated
AS AT 31 DECEMBER	Dec 2018 A$	June 2018 A$
Finished goods	8,881,298	4,300,895
Write-down of inventories for the period	(189,556)	-
	8,691,742	4,300,895

 

9.    Property, plant and equipment

During the half year ended 31 December 2018, the Group acquired assets with a cost of A$249,100 (December 2017: A$740,154). The majority of these purchases are related to plant and equipment consisting of office laptops, desktops and monitors, and lab equipment. No assets were disposed of and the net movement in property, plant and equipment after depreciation was (A$257,431).

 

10.  Intangible Assets

During the half year ended 31 December 2018, the Group purchased intangibles totalling A$262,166 (December 2017: A$182,378). These purchases are related to trademark and patent applications. There were no disposals of intangible assets during the period and the net movement in intangible assets net of amortisation was (A$455,100).

 

11.  Financial liabilities (current and non-current)

Arrangements continued during the half year for the lease of equipment, and to securities a customer debtor (combined total A$1.2m). On 17 July 2018 the Group drew down US$2m (A$2.8m) from Export Finance & Insurance Corporation in relation to the financing of inventory for sales to approved overseas customers.

During the half year the Group entered into a financial guarantee contract to guarantee the repayment of a customer loan (A$1.1m), used to purchase inventory from the Group. Although the loan funds were used to pay the Group for the sale, the risks relating to the receivable had not been transferred as a result of the guarantee and in accordance with the requirements of AASB 9 Financial Instruments, could not be derecognised. As a result both a receivable and financial liability have been recognised. The receivable and financial liability are derecognised to the extent the underlying exposure has been settled.

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables, loans and borrowings and financial guarantees.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as described below:

 

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the Effective Interest Rate (EIR) method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings.

 

12.  Dividends paid

No dividends or distributions have been made to members during the half year reporting period and no dividends or distributions have been recommended or declared by the directors in respect of the half year reporting period.

 

 

13.  Shares issued during the half year

In November 2018, the non-executive directors received 25 percent of their annual remuneration in the form of new Ordinary Shares, issued annually in arrears. The total number of new ordinary shares issued for this purpose was 533,442. The total value of these shares is A$63,467.

During the half year ended 31 December 2018, 45,494,528 shares were issued and are held on trust for the benefit of employees, following the vesting of certain performance rights and options under the terms of the Group's Employee Benefits Plan. These shares are held in the existing Group trust until such time as the beneficiaries of the Award exercise the performance rights and / options. On the exercise of such performance rights and / options, the Trust will transfer the shares to the relevant beneficiary.

 

14.  Commitments

Operating lease commitments - Group as lessee

The Group has one operating lease on a property in Australia and one in the United States.

Future minimum rental payments under non-cancellable operating leases as at 31 December are as follows:

	Consolidated
	Dec 2018 A$	Dec 2017 A$
Within one year	1,231,894	1,011,657
After one year but not more than five years	4,592,241	3,653,932
More than five years	3,525,435	4,017,732
	9,349,570	8,683,321

 

Finance leases and hire purchase commitments - Group as lessee

The Group has three leasing/financing arrangements in relation to equipment. The first two relate to the lease of IT equipment and expire in July 2019 and October 2021. The other relates to the financing of hardware and support and expires in October 2022.

Payments required under these arrangements are as follows:

	Consolidated
	Dec 2018 A$	Dec 2017 A$
Within one year	512,093	-
After one year but not more than five years	842,150	-
Minimum payments	1,354,243	-
Less: Future finance charges	(171,858)	-
Present value of minimum payments	1,182,385	-

15.  Related party disclosure

(i)    Subsidiaries

On 29 August 2018 Seeing Machines Limited established a new entity in Japan; Seeing Machines Japan. Seeing Machines Limited paid ¥1,000,000 Yen (A$12,132) for the initial share capital.

Apart from this, the composition of the Group has remained unchanged from 30 June 2018.

(ii)    Directors' shareholdings in Seeing Machines Limited

31 December 2018	Balance 01 July 18		Granted as remuneration	Acquired or sold for cash		Net change other		Balance 31 Dec 18
Directors
K Kroeger1	8,331,393	-		400,000	-		8,731,393
T Crane	156,753	102,585		384,615	-		643,953
R Burger	503,798	102,585		-	-		606,383
J A Walker (resigned 13/12/2018)	604,558	123,102		-	-		727,660
L Carmichael	327,402	102,585		-	-		429,987
Yong Kang NG2	308,605	102,585		1,000,000	-		1,411,190
Jack Boyer (appointed 16/07/2018)	-	-		-	-		-
Kate Hill (appointed 13/12/2018)	-	-		-	-		-
	10,232,509	533,442		1,784,615	-		12,550,566

1. Ken Kroeger holds 35.8% of these shares through Cook Kroeger Superannuation Fund and has been issued a further 9,977,819 performance rights, of which 3,476,525 have vested but remain unexercised.

2. Yong Kang NG has an additional indirect interest in the Company by virtue of his direct and deemed (by virtue of his spouse) ownership of shares in V S Industry Berhad (VSI), being 0.084% of VSI's current issued share capital.

(iii)   Other Director-related transactions

All transactions with director-related entities were made under normal commercial terms and conditions.

 

16.  Key management personnel

a.    Details of Key Management Personnel

(i)    Directors

       Jack Boyer                   Chairman (appointed as a director 16 July 2018,        

                                           appointed as Chairman 19 September 2018)

       Ken Kroeger                  CEO & Executive Director

       Luke Oxenham              CFO & Finance Director (appointed 3 December 2018)

       James Allan Walker       Deputy Chairman (resigned 13 December 2018)

       Les Carmichael             Non-Executive Director

       Rudolph Burger             Non-Executive Director

       Yong Kang (YK) Ng       Non-Executive Director

       Tim Crane                     Non-Executive Director

       Kate Hill                       Non-Executive Director (appointed 13 December 2018)

 

(ii)    Executives

       Nick Difiore                   Senior Vice President and General Manager, Automotive

       Paul McGlone               General Manager, Fleet, Rail & Off Road Applications

                                                                                                (commenced 19 November 2018)

       Paul Angelatos              Senior Vice President and General Manager, Fleet, Rail & Off Road

                                                                                                Applications (resigned 14 September 2018)

       Tim Edwards                 Chief Technology Officer

       Sebastian Rougeaux      Chief Scientist, Machine Intelligence

       Mike Lenné                   Chief Scientist, Human Factors

       Patrick Nolan                General Manager, Aviation

       Nicole Makin                 Senior Vice President People and Culture

       Daniel Edmunds            Senior Vice President Engineering (1 December 2018)

       Ryan Murphy                Company Secretary and Chief Operating Officer

                                                                                                (commenced 15 October 2018)

       James Palmer               Chief Financial Officer (resigned 31 January 2019)

       Luke Oxenham              Chief Financial Officer (commenced 3 December 2018)

 

b.    Compensation for Key Management Personnel

	Half-year to December 2018 A$	Half-year to December 2017 A$
Short-term employee benefits	2,284,811	2,480,327
Share based payments	5,502,431	598,236
	7,787,242	3,078,563

17.  Share based payments

a.    Recognised share based payment expenses

	Consolidated
	Dec 2018 A$	Dec 2017 A$
Expense arising from share-based payment transactions under Employee Share Loan	-	87,935
Expense arising from performance rights under long term incentive	8,384,524	121,392
Expense arising from options under long term incentive	35,844	375,339
Expense arising from the shares issued to the employees	152,762	-
Add directors shares	63,467	90,166
	8,636,597	674,832

 

 

 

 

 

 

 

b.    2010 Executive Share Plan

In July 2010 the Company adopted an Executive Share Plan (2010 Plan). Under the 2010 Plan the Board may offer and issue ordinary fully paid shares (Shares) to employees or officers (including Directors) of the Company from time to time. The Company has made the following types of offers under the 2010 Plan:

 

(iii)   Issue of shares up-front

The Company has issued Shares to; eligible staff who are not covered by the Company's other incentive scheme; executives as a short-term incentive; and non-executive Directors as part of their remuneration. A total of 1,376,785 shares were issued under this arrangement during the previous half year. The issue price for these Shares was 6.75 pence being the volume weighted average closing share price on the AIM taken over the 5 trading days from 19 to 25 September 2018 (then converted using the current foreign exchange rate, of 1 GBP = 1.80591 AUD). There are no loans for these Shares and they vest on issue.

 

(iv)   Long Term Incentive - Performance Rights Offers

From 1 July 2015, senior staff and other key staff are offered long term performance rights or share options. Under this structure, the staff are only able to exercise the rights, and have New Ordinary Shares issued to them, if the performance and/or vesting conditions are met. These conditions typically include a vesting period of 2-3 years from the end of the relevant financial year. Performance rights or options are often offered as part of the annual remuneration review and may be offered at other times. Any offer of performance rights or options requires Board approval and, when granted, is announced to the market.

 

For all options standard valuation methodologies are used (binomial, trinomial and Black Scholes) using historic volatility as a proxy for implied volatility, long term UK gilt prices for the risk free rate and AIM share price information.

 

The Company issues new shares periodically as options and performance rights vest, the shares are held by a trustee until such time as the employee exercises their options or performance rights.

 

 

Summary of Performance Rights offers granted	December 2018 No.	December 2018 WAEP (cents)	December 2017 No.	December 2017 WAEP (cents)
Outstanding at the beginning of the financial period	110,887,918	14.07	33,856,297	6.78
Granted during the financial period	20,969,081	10.47	33,223,091	4.79
Forfeited during the financial period	(13,170,926)	19.09	(824,531)	4.79
Exercised during the financial period	(15,662,453)	9.15	-	-
Expired during the financial period	-	-	-	-
Outstanding at 31 December	103,023,620	7.84	66,254,857	5.81
Exercisable at 31 December	48,961,319	7.26	-	-

 

 

18.  Events after balance date

The Group has an Export Line of Credit Agreement with the Export Finance and Insurance Corporation which was signed on 31 January 2019.  The Agreement provides a revolving loan facility to the Group up to the value of US$3.5 million for funding inventory purchases for sales to approved overseas customers.  On 18 February the Group drew down in part on the loan facility providing a cash inflow of US$0.15 million.

On 19 February 2019, the Group secured a further program design win, working with a major Tier 1 partner, for a US Based OEM to deliver the Group's Driver Monitoring System (DMS) technology.  Mass production is scheduled from late 2020 and the technology will be delivered on Seeing Machines' proprietary FOVIO Chip. The estimated lifetime revenue value of this program is initially estimated at A$6m based on initial models included in the agreement. The first material production revenue is expected to be recognised in Seeing Machines' 2021 financial year.