Aimia
Annual Report 2023

Plain-text annual report

Ai-Media Technologies Limited Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Ai-Media Technologies Limited 12 122 058 708 For the year ended 30 June 2023 For the year ended 30 June 2022 2. Results for announcement to the market $ Revenues from ordinary activities up 3.3% to 61,769,967 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) up 200.8% to 3,310,552 Loss from ordinary activities after tax attributable to the owners of Ai- Media Technologies Limited down 18.4% to (4,017,064) Loss for the year attributable to the owners of Ai-Media Technologies Limited down 18.4% to (4,017,064) Dividends There were no dividends paid, recommended or declared during the current financial period. Comments Revenue for the period was $61,769,967, up 3.3% from the prior year (30 June 2022: $59,784,026). Revenue share of technology sales (including hardware and SaaS) increased to 39% of total revenue, compared to 30% in the prior year. EBITDA for the Group was profit of $3,310,552 up 200.8% from the prior period (30 June 2022: profit of $1,100,574). EBITDA growth was driven by increase in higher margin technology sales. EBITDA is a financial measure which is not prescribed by the Australian Accounting Standards (AASBs) and represents the profit under AASBs adjusted for specific items. The directors consider EBITDA to be one of the key financial measures of the Group. The loss for the Group after providing for income tax amounted to $4,017,064, an improvement of 18.4% year on year (30 June 2022: $4,923,715). Refer to the attached Directors' report 'Review of Operations' section for further explanation. Ai-Media Technologies Limited Appendix 4E Preliminary final report The following table summarises key reconciling items between statutory loss after income tax and EBITDA: Revenue Less: Direct employee costs Less: Other direct costs including inventory expenses Gross profit* Add: Other revenue** Less: Indirect costs or overheads Less: Income tax expense Loss after income tax expense Add: Finance costs Add: Income tax expense Less: Interest income Loss before interest and taxation (EBIT) Depreciation and amortisation expense EBITDA Consolidated 2023 $ 2022 $ 61,769,967 59,784,026 (23,409,456) (3,506,507) (20,750,957) (4,158,191) 36,860,819 32,868,063 313,246 (37,882,754) (222,270) 456,469 (39,623,352) (1,711,000) (4,017,064) 761,594 1,711,000 (50,169) (4,923,715) 1,366,631 222,270 (17,285) (1,594,639) 4,905,191 (3,352,099) 4,452,673 3,310,552 1,100,574 * ** Not all allocation of indirect costs or overheads to direct employee costs and other direct costs. This consists of a one off reversal of an over accrual of USA sales tax. 3. Net tangible assets Net tangible assets per ordinary security Reporting Previous period Cents period Cents 6.91 6.47 The net tangible assets calculation includes rights-of-use assets of $318,220 (30 June 2022: $634,918) and the corresponding lease liabilities of $345,713 (30 June 2022: $599,381). 4. Control gained over entities Not applicable. 5. Loss of control over entities Not applicable. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. Previous period There were no dividends paid, recommended or declared during the previous financial period. Ai-Media Technologies Limited Appendix 4E Preliminary final report 7. Dividend reinvestment plans Not applicable. 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. 10. Audit qualification or review Details of audit/review dispute or qualification (if any): The financial statements have been audited and an unmodified opinion has been issued. 11. Attachments Details of attachments (if any): The Annual Report of Ai-Media Technologies Limited for the year ended 30 June 2023 is attached. 12. Signed As authorised by the Board of Directors. Signed ___________________________ Date: 29 August 2023 Anthony Abrahams Director Sydney 2023 ANNUAL REPORT AI MEDIA ANNUAL REPORT 2023 ABOUT AI MEDIA HIGHLIGHTS CONTENTS ABOUT AI-MEDIA HIGHLIGHTS CEO AND CHAIR LETTERS PRODUCTS AND TECHNOLOGY BOARD OF DIRECTORS DIRECTORS’ REPORT 01 02 04 06 08 11 AUDITOR’S INDEPENDENCE DECLARATION 24 FINANCIAL REPORT DIRECTORS’ DECLARATION SHAREHOLDER INFORMATION CORPORATE DIRECTOR 25 63 69 73 World leading AI-powered captioning solutions CEO & CHAIR LETTERS PRODUCTS & TECHNOLOGY BOARD OF DIRECTORS DIRECTORS’ REPORT FINANCIAL REPORT CORPORATE DIRECTORY 11 ABOUT AI-MEDIA AI-Media is the leading captioning, transcription, and translation provider globally, with over 9 million minutes captured on its iCap platform a month. The Company has deployed the latest in artificial intelligence (AI) technology to transform its market offering to better serve the growing demand for high-quality captioning worldwide. The demand for captioning, transcription and translation has grown far beyond its broadcasting origin. AI-Media’s best-in-class technology provides the only end-to-end captioning solution in market, from encrypting source data to encoding, captioning and translation. AI-Media is uniquely positioned as a global leader in the live captioning and translation industry with six offices across three continents servicing live streaming in media, events, corporate, education, government, municipalities and more. 2 HIGHLIGHTS Highlights TECH GROSS PROFIT TOTAL GROSS PROFIT $20.2m UP 30% (FY22: $15.5M) $36.9m UP $4.0M (FY22: $32.9M) AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIA33 TOTAL REVENUE 1 LEXI REVENUE MONTHLY LEXI MINUTES 3 $61.8m UP $2.0M (FY22: $59.8M) $7.8m UP 45% (FY22: $5.4M) >3.4m UP 44% (FY22: 2.4M) TECH REVENUE 2 TOTAL EBITDA CASH BALANCE 4 $24.0m UP 33% (FY22: $18.0M) $3.3m UP >200% (FY22: $1.1M) $17.0m UP $1.8M (FY23 OP. CF: $3.5M) GROWTH IN CAPTIONING MINUTES Increasing iCap usage (minutes) underpinning conversion opportunity to higher margin LEXI solutions. ICAP NETWORK USAGE (MONTHLY MINUTES) LEXI USAGE (MONTHLY MINUTES) +21% 9.1m 7.6m 6.1m 3.4m +44% 2.4m 1.0m Jun 21 Jun 22 Jun 23 Jun 21 Jun 22 Jun 23 1. FY23 and FY22 revenue from ordinary activities, excludes interest and other income 2. Includes revenue from Hardware, SaaS & Support 3. Based on management information 4. Cash balance as at 30 June 2023 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY4 Chair’s letter DEANNE WEIR CHAIR Dear fellow Shareholders, This has been another year of significant transformation for your Company, and I am pleased to present the Annual Report for the financial 2023 year (FY23). We have continued to refine our product solutions and enhance our technology, to ensure we are well positioned for increased growth in an expanding global captioning, transcription and translation market. Our improved financial performance over the year was underpinned by our high‑quality technology and scalable suite of solutions, that are designed to meet the varying quality, security and accuracy needs of our customers. This increased flexibility allowed us to attract new customers and continue to deliver great value to our existing customers. Some customers have changed their service mix, swapping out human delivered services where their needs are better met by our technology led solutions. This change in services impacts our revenue mix, pleasingly we have continued to deliver both topline revenue growth and significant improvement to the bottom line during this ongoing transformation. Our FY23 financial performance demonstrates the reformation in our business approach towards higher quality revenue streams, which underpinned FY23 revenue of $61.8 million, a 3.3% increase on FY22. Gross Profit of $36.9 million, a 12% increase on FY22 with over 54% of Gross Profit now coming from technology revenues. The Company delivered $3.3 million of earnings before interest, tax depreciation and amortisation (EBITDA), an increase of 201% compared to FY22, further highlighting increased operating leverage in the business. As we continue our transformation into higher margin, SaaS products, we have observed a growing demand for language services across entertainment, government, and corporate clients. Through our engagement with customers across the globe we have continued to build our reputation for delivering extremely accurate, low‑cost captioning and translation services, and have been rewarded with new premium contract signings from customers including Google and SBS, in addition to renewed agreements with Foxtel and Al Jazeera. We remain committed to driving further growth and profitability via broadening our SaaS offerings and believe our product suite is well‑placed to take advantage of mandated spending across captioning and translation services by potential customers including broadcasters. Social inclusion and equity is in our DNA. Our Company has a long history of advancing social inclusion throughout all business operations and making the world’s content accessible to all. Last year we launched the Leonie Jackson Education Grant, and I am pleased to share that the 2022 recipient is Sylvia Ciechanowski. In the year ahead, Sylvia will put the $10,000 grant towards completing the Post‑ Professional Doctor of Audiology Program at A.T. Still University. We continue to nurture a diverse workplace that fosters inclusivity and career development. As at 30 June 2023 40% of AI‑Media’s leadership team, 54% of our employees and 60% of our board identify as women. We continue to build upon our purpose to be inclusive to all and continue to be focused on our commitment to achieve growth by investing in our people and products. We believe it is this vision that deepens our appeal to potential customers, making AI‑Media an attractive captioning partner of choice. Throughout the year the transformation strategy was at the forefront of AI‑Media’s work, with continued investment being made in the business to accelerate growth and deliver significant value to shareholders. As a fellow shareholder I believe the share price has not reflected the inherent value of our Company. We are seeking to rectify this by continuing to improve our product suite, upselling to our existing customer base and winning new customers. Ending the year with a cash balance of $17.0 million (from which the final amounts of US$5.25 million for previous acquisitions will be paid in Q1 FY24) puts us in a good position to capitalise on growth opportunities as they arise. Despite the mismatch between the share price performance and the inherent value of the business, the current view of the Board is that we are better to preserve available cash for growth opportunities rather than undertake a further share buy‑back program. The growth achieved over the financial year would not have been achieved without the commitment of everyone at AI‑Media. I would like to thank the team, including, management and the board, who have worked consistently and efficiently to deliver great results to our customers and to position the business for significant future growth. I am very proud of the entire team for the outstanding job achieved this financial year. Finally, my sincere thanks to you, our shareholders. We greatly appreciate your continued support, and as we move into FY24 we look forward to updating you on our progress in delivering enhanced shareholder value. DEANNE WEIR CHAIR AI‑Media 54% OF GROSS PROFIT NOW COMING FROM TECHNOLOGY REVENUES AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTSCEO & CHAIR LETTERS 55 CEO’s letter TONY ABRAHAMS CO-FOUNDER, CEO AND MANAGING DIRECTOR FY23 cemented AI-Media’s position as a global leader in the delivery of high-quality live and recorded captioning, transcription, and translation solutions, demonstrating the success of our transformational shift towards higher margin software-as-a-service (SaaS) revenues. Our results were underpinned by new customer wins, in addition to existing iCap customers who have transferred to our LEXI products and further product developments with the release of LEXI 3.0 in May 2023. LEXI 3.0 provides a more accurate and advanced automatic captioning solution, delivering results that rival human captions at a fraction of the cost; with 35% fewer recognition, formatting, and punctuation errors than the previous version of LEXI. Our improved product accelerates automatic captioning adoption as it significantly increases quality, reduces latency, and includes new automated features that previously required manual intervention, including speaker changes and placement of captions to not obscure important visuals. We are extremely proud of LEXI 3.0 as it provides a streamlined product offering, enabling product differentiation in the market, whilst providing opportunities to expand our market reach and grow sales. Demand for LEXI continues to grow beyond broadcasting, with new sales wins in enterprise, government and corporate. Our captioning monthly minutes increased 21%, delivering an average of 9 million minutes every month. Over the year we witnessed many customers increasing the minutes captioned via our suite of solutions, including Major League Baseball (MLB), the United Kingdom Parliament and a five-year contract renewal with major Australian broadcaster the Seven Network (Seven). AI‑Media is well‑positioned to capitalise on the increasing need by broadcasters to meet accessibility requirements, as more countries continue to adopt and implement accessibility legislation. The renewal by Seven showcased the strength of our full suite of technology products, as the partnership included the broadcaster pioneering the use of our rebranded LEXI Library product (formerly SubSilo) with captioning powering intuitive search across Seven’s extensive media archive.The successful multi‑year contract signing with Google in August 2022 demonstrates AI‑Media’s position as a trusted partner by the corporate market. Since acquiring EEG in May 2021, we have made strategic investments in our technology products, while transitioning the business away from legacy services towards higher margin SaaS revenues. It is this shift which has successfully underpinned FY23 revenue of $61.8 million, with 39% delivered via technology revenues, delivering an increase to Gross Profit Margins to 60% in FY23, up 5 percentage points on FY22. Overall, we witnessed strong growth in monthly captioning minutes, with LEXI minutes up 44% and iCap network minutes up 21%, this demonstrates further opportunity for conversion to LEXI product suite. As the business transitions further towards SaaS revenues, we expect further improvements in operating leverage. FY23 delivered a 201% increase in EBITDA to $3.3 million in FY23 and an EBITDA margin of 5%, reflecting the scalability of the business model. To celebrate AI‑Media’s 20th anniversary in August 2023 and in recognition of our technology‑led strategy, we launched a new brand and logo set. The rebrand champions our market‑leading position, to meet the growing demand for accessible content worldwide, across a variety of industries. As we seek to capture further market share in FY24 and beyond, our competitive moat continues to be strengthened by the transformative advances in Artificial Intelligence (AI). Our full range of encoding solutions (hardware, virtualised and cloud‑based) together with access to customer data behind corporate firewalls are the key to unlocking this transformative potential of AI. As we look to the future, we have strengthened our balance sheet, with a cash position of $17.0 million as at 30 June 2023. In Q1 FY24 the final amounts of US$5.25m for previous acquisitions will be paid, leaving the balance available for further product and market development. The success we have achieved in our transformation to date would not have been possible without the efforts of our customers, dedicated employees and the leadership of the Board and management team. Thank you to our shareholders for your patience through difficult market conditions. I look forward to updating you further as we build and extend our technology‑led growth strategy. 60% GROSS PROFIT MARGINS IN FY23 UP 5% points on FY22 TONY ABRAHAMS CO-FOUNDER, CEO AND MANAGING DIRECTOR AI‑Media PRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY6 Products and technology LEXI The launch of LEXI 3.0 delivered a new and improved version of AI‑Media’s flagship live automatic captioning solution. Launched in May 2023, the new release is strengthened by innovation in AI, affording a more accurate and advanced automatic captioning solution. LEXI 3.0 delivers results that rival human captions at a fraction of the cost; with 35% fewer recognition, formatting, and punctuation errors than the previous version of LEXI. Average quality results have increased significantly from 98.2% to 98.7% NER. Across the AI industry fast‑emerging improvements in Generative Pre‑Trained Transformative (GPT), Natural Language Processing (NLP) and Acoustic & Pronunciation Modelling (APM) language modelling are delivering enhancements in prediction, text transcripts databases and are improving and enhancing accent and language accuracy. Powered by AI advancements LEXI 3.0 has closed the gap on human captions, improving the value of AI‑Media’s automatic captioning solution by accelerating adoption of captioning by significantly increasing quality, reducing latency, and delivering new automated features including speaker identification and AI‑powered caption placement to avoid on‑screen interference. LEXI 3.0 is an affordable on‑demand solution perfect for live captioning a wide range of content types – from linear TV broadcasts, OTT, Live Sports and live streams, to meetings, events, lectures and more. Delivered via any AI‑Media encoder (Hardware, Alta and Falcon) connected to AI‑Media’s iCap Cloud Network, existing AI‑Media customers, have access to LEXI 3.0 at no additional cost. “We are extremely proud of LEXI 3.0 our flagship product it is enabling product differentiation, expanding market opportunities to grow sales by revolutionising automatic captioning to deliver unprecedented accuracy and reliability, without the sizeable per hour costs typical of human captions.” — James Ward- Chief Sales Officer ECOSYSTEM AI‑Media’s unique product suite offers an end‑to‑end ecosystem of captioning, translation and transcription solutions to a large and growing customer base. The product suite combines the best technology, security, and service, differentiating AI‑Media from the competition as it enables the delivery of end‑to‑end solutions to meet any customers captioning needs. The world leading captioning network is comprised of an ecosystem of hardware, infrastructure, and software solutions. The network of end‑to‑end solutions begins with a range of on‑premise, virtualised, cloud‑captioning encoders that seamlessly integrate via iCap to AI‑Media’s world‑leading proprietary speech recognition solutions. The encoders, Falcon, Alta and Encoder Pro are compatible with multiple resolutions and deliver physical, virtual, and cloud‑based encoding technology to our customers, captioning content reliably, flexibly and securely. AI‑Media’s encoding solutions make it easy to deliver a high‑quality, low‑latency broadcast with near real‑time captions for any need. The iCap network integrates seamlessly with AI-Media’ ASR cloud captioning solutions LEXI and third‑party captioners across the globe. iCap’s scalable cloud based network separates us from the competition by delivering a secure, encrypted connection with a global standard of service with the highest accuracy at an affordable price to customers anywhere in the globe. Fast, accurate, efficient and scalable LEXI is our proprietary speech recognition solution. Underpinned by AI, LEXI has leading captioning capabilities, delivering coherent captions using advanced algorithms with enterprise grade accuracy of 98.7%. AI-MEDIA ECOSYSTEM Leading global captioning platform, providing customers with the only end-to-end solution in market 1 Video Input 2 3 4 Encrypted Encoding Real-time Captioning Captioned Video Output Encoders and iCap network used by both customers and competitors Live or recorded video source via broadcasts, events or over‑the‑top (OTT) content Cloud, virtual, or physical encoders convert audio into digital data that is sent to iCap network Matches captions to video sources and provides encrypted remote access to customer data improving contextual accuracy LEXI converts spoken language into written text to present live captions on any screen or platform, in any language AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTSPRODUCTS & TECHNOLOGY 77 FY24 OUTLOOK Continued technology transition will drive long-term business model. LEVERAGE RECENT PRODUCT RELEASES (LEXI 3.0 AND LEXI TOOLKIT) TO DRIVE GROWTH. ACCELERATE CONVERSION OF 3RD PARTY ICAP USERS TO LEXI & UPSELL BASE PRIORITISE ICAP AND ENCODING TECHNOLOGY DEVELOPMENT TO BROADEN REVENUE OPPORTUNITY AND DRIVE CUSTOMER STICKINESS SCALE GLOBAL PRESENCE THROUGH NEW STRATEGIC PARTNERSHIPS, TRACK RECORD AND ENHANCED SOLUTIONS EXECUTE ON GROWTH OPPORTUNITIES IN NEW TERRITORIES AND ADJACENT MARKETS REVENUE COMPOSITION & GP MARGIN (%) FY22 55% FY23 60% FY21 41% 6% 30% 39% $48.7m $59.8m $61.8m 94% 70% 61% Tech Services Executing on business model transition away from low margin services (>40% GPM) towards technology revenues (>80% GPM) CEO & CHAIR LETTERSBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY8 Board of Directors DEANNE WEIR Non-Executive Director and Chair BA(Hons) LLB(Hons) LLM Deanne has served as a director of Ai-Media since 2010 and became Chair in August 2013. An entrepreneur, company director and philanthropist, she previously spent 10 years at ASX listed company Austar United Communications as General Counsel and Company Secretary. Deanne is Chair of Seer Data and Analytics, an Australian scale up technology company, and also a Board member at Verve Super. Deanne is passionate about community engagement and the power of storytelling to help influence social change. She was a long‑term Board member and Deputy Chair at Screen Australia and in 2017 was appointed Chair of the Sydney Film Festival. Deanne is a graduate of the Australian Institute of Company Directors. ANTHONY ABRAHAMS Co-Founder, Director and Chief Executive Officer BCom (Hons). LLB (UNSW), MPhil. MBA (Oxford) Tony co‑founded AI‑Media in 2003. He served as a Director of Northcott Disability Services from 2010 to 2018 and was recognised by the World Economic Forum as a Young Global Leader in 2013. In previous roles, Tony worked to establish the Oxford Internet Institute in 2001, while attending the University of Oxford as a Rhodes Scholar. Tony has been a member of the Australian Institute of Company Directors since 2006. JOHN MARTIN Independent, Non-Executive Director BA LLB (Hons) John joined the board in 2010 and served as the company’s first Chairman until 2013. He’s an experienced company director and business executive, having served as CEO and director of ASX-listed Babcock & Brown Communities, Primelife and Regeneus. John is a Non-Executive Director of Australian law firm Sparke Helmore; Sydney biotech company Biopoint; US internet services company Lokket and Melbourne not‑ for-profit CCRM Australia. He is also a member of the Australian Institute of Company Directors. 482 EMPLOYEES 220 PERMANENT STAFF AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTSBOARD OF DIRECTORS 99 ALISON LOAT Independent, Non-Executive Director BAH, Queen’s University, Kingston Canada; MPP, Harvard Kennedy School Alison is the Managing Director, Sustainable Investing and Innovation at OPTrust, a Canadian public pension plan. Previously, she was the Senior Managing Director of FCLTGlobal, a long‑term investing organization, the CEO of a think tank and a consultant at McKinsey & Company. She’s also on the board of two Canadian educational institutions and a privately held media company. Alison received the Queen’s Gold and Diamond Jubilee Medals and was named one of the 100 Most Powerful Women in Canada. She received the ICD designation from Canada’s Institute of Corporate Directors. She has degrees from Queen’s University and the Harvard Kennedy School. CHERYL HAYMAN Independent, Non-Executive Director Bachelor of Commerce, FAICD, FGIA Cheryl joined the board in March 2022 and has extensive experience working as an independent Director across multiple sectors including ASX‑listed companies as well as industry bodies and not-for-profit organisations. Her Board roles include Beston Global Food Company (ASX: BFC) and Silk Logistics Holdings (ASX:SLH). Cheryl’s corporate experience encompasses a range of senior strategic technology, digital strategy roles and global marketing roles including Head of Marketing and Innovation at Sunrice, George Weston Foods, Unilever Australia, NZ and UK, Yum Restaurants International and Who Weekly magazine. Cheryl is a Fellow of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia, and serves as Chair of AIM’s Remuneration and Nomination Committee and member of the Audit and Risk Committee. 5 OFFICE LOCATIONS CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY10 Ai-Media Technologies Limited Contents 30 June 2023 Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Note 1. General information Note 2. Significant accounting policies Note 3. Critical accounting judgements, estimates and assumptions Note 4. Operating segments Note 5. Revenue Note 6. Other income Note 7. Expenses Note 8. Income tax Note 9. Cash and cash equivalents Note 10. Trade and other receivables Note 11. Inventories Note 12. Contract assets Note 13. Term deposits Note 14. Property, plant and equipment Note 15. Right-of-use assets Note 16. Intangibles Note 17. Trade and other payables Note 18. Contract liabilities Note 19. Borrowings Note 20. Lease liabilities Note 21. Provisions Note 22. Issued capital Note 23. Reserves Note 24. Dividends Note 25. Financial instruments Note 26. Remuneration of auditors Note 27. Contingent liabilities Note 28. Key management personnel disclosures Note 29. Related party transactions Note 30. Interests in subsidiaries Note 31. Earnings per share Note 32. Parent entity information Note 33. Reconciliation of loss after income tax to net cash from operating activities Note 34. Changes in liabilities arising from financing activities Note 35. Share-based payments Note 36. Events after the reporting period Directors' declaration Independent auditor's report to the members of Ai-Media Technologies Limited Shareholder information 10 11 24 25 26 27 28 29 29 29 38 39 40 41 42 43 45 45 46 46 47 47 48 49 50 51 51 52 52 53 55 55 56 58 58 58 58 59 59 60 61 61 62 62 63 64 69 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 1111 Ai-Media Technologies Limited Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Ai-Media Technologies Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2023. Directors The following persons were directors of Ai-Media Technologies Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Deanne Weir - Non-Executive Director and Chair Anthony Abrahams - Executive Director and Chief Executive Officer John Martin - Non-Executive Director Alison Loat - Non-Executive Director Cheryl Hayman - Non-Executive Director Principal activities Ai-Media Technologies Limited (Ai-Media or Company) (ASX: AIM), is a global provider of technology-driven captioning, transcription and translation products and services. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The loss for the Group after providing for income tax amounted to $4,017,064 (30 June 2022: $4,923,715). Operations A summary of the results for the year is as follows: 2023 $ 2022 $ Change Change $ % Revenue from operating activities Earnings/(loss) before interest, taxation, depreciation and amortisation (EBITDA) Loss after tax (expense)/benefit from ordinary activities 61,769,967 59,784,026 1,985,941 3.3% 3,310,552 (4,017,064) 1,100,574 (4,923,715) 2,209,978 200.8% 906,651 18.4% EBITDA is a financial measure which is not prescribed by the Australian Accounting Standards (AASBs) and represents the profit under AASBs adjusted for specific items. The directors consider EBITDA to be one of the key financial measures of the Group. The strengths of the technology and products introduced into the Group as part of the EEG acquisition in 2021 has provided the main impetus to the EBITDA growth. The legacy business continues to perform in the broadcast sector where tailored solutions and a high degree of accuracy is required. Comparatively, there has been a decline in legacy Live Enterprise services, especially in the education sector, where free tools have gained market share particularly where tailored solutions and a high degree of accuracy are not required. As at 30 June 2023, the consolidated statement of financial position reflects a net asset position of $77,122,909 (30 June 2022: $78,960,817). The EBITDA growth along with a strong balance sheet with minimal debt has the Group well positioned to pursue our growth agenda and take advantage of new opportunities as they arise. 11 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 12 Ai-Media Technologies Limited Directors' report 30 June 2023 The following table summarises key reconciling items between statutory loss after income tax and EBITDA: Revenue Less: Direct employee costs Less: Other direct costs including inventory expenses Gross profit* Add: Other revenue** Less: Indirect costs or overheads Less: Income tax expense Loss after income tax expense Add: Finance costs Add: Income tax expense Less: Interest income Loss before interest and taxation (EBIT) Depreciation and amortisation expense EBITDA Consolidated 2023 $ 2022 $ 61,769,967 59,784,026 (23,409,456) (3,506,507) (20,750,957) (4,158,191) 36,860,819 32,868,063 313,246 (37,882,754) (222,270) 456,469 (39,623,352) (1,711,000) (4,017,064) 761,594 1,711,000 (50,169) (4,923,715) 1,366,631 222,270 (17,285) (1,594,639) 4,905,191 (3,352,099) 4,452,673 3,310,552 1,100,574 * ** Not all allocation of indirect costs or overheads to direct employee costs and other direct costs. This consists of a one off reversal of an over accrual of USA sales tax. EBITDA for the Group was $3,310,552 (2022: $1,100,574), showing significant progress in the Group's performance compared to the previous year. Liquidity The consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2023 reflects a net loss after income tax of $4,017,064 (2022: $4,923,715) and the consolidated statement of cash flows reflects net cash inflows from operating activities of $3,477,003 (2022: $1,893,490). As at 30 June 2023, the consolidated statement of financial position reflects a net asset position of $77,122,909 (2022: net asset of $78,960,817) and a net current asset position of $10,395,527 (2022: net current asset of $16,444,315). While revenue for the period was up 3.3%, we saw a continuing strong growth in the share of higher margin technology sales (including hardware and SaaS) of total revenue 39%, compared to 30% in the prior year. The Group has successfully returned to a positive EBITDA, and with a robust balance sheet featuring a cash balance of nearly $17 million, along with improving performance, it is now well-positioned to confidently pursue growth and seize new opportunities as they arise. The directors have assessed that based on the Group’s position it is appropriate to prepare the financial report on a going concern basis. For further information, refer to note 2. Business risks The following is a summary of material business risks that could adversely affect the Group's financial performance and growth potential in future years and how the Group propose to mitigate such risks. Macroeconomic risks The Group’s financial performance can be impacted by current and future economic conditions which it cannot control, such as increases in interest rates and inflation. The Group stays abreast of these conditions, focuses on its internal debtor controls and diversifies its customer base by industry and geography to help manage these risks. 12 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 1313 Ai-Media Technologies Limited Directors' report 30 June 2023 Recruitment and crowd sourcing It is evident that the labour landscape has displayed a trend of increasing availability within sectors such as technology, sales, operations, and professional services. However, labour market tightness persists as a noteworthy consideration. While inflationary pressures have also shown signs of stabilising, the consequences stemming from these pressures throughout the past year have led to a notable salary escalation of up to 10% beyond the initially budgeted projections for positions demanding professional expertise or high-level skills. In line with our ongoing business technology transformation, demand for crowd recruitment has also experienced a reduction. Tools such as LinkedIn Recruiter, LinkedIn advertising, and internal referrals continue to outperform traditional labour advertising avenues, mostly eliminating the need to engage recruitment agency services. Competitive market and changes to market trends The Group operates in a highly competitive market. Innovation is constant and superior products that may be released to the market could result in pricing pressures upon our product and result in unfavourable product positioning within the market. The Group seeks to mitigate this risk through maintaining experienced product development teams that remain abreast of the latest technological advances and their potential impact on current and future products. Disruption to, or failure of, technology systems and software, including cybersecurity breaches The risk of system disruption, either malicious or accidental is something that can never be completely mitigated against as technology and methods of potential disruption are constantly changing. We manage this risk in diverse ways, including utilising third parties to proactively review our environments and make recommendations for improvement, focusing on monitoring environments so we can spot any changes as they happen (before causing noticeable disruption) and by making sure we have backups and methods in place to reproduce environments from scratch in case the worst case scenario does happen. Data protection and privacy laws Data protection and privacy laws are being implemented and updated across many jurisdictions globally. This could be a risk if we are not aware of the changes or not able to comply and therefore we need to make sure we are actively monitoring changes. We look to minimise this risk by basing our data protection and privacy standards on the most robust jurisdictions in order to aid in global compliance. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2023 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 growth strategy is focused on exploiting its strengths as a global leader in the provision of high-quality live and recorded captioning, transcription and translation products and services. Its technology platform combines artificial intelligence and human expertise to deliver speech-to-text at the accuracy required in the rapidly evolving broadcast and large enterprise markets. The key pillars of the Group’s growth strategy are: ● ● ● ● ● ● drive growth of unified product offering in existing and new markets; market standardised scalable global product portfolio solution; focus on transitional sales of SaaS and Premium ASR in markets previously dominated by human captioning; ongoing organic growth of existing markets and customers; develop partnership opportunities and new sales channels; and consider acquisition opportunities, particularly of technology to enhance products. Environmental regulation The Group is not subject to any significant environmental regulation under a law of Commonwealth or State law within all the geographical locations the Group operate in. 13 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 14 Ai-Media Technologies Limited Directors' report 30 June 2023 Information on directors Name: Title: Qualifications: Experience and expertise: Deanne Weir Non-Executive Director and Chair BA(Hons) LLB(Hons) LLM Deanne has served as a director of Ai-Media since 2010, and became Chair in August 2013. An entrepreneur, company director and philanthropist, Deanne previously spent 10 years at ASX listed company Austar United Communications as a senior executive, including as General Counsel and Company Secretary. Deanne is Chair of Seer Data and Analytics, an Australian scale up technology company, and also a Board member at Verve Super. Deanne is passionate about community engagement and the power of story-telling to help influence social change. Deanne was a long-term Board member and Deputy Chair at Screen Australia and in 2017 was appointed Chair of the Sydney Film Festival. Deanne is a Graduate of the Australian Institute of Company Directors. No other listed entities Other current directorships: Former directorships (last 3 years): No other listed entities Special responsibilities: Interests in shares: Board Chair, Member of RNC (Remuneration and Nominations Committee) 16,072,336 ordinary shares directly held 2,572,659 ordinary shares indirectly held Name: Title: Qualifications: Experience and expertise: Anthony Abrahams Co-Founder, Director and Chief Executive Officer BCom (Hons). LLB (UNSW), MPhil. MBA (Oxford) Tony co-founded Ai-Media in 2003. Tony served as a Director of Northcott Disability Services from 2010 to 2018, and was recognised by the World Economic Forum as a Young Global Leader in 2013. In previous roles, Tony worked to establish the Oxford Internet Institute in 2001, while attending the University of Oxford as a Rhodes Scholar. Tony has been a member of the Australian Institute of Company Directors since 2006. Other current directorships: No other listed entities Former directorships (last 3 years): No other listed entities Chief Executive Officer Special responsibilities: 30,339,898 ordinary shares indirectly held Interests in shares: Name: Title: Qualifications: Experience and expertise: John Martin Independent, Non-Executive Director BA LLB (Hons) John joined the board in 2010 and served as the company’s first Chairman until 2013. He is an experienced company director and business executive, having served as CEO and director of ASX-listed Babcock & Brown Communities, Primelife and Regeneus. John is a Non-Executive Director of Australian law firm Sparke Helmore; Sydney biotech company Biopoint; US internet services company Lokket and Melbourne not for- profit CCRM Australia. He is also a member of the Australian Institute of Company Directors. Other current directorships: Former directorships (last 3 years): Concentrated Leaders Fund Limited Special responsibilities: No other listed entities Interests in shares: Interests in options: Chair of Audit and Risk Committee; Member of Remuneration and Nomination Committee 49,150 ordinary shares directly held and 1,276,669 ordinary shares indirectly held 97,972 restricted share units 14 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 1515 Ai-Media Technologies Limited Directors' report 30 June 2023 Name: Title: Qualifications: Experience and expertise: Alison Loat Independent, Non-Executive Director BAH, Queen’s University, Kingston Canada; MPP, Harvard Kennedy School Alison is the Managing Director, Sustainable Investing and Innovation at OPTrust, a Canadian public pension plan. Previously, she was the Senior Managing Director of FCLTGlobal, a long-term investing organization, the CEO of a think tank and a consultant at McKinsey & Company. She’s also on the board of two Canadian educational institutions and a privately held media company. Alison received the Queen’s Gold and Diamond Jubilee Medals and was named one of the 100 Most Powerful Women in Canada. She received the ICD designation from Canada’s Institute of Corporate Directors. She has degrees from Queen’s University and the Harvard Kennedy School. No other listed entities Other current directorships: Former directorships (last 3 years): No other listed entities Special responsibilities: Interests in shares: Interests in options: Name: Title: Qualifications: Experience and expertise: Member of RNC (Remuneration and Nominations Committee); Member of ARC (Audit and Risk Committee) 299,150 ordinary shares directly held 97,972 restricted share units Cheryl Hayman Independent Non-Executive Director (appointed on 14 March 2022) BCom (Mktg), FAICD, FGIA Cheryl joined the board in March 2022 and has extensive experience working as an independent Director across multiple sectors including ASX-listed companies as well as industry bodies and not-for-profit organisations. Her Board roles include Beston Global Food Company (ASX: BFC) and Silk Logistics Holdings (ASX:SLH). Cheryl’s corporate experience encompasses a range of senior strategic technology, digital strategy roles and global marketing roles including Head of Marketing and Innovation at Sunrice, George Weston Foods, Unilever Australia, NZ and UK, Yum Restaurants International and Who Weekly magazine. Cheryl is a Fellow of the Australian Institute of Company Directors and a Fellow of the Governance Institute of Australia, and serves as Chair of AIM’s Remuneration and Nomination Committee and member of the Audit and Risk Committee. Other current directorships: Beston Global Food Company (ASX: BFC) and Silk Logistics Holdings Ltd (ASX:SLH) Former directorships (last 3 years): Shriro Holdings Ltd (ASX:SHM), Clover Corporation (ASX:CLV) and HGL Limited Special responsibilities: Interests in shares: Interests in options: (ASX:HNG) Chair of RNC (Remuneration and Nominations Committee); Member of ARC (Audit and Risk Committee) 12,561 ordinary shares directly held and 50,000 ordinary shares indirectly held 97,972 restricted share units '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. 15 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 16 Ai-Media Technologies Limited Directors' report 30 June 2023 Company secretary Name: Title: Experience and expertise: Name: Title: Experience and expertise: Lisa Jones Company Secretary (appointed 1 September 2022) Lisa is an experienced corporate lawyer and governance professional and a Fellow of the Governance Institute of Australia. She has more than 20 years' experience in commercial and corporate affairs, working with both public listed and private companies in Australia and Europe after starting her career in the corporate practice Allens. She is the principal of Jones Meredith Group which provides governance; corporate advisory and company secretarial services to ASX listed and private companies. Suzanne Sanossian Company Secretary (resigned 1 September 2022) Sue joined Ai-Media in 2011 and was responsible for assisting the Board and company in meeting its fiduciary, legal, compliance and corporate governance obligations. Sue was a pivotal point of contact for the Board, investors, senior executives, staff and industry peers, and led AIM’s People and Culture team up until her resignation on 1 September 2022. Meetings of directors The number of meetings of the Company's Board of Directors (the Board) and of each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each director were: Full Board Audit and Risk Committee Remuneration and Nomination Committee Attended Held Attended Held Attended Held Deanne Weir Anthony Abrahams John Martin Alison Loat Cheryl Hayman 9 9 8 9 9 9 9 9 9 9 5 5 5 5 5 5 5 5 5 5 3 3 3 3 3 3 3 3 3 3 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● ● ● ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share-based compensation Additional information Additional disclosures relating to key management personnel 16 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 1717 Ai-Media Technologies Limited Directors' report 30 June 2023 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 of Directors (the Board) ensures that executive reward satisfies the following key criteria for good reward governance practices: ● ● ● ● competitiveness and reasonableness; acceptability to shareholders; performance linkage / alignment of executive compensation; and transparency. The Remuneration and Nomination 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 Remuneration and Nomination 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; and 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; and 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 Remuneration and Nomination Committee. The Remuneration and Nomination 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 chair's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chair is not present at any discussions relating to the determination of her own remuneration. As part of their remuneration package, eligible non-executive directors are granted up to $25,000 worth of restricted share units per year, which vest on a quarterly basis and are automatically exercised at the end of the financial year. ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 9 August 2020, where the shareholders approved a maximum annual aggregate remuneration of $500,000. 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 four components: ● ● ● ● base pay and non-monetary benefits; short-term performance incentives; share-based payments; and other remuneration such as superannuation and long service leave. The combination of these comprises the executive's total remuneration. 17 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 18 Ai-Media Technologies Limited Directors' report 30 June 2023 Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Remuneration and Nomination 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 short-term incentives (STI) program includes salaries, annual leave and other short term incentive payments and is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators (KPI's) being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. The long-term incentives (LTI) include long service leave and share-based payments. Shares are awarded to executives over a period of three years based on long-term incentive measures. These include increase in shareholders' value relative to the entire market and the increase compared to the Group's direct competitors. The Remuneration and Nomination Committee reviewed the long-term equity-linked performance incentives for executives during the financial year. Under the LTI, eligible key management personnel may be given restricted share units (RSUs) which may be subject to vesting conditions set by the Board. Consolidated entity performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the Group. A portion of cash bonus and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Remuneration and Nomination Committee. Refer to the section 'Additional information' below for details of the earnings and total shareholders return for the last five years. The Remuneration and Nomination 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. Use of remuneration consultants During the financial year ended 30 June 2023, the Group did not engage the use of remuneration consultants, to review its existing remuneration policies and provide recommendations on how to improve both the STI and LTI programs for future financial years. Voting and comments made at the Company's 30 June 2022 Annual General Meeting (AGM) At the 23 November 2022 AGM, 99.89% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. The key management personnel of the Group consisted of the following directors of Ai-Media Technologies Limited: ● ● ● ● ● ● Deanne Weir - Chair Anthony Abrahams - Chief Executive Officer John Martin - Non-Executive Director Alison Loat - Non-Executive Director Cheryl Hayman - Non-Executive Director (appointed on 14 March 2022) Jonathan Pearce - Non-Executive Director (retired on 31 August 2021) And the following person: ● John Bird - Chief Financial Officer 18 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 1919 Ai-Media Technologies Limited Directors' report 30 June 2023 Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Annual leave $ Super- annuation $ Long service leave $ Equity- settled $ Total $ 91,324 58,824 70,028 59,091 - - - - - - - - 9,589 6,176 3,878 6,205 - - - - - 25,000 25,000 25,000 100,913 90,000 98,906 90,296 332,920 - 12,272 18,411 4,135 - 367,738 285,029 897,216 - - 21,234 33,506 25,292 69,551 - 4,135 - 331,555 75,000 1,079,408 Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Annual leave $ Super- annuation $ Long service leave $ Equity- settled $ Total $ 91,324 59,091 68,801 17,727 9,795 321,876 277,802 846,416 - - - - - - - - - - - - - 9,132 5,909 3,448 1,773 980 - - - - - - 25,000 25,000 7,397 4,247 100,456 90,000 97,249 26,897 15,022 5,340 15,320 4,135 - 346,671 14,034 19,374 23,568 60,130 - 4,135 - 61,644 315,404 991,699 2023 Non-Executive Directors: Deanne Weir John Martin Alison Loat Cheryl Hayman Executive Directors: Anthony Abrahams Other Key Management Personnel: John Bird 2022 Non-Executive Directors: Deanne Weir John Martin Alison Loat Cheryl Hayman* Jonathan Pearce** Executive Directors: Anthony Abrahams Other Key Management Personnel: John Bird * ** Remuneration disclosed is for the period from appointment of 14 March 2022 to 30 June 2022. Remuneration disclosed is from 1 July 2021 to the date of cessation of employment/appointment on 31 August 2021. 19 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 20 Ai-Media Technologies Limited Directors' report 30 June 2023 The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-Executive Directors: Deanne Weir John Martin Alison Loat Cheryl Hayman Jonathan Pearce Executive Directors: Anthony Abrahams Other Key Management Personnel: John Bird Fixed remuneration 2022 2023 At risk - STI At risk - LTI 2023 2022 2023 2022 100% 72% 75% 72% - 100% 72% 74% 72% 72% 100% 100% 100% 100% - 28% 25% 28% - - - - 28% 26% 28% 28% - - - - - - - - - - - - - - - - * At risk - STI relates to the share based payments, equity settled. Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Name: Title: Agreement commenced: Term of agreement: Details: Anthony Abrahams Chief Executive Officer Australia 1 July 2020 Ongoing - no fixed minimum term Annual fees of $153,287 including superannuation Anthony Abrahams Chief Executive Officer Canada 19 April 2018 Ongoing - no fixed minimum term Annual fees of CAD186,576 John Bird Chief Financial Officer 15 March 2021 Ongoing - no fixed minimum term Annual fees of $332,000 including superannuation Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares Details of ordinary issued to directors and other key management personnel as part of compensation during the year ended 30 June 2023 are set out below: Name John Martin Alison Loat Cheryl Hayman Date 7 July 2022 7 July 2022 7 July 2022 Shares Issue price $ 28,915 28,915 12,561 $0.86 $0.86 $0.59 25,000 25,000 7,397 20 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 2121 Ai-Media Technologies Limited Directors' report 30 June 2023 Restricted Share Units (RSUs) Details of RSUs granted to directors and other key management personnel as part of compensation during the year ended 30 June 2023 are set out below: Name John Martin Alison Loat Cheryl Hayman Vesting and exercisable date RSUs Price $ 30 June 2023 30 June 2023 30 June 2023 97,972 97,972 97,972 $0.26 $0.26 $0.26 25,000 25,000 25,000 Additional information The earnings of the Group for the five years to 30 June 2023 are summarised below: 2023 $ 2022 $ 2021 $ 2020 $ 2019 $ Sales revenue EBITDA Loss after income tax 61,769,967 59,784,026 48,662,420 25,423,090 18,339,127 (2,506,516) (3,882,599) (8,678,600) (10,691,490) (10,048,332) (12,741,152) 1,100,574 (4,923,715) 3,310,552 (4,017,064) Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at Received as part of the start of the year remuneration Additions Disposals/ other Balance at the end of the year Ordinary shares Deanne Weir Anthony Abrahams John Martin Alison Loat Cheryl Hayman Jonathan Pearce* John Bird 18,644,995 27,889,898 1,296,904 270,235 50,000 512,980 - 48,665,012 - - 28,915 28,915 12,561 - - 70,391 - 3,000,000 - - - - - 3,000,000 - 18,644,995 (550,000) 30,339,898 1,325,819 299,150 62,561 - - (1,062,980) 50,672,423 - - - (512,980) - * Jonathan Pearce's disposals/other represents a member no longer being designated as a key management personnel and does not represent a disposal of holding. Option holding There were no options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group. RSU holding The number of RSUs over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: RSUs John Martin Alison Loat Cheryl Hayman Balance at the start of the year Granted Vested Issued Expired/ forfeited/ other Balance at the end of the year 28,915 28,915 12,561 97,972 97,972 97,972 70,391 293,916 - - - - (28,915) (28,915) (12,561) (70,391) - - - - 97,972 97,972 97,972 293,916 This concludes the remuneration report, which has been audited. 21 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY 22 Ai-Media Technologies Limited Directors' report 30 June 2023 Shares under option and restricted share units The following were unissued ordinary shares of Ai-Media Technologies Limited under restricted share units at the date of this report. Grant date 16 February 2023 Exercise price Number of units $0.26 293,916 Shares issued on the exercise of options and restricted share units The following ordinary shares of Ai-Media Technologies Limited were issued during the year ended 30 June 2023 on the exercise of RSUs granted: Date RSU granted 7 July 2022 7 July 2022 Exercise price Number of shares issued $0.86 $0.59 57,830 12,561 70,391 Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, except to the extent permitted by the law, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services During the period, Deloitte Touche Tohmatsu Australia, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board is satisfied that the provision of those non audit services during the period by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 (Cth) or as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks or rewards. Details of amounts paid or payable to the auditor for non audit services provided during the year by the auditor are outlined in note 26 to the financial statements. ‑ ‑ Officers of the Company who are former partners of Deloitte Touche Tohmatsu There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu. 22 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS DIRECTORS’ REPORT FINANCIAL REPORT 2323 Ai-Media Technologies Limited Directors' report 30 June 2023 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. 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 ___________________________ Anthony Abrahams Director and Chief Executive Officer 29 August 2023 Sydney 23 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSCORPORATE DIRECTORY24 2299 AAuugguusstt 22002233 The Board of Directors Ai-Media Technologies Limited Level 1, 103 Miller Street North Sydney NSW 2060 Dear Board Members Deloitte Touche Tohmatsu ABN 74 490 121 060 Quay Quarter Tower 50 Bridge Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo AAii--MMeeddiiaa TTeecchhnnoollooggiieess LLiimmiitteedd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the Board of Directors of Ai-Media Technologies Limited and its subsidiaries. As lead audit partner for the audit of the financial report of Ai-Media Technologies Limited for the year ended 30 June 2023, I declare that to the best of my knowledge and belief, there have been no contraventions of: • The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • Any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU Harsh Shah Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 24 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTSAi-Media Technologies Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Revenue Other income Interest revenue calculated using the effective interest method Expenses Cost of inventories consumed Employee benefits expense Outsourcing and contractor expenses Information technology related expenses Depreciation and amortisation expense Professional and consulting expenses Business development expenses Occupancy expenses Recovery/(impairment) of receivables Other expenses Finance costs Loss before income tax expense Income tax expense FINANCIAL REPORT 2525 Note Consolidated 2023 $ 2022 $ 5 61,769,967 59,784,026 6 7 10 7 456,469 50,169 313,246 17,285 (551,108) (39,483,865) (6,536,330) (4,932,213) (4,905,191) (4,048,113) (1,216,015) (637,555) 78,923 (1,589,608) (761,594) (784,110) (38,933,541) (8,274,050) (3,702,431) (4,452,673) (3,463,723) (1,107,719) (502,663) (176,422) (2,052,039) (1,366,631) (2,306,064) (4,701,445) 8 (1,711,000) (222,270) Loss after income tax expense for the year attributable to the owners of Ai- Media Technologies Limited (4,017,064) (4,923,715) Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive (loss)/income for the year attributable to the owners of Ai-Media Technologies Limited 2,053,353 5,406,060 2,053,353 5,406,060 (1,963,711) 482,345 Cents Cents Basic loss per share Diluted loss per share 31 31 (1.93) (1.93) (2.36) (2.36) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 25 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTCORPORATE DIRECTORY 26 Ai-Media Technologies Limited Consolidated statement of financial position As at 30 June 2023 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Term deposits Income tax receivable Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangibles Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Borrowings Lease liabilities Income tax payable Provisions Total current liabilities Non-current liabilities Lease liabilities Deferred tax Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note Consolidated 2023 $ 2022 $ 9 10 12 11 13 8 16,982,857 15,184,270 11,951,203 13,605,464 247,403 648,029 272,076 - 30,962,270 29,957,242 504,250 892,246 165,623 466,091 14 15 16 8 4,209,116 318,220 4,185,831 634,918 59,278,446 60,332,590 7,537,506 69,835,117 72,690,845 6,029,335 100,797,387 102,648,087 17 18 19 20 8 21 6,157,589 6,207,504 3,306,407 3,916,839 145,253 - 267,570 193,114 22,114 82,500 3,613,994 10,166,786 20,566,743 13,512,927 20 8 21 152,599 2,564,558 390,578 331,811 2,361,141 7,481,391 3,107,735 10,174,343 23,674,478 23,687,270 77,122,909 78,960,817 22 23 110,098,328 109,968,446 7,195,693 (38,203,322) 9,244,967 (42,220,386) 77,122,909 78,960,817 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 26 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 2727 Ai-Media Technologies Limited Consolidated statement of changes in equity For the year ended 30 June 2023 Consolidated Balance at 1 July 2021 Issued capital $ Reserves $ Accumulated losses $ Total equity $ 110,566,210 1,151,260 (32,720,404) 78,997,066 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive (loss)/income for the year - - - - 5,406,060 (4,923,715) - (4,923,715) 5,406,060 5,406,060 (4,923,715) 482,345 Transactions with owners in their capacity as owners: Share-based payments  (note 35)  Share buy-back (note 22) Transaction costs ( note 22) Conversion of Restricted Stock/Share Units ( note 22, note 23) Transfer from reserves to accumulated losses - (1,164,006) (30,414) 596,656 - 307,994 - - (228,824) 559,203 - - - - (559,203) 307,994 (1,164,006) (30,414) 367,832 - Balance at 30 June 2022 109,968,446 7,195,693 (38,203,322) 78,960,817 Consolidated Balance at 1 July 2022 Issued capital $ Reserves $ Accumulated losses $ Total equity $ 109,968,446 7,195,693 (38,203,322) 78,960,817 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive (loss)/income for the year - - - - 2,053,353 (4,017,064) - (4,017,064) 2,053,353 2,053,353 (4,017,064) (1,963,711) Transactions with owners in their capacity as owners: Share-based payments  (note 35)  Conversion of Restricted Stock/Share Units ( note 22, note 23) - 129,882 125,803 (129,882) - - 125,803 - Balance at 30 June 2023 110,098,328 9,244,967 (42,220,386) 77,122,909 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 27 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 28 Ai-Media Technologies Limited Consolidated statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Non-recurring EEG associated acquisition costs Interest received Other revenue Interest and other finance costs paid Note Consolidated 2023 $ 2022 $ 66,974,968 63,580,242 (59,815,417) (1,600,718) 17,285 23,910 (311,812) (63,632,282) - 50,169 456,469 (372,321) Net cash from operating activities 33 3,477,003 1,893,490 Cash flows from investing activities Payment for expenses relating to acquisitions Payments for property, plant and equipment Payments for intangibles Net cash used in investing activities Cash flows from financing activities Share issue transaction costs Payments for share buy-backs Repayments of related party loans Repayment of lease liabilities Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents 14 16 22 22 34 34 (367,647) (585,505) (695,426) (244,282) (525,428) (1,970,743) (1,648,578) (2,740,453) - - - (280,990) (59,391) (1,164,006) (303,993) (788,777) (280,990) (2,316,167) 1,547,435 (3,163,130) 15,184,270 17,864,220 483,180 251,152 Cash and cash equivalents at the end of the financial year 9 16,982,857 15,184,270 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 28 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 2929 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 1. General information The financial statements cover Ai-Media Technologies Limited as a Group consisting of Ai-Media Technologies Limited (Company or parent entity) and the entities it controlled at the end of, or during, the year (referred to in these financial statements as the Group). The financial statements are presented in Australian dollars, which is Ai-Media Technologies Limited's functional and presentation currency. Ai-Media Technologies Limited (formerly known as Access Innovation Holdings Limited) is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office Level 20 15 William Street Melbourne VIC 3000 Principal place of business Level 1 103 Miller Street North Sydney NSW 2060 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, in accordance with a resolution of directors, on 29 August 2023. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern The financial report has been prepared on the going concern basis which contemplates the continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business and assumes the Group will have sufficient cash resources to pay their debts as and when they become due and payable for at least 12 months from the date of signing the financial report. The consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2023 reflects a net loss after income tax of $4,017,064 (30 June 2022: $4,923,715) and the consolidated statement of cash flows reflects net cash inflows from operating activities of $3,477,003 (30 June 2022: $1,893,490 ). As at 30 June 2023, the consolidated statement of financial position reflects a net asset position of $77,122,909 (30 June 2022: net asset of $78,960,817) and a net current asset position of $10,395,527 (30 June 2022: net current asset of $ 16,444,315). While the Group continues to experience losses it is taking the necessary action to grow revenue sustainably and ensure that it will become profitable in the near future. Based upon the growth of the business achieved to date, sufficient cash reserves at reporting date and after reviewing forecasts and projections prepared for the business, the directors are confident that it is appropriate to prepare the financial statements on the going concern basis. Change in Presentation of Financial Statements During the current financial year, the management of the Company has introduced a revision in the presentation of the statement of profit or loss and other comprehensive income, along with the comparative figures from the prior year. This modification involves a transition to a presentation by nature, aiming to enhance the clarity and transparency of financial information for the stakeholders. Importantly, to underscore that this transition in presentation format has been executed with utmost diligence, and it is confirmed that this change has no financial impact on the reported figures or overall financial standing of the Company. 29 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 30 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) The summary of reclassifications follow: Cost of sales Cost of inventories consumed Employee benefits expense Outsourcing and contractor expense Information Technology expense Impairment of receivables Professional and consulting costs Business development costs Networking and information technology costs Other employment costs Office expenses / Occupancy expenses Other expenses 2022 2022 Reported Adjustment Reclassified $ $ $ (26,915,963) 784,110 26,915,963 - - 784,110 21,150,343 17,783,198 38,933,541 8,274,050 3,702,431 176,422 3,463,723 1,107,719 - - 502,663 2,052,039 8,274,050 3,702,431 - 170,237 (350,127) (3,100,333) (822,138) (95,517) 570,052 - - 176,422 3,293,486 1,457,846 3,100,333 822,138 598,180 1,481,987 58,996,698 - 58,996,698 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. 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 32. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Ai-Media Technologies Limited as at 30 June 2023 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. 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 Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. 30 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 3131 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Where the Group 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 Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (CODM). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation Foreign currency transactions Foreign currency transactions are translated into the Company's functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition The Group recognises revenue as follows: 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 variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. During the year, variable consideration comprised of immaterial discounts to certain customers. Revenue from services Revenue from a contract to provide services is recognised over time for all live captioning, as customers simultaneously receive and consume captioning services as live captioned events occur. All recorded captioning is recognised at a point in time, at such time that the customers gains control of and derives the benefits from the completed captioned medium(s) produced and incurs the obligation to pay for completed captioning. Revenue from services primarily have payment terms of 30-60 days. Hardware Revenue from a contract to provide goods (computer hardware, parts, and hardware rentals) are recognized based on the Incoterm Ex works which is a shipping arrangement where the seller makes product available for pick up at a specific location and the buyer pays for the transport costs. The goods are picked up for delivery and loaded into the carrier’s vehicle which is when the title, risks and rewards pass from the seller to the buyer, and it is when the company invoices the client. 31 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 32 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Software as a Service Software as a service (SaaS) are electronically delivered software that are categorized as single contract for services or multiple deliverable arrangements depending on the terms of the license or subscription. Revenue is recognised either proportionally over the term of the license or subscription agreement, which is when the stand-alone performance obligation(s) are satisfied, or at the point of consumption, when the service is delivered based on usage. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Other income 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. Grant income Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and that the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss as other income over the periods necessary to match them with the costs that they are intended to compensate. Contract assets and liabilities AASB 15 ‘Revenue from Contracts with Customers’ uses the terms ‘contract asset’ and ‘contract liability’ to describe what is commonly known as ‘accrued revenue’ and ‘deferred revenue’. Contract assets represent the Group’s right to consideration for services provided to customers for which the Group’s right remains conditional on something other than the passage of time. Contract liabilities arise where payment is received prior to work being performed. Contract assets and contract liabilities are recognised and measured in accordance with this accounting policy. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a ● transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. 32 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 3333 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Ai-Media Technologies Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. Research and development (R&D) grant The Group has exceeded the $20 million ATO threshold to claim the refundable R&D tax credit, the non-refundable R&D credits are accounted through income tax expense/benefit for the financial year. 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 non-current. 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. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Contract receivables represent receivables in respect of which the Group’s right to consideration is unconditional subject only to the passage of time. Contract receivables are non-derivative financial assets accounted for in accordance with the Group’s accounting policy for non-derivative financial assets for expected credit losses. Trade receivables are generally due for settlement within 30-60 days. 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. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories Finished goods are stated at the lower of cost and net realisable value on a weighted average cost basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. 33 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 34 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings Leasehold improvements Plant and equipment 30 years Over the lease term 3 to 5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the 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. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Development Development costs are capitalised when: it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably. Capitalised development costs are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 4 years. Intellectual property Significant costs associated with intellectual property are deferred and amortised on a straight-line basis over the period of its expected benefit, being its finite life of 10 years. 34 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 3535 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Brand name and trademarks Brand name and trademarks arise on the acquisition of a business and are carried at cost less accumulated impairment losses. Brand name and trademarks are assessed to have indefinite lives as there is no indication that the useful life of the asset will end in the reasonably foreseeable future and there is no way to reliably determine when the assets will cease having economic value. Customer contracts Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. As a component of the ACS, CaptionAccess, Caption IT acquisition assessment, the management of the company has undertaken a comprehensive review of the customer contracts. Subsequently, there has been a revision in the useful life assigned to these customer contracts. It is now anticipated that the amortization process for these contracts will be completed by the conclusion of FY25. This adjustment reflects our commitment to accurate and prudent accounting practices. During the financial year, the Group completed an assessment of the useful lives of these customer contracts and revised the estimated useful life from ten years to five years. This change in accounting estimate will be effective 1 July 2022. Based on the carrying amount of these customer contracts included in 'Intangibles' as of 30 June 2023, it is estimated this change will increase loss for the year by $413,873. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of its expected benefit, being its finite life, which varies from 7 to 10 years. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 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. 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. 35 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 36 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. 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 as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, 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. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions 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. 36 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 3737 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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, they are treated as if they had vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. 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 used to measure fair value are those that are appropriate in the circumstances and which maximise the use of relevant observable inputs and minimise the use of unobservable inputs. 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. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. 37 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 38 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Ai-Media Technologies Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming conversion of all dilutive potential ordinary shares. Goods and Services Tax (GST) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2023. The Group has assessed that there will be no significant impact on adoption of these new or amended Accounting Standards and Interpretations. The new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. AASB 2020-1 Amendments to AASs – Classification of Liabilities as Current or Non-current These amendments are applicable for annual reporting periods beginning on or after 1 January 2023. These amendments to AASB 101 Presentation of Financial Statements clarify the requirements for classifying liabilities as current or non-current. The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists. These amendments are applied retrospectively. Earlier application is permitted. AASB 2021-2 Amendments to AASB 108 – Definition of Accounting Estimates These amendments are applicable for annual reporting periods beginning on or after 1 January 2023. These amendments to AASB 108 clarify the definition of an accounting estimate, making it easier to differentiate it from an accounting policy. The distinction is necessary as their treatment and disclosure requirements are different. Critically, a change in an accounting estimate is applied prospectively whereas a change in an accounting policy is generally applied retrospectively. The new definition states that ‘Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty. The amendments are applied prospectively. Earlier application is permitted. 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 expectations of future events, management believes to be reasonable under the circumstances. 38 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 3939 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 3. Critical accounting judgements, estimates and assumptions (continued) Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the COVID-19 pandemic 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. Best estimate judgements on present obligations The amount recognised as a provision shall be the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Management take into account the probability weighting of the most likely outcome when recognising provisions which involves key judgements. 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. Goodwill and other indefinite life intangible assets The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment in accordance with the accounting policy stated in note 2. Recovery of deferred tax assets Deferred tax assets are recognised when the Group believes it is probable that future taxable amounts will be available for utilizing tax losses and deductible temporary differences. Currently, the group holds notable tax losses and Research and Development credit balances in Australia and its overseas entities. The projected sustained profitability in Australia over the forthcoming years is expected to facilitate the utilisation of these Deferred Tax Assets (DTA), attributed in part to recent modifications in corporate recharge strategies and the inclusion of intercompany loan interest. Note 4. Operating segments Identification of reportable operating segments The Group is organised into 3 operating segments based on geographical locations: Australia and New Zealand (ANZ), North America (which includes Canada and United States of America), and Rest of the world (ROW) (which includes United Kingdom, Singapore and Malaysia). These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (CODM) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. The CODM does not regularly review segment assets and segment liabilities. Refer to statement of financial position for assets and liabilities. Major customers During the year 30 June 2023 and 30 June 2022, there were no customers exceeding 10% of the Group's revenue. 39 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 40 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 4. Operating segments (continued) Operating segment information Consolidated - 2023 Revenue Sales to external customers Other revenue Total revenue EBITDA Depreciation and amortisation Interest revenue Finance costs Loss before income tax expense Income tax expense Loss after income tax expense Consolidated - 2022 Revenue Sales to external customers Other revenue Total revenue EBITDA Depreciation and amortisation Interest revenue Finance costs Loss before income tax expense Income tax expense Loss after income tax expense Note 5. Revenue Revenue ANZ $ North America $ ROW $ Corporate $ Total $ 20,371,220 35,387,442 456,469 - 20,371,220 35,843,911 6,011,305 - 6,011,305 - 61,769,967 - 456,469 - 62,226,436 8,064,141 10,202,778 (9,708) (14,946,659) 3,310,552 (4,905,191) 50,169 (761,594) (2,306,064) (1,711,000) (4,017,064) ANZ $ North America $ ROW $ Corporate $ Total $ 20,050,877 32,559,387 289,336 20,074,787 32,848,723 23,910 7,173,762 - 7,173,762 - 59,784,026 313,246 - - 60,097,272 7,407,859 9,820,838 733,087 (16,861,210) 1,100,574 (4,452,673) 17,285 (1,366,631) (4,701,445) (222,270) (4,923,715) Consolidated 2023 $ 2022 $ 61,769,967 59,784,026 40 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 5. Revenue (continued) Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Major product lines Broadcast* Non-broadcast* Timing of revenue recognition Goods and services transferred at a point in time Services transferred over time 4141 Consolidated 2023 $ 2022 $ 33,621,222 28,531,300 28,148,745 31,252,726 61,769,967 59,784,026 18,873,090 17,535,853 42,896,877 42,248,173 61,769,967 59,784,026 * Broadcast revenue encompasses services rendered to broadcasters, encompassing live captioning of sports events and recorded content. Non-broadcast revenue entails services provided to enterprise and convention clients, including corporate, government, and university entities. Note 6. Other income Other revenue Consolidated 2023 $ 2022 $ 456,469 313,246 In 2023, the other revenue pertains to the provision release for US sales tax (2022: relates to the release of deferred consideration associated with the acquisition of Alternative Communication Services LLC). 41 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 42 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 7. Expenses Loss before income tax includes the following specific expenses: Depreciation Buildings Leasehold improvements Plant and equipment Buildings right-of-use assets Plant and equipment right-of-use assets Total depreciation Amortisation Development Intellectual property Customer contracts Software Total amortisation Total depreciation and amortisation Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Bank fees and charges Interest on other payables from acquisitions* Finance costs expensed Net foreign exchange loss Net foreign exchange (gain)/loss Leases Short-term lease payments Superannuation expense Defined contribution superannuation expense Consolidated 2023 $ 2022 $ 65,574 120,035 459,901 243,582 73,116 62,639 288,302 361,686 413,214 80,213 962,208 1,206,054 1,679,474 779,881 1,036,524 447,104 1,912,586 720,997 139,157 473,879 3,942,983 3,246,619 4,905,191 4,452,673 7,395 46,088 296,785 411,326 30,838 13,914 267,060 1,054,819 761,594 1,366,631 (149,314) 50,223 292,467 190,564 1,995,893 1,933,720 * The amount recognised in 2023 represents a singular sum associated with the EEG earn-out interest, as outlined in the EEG acquisition agreement, and reflects the accumulated interest as of 30 June 2023. The amount recognised in 2022 is in reference to the unwinding of the deferred consideration associated with the EEG earn-out. 42 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 8. Income tax Income tax expense Current tax - adjustments recognised for prior periods Deferred tax - origination and reversal of temporary differences Deferred tax - adjustments recognised for prior periods Deferred tax write off for carried forward losses of overseas entities* Aggregate income tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Research and Development Other non-assessable and non-deductible items Difference in overseas tax rates Current tax - adjustments recognised for prior periods Deferred tax - adjustments recognised for prior periods Deferred tax write off for carried forward losses of overseas entities* Deferred tax asset not recognised on carried forward losses of overseas entities** Income tax expense 4343 Consolidated 2023 $ 2022 $ - 898,709 537,377 274,914 441,868 (654,932) (590,363) 1,025,697 1,711,000 222,270 (2,306,064) (4,701,445) (691,819) (1,410,434) - 437,735 (25,500) 419,332 (254,084) 320,158 - 537,377 274,914 832,635 (1,016,602) 361,670 441,868 (590,363) 1,025,697 - 1,711,000 222,270 * ** Group has reassessed the ability of its foreign subsidiaries to generate taxable income and has derecognised the carried forward tax losses in the current year. The Group has not recognised a deferred tax asset on unused tax losses (revenue in nature) as deductible temporary differences in jurisdictions where the group does not expect to have taxable income. As the Group's aggregated turnover is above $50 million at the end of the 2021-22 income year, it is no longer a base rate entity. Therefore, the applicable corporate tax rate for the 2021-2022 income year is 30%. The Company has remeasured its deferred tax balances, and any unrecognised potential tax benefits arising from carried forward tax losses, based on the effective tax rate that is expected to apply in the year the temporary differences are expected to reverse or benefits from tax losses realised. The impact of the change in tax rate on deferred tax balances has been recognised as tax expense in profit or loss or as an adjustment to equity to the extent to which the deferred tax relates to items previously recognised outside profit or loss. 43 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 44 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 8. Income tax (continued) Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Allowance for expected credit losses Property, plant and equipment Employee benefits Provisions Accrued expenses Tax losses Research and development tax credits Prepayments Capitalised development cost and customer contracts IPO costs Right-of-use assets/lease liabilities Unearned revenue Tax losses from foreign entities Other receivables Deferred tax asset Movements: Opening balance (Charged)/credited to profit or loss (Charged)/credited to profit or loss in relation to prior year adjustment Deferred tax write off for carried forward losses of overseas entity Closing balance Consolidated 2023 $ 2022 $ 8,103 211,674 536,828 8,268 286,995 2,116,946 2,086,118 (3,898) (30,236) 712,763 30,605 73,344 - (8,175) 9,839 209,975 552,204 40,993 267,033 3,529,536 1,966,561 (916) (416,324) 1,020,627 36,830 45,646 275,502 - 6,029,335 7,537,506 7,537,506 (895,522) (337,147) (275,502) 7,061,811 933,801 567,591 (1,025,697) 6,029,335 7,537,506 The Group has not recognised a deferred tax asset on unused tax losses (revenue in nature) as deductible temporary differences in the above calculations to the extent of $9,063,127 (2022: $8,230,642) relating to its foreign subsidiaries. Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Intangibles Tax losses - overseas entities Temporary difference - overseas entities Deferred tax liability Movements: Opening balance Charged to profit or loss Charged/(credited) to profit or loss in relation to prior year adjustment Closing balance 44 Consolidated 2023 $ 2022 $ 3,947,253 (500,576) (882,119) 2,588,402 (227,261) - 2,564,558 2,361,141 2,361,141 3,187 200,230 2,105,043 278,869 (22,771) 2,564,558 2,361,141 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 8. Income tax (continued) Income tax Income tax refund due Provision for income tax Provision for income tax 4545 Consolidated 2023 $ 2022 $ 466,091 - Consolidated 2023 $ 2022 $ 82,500 22,114 The Group has recognised a deferred tax asset in respect of the tax losses where it is considered probable that there will be future taxable profits available in excess of the profits arising from the reversal of existing taxable temporary differences. Note 9. Cash and cash equivalents Current assets Cash on hand Cash at bank Note 10. Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Prepayments Security deposits Consolidated 2023 $ 2022 $ 458 16,982,124 15,183,812 733 16,982,857 15,184,270 Consolidated 2023 $ 2022 $ 10,610,379 11,599,814 (358,317) 10,485,825 11,241,497 (124,554) 102,257 1,206,945 156,176 988,673 1,289,927 85,367 11,951,203 13,605,464 Allowance for expected credit losses The Group has recognised a loss of $78,923 (2022: recovery of $176,422) in profit or loss in respect of the expected credit losses for the year ended 30 June 2023. 45 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 46 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 10. Trade and other receivables (continued) The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Not overdue 0 to 3 months overdue Over 3 months overdue Carrying amount 2022 $ 2023 $ Allowance for expected credit losses 2023 $ 2022 $ 6,097,799 4,327,908 184,672 6,070,523 3,790,241 1,739,050 18,335 92,637 13,582 11,083 117,260 229,974 10,610,379 11,599,814 124,554 358,317 Movements in the allowance for expected credit losses are as follows: Opening balance Additional provisions/(reversals) recognised Foreign currency translation Unused amounts reversed Closing balance Note 11. Inventories Current assets Inventories - at cost Note 12. Contract assets Current assets Contract assets Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Additions Amounts recognised in profit and loss Closing balance 46 Consolidated 2023 $ 2022 $ 358,317 (78,923) 16,121 (170,961) 192,148 176,422 (10,253) - 124,554 358,317 Consolidated 2023 $ 2022 $ 892,246 648,029 Consolidated 2023 $ 2022 $ 504,250 247,403 247,403 3,015,468 (2,758,621) 54,299 1,320,467 (1,127,363) 504,250 247,403 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 13. Term deposits Current assets Term deposit 4747 Consolidated 2023 $ 2022 $ 165,623 272,076 The term deposit bears interest of 3.75% (2022: 0.25%) per annum and has a maturity of more than three months but less than one year. Note 14. Property, plant and equipment Non-current assets Land and buildings - at cost Less: Accumulated depreciation Leasehold improvements - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation Consolidated 2023 $ 2022 $ 3,016,591 (143,791) 2,872,800 2,903,179 (74,515) 2,828,664 1,162,518 (1,081,507) 81,011 1,580,984 (1,334,255) 246,729 5,253,983 (3,998,678) 1,255,305 6,025,367 (4,914,929) 1,110,438 4,209,116 4,185,831 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Exchange differences Depreciation expense Balance at 30 June 2022 Additions Reclassifications Exchange differences Depreciation expense Balance at 30 June 2023 Land and building $ Leasehold improvements $ Plant and equipment $ 2,647,699 - 243,604 (62,639) 2,828,664 - - 109,710 (65,574) 441,440 58,126 35,465 (288,302) 246,729 - (58,126) 12,443 (120,035) 1,036,820 467,302 (31,998) (361,686) 1,110,438 585,505 58,126 (38,863) (459,901) Total $ 4,125,959 525,428 247,071 (712,627) 4,185,831 585,505 - 83,290 (645,510) 2,872,800 81,011 1,255,305 4,209,116 47 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 48 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 15. Right-of-use assets Non-current assets Buildings - right-of-use Less: Accumulated depreciation Plant and equipment - right-of-use Less: Accumulated depreciation Consolidated 2023 $ 2022 $ 2,547,128 (2,228,908) 318,220 2,546,876 (1,985,074) 561,802 1,203,001 (1,203,001) - 1,203,001 (1,129,885) 73,116 318,220 634,918 The Group leases buildings for its offices under agreements of between one to three years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The Group also leases plant and equipment under agreements of three years. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Depreciation expense Balance at 30 June 2022 Depreciation expense Balance at 30 June 2023 Buildings right-of-use $ Plant and equipment right-of-use $ Total $ 414,298 560,718 (413,214) 153,329 - (80,213) 567,627 560,718 (493,427) 561,802 (243,582) 73,116 (73,116) 634,918 (316,698) 318,220 - 318,220 For other lease related disclosures refer to the following: ● ● ● ● note 7 for details of depreciation on right-of-use assets, interest on lease liabilities and other lease payments; note 20 for lease liabilities at year end; note 25 for maturity analysis of lease liabilities; and consolidated statement of cash flow for repayment of lease liabilities. 48 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 16. Intangibles Non-current assets Goodwill - at cost Development - at cost Less: Accumulated amortisation Intellectual property - at cost Less: Accumulated amortisation Brand name and trademarks - at cost Customer contracts - at cost Less: Accumulated amortisation Software - at cost Less: Accumulated amortisation 4949 Consolidated 2023 $ 2022 $ 45,023,937 43,278,754 11,393,380 10,695,903 (6,805,647) 3,890,256 (8,485,822) 2,907,558 8,540,631 (2,071,237) 6,469,394 8,234,159 (1,247,326) 6,986,833 286,576 275,802 4,019,015 (1,472,387) 2,546,628 4,396,522 (907,093) 3,489,429 3,118,037 (1,073,684) 2,044,353 4,155,433 (1,743,917) 2,411,516 59,278,446 60,332,590 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Goodwill $ Develop- ment $ Intellectual property $ Brand name and trademarks $ Customer contracts $ Software $ Total $ Balance at 1 July 2021 Additions Exchange differences Amortisation expense 39,104,366 3,832,099 7,121,502 - - 1,970,743 586,328 - (720,997) - (1,912,586) 4,174,388 Balance at 30 June 2022 Additions Exchange differences Amortisation expense 43,278,754 3,890,256 6,986,833 - 262,442 (779,881) 695,426 1,350 - (1,679,474) - 1,745,183 228,607 3,311,933 2,615,878 56,214,385 55,560 2,026,303 213,957 5,338,521 (473,879) (3,246,619) - 316,653 (139,157) - 47,195 - 275,802 3,489,429 2,411,516 60,332,590 695,426 79,941 2,193,413 (447,104) (3,942,983) - 93,723 - (1,036,524) - 10,774 - Balance at 30 June 2023 45,023,937 2,907,558 6,469,394 286,576 2,546,628 2,044,353 59,278,446 Impairment test for goodwill For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash generating units (CGU), or groups of CGUs, that are expected to benefit from the synergies of the combinations. Each unit or groups of units to which goodwill is allocated represents the lowest level at which assets are monitored for internal management purposes. 49 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 50 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 16. Intangibles (continued) The carrying amount of goodwill has been allocated to the CGUs as follows: North America ROW Consolidated 2023 $ 2022 $ 45,089,767 42,889,320 389,434 447,619 45,537,386 43,278,754 The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. Based on the growth experienced in the ROW CGU and impairment test conducted in EMEA, no impairment of goodwill has been identified. The goodwill associated with the North America CGU, arose through the ACS, CaptionAccess, Caption IT and EEG acquisitions. Subsequent to the acquisition, the subsidiaries continued to operate ahead of expectations and the Group is benefiting from the synergies of the combination in the North America CGU. The directors have assessed the recoverable amount of the North America CGU, using discount cash flow model, is in excess of the carrying amount. The model used a discount rate of 12% (2022: 8%), an average growth rate of 9% (2022: 27%) for the next 5 years and a terminal growth rate of 3% (2022: 3%). Despite the absence of goodwill in the Australia CGU, the management proceeded to assess the recoverable amount of the Australia CGU, ensuring that it exceeded the carrying amount of its assets. The model used a discount rate of 12% (2022: 8%), an average growth rate of 3% (2022: 13%) for the next 5 years and a terminal growth rate of 3% (2022: 3%). The evaluation of the recoverable amount, conducted using a discounted cash flow model, revealed a headroom over the carrying amount of the assets. Sensitivity analysis The Group has conducted an analysis of the sensitivity of the impairment test to changes in the key assumptions used to determine the recoverable amount for each of the group of CGUs to which goodwill is allocated. On management assumptions, sensitivities are applied to the value-in-use calculations with the associated headroom as set out below. Further sensitivities are applied to the value-in-use calculations with the associated headroom as set out below. These are considered to be reasonably possible, but not likely. ● ● ● Increase in the discount rate by 1% - 2% on FY24 budgets; and Reduction in revenue growth rates on FY24 budgets by 2-4% (US) / 1-2% (AU) / 5-10% (ROW); and Terminal value growth rate of 2%. The directors believe that any reasonably possible change in the key assumptions would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the related CGUs. Note 17. Trade and other payables Consolidated 2023 $ 2022 $ 948,716 5,258,788 1,750,228 4,407,361 6,207,504 6,157,589 Current liabilities Trade payables Accrued expenses Refer to note 25 for further information on financial instruments. 50 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 18. Contract liabilities Current liabilities Contract liabilities Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Billings during the year Transfer to revenue Foreign exchange Closing balance 5151 Consolidated 2023 $ 2022 $ 3,916,839 3,306,407 3,306,407 1,697,030 16,134,118 13,363,899 (11,806,177) 51,655 (15,650,070) 126,384 3,916,839 3,306,407 Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $3,916,839 as at 30 June 2023 ($3,306,407 as at 30 June 2022) and is expected to be recognised as revenue in future periods as follows: Within 12 months Note 19. Borrowings Current liabilities Insurance premium funding loan Consolidated 2023 $ 2022 $ 3,916,839 3,306,407 Consolidated 2023 $ 2022 $ - 145,253 Insurance premium funding loan The premium funding loan for the year ended 30 June 2022 was structured with a 10-month term, concluding with the last payment made on 30 August 2022. The loan had an interest rate of 3.88%. 51 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 52 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 20. Lease liabilities Current liabilities Lease liability Non-current liabilities Lease liability Refer to note 25 for further information on the maturity analysis of lease liabilities. Note 21. Provisions Current liabilities Annual leave Long service leave Other payables from acquisitions Lease make good Other provisions Non-current liabilities Long service leave Other payables from acquisitions Lease make good Consolidated 2023 $ 2022 $ 193,114 267,570 152,599 331,811 345,713 599,381 Consolidated 2023 $ 2022 $ 1,394,071 405,002 7,776,772 - 590,941 1,376,817 421,912 362,897 99,300 1,353,068 10,166,786 3,613,994 366,183 - 24,395 373,239 7,083,757 24,395 390,578 7,481,391 10,557,364 11,095,385 Other payables from acquisitions Lease make good The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end of the respective lease terms. Other payables from acquisitions A USD 4,968,000 (AUD 7,493,213) earn-out payment for the purchase of EEG is due on 29 September 2023 (this includes an additional USD 92,000 not accrued as at 30 June 2023) and a deferred liability of USD 280,000 (AUD 422,323) will be settled in cash instead of the FY23 Restricted Stock Unit plan as part of the ACS acquisition. The other payables from acquisitions is considered as a contractual liability and is measured at amortised cost using the effective interest method. Other provisions Other provisions represents the best estimate of a tax provision associated with the share based payment plan of $550,000 and for other indirect taxes in a foreign subsidiary amounting to $40,941. 52 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 5353 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 21. Provisions (continued) Annual leave and long service leave The current portion of provision for employee benefits includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required year of service. Based on past experience, the company does not expect the full amount of annual leave balances classified as current provisions to be settled within the next 12 months. However, these amounts must be classified as current, since the company does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below: Consolidated - 2022 Carrying amount at the start of the year Additional provisions recognised Amounts used Currency translation difference Unwinding of discount Unused amounts reversed Carrying amount at the end of the year Consolidated - 2023 Carrying amount at the start of the year Additional provisions recognised Amounts used Interest on earn-out Unused amounts reversed* Currency translation difference Carrying amount at the end of the year Lease makegood $ Other payables from acquisitions $ Other provisions $ Annual leave Long service leave 265,352 - - - - (141,657) 123,695 123,695 - - - (99,300) - 24,395 6,260,593 - (363,585) 784,163 1,054,819 (289,336) 7,446,654 7,446,654 - (372,578) 411,326 - 291,370 7,776,772 557,479 803,068 - - - (7,479) 1,353,068 1,353,068 69,398 (396,988) - (456,469) 21,932 590,941 1,089,448 580,505 (293,136) - - - 1,376,817 1,376,817 90,943 (73,689) - - - 1,394,071 620,770 348,762 (174,381) - - - 795,151 795,151 - 23,965 - (47,931) - 771,185 * The amount reversed in other provision relates to the unused portion of the sales tax provision relating to sales generated prior to the purchase of EEG. Note 22. Issued capital Ordinary shares - fully paid 208,249,132 207,925,773 110,098,328 109,968,446 Consolidated 2023 Shares 2022 Shares 2023 $ 2022 $ 53 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 54 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 22. Issued capital (continued) Movements in ordinary share capital Details Date Shares Issue price $ Balance Conversion of Restricted Share Units issued to KMP 30 September 2021 Conversion of Restricted Share Units issued to KMP 26 October 2021 Share buy-back 1 July 2021 November 2021 - June 2022 209,439,498 60,705 4,912 110,566,210 75,000 4,247 $1.23 $0.86 (2,000,000) $0.51 (1,164,006) Conversion of Restricted Stock Units issued for ACS acquisition Conversion of Restricted Stock Units issued to ex- ACS employees Transaction costs (net of tax) 1 February 2022 295,597 $1.23 363,585 1 February 2022 125,061 - $1.23 $0.00 153,824 (30,414) Balance Conversion of Restricted Share Units Conversion of Restricted Share Units Conversion of Restricted Share Units 30 June 2022 7 July 2022 7 July 2022 9 December 2022 207,925,773 57,830 12,561 252,968 109,968,446 50,000 7,397 72,485 $0.86 $0.59 $0.29 Balance 30 June 2023 208,249,132 110,098,328 Ordinary shares Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up in proportions that consider both the number of shares held and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. 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. The Group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The capital risk management policy remains unchanged from the 30 June 2022 Annual Report. 54 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 23. Reserves Foreign currency translation reserve Employee share option reserve 5555 Consolidated 2023 $ 2022 $ 9,094,876 150,091 7,041,523 154,170 9,244,967 7,195,693 Foreign currency translation reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. 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 year are set out below: Consolidated Balance at 1 July 2021 Foreign currency translation Share-based payments Conversion of RSUs to ordinary shares Transfer to accumulated losses Balance at 30 June 2022 Foreign currency translation Share-based payments Conversion of RSUs to ordinary shares Balance at 30 June 2023 Note 24. Dividends Foreign currency translation reserve $ Share-based payment reserve $ 1,076,260 5,406,060 - - 559,203 7,041,523 2,053,353 - - 75,000 - 307,994 (228,824) - 154,170 - 125,803 (129,882) Total $ 1,151,260 5,406,060 307,994 (228,824) 559,203 7,195,693 2,053,353 125,803 (129,882) 9,094,876 150,091 9,244,967 Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% 104,411 104,411 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: ● ● ● franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Consolidated 2023 $ 2022 $ 55 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 56 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 25. Financial instruments Financial risk management objectives The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The 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. Risk management is carried out by senior finance executives (Finance) under frameworks approved by the Board of Directors (the Board). These frameworks include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Market risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities before intercompany eliminations at the reporting date were as follows: Consolidated Pound sterling Canadian dollars Singapore dollars US dollars Malaysian ringgit Assets Liabilities 2023 $ 2022 $ 2023 $ 2022 $ 5,355,708 9,653,252 1,528,894 9,802,482 5,643,594 12,848,365 2,208,223 2,674,505 63,357,546 43,870,696 120,712,524 90,832,727 482,596 7,143,152 10,465,055 6,411,621 1,749,490 774,615 729,326 64,926 80,624,726 59,239,885 140,270,293 116,174,393 The Group had net liabilities denominated in foreign currencies of $59,645,567 (assets of $80,624,726 less liabilities of $140,270,293) as at 30 June 2023 (2022: $56,934,508 (assets of $59,239,885 less liabilities of $116,174,393)). Based on this exposure, had the Australian dollars weakened by 5%/strengthened by 5% (2022 : weakened by 5%/strengthened by 5%) against these foreign currencies with all other variables held constant, the Group's profit before tax for the year would have been $306,287 lower/$306,287 higher (2022: $286,037 lower/$286,037 higher) and equity would have been $214,401 lower/$214,401 higher (2022: $200,226 lower/$200,226 higher). The percentage change is the expected overall volatility of the significant currencies, which is based on management's assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and the spot rate at each reporting date. The actual foreign exchange gain for the year ended 30 June 2023 was $149,314 (2022: loss of $50,223). Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group’s financial performance can be impacted by current and future economic conditions which it cannot control, such as increases in interest rates and inflation. The Group has no short or long-term borrowings thus, 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, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. 56 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 5757 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 25. Financial instruments (continued) 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. 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 Liquidity risk requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves 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 (except as noted below) and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2023 Non-interest bearing Trade payables Interest-bearing - fixed rate Lease liability Other payables from acquisitions Total non-derivatives Consolidated - 2022 Non-interest bearing Trade payables Interest-bearing - fixed rate Insurance premium funding loan Lease liability Other payables from acquisitions Total non-derivatives 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ 948,716 - 197,808 7,776,772 8,923,296 152,599 - 152,599 - - - - - - - - 948,716 350,407 7,776,772 9,075,895 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Over 5 years $ Remaining contractual maturities $ 1,750,228 - - - 1,750,228 150,889 285,775 362,897 2,549,789 - 203,123 7,650,458 7,853,581 - 140,827 - 140,827 150,889 - 629,725 - - 8,013,355 - 10,544,197 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. 57 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 58 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 26. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of the Company: Deloitte Touche Tohmatsu Australia Audit and review of financial reports Other services Total Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu related practices Audit of financial reports Other services Total Deloitte Touche Tohmatsu related practices Total remuneration of auditors Note 27. Contingent liabilities Consolidated 2023 $ 2022 $ 380,000 71,811 451,811 349,530 106,594 456,124 20,031 37,060 57,091 - - - 508,902 456,124 The Group has given bank guarantees as at 30 June 2023 of $165,663 (2022: $368,360) to various landlords and a customer. Note 28. 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: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Note 29. Related party transactions Parent entity Ai-Media Technologies Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 30. Consolidated 2023 $ 2022 $ 930,722 69,551 4,135 75,000 865,790 60,130 4,135 61,644 1,079,408 991,699 Key management personnel Disclosures relating to key management personnel are set out in note 28 and 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 year. 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. 58 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 5959 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 29. Related party transactions (continued) Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Note 30. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Access Innovation Media Pty Limited Access Innovation IP Pty Limited Access Innovation Media UK Ltd -Ai-Media UK B Ltd * Ai Media Inc. -Ai-Media Technologies LLC**** -PostCAP LLC**** Ai-Media Canada Inc.** Ai-Media NZ Limited Ai-Media SG Pte. Ltd Caption IT LLC *** CaptionAccess LLC *** EEG Enterprise, Inc**** Access Innovation Media Malaysia Sdn Bhd Principal place of business / Country of incorporation Ownership interest 2022 2023 % % Australia Australia United Kingdom United Kingdom United States of America United States of America United States of America Canada New Zealand Singapore United States of America United States of America United States of America Malaysia 100% 100% 100% 100% 100% 100% 100% 49% 100% 100% - - 100% 100% 100% 100% 100% 100% 100% 100% 100% 49% 100% 100% 100% 100% 100% 100% * ** Wholly-owned subsidiary of Access Innovation Media UK Ltd Ai-Media Canada Inc is owned 51% by Anthony Abrahams and 49% by Ai-Media Technologies Limited. Ai Media Canada Inc is 100% consolidated into Ai-Media Technologies Limited as they share in 100% of the variable returns and are able to use their power to affect such returns. *** Wound up as at 30 June 2023. **** Wholly-owned subsidiary of Ai-Media Inc Note 31. Earnings per share Consolidated 2023 $ 2022 $ Loss after income tax attributable to the owners of Ai-Media Technologies Limited (4,017,064) (4,923,715) Weighted average number of ordinary shares used in calculating basic loss per share 208,136,392 208,985,024 Weighted average number of ordinary shares used in calculating diluted loss per share 208,136,392 208,985,024 Number Number Basic loss per share Diluted loss per share There are no options outstanding as at 30 June 2023 and 30 June 2022. Cents Cents (1.93) (1.93) (2.36) (2.36) 59 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 60 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 32. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income (Loss)/profit after income tax* Total comprehensive (loss)/income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Employee share option reserve Accumulated losses Total equity Parent 2023 $ 2022 $ (24,868,410) 3,188,391 (24,868,410) 3,188,391 Parent 2023 $ 2022 $ 67,866,160 105,017,082 86,391,170 110,302,623 950,257 2,355,397 950,257 2,355,397 110,098,328 109,968,446 154,170 (2,175,390) 150,554 (24,807,969) 85,440,913 107,947,226 * Includes a provision for impairment of investments in subsidiaries and loan receivable from subsidiaries amounting to $25,000,000 (2022: $nil). There is no impact on group performance due to this provision. Movement in accumulated losses Accumulated losses at the beginning of the financial year Comprehensive income before impairment of assets Provision for impairment of investments in and loan receivable from subsidiaries Transfer from reserves Adjustments relating to prior period* Retained profits/(accumulated losses) * No impact on consolidated financial statements. Parent 2023 $ 2022 $ (2,175,390) 131,590 (25,000,000) - 2,235,831 (4,629,548) 3,188,391 - (734,233) - (24,807,969) (2,175,390) Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2023 and 30 June 2022. Contingent liabilities Except as disclosed in note 27, the parent entity had no contingent liabilities as at 30 June 2023 and 30 June 2022. 60 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 6161 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 32. Parent entity information (continued) Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. 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 33. Reconciliation of loss after income tax to net cash from operating activities Loss after income tax expense for the year (4,017,064) (4,923,715) Consolidated 2023 $ 2022 $ Adjustments for: Depreciation and amortisation Share-based payments Income tax expense Foreign exchange differences Items classified as financing and other non-cash items Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Increase in contract assets Increase in inventories Increase in term deposit Decrease in trade and other payables Increase in contract liabilities (Decrease)/increase in provisions Net cash from operating activities Note 34. Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2021 Net cash used in financing activities Acquisition of leases Other changes Balance at 30 June 2022 Net cash used in financing activities Other changes Balance at 30 June 2023 61 4,905,191 125,803 1,711,000 (405,117) - 4,452,673 307,994 222,270 (419,753) (37,799) 1,654,261 (256,847) (244,217) 106,453 (95,338) 610,432 (617,554) (69,925) (193,104) (220,921) - (747,996) 1,609,377 1,914,389 3,477,003 1,893,490 Related party loans $ Lease liability $ Total $ 263,993 (303,993) - 40,000 868,644 1,132,637 (788,777) (1,092,770) 560,718 560,718 (1,204) (41,204) - - - - 599,381 (280,990) 27,322 599,381 (280,990) 27,322 345,713 345,713 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 62 Ai-Media Technologies Limited Notes to the consolidated financial statements 30 June 2023 Note 35. Share-based payments Restricted Share Units (RSUs) The Company agreed to grant each Non-Executive Directors RSUs to the value of $25,000 per annum for each of the first 3 financial years following the IPO. The first tranche of the 60,705 RSUs was vested and convertible into fully paid ordinary shares of the Company at 30 June 2021 based on the Offer Price under the IPO. The second tranche of 70,391 RSUs was vested as at 30 June 2022 and converted into fully paid ordinary shares of the Company on 7 July 2022. The third tranche of 293,916 RSUs was vested and not yet converted into fully paid ordinary shares of the Company as at 30 June 2023. In determining the fair value at grant date of restricted share units, reference was made to the value of the share-based payment entitlement of $25,000. A valuation model was not required and no further inputs were considered necessary since the entitlement at grant date has been fixed at $25,000. On 20 December 2021, the Company granted RSUs to ex-ACS employees as part of the acquisition of ACS. 125,061 RSUs were vested and converted into fully paid ordinary shares of the company on 1 February 2022 based on the offer price under the IPO to the value of $153,824. The second tranche of 252,968 RSUs vested and converted into fully paid ordinary shares of the company on 20 December 2022 amounted to $72,485. The third tranche of $75,091 worth of RSUs were not issued as at 30 June 2023. On 17 December 2021, 6,766,136 RSUs were granted. These RSUs did not meet the vesting conditions, performance and RTSR hurdles and have therefore lapsed. No expenses in relation to the RSUs have been recorded in the financial year ended 30 June 2022. The share-based payment expense in relation to RSUs for 2023 is $125,803 (2022: $307,994). Set out below are summaries of options granted: Outstanding at the beginning of the financial year Granted Exercised Lapsed Outstanding at the end of the financial year Note 36. Events after the reporting period Number of options 2022 2023 70,391 293,916 (70,391) - 40,470 7,356,999 (40,470) (7,286,608) 293,916 70,391 No matter or circumstance has arisen since 30 June 2023 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. 62 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 6363 Ai-Media Technologies Limited Directors' declaration 30 June 2023 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 June 2023 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Anthony Abrahams Director and Chief Executive Officer 29 August 2023 Sydney 63 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY64 Deloitte Touche Tohmatsu ABN 74 490 121 060 Quay Quarter Tower 50 Bridge Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Independent Auditor’s Report to the members of Ai-Media Technologies Limited RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of Ai-Media Technologies Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: • Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year then ended; and • 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 64 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Key Audit Matter RReeccoovveerraabbiilliittyy ooff ddeeffeerrrreedd ttaaxx aasssseett As at 30 June 2023, the Australian tax consolidated group has recognised a net deferred tax asset of $6m (30 June 2022: $7.26m). The Group has significant carry forward tax losses and unutilised tax credits in Australia and some other jurisdictions incurred in prior years. The Group can only recognise a deferred tax asset arising from unused tax losses or tax credits to the extent that the Group has taxable temporary differences or there is convincing other evidence that sufficient future taxable income will be derived. Significant management judgement is required to determine the amount of the deferred tax asset that can be recognised, based upon the likely timing and the amount of future taxable profits. Accordingly, the recognition and recoverability of the deferred tax asset is a key audit matter for the year ended 30 June 2023. Recoverability of goodwill As at 30 June 2023, the Group has goodwill a amounting to $45.54m reflected in the balance sheet. Where a cash generating unit (“CGU”) contains goodwill, management conducts annual impairment tests (or more frequently if impairment indicators exist) to assess the recoverable amount of goodwill. This assessment the preparation of discounted cash flow model. is performed through The evaluation of the recoverable amount requires significant in determining the key assumptions supporting the forecast cash flows of each CGU including: by management judgement Forecast EBITDA; Long term growth rate; and • • • Appropriate discount rate. 6565 How the scope of our audit responded to the Key Audit Matter In consultation with our tax specialists, our procedures included, but were not limited to: • Understood and and tested implementation of key controls over the models used to assess the recoverability of the deferred tax asset; design the • Assessed the accuracy of the deferred tax calculation prepared by management and reviewed applicable tax regulation; • Evaluated the reasonableness of the operating budgets approved by the Directors where applicable, including an assessment of forecasting accuracy and assessed the reasonableness of assumptions used in management’s estimate; • Recalculated the accuracy of the deferred tax calculation; and • Assessed the appropriateness of the disclosures included in Note 8 of the financial statements. In consultation with our valuation specialists, our audit procedures limited to the following: included, but were not • • Evaluated management's identification of each CGU to which goodwill is allocated; Reviewed and critically challenged management’s assessment of impairment indicators; • Understood of and and tested implementation the key determination of recoverable amounts of each CGU and comparing this to the carrying value of the CGU's assets; the controls design over • Assessed the appropriateness of management’s recoverable amount calculations using a discounted cashflow model for each CGU; • Challenged the key assumptions and estimates used by management, including analysing growth rates and performing an independent calculation of the discount rates; • Agreed inputs used in the model to forecasts approved by the Directors, where applicable; 65 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 66 Key Audit Matter How the scope of our audit responded to the Key Audit Matter • Assessed the historical accuracy of management’s forecasting by comparing actual results to budgeted results; • Performed sensitivity analysis on the key assumptions supporting the forecast cash flows of each CGU (including forecast EBITDA levels, long term growth rates and applicable discount rates); and • Assessed the appropriateness of the disclosures included in Note 16 of the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2023, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 66 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS 6767 As part of an audit in accordance with the 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’s 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 matters 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. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 16 to 21 of the Directors’ Report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Ai-Media Technologies Limited, for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. 67 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 68 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. DELOITTE TOUCHE TOHMATSU Harsh Shah Partner Chartered Accountants SSyyddnneeyy,, 2299 AAuugguusstt 22002233 68 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS6969 Ai-Media Technologies Limited Shareholder information 30 June 2023 The shareholder information set out below was applicable as at 25 August 2023. Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not disclosed elsewhere in the Report is set out below. In accordance with the 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations, the 2023 Corporate Governance Statement, as approved by the Board, is available on the Company’s website at: https://www.ai- media.tv/corporate-governance/. The Corporate Governance Statement sets out the extent to which Ai-Media Technologies Limited has followed the ASX Corporate Governance Council’s Recommendations during the 2023 financial year. Distribution of equity securities Analysis of number of equity security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Ordinary shares % of total Number of holders shares issued Number of shares 354 619 282 530 118 242,384 0.12 1,797,118 0.86 1.06 2,206,012 8.18 17,044,142 89.78 186,959,476 1,903 100.00 208,249,132 Holding less than a marketable parcel 487 0.21 427,594 69 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 70 Ai-Media Technologies Limited Shareholder information 30 June 2023 Equity security holders The names of the twenty largest security holders of ordinary shares are listed below: PEARLIROSE PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED DEANNE WEIR EEG VIDEO HOLDINGS LLC BOND STREET CUSTODIANS LIMITED UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED BNP PARIBAS NOMS PTY LTD TYLER LEE PTY LTD ONE FUND SERVICES LTD ALTOR CAPITAL MANAGEMENT PTY LTD ICONIC INVESTMENTS PTY LTD HGL INVESTMENTS PTY LTD CITICORP NOMINEES PTY LIMITED GREG SIRTES MRS ANGELA ABRAHAMS + MR GEOFFREY ABRAHAMS G & L CAPON SUPER CO PTY LTD MRS ANGELA ABRAHAMS + MR GEOFFREY ROBERT ABRAHAMS (G&A ABRAHAMS S/F A/C) FRANK MAHLAB PTY LTD MRS ANGELA ABRAHAMS + MR GEOFFREY ABRAHAMS Ordinary shares % of total Number held 30,339,898 20,882,723 16,072,336 14,630,017 14,000,000 8,834,953 7,587,522 7,209,739 5,700,000 5,583,571 4,496,127 3,265,994 3,000,000 2,572,659 2,493,603 2,467,251 2,144,020 2,069,857 1,976,490 1,784,502 shares issued 14.57 10.03 7.72 7.03 6.72 4.24 3.64 3.46 2.74 2.68 2.16 1.57 1.44 1.24 1.20 1.18 1.03 0.99 0.95 0.86 157,111,262 75.45 Unquoted equity securities The company has 293,916 Restricted Share Units (RSUs) issued to three non-executive directors each of whom hold 97,972 RSUs. See the Remuneration Report for further details. Substantial holders Name Anthony Abrahams and Pearlirose Pty Ltd Deanne Weir EEG Video Holdings LLC Salter Brothers Emerging Companies Limited Quest Asset Partners Pty Ltd Jencay Capital Pty Limited Shares held Issued capital % Notice date 30,339,898 18,644,995 14,630,017 13,100,000 12,125,910 10,431,474 14.59 8.89 7.03 6.29 5.79 5.02 28/11/2022 02/11/2021 02/07/2021 26/04/2023 05/11/2021 29/09/2022 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. 70 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTS Ai-Media Technologies Limited Shareholder information 30 June 2023 Restricted securities Class EMPLOYEE ESCROW (EMP) ESCROWED SHARES (ES6) ESCROWED SHARES (ES7) ESCROWED SHARES (ES4) ESCROWED SHARES (ESC) Expiry date 9 September 2023 12 May 2023 12 May 2024 30 August 2023 4 January 2024 On market buy-back The Company is not currently conducting an on-market buy-back. 7171 Number of shares 104,877 4,876,672 4,876,673 23,326,736 140,631 33,325,589 71 CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTFINANCIAL REPORTCORPORATE DIRECTORY 72 AI MEDIA ANNUAL REPORT 2023ABOUT AI MEDIAHIGHLIGHTSCorporate directory DIRECTORS Deanne Weir – Chair Anthony Abrahams John Martin Alison Loat Cheryl Hayman COMPANY SECRETARY Lisa Jones REGISTERED OFFICE Level 20 15 William Street Melbourne VIC 3000 Australia PRINCIPAL PLACE OF BUSINESS Level 1 103 Miller Street North Sydney NSW 2060 SHARE REGISTER Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney NSW 2000 AUDITOR Deloitte Touche Tohmatsu Grosvenor Place 225 George Street Sydney NSW 2000 FINANCIAL REPORT CORPORATE DIRECTORY 7373 SOLICITORS Becketts Lawyers Level 21 90 Collins Street Melbourne VIC 3000 STOCK EXCHANGE LISTING AI‑Media Technologies Limited shares are listed on the Australian Securities Exchange (ASX code: AIM) WEBSITE http://www.AI‑Media.tv/ BUSINESS OBJECTIVES AI‑Media Technologies Limited has used cash and cash equivalents held at the time of listing, in a way consistent with its stated business objectives. CORPORATE GOVERNANCE STATEMENT The Company’s directors and management are committed to conducting the Group’s business in an ethical manner and in accordance with the highest standards of corporate governance. The Company has adopted and substantially complies with the ASX Corporate Governance Principles and Recommendations (4th Edition) (‘Recommendations’) to the extent appropriate to the size and nature of the Group’s operations. The Company has prepared a Corporate Governance Statement which sets out the corporate governance practices that were in operation since listing, identifies any Recommendations that have not been followed, and provides reasons for not following such Recommendations. The Company’s Corporate Governance Statement and policies, which is approved at the same time as the Annual Report, can be found on its website: https://www. AI‑Media.tv/corporate‑governance/ y e v a d n g i s e d CEO & CHAIR LETTERSPRODUCTS & TECHNOLOGYBOARD OF DIRECTORSDIRECTORS’ REPORTwww.AI-Media.tv 

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