ANNUAL REPORT
2017
FY17 Financial Highlights
30%
growth in revenue to $11.3m (USD)
$1.2m
in positive operating cashflow
$0.8m*
statutory EBITDA compared to $0.1M loss pcp
$14m
in primary capital raised
* Statutory EBITDA excludes the one-off impact of IPO costs and the expense for conversion
of preference shares
$0.3m
better than prospectus forecast in delivering a pro forma
EBITDA loss of ($0.4m)
FY17 Operational Highlights
35%
2 new products launched
growth in Dante-enabled products to 1,182
Dante Broadway chip and Dante adaptors
48%
39,000+
growth in units shipped to over 180,000
online certification training courses delivered
369
OEM brandshare adopted Dante, up from 310 a year ago
Contents
Chairman’s letter
CEO’s letter
Corporate directory
Directors’ report
Auditor’s independence declaration
Consolidated statement of profit or loss
and other comprehensive income
1
2
5
6
22
23
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the
members of Audinate Group Limited
Shareholder information
24
25
26
27
53
54
58
AUDINATE GROUP LIMITED “ To our shareholders, who
have placed your trust and
confidence in Audinate,
we are committed to
our responsibilities as
a public company in
executing our growth
strategy and enhancing
shareholder value.”
Dear Shareholders,
It gives me great pleasure to present the first Annual Report of Audinate Group Limited
(the ‘Company’) since the Company’s successful listing on the Australian Securities
Exchange (‘ASX’) on 30 June 2017.
Audinate is the leading provider of professional digital audio networking technologies
globally. Audinate has grown its customer base to 369 original equipment manufacturer
(OEM) brands, including many of the world’s leading professional Audio Visual (AV)
equipment brands such as Bosch, Bose, Harman, Roland, Shure, Sony, Symetrix
and Yamaha. Audinate’s primary customers are OEM brands who design Audinate’s
technology platform, Dante, into their professional audio products.
The Dante platform distributes digital audio signals over computer networks, and
is designed to bring the benefits of IT networking to the professional AV industry.
Dante comprises software and hardware that primarily resides inside the audio products
of its customers and provides a complete audio networking solution. Using Dante-
enabled products ensures interoperability between audio devices and allows end
users to enjoy high quality, flexible audio solutions typically with a lower total cost of
ownership compared to analogue installations. This technology is displacing traditional
analogue installations and we believe that we are only in the early stages of a transition
to networked audio installations.
The Company again delivered a strong financial performance in 2017, headlined
by revenue growth of 27% to $15.1 million and normalised EBITDA of $0.8 million
excluding Initial Public Offer (‘IPO’) costs. On a pro forma basis these results were
also better than the FY17 prospectus forecast. Revenue was $0.5 million better than
the prospectus forecast and the pro forma EBITDA loss of $0.4 million was $0.3 million
ahead of forecast. The statutory loss of $20.4 million was primarily due to a non-cash
charge of $18.5 million for preference shares at the IPO and one-off costs of $1.7 million
associated with the offer.
The IPO was successful in raising $21 million, including a primary raise of $14 million,
and represented the culmination of the first chapter of the business which commenced
with development of the core Dante technology in 2004 and the subsequent spin-out
from National Information and Communications Technology of Australia (‘NICTA’) in
2006. Subsequent venture funding was provided by Starfish Ventures and Innovation
Capital, followed by a strategic investment by Yamaha Corporation. Together with the
funding and contribution from founders and staff all these parties played important roles
in getting the Company to where it is today.
In the 2018 financial year the Company is focused upon continued revenue growth in
our core business to meet our prospectus forecast of revenue of $18.6 million and an
EBITDA loss of $1.2 million. With the growth capital provided by the IPO the business
is also focused upon three key strategic initiatives: 1) the successful launch of Dante
Domain Manager to manage and control Dante installations; 2) coming to market with
an expanded suite of adaptor products; and, 3) the development of a prototype video
product to enable us to come to market during the 2019 financial year. We are excited
about these developments and the potential for them to more than double Audinate’s
addressable market.
On behalf of the Board of Directors of Audinate, we wish to express our appreciation
to the executive management team and all our employees around the world for their
contribution in completing the IPO and once again delivering a strong set of financial
results. The enthusiasm, dedication and innovation of this team will continue to provide
the impetus for our ongoing success.
Lastly to our shareholders, who have placed your trust and confidence in Audinate,
we are committed to our responsibilities as a public company in executing our growth
strategy and enhancing shareholder value.
David Krall
Chairman
22 September 2017
ANNUAL REPORT 2017 1
Chairman’s letter CEO’s letter
Dear Shareholders,
This year has been an extremely exciting year for Audinate, filled with many
achievements and milestones. Audinate started on this journey over ten years ago
with a vision to bring the IT revolution to the Audio Visual (A/V) industry to exploit
the transition from analogue connected systems to audio over IP based systems.
Our market leading Dante technology replaces traditional analogue audio cables by
transmitting perfectly synchronised audio signals to multiple locations at once, using
standard computer networks. With the listing on the Australian Stock Exchange on
30 June 2017, we are in a better position than ever to execute on our vision.
Financial Results
Audinate had an outstanding year delivering strong results in both revenue growth
and earnings before interest, taxes, depreciation and amortisation (EBITDA). During
the year, revenue increased by 26.5% to AUD $15.1 million from AUD $11.9 million in
the prior year. We invoice in USD, and in this currency, revenue increased by 30.3%
to USD $11.3 million from USD $8.7 million in 2016. On a normalised basis EBITDA
for 2017 amounted to approximately AUD $0.8 million representing a significant
improvement from an EBITDA loss of AUD $0.1 million for the prior comparable period
in 2016.
Executing on our growth strategy
Our OEM customers benefit from our trusted expertise in the field of media networking,
which enables them to accelerate their product initiatives without the need to make
investments in developing their own networking capability. Providing a high level of
customer support has been core to the culture of Audinate since we started. As a result,
over our 10 years in business, we have built a global customer base which includes the
leading blue-chip companies in the A/V industry.
By developing a broad suite of networking products that are easy for professional
audio manufacturers to integrate into their products, and making it easy for
end-customers to use, Dante has become the defacto standard. With Dante,
manufacturers achieve plug and play interoperability between multi-vendor audio
devices, whilst providing their customers with a higher quality, more flexible system,
compared to analogue installations.
The number of Dante enabled manufacturer products available in market grew
35% year over year, as unit sales of Dante chips, modules and cards grew by 48%.
Audinate continues to expand its market leadership position, now having almost
5 times the number of OEM products on the market than our nearest competitor.
As of the end of the fiscal year, 369 OEM brands who have adopted Dante technology
with 1,182 Dante-enabled products available in the market. As Audinate increases
its customer base, and the number of Dante-enabled devices within the ecosystem
increases, making more choices available for consultants, system designers, integrators,
and end-users. This in turn, further entrenches Dante as the preferred networking
technology for professional A/V installations, and encourages new OEMs to embed
Dante into their future products.
“ Audinate is uniquely
positioned to be at the
heart of this convergence
of A/V and IT systems.
We look forward to
executing on our strategy,
working closely with
our customers to meet
their needs, enhancing
our brand in the market,
and building sustainable
shareholder value.”
2 AUDINATE GROUP LIMITED
Strategy for Growth
Audinate has a strong track record of product innovation since its inception.
Our customers benefit from our trusted expertise in the field of media networking,
which enables them to focus on their core competencies to accelerate their own
product initiatives without the need to make investments in developing their own
networking capability.
As part of our strategy to increase the penetration of digital networked solutions, we
continue to extend our core networking product portfolio to deliver more cost effective,
innovative new products. During the last quarter, we introduced our Dante Broadway
chip. Dante Broadway was developed to bridge the gap between our Brooklyn II module
and our low channel count Ultimo chip. Broadway is a cost-effective solution designed
for medium channel count applications for integration into products like amplifiers,
interfaces, or small mixers needing 4-16 channels.
Earlier in the year, we introduced our Dante Analogue Output module which provides
manufacturers with a complete module to build adaptor endpoints which can be used
to connect legacy analogue products to the Dante ecosystem.
Another key part of the strategy is to foster our brand with system integrators and end
customers, and educate them on the benefits and ease of use of the Dante system.
In order to do that, we introduced an on-line certification training program and during
the past year we delivered over 39,000 certification training courses.
Investing in the future
Audinate is expanding our sales and marketing channel to establish a tighter relationship
with system integrators to educate them on the benefits of Dante. By offering Dante
certification programs both online and in person, consultants, system designers,
integrators, end users and others in the industry learn about Dante with in-depth
training. This, in turn, is expected to increase the participants’ recommendation to
design and install Dante networked solutions.
We anticipate introducing Dante Domain Manager in early 2018, which complements
and builds upon existing and new installations of Dante partner products. Dante Domain
Manager is a network management platform which makes audio networking more
secure, more scalable, and more manageable than ever before. Audinate is actively
creating a distribution channel to sell Dante Domain Manager to end customers through
authorised resellers.
We have also begun research and development into adding video support to our
solution. By adding video networking with similar capabilities and tools which we have
for managing audio systems today, our addressable market is anticipated to double
in size.
Audinate is uniquely positioned to be at the heart of this convergence of A/V and
IT systems. We look forward to executing on our strategy, working closely with our
customers to meet their needs, enhancing our brand in the market, and building
sustainable shareholder value.
Lee Ellison
Chief Executive Officer
22 September 2017
ANNUAL REPORT 2017 3
Contents
Audinate Group Limited
Contents
30 June 2017
Corporate directory
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
Directors' declaration
Independent auditor's report to the members of Audinate Group Limited
5
6
22
23
24
25
26
27
53
54
4 AUDINATE GROUP LIMITED
1
Corporate directory
Audinate Group Limited
Corporate directory
30 June 2017
Directors
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Company secretary
Rob Goss
Registered office
Share register
Auditor
Solicitors
Level 1
458 - 468 Wattle Street
Ultimo NSW 2007
Tel: 02 8280 7100
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Tel: 1300 554 474
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
DLA Piper
Level 22
1 Martin Place
Sydney NSW 2000
Stock exchange listing
Audinate Group Limited shares are listed on the Australian Securities Exchange (ASX
code: AD8)
Website
www.audinate.com
Corporate Governance Statement
The corporate governance statement which is approved at the same time as the
Annual Report can be found at:
https://www.audinate.com/company/governance
2
ANNUAL REPORT 2017 5
Audinate Group Limited
Directors' report
30 June 2017
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Audinate Group 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 2017.
Directors
The following persons were directors of Audinate Group Limited from the date of incorporation, being 19 April 2017, up to
the date of this report, unless otherwise stated:
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
(appointed on 9 May 2017)
(appointed on 9 May 2017)
Principal activities
The Group's principal activity is the development and sale of digital Audio Visual ('AV') networking solutions. Dante is the
Group’s technology platform that distributes uncompressed digital audio signals over computer networks. Dante comprises
software and hardware that is sold to and integrated inside the AV products of its Original Equipment Manufacturer ('OEM')
customers.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
During the financial year, the Group undertook a capital reconstruction and group reorganisation. Refer to 'Significant
changes in the state of affairs' below. As a result of this reorganisation, the comparative information are the results of
Audinate Pty Limited and its subsidiaries. The current year represents Audinate Group Limited and its subsidiaries for the
one day being 30 June 2017 and Audinate Pty Limited and its subsidiaries for the entire year. Refer to 'Basis of
preparation' in note 2 to the financial statements for further details.
The Group primarily generates revenue from the following four key sources:
(a) the sale of chips, modules, cards and adaptor products;
(b) license fees from reference designs;
(c) license fees from software and royalties; and
(d) other including maintenance and professional services revenue.
For the year ended 30 June 2017, the Group reported an increase in revenue of 26.5% to $15.1 million from $11.9 million
in the prior year. As the Group invoices its customers in US dollars, this currency is considered to be a more relevant
measure of sales performance. In US dollars, revenue increased by 30.3% to US$11.3 million in 2017 from US$8.7 million
in the prior year.
The Group has grown its OEM base to 369 manufacturer brands at 30 June 2017, up from 310 at 30 June 2016. Once the
OEM has designed the Dante platform into one of its products, the Group will receive revenue at each production run in the
form of sales of Dante chips, modules or cards or royalties. Dante enabled OEM products available for sale increased to
1182 products, up 36% from 872 at the end of June 2016. Sales units of the volume of chips, modules and cards, shipped
in 2017 increased to 180,724, a 48% increase over the prior year.
Operating expenses, which consist of employee benefit expenses, marketing expenses and administration and other
operating expenses increased by approximately 17.6% to $10.5 million in 2017 from $8.9 million in the prior year. Earnings
before interest, tax, depreciation and amortisation (‘EBITDA’), excluding the non-cash change in fair value of preference
shares and the initial public offering ('IPO') expenses, increased to $0.8 million in 2017 from an EBITDA loss of $0.1 million
in the prior year. The improvement was due to revenue growth of 26.5% significantly out-stripping growth in operating costs
of 17.6% during 2017.
6 AUDINATE GROUP LIMITED
3
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Audinate Pty Limited issued convertible redeemable preference shares ('CRPS') which contained an anti-dilution clause
which required the instruments to be recorded at fair value. On 30 June 2017, these instruments were converted into
ordinary shares in the Company as part of the capital reconstruction, group reorganisation and IPO. The accounting
treatment of the CRPS at conversion required an expense to be recorded for the difference between the carrying value of
the preference shares and the fair value of shares in the Company at settlement. This non-cash transaction resulted in an
expense in profit or loss for the year ended 30 June 2017 of $18.5 million.
Primarily as a result of the expense for CRPS, described above, and the one-off IPO costs, the Company recorded a loss
of $20.4 million for the year ended 30 June 2017, compared to a profit of $0.1 million for the prior year.
Significant changes in the state of affairs
Group reorganisation, Initial Public Offering and Australian Securities Exchange ('ASX') listing
Effective 30 June 2017, the Company as part of a capital reconstruction and group reorganisation, acquired Audinate Pty
Limited.
On 30 June 2017, the Company was admitted to the Official List of ASX Limited with the ASX code ('AD8') and official
quotation of the ordinary shares in the Company commenced on that date on a deferred settlement basis. The Company
also raised $21,029,898 by issuing 17,237,622 ordinary shares at $1.22 per share, as part of the IPO. The primary raise
was $14,000,000 and the balance of the proceeds was paid to selling shareholders.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Audinate Group Limited listed on the Australian Securities Exchange on 30 June 2017. As part of the listing process
holders of CRPS sold shares, amounting to $7,029,899, to new shareholders. Consequently the Group shows a liability for
this amount at 30 June 2017, offset by a receivable of $4,062,354 with the balance of $2,967,545 included in cash at bank.
Subsequent to the end of the financial year the full proceeds of the IPO were received and $7,029,899 was paid to the
selling shareholders on 5 July 2017.
No other matter or circumstance has arisen since 30 June 2017 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 multi-faceted and seeks to:
●
●
●
●
continue to grow the number of OEMs adopting Dante;
increase the adoption of Dante across an OEM's product portfolio in order to expand the ecosystem of available
Dante enabled products;
drive other market participants’ adoption of Dante by working with consultants, integrators, and major end customer to
create a “network effect” as the adoption of the Dante in partner products expands; and
deliver new products and services to both OEMs and end-users.
As the Group increases its customer base, and the number of Dante-enabled devices within the ecosystem increases,
more choices are available for consultants, system designers, integrators, and end users to design Dante enabled turnkey
systems. This in turn, further entrenches Dante as the preferred networking technology for professional AV installations,
and encourages OEMs to be part of the Dante ecosystem to ensure their products are considered for new installations as
well as upgrades to existing installations.
With the funds raised from the IPO the Group will continue to increase its sales and marketing efforts over the next 12
months, with a specific focus on the launch of Dante Domain Manager ('DDM') which is expected to occur in January 2018.
Additional engineering resources will be employed to complete the roll-out of DDM and additional adaptor module products
and accelerate the Group’s video product strategy. These growth initiatives are envisaged to significantly expand the
addressable market for Dante technology.
The Group will also invest in system and process improvements to support the ongoing growth of the business and provide
growth related cost efficiencies.
Therefore, the Group will use the cash and cash equivalents held at the time of listing, in a way consistent with its stated
business objectives.
4
ANNUAL REPORT 2017 7
Audinate Group Limited
Directors' report
30 June 2017
Environmental regulation
The Group is not directly subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
David Krall
Chairman and Non-Executive Director (appointed on 19 April 2017)
David has a Master of Business Administration from Harvard University and both a
Bachelor of Science degree and Masters degree in Engineering from Massachusetts
Institute of Technology.
David serves as a director and/or strategic advisor to several technology companies,
combining a strong educational background in engineering and business with 30
years of professional experience. David currently acts as Strategic Advisor for
Universal Audio. He is the former President and Chief Operating Officer of Roku Inc.,
a market leader in television streaming. He was also formerly President and Chief
Executive Officer of Avid Technology Inc. (NASDAQ: AVID)
Director of Progress Software Corporation (NASDAQ: PRGS)
Other current directorships:
Former directorships (last 3 years): Director of Quantum Corp. (NYSE: QTM)
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Member of the Remuneration and Nomination Committee
293,958 ordinary shares
186,042 options over ordinary shares
None
Experience and expertise:
Name:
Title:
Qualifications:
Lee Ellison
Chief Executive Officer (appointed as a director on 19 April 2017)
Lee has a Bachelor of Science degree from The Ohio State University. Lee also
completed an executive management program at the University of Virginia's Darden
Business School.
Lee has held a series of senior management roles in both start-up and listed
companies in telecom and computer technology industries. Lee has held various
senior executive and leadership roles over the last 30 years. Lee formerly served as
founding Senior Vice President of Worldwide Sales at Dilithium Networks. Previously,
Lee served as Vice President of Global Sales and International Operations for
Tektronix, Inc. During his 16-year tenure with Glenayre Electronics, Lee held various
executive management positions.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
820 ordinary shares
Interests in shares:
320,000 options over ordinary shares
Interests in options:
267,811 performance rights over ordinary shares
Interests in rights:
8 AUDINATE GROUP LIMITED
5
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Experience and expertise:
Name:
Title:
Qualifications:
John Dyson
Non-Executive Director (appointed on 19 April 2017)
John has a Master of Business Administration from RMIT University and a Bachelor
of Science degree from Monash University. He has a Graduate Diploma in Finance
and Investment from the Securities Institute of Australia and is a member of the
Australian Institute of Company Directors.
John is a director and one of the founders of Starfish Ventures. He played a crucial
role in the establishment of Starfish Ventures and has personally overseen and
managed investments across a range of technologies and industries. John is
currently a director of Atmail Pty Ltd., Myriax Pty Ltd., and Swinburne Ventures Pty
Ltd. John is also a director at the Walter and Eliza Hall Institute of Medical Research.
Formerly, John was General Manager (Australia) of JAFCO Investment (Asia Pacific),
a Singapore based private equity manager. Prior to joining JAFCO, John worked in
the
for Schroders, Nomura
Securities, KPMG and ANZ McCaughan.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
investment banking and stockbroking
industries
Member of the Remuneration and Nomination Committee and Audit and Risk
Management and Nomination Committee
12,132,848 ordinary shares
None
None
Interests in shares:
Interests in options:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Roger Price
Non-Executive Director (appointed on 19 April 2017)
Roger has an Engineering degree from the University of Technology, Sydney.
Roger is also a General Partner at Innovation Capital, a venture capital firm in
Sydney, one of the early investors in the Group. Roger is currently the Chairman and
Chief Executive Officer of Windlab Limited, a wind energy company. Roger has a
depth of operational experience
including senior engineering, manufacturing,
information technology service and international business development roles for a
number of technology based companies. Prior to joining Innovation Capital, Roger
was the Chief Executive Officer of Reino Intl., a developer of advanced parking
solutions. Roger commenced his career at Alcatel, and has held senior positions with
a number of Australian technology businesses and NASDAQ listed software
companies.
Director of Windlab Limited
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Member of the Audit and Risk Management Committee
49,181 ordinary shares
None
None
6
ANNUAL REPORT 2017 9
Audinate Group Limited
Directors' report
30 June 2017
Name:
Title:
Qualifications:
Experience and expertise:
Alison Ledger
Non-Executive Director (appointed 9 May 2017)
Alison has a Master of Business Administration from Harvard University and
graduated magna cum laude, with a Bachelor of Arts degree in Economics from
Boston College. She is a graduate and member of the Australian Institute of
Company Directors.
Alison has more than 30 years of experience and has held various leadership roles in
Australia, the United Kingdom, and the United States of America. She is currently a
Non-Executive Director of Latitude Financial Services. Alison held various senior
management and strategic roles while at Insurance Australia Group for eight years,
including Head of Group Strategy and Executive General Manager, Product, Pricing
and eBusiness. During her tenure as a Partner with McKinsey and Company she
advised some of the leading global and Australian banks on strategy and
organisational change. Alison began her professional career in the banking industry
working with leading financial institutions.
Non-Executive Director of Countplus Limited (ASX: CUP)
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chair of Remuneration and Nomination Committee
None
None
None
Experience and expertise:
Name:
Title:
Qualifications:
Tim Finlayson
Non-Executive Director (appointed on 9 May 2017)
Tim has degrees in Economics and Laws from Macquarie University. He is a member
of Chartered Accountants Australia and New Zealand and is admitted as a Solicitor of
the Supreme Court of New South Wales.
Tim is a chartered accountant with 25 years of experience in professional services,
telecommunications and
finance and
operational leadership roles in Australia, Singapore and Vietnam. Tim is currently
Chief Operating Officer with King & Wood Mallesons Australia, a leading international
law firm. During his time at PricewaterhouseCoopers, Tim was a partner of Tax and
Legal Services in Indochina advising foreign companies on setting up and operating
in Vietnam, Cambodia and Laos, following tax advisory roles in Sydney and
Singapore. Tim was previously Chief Financial Officer for Sydney Airport Corporation
(ASX: SYD) and Hutchison Telecommunications (Australia) Limited (ASX: HTA).
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Interests in rights:
Chair of Audit and Risk Management Committee
122,951 ordinary shares
None
None
industries and has held
infrastructure
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Rob Goss is the Chief Financial Officer and Company Secretary, responsible for finance and accounting operations and
administration of the Group. Rob has extensive experience in finance in publicly listed companies. Rob is a member of the
Chartered Accountants Australia and New Zealand and has a Bachelor of Business degree, majoring in Accounting, from
the University of Technology, Sydney.
Before joining the Group in 2017, Rob served as Chief Financial Officer for BuildingIQ, Inc. (ASX: BIQ), a commercial
energy platform to manage building heating and cooling via the cloud to save on energy costs. Prior to BuildingIQ, Rob
was Chief Financial Officer at iProperty Group Limited (ASX: IPP), an online property and portal operating in Malaysia,
Hong Kong, Indonesia, Singapore and Thailand. Previously, Rob held senior finance roles at ANZ Bank and Allco Finance
Group after commencing his career as a chartered accountant at KPMG.
10 AUDINATE GROUP LIMITED
7
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2017, and
the number of meetings attended by each director were:
David Krall
Lee Ellison
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Full Board
Attended
Held
3
3
3
3
3
3
3
3
3
3
3
3
Held: represents the number of meetings held during the time the director held office.
The above table excludes the Board meetings held by Audinate Pty Ltd during the twelve months period ended 30 June
2017.
Given the restructure occurred on 30 June 2017, there were no meetings of the Remuneration and Nomination Committee
or Audit and Risk Management Committee held during the period.
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
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 good market practices 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 advising the Board on the composition of the Board and
its committees, evaluating potential Board candidates and advising on their suitability, and ensuring appropriate succession
plans are in place.
The Remuneration and Nomination Committee establishes, amends, reviews and approves the compensation and equity
incentive plans with respect to senior management and employees of the Group including determining individual elements
of the total compensation of the chief executive officer, and other members of senior management.
The Remuneration and Nomination Committee may seek external advice to determine the appropriate level and structure
of the remuneration packages from time to time (refer to the section 'Use of remuneration consultants' below).
8
ANNUAL REPORT 2017 11
Audinate Group Limited
Directors' report
30 June 2017
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having profit growth as a core component of plan design;
focusing on sustained growth in shareholder wealth 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 good 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 Board. The Board may, from time to time, receive advice from
independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line
with the market. The chairman's fees are determined independently to the fees of other non-executive directors based on
comparative roles in the external market. The chairman is not present at any discussions relating to the determination of
his own remuneration.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. This amount is currently capped under the Constitution at $750,000 per annum. Any increase to the aggregate
amount needs to be approved by shareholders. Directors will seek approval from time to time, as appropriate. This
aggregate annual sum does not include any special remuneration which the Board may grant to the directors for special
exertions or additional services performed by a director for or at the request of the Group, which may be in addition to or in
substitution of the director's fees.
The Company has entered into an appointment letter with each of its non-executive directors. Non-executive fees, inclusive
of superannuation but exclusive of GST (where applicable), are currently as follows:
Name of Non-Executive Director
Fees per annum
David Krall
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
$120,000
$65,000
$65,000
$65,000
$65,000
Non-executive directors also receive an additional $15,000 per annum for chairing a Board committee.
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;
long-term performance incentives; and
other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
The Remuneration and Nomination Committee recommends to the Board the fixed remuneration packages for the
executive team and these are reviewed annually.
12 AUDINATE GROUP LIMITED
9
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Short-term incentive plan ('STI Plan')
The STI Plan is designed to reward eligible employees for their efforts toward the accomplishment of the Group's goals
during the plan year. Under the STI Plan, the decision to pay any bonus remains at the full discretion of the Board, based
on recommendations by the Remuneration and Nomination Committee.
The key components of the cash-based STI Plan are:
●
●
participants are entitled to receive a percentage of their fixed remuneration as an annual cash bonus;
payment of an annual cash bonus is based on individual key performance targets and objectives and the Group's
performance against key performance indicators; and
key performance indicators are set annually and may include measures such as revenue, earnings before interest,
tax, depreciation and amortisation ('EBITDA') and growth targets, or other targets as considered appropriate and set
by the Board.
●
Long-term incentive plan ('LTI Plan')
The LTI Plan is designed to assist in the reward, retention and motivation of the Group's senior management and other key
employees ('participants'). Under the rules of the LTI Plan, the Board has a discretion to offer awards (being options to
acquire shares; performance rights to acquire shares; and/or shares, including those acquired under a limited recourse
loan funded arrangement) to nominated participants.
A summary of the rules of the LTI Plan is set out below:
●
●
the LTI Plan is open to participants, as determined by the Board. Participation is voluntary;
the Board may determine the type/number of awards to be issued under the LTI Plan to each participant and other
terms of issue such as: service-based conditions and/or performance hurdles; any amount payable on the grant of the
awards; the exercise price of any option granted; the period during which a vested option can be exercised; and any
forfeiture conditions or disposal restrictions applying to the awards and any shares that a participant receives upon
exercise of their options or performance rights;
the Board may, in its discretion, also determine that the Company will issue limited recourse loans to participants to
use for the purchase of shares as part of a share award under the LTI Plan;
when any service-based conditions and/or performance hurdles have been satisfied, participants will receive fully
vested shares or their options/performance rights will become vested and will be exercisable over shares, as
applicable;
each vested option and performance right enables the participant to be issued or to be transferred one share upon
exercise, subject to the rules governing the LTI Plan and the terms of any particular offer;
participants holding options or performance rights are not permitted to participate in new issues of securities by the
Company but adjustments may be made to the number of shares over which the options or performance rights are
granted and/or the exercise price (if any) to take into account changes in the capital structure of the Company that
occur by way of pro rata and bonus issues in accordance with the rules of the LTI Plan and the ASX Listing Rules.
the LTI Plan limits the number of awards that the Company may grant without shareholder approval, such that the
sum of all awards on issue (assuming all options and performance rights were exercised) do not at any time exceed in
aggregate 10% of the total issued capital of the Company as at the date of any proposed new awards; and
the Board may delegate management and administration of the LTI Plan, together with any of their powers or
discretions under the LTI Plan, to a committee of the Board or to anyone or more persons selected by them as the
Board thinks fit.
●
●
●
●
●
●
During the financial year the Group offered performance rights to eligible participants under the LTI Plan.
Group performance and link to remuneration
Remuneration for all staff is directly linked to the performance of the Group. The overall level of reward is based on the
achievement of revenue and EBITDA thresholds as well as the individual's performance assessment score. No bonus is
payable unless the thresholds are met and the ultimate amount payable remains at the discretion of the Board. Refer to the
section ''Additional information" below for details of the total shareholders return and earnings. Total shareholders return
represents a key measure for the LTI plan.
Use of remuneration consultants
During the financial year ended 30 June 2017, the Group, through the Remuneration and Nomination Committee, engaged
Egan Associates Pty Limited, remuneration consultants, to review its existing remuneration policies and provide
recommendations on the establishment of the STI and LTI Plans. Egan Associates Pty Limited was paid $30,000 for these
services.
10
ANNUAL REPORT 2017 13
Audinate Group Limited
Directors' report
30 June 2017
An agreed set of protocols was put in place to ensure that the remuneration recommendations would be free from undue
influence from key management personnel. The Board is also required to make inquiries of the consultant's processes at
the conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free from
undue influence. The Board is satisfied that these protocols were followed and as such there was no undue influence.
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 Audinate Group Limited:
●
●
●
●
●
●
David Krall - Chairman and Non-Executive Director (appointed on 19 April 2017)
Lee Ellison - Chief Executive Officer (appointed on 19 April 2017)
John Dyson - Non-Executive Director (appointed on 19 April 2017)
Roger Price - Non-Executive Director (appointed on 19 April 2017)
Alison Ledger - Non-Executive Director (appointed on 9 May 2017)
Tim Finlayson - Non-Executive Director (appointed on 9 May 2017)
And the following persons:
●
●
Rob Goss - Chief Financial Officer and Company Secretary
Aidan Williams - Chief Technology Officer
The 2017 table below represents remuneration paid by the Group consisting of Audinate Pty Ltd and its subsidiaries for the
entire financial year and Audinate Group Limited and its subsidiaries for the one day to 30 June 2017.
Prior to the capital reconstruction and group reorganisation on 30 June 2017, Audinate Pty Limited was not required to
prepare a remuneration report in accordance with the Corporations Act 2001. As such, remuneration report information
presented below is for the year ended 30 June 2017 only.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Equity-
settled
$
Total
$
69,370
12,970
11,845
10,892
10,892
-
-
-
-
-
-
-
-
-
-
-
-
1,125
1,035
1,035
335,964
167,905
18,249
-
108,003
216,354
776,290
47,500
48,802
264,207
-
-
18,249
9,744
16,987
29,926
-
-
-
-
-
-
-
-
-
-
-
-
-
-
69,370
12,970
12,970
11,927
11,927
11,311
533,429
63,480
9,550
228,727
291,693
84,341 1,173,013
2017
Non-Executive Directors:
David Krall (Chairman)
John Dyson
Roger Price
Alison Ledger
Tim Finlayson
Executive Directors:
Lee Ellison
Other Key Management
Personnel:
Rob Goss
Aidan Williams
14 AUDINATE GROUP LIMITED
11
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Executive Directors:
Lee Ellison
Other Key Management Personnel:
Rob Goss
Aidan Williams
Fixed
remuneration At risk - STI
2017
2017
At risk - LTI
2017
67%
31%
2%
51%
80%
21%
17%
28%
3%
Non-executive directors did not receive share options or other performance linked incentives during the year ended 30
June 2017.
No cash bonus was forfeited by key management personnel for the year ended 30 June 2017.
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:
Lee Ellison
Chief Executive Officer
19 April 2017
Ongoing, employed by Audinate, Inc.
Fixed: Lee receives a fixed remuneration package ('FRP') of US$283,000 and is
eligible to participate in various employee benefit programs maintained by Audinate,
Inc., which includes 80% company sponsored payment of health and dental
insurance coverage, as well as other employee related benefits.
STI: Lee is also eligible to receive an annual STI of up to 50% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Lee has participated in the Company's legacy Employee Share Option Plan
('ESOP') and may exercise his vested options under the ESOP. Lee is also eligible to
participate in the LTI Plan and was issued an initial grant of 267,811 performance
rights for nil consideration on listing. In addition, subsequent to listing, the Company
has granted Lee 1,995,000 performance rights which will be automatically exercised
into shares on 15 September 2019 provided Lee does not resign for the period of nine
months from the date of grant.
Termination: Either party may terminate the employment contract by giving 6 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Lee on garden leave for all or part of that notice period.
Restraint: After termination Lee will be subject to non-competition, non-solicitation of
client and non-poaching of employees' restrictions, within the United States of
America and Australia for a maximum period of 6 months.
12
ANNUAL REPORT 2017 15
Audinate Group Limited
Directors' report
30 June 2017
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Rob Goss
Chief Financial Officer and Company Secretary
19 April 2017
Ongoing, employed by Audinate Group Limited
Fixed: Rob receives a FRP of $257,000 including mandatory superannuation
contributions. He received a $15,000 bonus on successful completion of the listing.
STI: Rob is also eligible to receive an annual STI up to 25% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Rob has participated in the Company's ESOP and may exercise his vested
options under the ESOP.
Termination: Either party may terminate the employment contract by giving 3 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Rob on garden leave for all or part of that notice period.
Restraint: After termination Rob will be subject to non-competition, non-solicitation of
client and non-poaching of employees' restrictions, within the United States of
America, Australia and the United Kingdom for a maximum period of 12 months.
Aidan Williams
Chief Technology Officer
19 April 2017
Ongoing, employed by Audinate Group Limited
Fixed: Aidan receives a fixed remuneration package of $235,000 including mandatory
superannuation contributions.
STI: Aidan is also eligible to receive an annual STI up to 25% of his FRP, subject to
achieving the annual targets against key performance indicators and personal
objectives as agreed with the Board for that year. Any payment for over achievement
of annual targets, is at the discretion of the Board.
LTI: Aidan has participated in the Company's ESOP and may exercise his vested
options under the ESOP.
Termination: Either party may terminate the employment contract by giving 6 months'
written notice. The Company can elect in its discretion to make a payment in lieu of
notice or place Aidan on garden leave for all or part of that notice period.
Restraint: After termination Aidan will be subject to non-competition, non-solicitation
of client and non-poaching of employees' restrictions, within the United States of
America, Australia and the United Kingdom for a maximum period of 12 months.
All other senior management are employed under written terms of employment with the Group. The key terms and
conditions of their employment include:
● remuneration packages;
● eligibility to participate in the STI and LTI Plans;
● notice of termination of employment provisions, with the relevant notice period of up to 3 months; and
● for some of those executives, post-employment restrictions covering non-competition, non-solicitation of clients
for a maximum duration of up to 3 months.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
16 AUDINATE GROUP LIMITED
13
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2017.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
30 June 2017
30 June 2017
30 June 2017
30 June 2017
Vesting date and
exercisable date
30 June 2017
30 June 2017
30 June 2017
30 June 2017
Fair value
per option
Expiry date
Exercise price at grant date
17 August 2019
23 June 2022
23 August 2022
16 January 2023
$0.062
$0.260
$0.260
$0.260
$0.022
$0.090
$0.090
$0.090
Options granted carry no dividend or voting rights. The options set out in the table above represent options granted in
exchange for options in Audinate Group Limited as part of the restructure which took place at the date of the IPO on 30
June 2017.
The number of options over ordinary shares granted to and vested by directors and other key management personnel as
part of compensation during the year ended 30 June 2017 are set out below:
Name
David Krall
Lee Ellison
Rob Goss
Aidan Williams
Number of
options
granted
during the
year
2017
Number of
options
granted
during the
year
2016
Number of
options
vested
during the
year
2017
Number of
options
vested
during the
year
2016
186,042
320,000
690,000
204,000
-
-
-
-
186,042
320,000
690,000
204,000
-
-
-
-
It should be noted that options issued by Audinate Pty Limited vested during the financial year and are included within the
key management personnel remuneration table in the share-based payments column, as detailed in the "Details of
remuneration" section above. All options under this plan vested at the time of the IPO at 30 June 2017 and were then
exchanged for options in the Company. Accordingly, the above table shows options being issued and 100% vested during
the financial year.
No options were exercised in Audinate Group Limited or lapsed during the year ended 30 June 2017.
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and
other key management personnel in this financial year or future reporting years are as follows:
Name
Lee Ellison
Rob Goss
Aidan Williams
Number of
rights
granted
Grant date
Expiry date
267,811 30 June 2017
89,270 30 June 2017
178,541 30 June 2017
30 July 2022
30 July 2022
30 July 2022
Share price
hurdle for
vesting
Fair value
per right
at grant date
$0.000
$0.000
$0.000
$0.810
$0.810
$0.810
These performance rights vest in three tranches after the release of the annual results in 2020, 2021 and 2022.
Performance rights granted carry no dividend or voting rights and no rights vested during the year ended 30 June 2017.
14
ANNUAL REPORT 2017 17
Audinate Group Limited
Directors' report
30 June 2017
Additional information
The earnings of the Group for the four years to 30 June 2017 are summarised below:
Sales revenue
EBITDA
Profit after income tax
2014*
$
2015*
$
2016*
$
2017**
$
6,519,830
(816,516)
(101,710)
8,035,464
25,944
516,383
11,903,452
(64,362)
54,451
15,062,845
783,540
(20,443,388)
*
**
Relates to the Group prior to the restructure that occurred at the time of the IPO at 30 June 2017. The Group adopted
International Financial Reporting Standards for the 2014 financial year and hence the information for 2013 is not
provided as it is not available on a comparable basis.
EBITDA in 2017 financial year is calculated excluding the one-off impacts of IPO expenses and the change in fair
value of redeemable preference shares.
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Additional disclosures relating to key management personnel
2017
1.53
(573.55)
(573.55)
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:
Ordinary shares
David Krall
Lee Ellison
John Dyson*
Roger Price**
Tim Finlayson**
Rob Goss
Aidan Williams
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
-
-
-
-
-
-
-
-
-
820
-
-
-
820
820
2,460
293,958
-
204,921
49,181
122,951
-
1,713,544
2,384,555
-
-
-
-
-
-
-
-
Balance at
the end of
the year
293,958
820
204,921
49,181
122,951
820
1,714,364
2,387,015
Entities associated with John Dyson hold 11,927,927 ordinary shares as at 30 June 2017.
*
** Held indirectly
18 AUDINATE GROUP LIMITED
15
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Options over ordinary shares
David Krall
Lee Ellison*
Rob Goss*
Aidan Williams
*
Held indirectly
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
186,042
320,000
690,000
204,000
1,400,042
-
-
-
-
-
-
-
-
-
-
186,042
320,000
690,000
204,000
1,400,042
All of these options were fully vested and exercisable at 30 June 2017. However they are all subject to escrow provisions
as described in the prospectus.
Performance rights holding
The number of performance rights 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:
Performance rights over ordinary shares
Lee Ellison
Rob Goss
Aidan Williams
Balance at
the start of
the year
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
267,811
89,270
178,541
535,622
-
-
-
-
-
-
-
-
267,811
89,270
178,541
535,622
No performance rights over ordinary shares had vested at 30 June 2017.
This concludes the remuneration report, which has been audited.
Loans to directors and executives
Prior to the IPO, Audinate Pty Limited offered option-holders an interest bearing, non-recourse loan in order to fund the
exercise price of options for shares in Audinate Pty Limited. As a part of the restructure described in the prospectus these
shares were then exchanged for shares in Audinate Group Limited. The total value of the loans outstanding at 30 June
2017 was $117,953, inclusive of a loan outstanding to Aidan Williams of $36,613.
16
ANNUAL REPORT 2017 19
Audinate Group Limited
Directors' report
30 June 2017
Shares under option
Unissued ordinary shares of Audinate Group Limited under option at the date of this report are as follows:
Grant date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
Expiry date
23 November 2018
17 October 2019
9 December 2019
9 January 2020
21 August 2020
9 December 2020
11 June 2022
23 August 2022
23 August 2022
31 January 2023
3 April 2023
Exercise
price
Number
under option
$0.036
$0.062
$0.062
$0.062
$0.062
$0.062
$0.260
$0.260
$0.260
$0.260
$0.260
36,000
913,042
40,000
10,000
58,000
460,000
188,000
440,000
300,000
770,000
50,000
3,265,042
Shares under performance rights
Unissued ordinary shares of Audinate Group Limited under performance rights* at the date of this report are as follows:
Grant date
30/06/2017
Expiry date
30/06/2022
*
ASX restricted quoted performance rights
Exercise
price
Number
under rights
$0.000
1,038,509
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate
in any share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Audinate Group Limited issued on the exercise of options during the year ended 30 June
2017 and up to the date of this report. However, there were 1,913,304 ordinary shares issued on the exercise of options in
Audinate Pty Limited prior to the restructure, as set out in note 17 to the financial statements.
Shares issued on the exercise of performance rights
There were no ordinary shares of Audinate Group Limited issued on the exercise of performance rights during the year
ended 30 June 2017 and up to the date of this report.
Indemnity and insurance of officers
During the financial year, the Company had a policy in place in respect of directors’ and officers’ liability and legal
expenses insurance contracts, for current directors, including senior executives, employees and officers and for former
directors, officers and employees of the Company for a period of 12 months and directors, senior executives, secretaries
and employees of its Group, excluding actions brought in a court in the United States of America or Canada. The policy
prohibits disclosure of the premiums paid.
The policy covers:
● costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and
whatever their outcome; and
● other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty
or improper use of information or position to gain a personal advantage.
The Company has also entered into a Deed of Access ('Deed') and Indemnity with all past and present directors, which
provides an indemnity to the directors for legal costs and any liability arising from negligence of the director, to the extent
permitted by law. In addition, the Deed allows the Company to advance a director an interest free loan equal to any legal
costs which, in the Company’s opinion, are not permitted to be indemnified under the law. Any such advance is repayable
by the director at the conclusion of the proceedings.
20 AUDINATE GROUP LIMITED
17
Directors’ report30 June 2017
Audinate Group Limited
Directors' report
30 June 2017
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court for leave to bring proceedings on behalf of the Company, or to intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or
part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 22 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 22 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of Deloitte Touche Tohmatsu
There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu.
Auditor's independence declaration
A copy of the auditor's independence declaration is set out on the following page.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
On behalf of the directors
___________________________
David Krall
Chairman
21 August 2017
Sydney
18
ANNUAL REPORT 2017 21
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
21 August 2017
The Board of Directors
Audinate Group Limited
Level 1, Suite 2
458-468 Wattle Street
Ultimo, NSW 2007
Dear Board Members
Audinate Group Limited
I am pleased to provide the following declaration of independence to the directors of Audinate Group Limited.
As lead audit partner for the audit of the financial statements of Audinate Group Limited for the year ended
30 June 2017, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
22 AUDINATE GROUP LIMITED
19
Auditor’s independence declaration
Audinate Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Audinate Group Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Consolidated
Revenue
Sales
Cost of goods sold
Revenue
Gross margin
Sales
Cost of goods sold
Gross margin
Expenses
Employee benefit expenses
Marketing expenses
Expenses
Administration and other operating expenses
Employee benefit expenses
Depreciation and amortisation
Marketing expenses
Initial public offering expenses
Administration and other operating expenses
Conversion of redeemable preference shares
Depreciation and amortisation
Finance costs
Initial public offering expenses
Total expenses
Conversion of redeemable preference shares
Finance costs
Operating loss
Total expenses
Other income
Operating loss
Profit/(loss) before income tax expense
Other income
Income tax expense
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense for the year attributable to the owners of
Audinate Group Limited
Profit/(loss) after income tax expense for the year attributable to the owners of
Audinate Group Limited
Other comprehensive income
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
Total comprehensive income for the year attributable to the owners of
Audinate Group Limited
2016
$
Consolidated
2016
$
11,903,452
(3,062,040)
8,841,412
11,903,452
(3,062,040)
8,841,412
Note
Note
5
5
5
16
5
16
2017
$
2017
$
15,062,845
(3,802,226)
11,260,619
15,062,845
(3,802,226)
11,260,619
(7,289,702)
(1,603,253)
(1,584,124)
(1,088,987)
(1,694,328)
(18,547,790)
(400)
(31,808,584)
(7,289,702)
(1,603,253)
(1,584,124)
(1,088,987)
(1,694,328)
(18,547,790)
(400)
(31,808,584)
(20,547,965)
(5,884,886)
(1,639,337)
(1,381,551)
(5,884,886)
(627,165)
(1,639,337)
-
(1,381,551)
-
(627,165)
(402)
-
(9,533,341)
-
(402)
(691,929)
(9,533,341)
6
152,551
(20,547,965)
758,131
(691,929)
6
(20,395,414)
152,551
66,202
758,131
7
7
(47,974)
(20,395,414)
(11,751)
66,202
(47,974)
(20,443,388)
(11,751)
54,451
(20,443,388)
54,451
(103,955)
(24,863)
(103,955)
(103,955)
(24,863)
(24,863)
(103,955)
(20,547,343)
(24,863)
29,588
(20,547,343)
Cents
Cents
29,588
8
8
(573.55)
Cents
(573.55)
Cents
1.77
0.12
8
8
(573.55)
(573.55)
1.77
0.12
Basic earnings per share
Diluted earnings per share
Basic earnings per share
Diluted earnings per share
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
ANNUAL REPORT 2017 23
Consolidated statement of profit or loss and other comprehensive incomefor the year ended 30 June 2017
Audinate Group Limited
Audinate Group Limited
Consolidated statement of financial position
Consolidated statement of financial position
As at 30 June 2017
As at 30 June 2017
Note
Note
Consolidated
Consolidated
2016
2017
2016
2017
$
$
$
$
9
9
10
10
13
13
14
14
11
11
12
12
323,546
323,546
1,268,868
1,268,868
1,592,414
1,592,414
8,366,241
8,366,241
365,447
365,447
2,000,750
2,000,750
2,366,197
2,366,197
29,068,168
29,068,168
3,108,435
3,108,435
1,915,192
1,915,192
-
-
1,149,763
1,149,763
455,039
455,039
145,398
145,398
6,773,827
6,773,827
18,694,193
18,694,193
2,030,127
2,030,127
4,062,354
4,062,354
901,936
901,936
767,015
767,015
246,346
246,346
26,701,971
26,701,971
Assets
Assets
Current assets
Cash and cash equivalents
Current assets
Cash and cash equivalents
Trade and other receivables
Trade and other receivables
Receivable from issue of shares
Receivable from issue of shares
Research and development incentive
Research and development incentive
Inventories
Inventories
Other assets
Other assets
Total current assets
Total current assets
Non-current assets
Property, plant and equipment
Non-current assets
Property, plant and equipment
Intangibles
Intangibles
Total non-current assets
Total non-current assets
Total assets
Total assets
Liabilities
Liabilities
Current liabilities
Trade and other payables
Current liabilities
Trade and other payables
Payable to selling shareholders
Payable to selling shareholders
Income tax payable
Income tax payable
Employee benefits
Employee benefits
Warranty provision
Warranty provision
Redeemable preference shares
Redeemable preference shares
Unearned revenue
Unearned revenue
Total current liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Non-current liabilities
Employee benefits
Total non-current liabilities
Total non-current liabilities
Total liabilities
Total liabilities
Net assets/(liabilities)
Net assets/(liabilities)
Equity
63,261,592
Contributed capital
Equity
63,261,592
Contributed capital
302,566
Reserves
302,566
Reserves
Accumulated losses
(45,979,681)
(45,979,681)
Accumulated losses
17,584,477
Total equity/(deficiency)
17,584,477
Total equity/(deficiency)
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
The Company listed on the Australian Securities Exchange on 30 June 2017 and paid proceeds of $7,029,899 to selling
The Company listed on the Australian Securities Exchange on 30 June 2017 and paid proceeds of $7,029,899 to selling
shareholders on 5 July 2017 (refer to note 31).
shareholders on 5 July 2017 (refer to note 31).
2,557,814
2,557,814
7,029,899
7,029,899
34,216
34,216
1,359,954
1,359,954
33,285
33,285
-
-
163,705
163,705
11,178,873
11,178,873
756,978
756,978
-
-
14,912
14,912
882,710
882,710
29,110
29,110
31,550,905
31,550,905
163,579
163,579
33,398,194
33,398,194
231,276
231,276
231,276
231,276
33,629,470
33,629,470
(25,263,229)
(25,263,229)
304,818
304,818
304,818
304,818
11,483,691
11,483,691
17,584,477
17,584,477
29,392
29,392
243,672
243,672
(25,536,293)
(25,536,293)
(25,263,229)
(25,263,229)
17
17
18
18
15
15
16
16
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
21
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
21
24 AUDINATE GROUP LIMITED
Consolidated statement of financial positionas at 30 June 2017
Audinate Group Limited
Audinate Group Limited
Consolidated statement of changes in equity
Consolidated statement of changes in equity
For the year ended 30 June 2017
For the year ended 30 June 2017
Consolidated
Consolidated
Balance at 1 July 2015
Balance at 1 July 2015
Profit after income tax expense for the year
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Transactions with owners in their capacity as owners:
Share-based payments (note 30)
Share-based payments (note 30)
Issue of shares on exercise of options in Audinate Pty Limited
Issue of shares on exercise of options in Audinate Pty Limited
Balance at 30 June 2016
Balance at 30 June 2016
Contributed
Contributed
capital
capital
$
$
26,297
26,297
-
-
-
-
-
-
Reserves
Reserves
$
$
255,394
255,394
-
-
(24,863)
(24,863)
(24,863)
(24,863)
Accumulated
Accumulated
losses
losses
$
$
(25,590,744)
(25,590,744)
54,451
54,451
-
-
54,451
54,451
Total equity
Total equity
$
$
(25,309,053)
(25,309,053)
54,451
54,451
(24,863)
(24,863)
29,588
29,588
-
-
3,095
3,095
29,392
29,392
13,141
13,141
-
-
243,672
243,672
-
-
-
-
(25,536,293)
(25,536,293)
13,141
13,141
3,095
3,095
(25,263,229)
(25,263,229)
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
Consolidated
Consolidated
Balance at 1 July 2016
Balance at 1 July 2016
Loss after income tax expense for the year
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 17)
Contributions of equity, net of transaction costs (note 17)
Share-based payments (note 30)
Share-based payments (note 30)
Issue of shares on exercise of options in Audinate Pty Limited
Issue of shares on exercise of options in Audinate Pty Limited
Issue of shares as employee share gift
Issue of shares as employee share gift
Balance at 30 June 2017
Balance at 30 June 2017
Contributed
Contributed
capital
capital
$
$
29,392
29,392
-
-
-
-
-
-
63,035,050
63,035,050
-
-
138,126
138,126
59,024
59,024
63,261,592
63,261,592
Reserves
Reserves
$
$
243,672
243,672
-
-
(103,955)
(103,955)
(103,955)
(103,955)
Accumulated
Accumulated
losses
losses
$
$
(25,536,293)
(25,536,293)
(20,443,388)
(20,443,388)
-
-
(20,443,388)
(20,443,388)
Total equity
Total equity
$
$
(25,263,229)
(25,263,229)
(20,443,388)
(20,443,388)
(103,955)
(103,955)
(20,547,343)
(20,547,343)
-
-
162,849
162,849
-
-
-
-
302,566
302,566
-
-
-
-
-
-
-
-
(45,979,681)
(45,979,681)
63,035,050
63,035,050
162,849
162,849
138,126
138,126
59,024
59,024
17,584,477
17,584,477
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
22
22
ANNUAL REPORT 2017 25
Consolidated statement of changes in equityfor the year ended 30 June 2017
Audinate Group Limited
Consolidated statement of cash flows
Audinate Group Limited
For the year ended 30 June 2017
Consolidated statement of cash flows
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Cash flows from operating activities
Payments to suppliers and employees (inclusive of GST)
Receipts from customers (inclusive of GST)
Interest received
Payments to suppliers and employees (inclusive of GST)
Interest and other finance costs paid
Interest received
Research and development incentive received for research activities
Interest and other finance costs paid
Income taxes paid
Research and development incentive received for research activities
Income taxes paid
Net cash from operating activities
Net cash from operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Cash flows from investing activities
Payments for intangibles
Payments for property, plant and equipment
Research and development incentive received for development activities
Payments for intangibles
Research and development incentive received for development activities
Net cash used in investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cash flows from financing activities
Share issue transaction costs
Proceeds from issue of shares
Share issue transaction costs
Net cash from financing activities
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Note
Note
Consolidated
2016
2017
Consolidated
$
$
2017
2016
$
$
15,079,335
(14,407,491)
15,079,335
51,541
(14,407,491)
(1,562)
51,541
598,975
(1,562)
(80,440)
598,975
(80,440)
1,240,358
11,763,780
(11,471,959)
11,763,780
38,001
(11,471,959)
(402)
38,001
446,641
(402)
(11,751)
446,641
(11,751)
764,310
1,240,358
(138,903)
(2,307,518)
(138,903)
580,955
(2,307,518)
580,955
(1,865,466)
(1,865,466)
16,987,866
(777,000)
16,987,866
(777,000)
16,210,866
16,210,866
15,585,758
3,108,435
15,585,758
3,108,435
18,694,193
764,310
(212,123)
(1,434,911)
(212,123)
605,115
(1,434,911)
605,115
(1,041,919)
(1,041,919)
3,095
-
3,095
-
3,095
3,095
(274,514)
3,382,949
(274,514)
3,382,949
3,108,435
28
28
9
Cash and cash equivalents at the end of the financial year
18,694,193
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
9
3,108,435
Refer to note 2 for information on comparatives, which relate to Audinate Pty Limited and controlled entities.
The Company listed on the Australian Securities Exchange on 30 June 2017. Further cash of $4,062,354 was received
from issue of shares and $7,029,899 was paid to selling shareholders on 5 July 2017 (neither amount is included in the
The Company listed on the Australian Securities Exchange on 30 June 2017. Further cash of $4,062,354 was received
consolidated statement of cashflows above). Refer to note 31 for more details.
from issue of shares and $7,029,899 was paid to selling shareholders on 5 July 2017 (neither amount is included in the
consolidated statement of cashflows above). Refer to note 31 for more details.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
23
26 AUDINATE GROUP LIMITED
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
23
Consolidated statement of cash flowsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 1. General information
The financial statements cover Audinate Group Limited ('Company' or 'parent entity') as a consolidated entity consisting of
Audinate Group Limited and the entities it controlled ('Group') at the end of, or during, the year. The financial statements
are presented in Australian dollars, which is Audinate Group Limited's functional and presentation currency.
Audinate Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 1, 458 - 468 Wattle Street
Ultimo NSW 2007
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 21 August 2017. 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 and amended 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.
Basis of preparation
Acquisition of Audinate Pty Limited and comparative information
Effective 30 June 2017, Audinate Group Limited (the 'Company') acquired Audinate Pty Limited ('Audinate'). This
acquisition did not represent a business combination in accordance with AASB 3 'Business Combinations'. Instead the
appropriate accounting treatment for recognising the new group structure is on the basis that the transaction is a form of
capital reconstruction and group reorganisation.
Accordingly the financial statements are a continuation of Audinate with the following principals having being applied:
● retained earnings and other equity balances in the consolidated financial statements at acquisition date are those of
Audinate;
● the equity structure in the consolidated financial statements (the number and type of equity instruments issued) at the
date of the acquisition reflects the equity structure of Audinate, as well as the equity instruments issued by the
Company to affect the acquisition;
● no 'new' goodwill has been recognised as a result of the combination;
● the results for the financial year ended 30 June 2017 comprise the results for the entire year of Audinate and its
subsidiaries, together with the results of the Company for one day being 30 June 2017; and
● the comparative results represents the results of Audinate and its subsidiaries only.
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB'), as appropriate for for-profit oriented entities.
These financial statements also comply with International Financial Reporting Standards ('IFRS') as issued by the
International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for redeemable preference
shares which were measured at fair value.
24
ANNUAL REPORT 2017 27
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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
These financial statements present the results of the Group only. Supplementary information about the parent entity is
disclosed in note 29.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Audinate Group Limited as
at 30 June 2017 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.
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
The financial statements are presented in Australian dollars, which is Audinate Group Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed.
28 AUDINATE GROUP LIMITED
25
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Sales revenue
Sales revenue includes sale of goods and licence fee revenue.
Sale of goods revenue is recognised at the point of sale, when the risks and rewards are transferred to the customer and
there is a valid sales contract. Amounts disclosed as revenue are net of sales returns and trade discounts.
Revenue from licence fees, on software sales, is recognised on the transferring of significant risk and rewards of the
software which normally incurs when the customer has access to the software.
Unearned revenue represents amounts received from customers in advance of the services to be provided. They are
recognised as unearned revenue in the statement of financial position and transferred to profit or loss when the support
and maintenance services have been provided.
Government grants including research and development incentives
Government grants and the research and development incentives are recognised when there is reasonable assurance that
the entity will comply with the conditions attaching to them and the grants will be received. Government grants are
recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related
costs for which the grants are intended to compensate.
The total research and development tax incentive receivable is apportioned between other income and the development
asset based on the split of expenditure in the claim.
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.
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.
26
ANNUAL REPORT 2017 29
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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.
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 financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 90 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Raw materials and finished goods are stated at the lower of cost and net realisable value on a 'weighted average cost'
basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate
proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable,
transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates
and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
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.
30 AUDINATE GROUP LIMITED
27
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
over their expected useful lives as follows:
Leasehold improvements
Furniture and fittings
Computer and engineering equipment
Lease term
4 - 10 years
1 - 10 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
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.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets 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.
Research and development
Research costs are expensed in the period in which they are incurred. 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, commencing from the time the asset's development reaches the
condition necessary for it to be capable of operation in the manner intended by management. Amortisation is calculated on
a straight-line basis over the period of their expected benefit, being their finite useful life of three years.
Intellectual property
Significant costs associated with intellectual property are deferred and not amortised. Intellectual property has an indefinite
life and is tested for impairment annually. The assessment of indefinite life is reviewed annually to determine whether the
indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective
basis.
Impairment of non-financial assets
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.
28
ANNUAL REPORT 2017 31
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Trade and other payables
These amounts 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.
Redeemable preference shares
Preference shares which are redeemable at the option of the noteholder are classified as a liability in the statement of
financial position. Due to the operability of the anti-dilution clauses in the preference shareholder agreements, the
preference shares are considered to include a derivative liability. As such the preference shares are considered to
represent a liability with an equity conversion option derivative with the entire instrument being accounted for at fair value
through profit or loss.
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 at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined
contribution plans are recognised as an employee related cost in profit or loss when they are due.
Share-based payments
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.
32 AUDINATE GROUP LIMITED
29
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Audinate Group Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
30
ANNUAL REPORT 2017 33
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 2017. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace AASB 139 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The Group will adopt this standard from 1 July 2018. It is not expected to significantly impact the financial
statements on the basis that the main financial assets recognised represent cash and cash equivalent and trade
receivables that do not carry a significant financing component and involve a single cash flow representing the repayment
of principal, which in the case of trade receivables is the transaction price. Both asset classes will continue to be measured
at face value. Other financial asset classes are not material to the Group. Financial liabilities of the Group are not impacted
as the Group does not carry them at fair value. and the impact of its adoption will be minimal.
34 AUDINATE GROUP LIMITED
31
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will
adopt this standard from 1 July 2018. It is not expected to significantly impact the financial statements on the basis that
most of the Group's revenue is recognised at the time of transfer of goods and services to customer which represents the
satisfaction of the primary performance obligation.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and
Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit
or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into
both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting,
the standard does not substantially change how a lessor accounts for leases. Had the standard been adopted from 1 July
2017, and using the transitional rules available, the Group would have recognised a lease liability, being the present value
of the lease commitments as disclosed in note 24 discounted using the Group’s incremental borrowing rate, with a
corresponding increase in property, plant and equipment. However, the Group will adopt this standard from 1 July 2019
and the actual impact will depend on the operating lease assets held by the Group as at 1 July 2019 and the transitional
elections made at that time.
Other amending accounting standards
Other amending accounting standards issued are not considered to have a significant impact on the financial statements of
the Group as their amendments provide either clarification of existing accounting treatment or editorial amendments.
32
ANNUAL REPORT 2017 35
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
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. 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.
Accounting for the corporate reorganisation prior to Initial Public Offering (‘IPO’)
During the financial year, a corporate reorganisation took place in preparation of the listing of the Group on the Australian
Securities Exchange. This resulted in a newly incorporated company, Audinate Group Limited becoming the legal parent of
the Group, conditional on the IPO completing. The directors elected to account for the restructure as a capital
reconstruction and group reorganisation rather than a business combination. In the directors’ judgement, the continuation
of the existing accounting values most appropriately reflects the substance of the internal restructure. As such, the
consolidated financial statements of the Group have been presented as a continuation of the pre-existing accounting
values of assets and liabilities of the consolidated financial statements of Audinate Pty Limited.
In adopting this approach, the directors note that there is an alternate view that such a restructure conditional on the IPO
completing should be accounted for as a business combination that follows the legal structure of Audinate Group Limited
being the acquirer. An IASB project on accounting for common control transactions is likely to address such restructures in
the future. However, the precise nature of any new requirements and the timing of these are uncertain. In any event,
history indicates that any potential changes are unlikely to require retrospective amendments to the financial statements.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Useful life of capitalised development costs
The Group regularly considers the useful life of development costs, which is currently estimated to be three years. In
determining the appropriate useful life for these assets a range of factors are taken into account including the specific
nature of the asset created, risk of technical obsolescence, business performance and market conditions. To the extent
that there is a change to the useful life of these assets (not related to impairment) the amortisation charge is changed
prospectively.
Note 4. Operating segments
Identification of reportable operating segments
The Group operates in one segment, 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.
As a result, the operating segment information is as disclosed in the statements and notes to the financial statements
throughout the report.
Major customers
Most of the Group’s major customers are multinational companies that Audinate may transact with in multiple countries.
Due to the corporate structure of the Group this revenue is accounted for by Audinate Pty Limited in Australia. The top ten
customers represent approximately 52% (2016: 52%) of the Group’s revenue during the year ended 30 June 2017 and of
that amount the largest customer represents approximately 23% (2016: 22%) of the Group’s revenue.
36 AUDINATE GROUP LIMITED
33
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 4. Operating segments (continued)
Geographical information
Australia
United Kingdom
Hong Kong
United States of America
Sales to external customers
Geographical non-current
assets
2017
$
2016
$
2017
$
2016
$
14,939,667
-
-
123,178
11,595,756
84,432
-
223,264
2,275,099
12,098
1,671
77,329
1,531,058
13,477
3,920
43,959
15,062,845
11,903,452
2,366,197
1,592,414
The majority of the Group's revenue is generated from sales contracts between Audinate Pty Limited and a range of
international companies. The geographic split of this revenue is: a) Americas (38%); b) Asia (33%); and c) Europe and
Middle East (29%). Occasionally the international offices may generate some revenue related to marketing activities.
Note 5. Expenses
Profit/(loss) before income tax includes the following specific expenses:
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangibles
Total depreciation and amortisation
Rental expense relating to operating leases
Minimum lease payments
Employee benefit expenses
Salaries and wages
Superannuation
Share-based payments
Other costs
Total employee benefit expenses
Consolidated
2017
$
2016
$
103,326
985,661
85,461
541,704
1,088,987
627,165
366,287
286,745
6,162,134
428,203
67,443
631,922
5,025,767
312,915
13,141
533,063
7,289,702
5,884,886
Share-based payment amount excludes the expense for the accelerated vesting of options which amounted to $95,406
and was classified as an IPO expense.
Note 6. Other income
Net foreign exchange gain/(loss)
Research and development incentive
Interest revenue
Consolidated
2017
$
2016
$
(219,972)
320,982
51,541
146,317
573,813
38,001
152,551
758,131
ANNUAL REPORT 2017 37
34
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 7. Income tax expense
The Group incurs an income tax expense in its overseas subsidiaries relating to the net taxable profit generated on
services provided to the Group.
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit/(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:
Conversion of redeemable preference shares
Expenditure claimed for research and development incentive
Other non-assessable items
Utilisation of prior period losses
Reduction in current period research and development incentive
Income tax payable in respect of foreign subsidiaries
Income tax expense
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit @ 30%
Consolidated
2017
$
2016
$
(20,395,414)
66,202
(6,118,624)
19,861
5,564,337
993,063
478,291
(376,373)
(540,694)
-
838,800
(441,466)
(417,195)
-
-
47,974
-
11,751
47,974
11,751
Consolidated
2017
$
2016
$
-
-
1,254,577
376,373
Australian losses can be carried forward indefinitely. The benefit will only be obtained if: (a) the Group derives future
foreseeable income to utilise the losses; (b) the Group continues to satisfy the conditions for deductibility impose by law;
and (c) there are no changes in tax legislation which adversely impact the Group's ability to realise the benefit from the
deduction for the losses.
Note 8. Earnings per share
Consolidated
2017
$
2016
$
Profit/(loss) after income tax attributable to the owners of Audinate Group Limited
(20,443,388)
54,451
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Redeemable preference shares
Number
Number
3,564,389
3,079,271
-
-
7,711,243
35,302,297
Weighted average number of ordinary shares used in calculating diluted earnings per share
3,564,389
46,092,811
38 AUDINATE GROUP LIMITED
35
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 8. Earnings per share (continued)
Basic earnings per share
Diluted earnings per share
Cents
Cents
(573.55)
(573.55)
1.77
0.12
The weighted average number of ordinary shares, options over ordinary shares and redeemable preference shares for the
comparative period have been adjusted to give effect to the capital reconstruction and group reorganisation which occurred
during the financial year.
3,265,042 options over ordinary shares and the impact of preference shares during the current period have been excluded
from the current period calculation of the weighted average number of ordinary shares used in calculating diluted earnings
per share as they are anti-dilutive.
Note 9. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Note 10. Current assets - trade and other receivables
Trade receivables
Other receivables
Impairment of receivables
Movements in the provision for impairment of receivables are as follows:
Opening balance
Unused amounts reversed
Closing balance
Consolidated
2017
$
2016
$
17,138,351
1,555,842
1,577,703
1,530,732
18,694,193
3,108,435
Consolidated
2017
$
2016
$
1,717,594
312,533
1,822,874
92,318
2,030,127
1,915,192
Consolidated
2017
$
2016
$
-
-
-
102,763
(102,763)
-
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $16,320 as at 30 June
2017 ($42,766 as at 30 June 2016).
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on
recent collection practices.
36
ANNUAL REPORT 2017 39
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 10. Current assets - trade and other receivables (continued)
The ageing of the past due but not impaired receivables are as follows:
3 to 6 months overdue
Note 11. Current assets - inventories
Raw materials - at cost
Finished goods - at cost
Note 12. Current assets - other assets
Prepayments
Deposits
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Furniture and fittings - at cost
Less: Accumulated depreciation
Computer and engineering equipment - at cost
Less: Accumulated depreciation
40 AUDINATE GROUP LIMITED
37
Consolidated
2017
$
2016
$
16,320
42,766
Consolidated
2017
$
2016
$
345,456
421,559
249,642
205,397
767,015
455,039
Consolidated
2017
$
2016
$
140,940
105,406
46,159
99,239
246,346
145,398
Consolidated
2017
$
2016
$
175,711
(55,118)
120,593
67,385
(18,402)
48,983
117,394
(11,707)
105,687
31,593
(15,643)
15,950
607,872
(412,001)
195,871
540,076
(338,167)
201,909
365,447
323,546
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 13. Non-current assets - property, plant and equipment (continued)
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 2015
Additions
Depreciation expense
Balance at 30 June 2016
Additions
Depreciation expense
Balance at 30 June 2017
Note 14. Non-current assets - intangibles
Development costs
Less: Accumulated amortisation
Intellectual property
Less: Accumulated amortisation
Leasehold
improvements
$
Furniture and
fittings
$
Computer and
engineering
equipment
$
-
117,394
(11,707)
105,687
40,065
(25,159)
18,076
413
(2,539)
15,950
35,882
(2,849)
178,808
94,316
(71,215)
201,909
69,280
(75,318)
Total
$
196,884
212,123
(85,461)
323,546
145,227
(103,326)
120,593
48,983
195,871
365,447
Consolidated
2017
$
2016
$
3,762,932
(1,860,206)
1,902,726
2,158,402
(893,380)
1,265,022
116,860
(18,836)
98,024
3,846
-
3,846
2,000,750
1,268,868
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 2015
Additions*
Amortisation expense
Balance at 30 June 2016
Additions*
Amortisation expense
Balance at 30 June 2017
Development
costs
$
Intellectual
property
$
Total
$
976,930
829,796
(541,704)
1,265,022
1,604,529
(966,825)
3,846
-
-
980,776
829,796
(541,704)
3,846
113,014
(18,836)
1,268,868
1,717,543
(985,661)
1,902,726
98,024
2,000,750
*
Net of research and development incentive received for development activities.
38
ANNUAL REPORT 2017 41
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 15. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Other payables
Refer to note 20 for further information on financial instruments.
Note 16. Current liabilities - redeemable preference shares
Redeemable preference shares
Consolidated
2017
$
2016
$
734,529
1,561,711
261,574
625,676
35,219
96,083
2,557,814
756,978
Consolidated
2017
$
2016
$
-
31,550,905
Preference shares which were redeemable at the option of the noteholder are classified as a liability in the statement of
financial position. Due to the operability of the anti-dilution clauses in the preference shareholder agreements, the
preference shares were considered to include a derivative liability. As such the preference shares were considered to
represent a liability with an equity conversion option derivative with the entire instrument being accounted for at fair value
through profit or loss.
The preference shares converted into ordinary shares in the Company on the date of the IPO. The accounting treatment of
the CRPS at conversion required an expense to be recorded, amounting to $18,547,790, for the difference in carrying
value of the CRPS and the fair value of shares in the Company at settlement.
Note 17. Equity - contributed capital
The share capital dollar value represents the continuation of Audinate Pty Limited ('Audinate'). The number of shares on
issue reflect those of Audinate Group Limited (the 'Company'). Refer to note 2 'Basis of preparation' for further details of
the accounting principles applied.
Fully paid ordinary shares
Ordinary shares - fully paid
59,513,513
1,549,303
63,261,592
29,392
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
42 AUDINATE GROUP LIMITED
39
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 17. Equity - contributed capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
1 July 2015
24 July 2015
8 September 2015
9 September 2015
1 June 2016
30 June 2016
29 November 2016
29 November 2016
11 May 2017
2 June 2017
Balance
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
Issue of shares in Audinate - exercise of options
Conversion of shares on group reorganisation - two
shares in the Company for each existing share in
Audinate
Issue of shares in the Company - conversion of
30 June 2017
convertible redeemable preference shares
Issue of shares in the Company - employee gift offer 30 June 2017
Issue of shares in the Company - IPO
30 June 2017
Share issue costs
30 June 2017
1,509,095
12,500
18,750
3,958
5,000
1,549,303
5,000
7,083
45,000
1,856,221
$0.072
$0.072
$0.124
$0.072
$0.072
$0.124
$0.072
$0.072
26,297
894
1,350
491
360
29,392
360
878
3,240
133,648
3,462,607
$0.000
-
41,064,509
48,380
11,475,410
-
$1.220
$1.220
$1.220
$0.000
50,098,701
59,024
14,000,000
(1,063,651)
Balance
30 June 2017
59,513,513
63,261,592
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
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.
40
ANNUAL REPORT 2017 43
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 18. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Consolidated
2017
$
2016
$
(88,744)
391,310
15,211
228,461
302,566
243,672
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars.
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 2015
Foreign currency translation
Share-based payments
Balance at 30 June 2016
Foreign currency translation
Share-based payments
Balance at 30 June 2017
Note 19. Equity - dividends
Foreign
currency
$
Share-based
payments
$
40,074
(24,863)
-
15,211
(103,955)
-
215,320
-
13,141
228,461
-
162,849
Total
$
255,394
(24,863)
13,141
243,672
(103,955)
162,849
(88,744)
391,310
302,566
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 20. 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 seeks to minimise potential
adverse effects on the financial performance of the Group.
The Group's policy is not to trade in or use financial instruments to hedge it's risks.
Risk management is carried out by the Board of Directors ('the Board'). The Board uses different methods to measure
different types of risks to which the Group is exposed. These methods include ageing analysis for credit risk and sensitivity
analysis in the case of interest rate risk.
Market risk
Foreign currency risk
The Group's US dollar denominated sales for the year ended 30 June 2017 was approximately US$11.2 million (2016:
US$8.9 million) on which the risk of foreign exchange movement was partially offset against exchange rate movement of
US dollar denominated for purchases of approximately US$7.2 million (2016: US$5.5 million).
44 AUDINATE GROUP LIMITED
41
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 20. Financial instruments (continued)
Interest rate risk
At the reporting date, the Group had no variable rate borrowings. Cash at bank earns interest at floating rates based on
daily bank deposit rates.
As at the reporting date, the Group had the following variable rate cash and cash equivalents:
Consolidated
Cash at bank
Cash on deposit
2017
2016
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$
Balance
$
-
2.50%
17,138,351
1,555,842
-
2.86%
1,577,703
1,530,732
Net exposure to cash flow interest rate risk
18,694,193
3,108,435
No sensitivity analysis has been performed for the exposure to interest rate risk on the Group's bank balance as the
exposure is not significant.
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 trades only with recognised and creditworthy independent third parties. The Group has a strict code of credit,
including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group
monitors the receivables on an ongoing basis and its exposure to bad debts is not significant.
There is no significant concentration of credit risk as the Group’s trade receivables are spread over a number of diversified
customers. The Group does not hold any collateral or other credit enhancements over these balances.
The Group's bank balance are deposited with creditworthy banks with no recent history of default.
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.
Liquidity risk
Prudent liquidity risk management 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.
42
ANNUAL REPORT 2017 45
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 20. Financial instruments (continued)
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.
Consolidated - 2017
Non-interest bearing
Trade payables
Other payables
Payable to selling shareholders
Total non-derivatives
Consolidated - 2016
Non-interest bearing
Trade payables
Other payables
Redeemable preference
shares*
Total non-derivatives
Weighted
average
interest rate 1 year or less
%
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
734,529
261,574
7,029,899
8,026,002
-
-
-
-
-
-
-
-
-
-
-
-
734,529
261,574
7,029,899
8,026,002
Weighted
average
interest rate 1 year or less
%
$
Between 1
and 2 years
$
Between 2
and 5 years Over 5 years
$
$
Remaining
contractual
maturities
$
-
-
-
625,676
96,083
22,242,164
22,963,923
-
-
-
-
-
-
-
-
-
-
-
-
625,676
96,083
22,242,164
22,963,923
*
The amount included in the tables above for preference shares represents the amount the preference shareholders
would receive if the preference shares were redeemed at their discretion. These preference shares were revalued
during the year as described in note 16.
The cash flows in the maturity analysis above are not expected to occur earlier than contractually disclosed above.
Note 21. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2016
Liabilities
Redeemable preference shares
Total liabilities
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
31,550,905
31,550,905
-
-
31,550,905
31,550,905
There were no transfers between levels during the financial year. There were no amounts at fair value as at 30 June 2017.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
46 AUDINATE GROUP LIMITED
43
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 21. Fair value measurement (continued)
Valuation techniques for fair value measurements categorised within level 2
Redeemable preference shares were valued based on the capital raising of $1.59 per preference share that occurred on
18 January 2012. The value of $1.59 per preference share as at 30 June 2016 was supported by subsequent valuations of
the Group provided by external valuers.
Note 22. 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:
Audit services - Deloitte Touche Tohmatsu
Audit or review of the financial statements
Other services - Deloitte Touche Tohmatsu
Investigating accountant services
Additional accounting and tax advice
Note 23. Contingent liabilities
The Group had no contingent liabilities at 30 June 2017 and 30 June 2016.
Note 24. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Consolidated
2017
$
2016
$
100,000
26,280
235,000
120,000
355,000
-
-
-
455,000
26,280
Consolidated
2017
$
2016
$
368,539
1,126,145
397,818
1,774,618
1,494,684
2,172,436
Operating lease commitments includes contracted amounts for offices. The leases have various escalation clauses. On
renewal, the terms of the leases may be renegotiated.
44
ANNUAL REPORT 2017 47
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 25. 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
Share-based payments
Note 26. Related party transactions
Parent entity
Audinate Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Consolidated
2017
$
2016
$
1,058,746
29,926
84,341
1,100,446
40,546
7,127
1,173,013
1,148,119
Key management personnel
Disclosures relating to key management personnel are set out in note 25 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.
Loans to/from related parties
As described in the directors' report, Audinate Pty Limited offered employees interest bearing, non-recourse loans in order
to fund the exercise of options prior to the IPO. The total value of the loans outstanding at 30 June 2017 was $117,953
(2016: $nil).
There were no other loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
48 AUDINATE GROUP LIMITED
45
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 27. 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
Audinate Pty Limited
Audinate, Inc.
Audinate Limited
Audinate Limited
Audinate Holdings Limited
Principal place of business /
Country of incorporation
Australia
United States of America
United Kingdom
Hong Kong
Australia
Ownership
interest
2017
%
100%
100%
100%
100%
100%
At 30 June 2016 Audinate Pty Limited was the parent entity and owned 100% of Audinate, Inc., Audinate Limited (United
Kingdom) and Audinate Limited (Hong Kong).
Note 28. Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax expense for the year
(20,443,388)
54,451
Consolidated
2017
$
2016
$
Adjustments for:
Depreciation and amortisation
Reversal of impairment of receivables
Fair value on redeemable preference shares
Share-based payments
Employee gift shares
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Increase in research and development incentive
Decrease/(increase) in prepayments
Increase in trade and other payables
Increase in provisions
Net cash from operating activities
Note 29. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
1,088,987
-
18,547,790
162,849
59,024
627,165
(102,763)
-
13,141
-
51,490
(345,962)
(298,065)
(46,880)
1,393,838
1,070,675
(338,658)
(7,390)
(127,169)
40,057
359,770
245,706
1,240,358
764,310
Parent
2017
$
2016
$
(1,694,328)
(1,694,328)
-
-
46
ANNUAL REPORT 2017 49
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 29. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed capital
Accumulated losses
Total equity
Parent
2017
$
2016
$
21,029,899
79,636,384
9,787,878
9,787,878
71,542,834
(1,694,328)
69,848,506
-
-
-
-
-
-
-
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 2017.
Parent entity information
Parent entity financial information relates to Audinate Group Limited. The Company was incorporated on 19 April 2017 and
the information presented is for the period from 19 April 2017 to 30 June 2017. Therefore there is no comparative
information.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017.
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 except for the
investment in Audinate Pty Limited which is held at fair value as part of the Group reorganisation.
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 30. Share-based payments
Options
Under the Employee Share Option Plan ('ESOP'), the Company’s Board of Directors ('Board'), or a committee of the Board,
may grant incentive and non-qualified stock options to employees, officers, directors, consultants, independent contractors,
and advisors to the Company, or to any parent, subsidiary, or affiliate of the Company. The purpose of the ESOP is to
attract, retain, and motivate eligible persons whose present and potential contributions are important to the Group’s
success by offering them an opportunity to participate in the Company’s future performance through equity awards of stock
options and stock bonuses.
50 AUDINATE GROUP LIMITED
47
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 30. Share-based payments (continued)
Set out below are summaries of options granted under the plan:
2017
Start date
End date
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
30/06/2017
23/11/2018
17/10/2019
09/12/2019
09/01/2020
21/08/2020
09/12/2020
11/06/2022
23/08/2022
31/01/2023
03/04/2023
Exercise
price
Balance at
the start of
the year
Granted*
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.036
$0.062
$0.062
$0.062
$0.062
$0.062
$0.260
$0.260
$0.260
$0.260
-
-
-
-
-
-
-
-
-
-
-
36,000
913,042
40,000
10,000
58,000
460,000
188,000
740,000
770,000
50,000
3,265,042
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,000
913,042
40,000
10,000
58,000
460,000
188,000
740,000
770,000
50,000
3,265,042
*
The options over shares in Audinate Pty Ltd were cancelled in exchange for options in the Company under the
restructure.
2016
Start date
End date
01/07/2015
01/07/2015
01/07/2015
30/06/2016
30/06/2016
30/06/2016
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.072
$0.124
$0.520
3,175,720
736,521
-
3,912,241
-
-
99,000
99,000
(36,250)
(3,958)
-
(40,208)
(18,750)
(18,042)
-
(36,792)
3,120,720
714,521
99,000
3,934,241
Weighted average exercise price
$0.082
$0.520
$0.077
$0.098
$0.093
3,265,042 options were exercisable at the end of the financial year (2016: 2,909,612).
The table above sets out the options outstanding in Audinate Pty Limited at 30 June 2016. As a part of the restructure that
occurred as a part of the IPO at 30 June 2017 the outstanding options in Audinate Pty Limited were exchanged on 1:2
basis for options in the Company (as explained in the prospectus).
During the financial year, Audinate Pty Ltd issued 780,000 options which were exchanged (on a 1:2 basis) for options in
Audinate Group Limited when the restructure took place at the time of the IPO on 30 June 2017. These options were
issued on multiple dates using the prevailing risk free rate. The other valuation inputs used were share price (41c), strike
price (52c) and volatility 51%. The fair value of the options based on these inputs was 18.4c.
Share Rights
Set out below are summaries of performance rights granted under the plan:
2017
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
30/06/2017
30/06/2022
$0.000
-
-
1,038,509
1,038,509
-
-
-
-
1,038,509
1,038,509
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 4
years (2016: not applicable).
48
ANNUAL REPORT 2017 51
Audinate Group Limited
Notes to the consolidated financial statements
30 June 2017
Note 30. Share-based payments (continued)
The performance rights issued on 30 June 2017 were valued based on a share price of $1.22, a strike price of zero,
volatility of 51%, a risk free interest rate of 2.63% and probability weighting reflecting the probability of meeting the vesting
conditions. The fair value of the share rights based on these inputs is 81c.
Note 31. Events after the reporting period
Audinate Group Limited listed on the Australian Securities Exchange on 30 June 2017. As part of the listing process
holders of CRPS sold shares, amounting to $7,029,899, to new shareholders. Consequently the Group shows a liability for
this amount at 30 June 2017, offset by a receivable of $4,062,354 with the balance of $2,967,545 included in cash at bank.
Subsequent to the end of the financial year the full proceeds of the IPO were received and $7,029,899 was paid to the
selling shareholders on 5 July 2017.
No other matter or circumstance has arisen since 30 June 2017 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.
52 AUDINATE GROUP LIMITED
49
Notes to financial statementsfor the year ended 30 June 2017
Audinate Group Limited
Directors' declaration
30 June 2017
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Accounting Standards 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
2017 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.
On behalf of the directors
___________________________
David Krall
Chairman
21 August 2017
Sydney
50
ANNUAL REPORT 2017 53
Directors’ declarationfor the year ended 30 June 2017
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney, NSW, 2000
Australia
Phone: +61 2 9322 7000
www.deloitte.com.au
Independent Auditor’s Report to the members of
Audinate Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Audinate Group Limited (the “Company”) and its subsidiaries (the
“Group”) which comprises the consolidated statement of financial position as at 30 June 2017, 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 a summary of significant accounting policies 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:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section
of our report. We are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
51
54 AUDINATE GROUP LIMITED
Independent auditor’s report
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.
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Derecognition of redeemable
preference shares
The Group’s capital structure included preference
shares which were redeemable at the option of the
noteholder and were classified as a liability in the
Statement of Financial Position as disclosed in note
16.
The preference shares were revalued at the date of
conversion based on the value of the ordinary
shares issued at Initial Public Offering and resulted
in a charge to the income statement for the full year
of $18.6 million.
Group reorganisation
To facilitate the Initial Public Offering there was a
reorganisation of the legal corporate structure as
disclosed in note 17.
The restructure is considered to be a capital
reorganisation that was accounted
for as a
continuation of the equity structure of Audinate Pty
Ltd as well as the equity instruments issued to affect
the acquisition. As part of the reorganisation
significant transaction costs were incurred.
is
required
Judgement
the
accounting treatment for the reorganisation as well
as any related costs to ensure compliance with the
relevant accounting standards.
in determining
Our procedures included, but were not limited to:
Agreeing total pre-converted preference shares to
preference share agreements;
Recalculating the change in the fair value of the
redeemable preference shares of $18.6 million
with reference to the Initial Public Offering price
of $1.22 per share; and
Agreeing total converted shares to the share
register.
We also assessed the appropriateness of the
disclosures in Note 16 to the financial statements.
Our procedures included, but were not limited to;
Reviewing the underlying legal documents that
facilitated
Initial Public Offering and
understanding the substance and legal form of the
reorganisation;
the
Evaluating management’s application of the
relevant Accounting Standards pertaining to the
reorganisation and ensuring the appropriateness
of the accounting treatment; and
Challenging the rationale management have used
to allocate capital raising costs to either equity or
expenses.
We also assessed the appropriateness of the
disclosures in Note 17 to the financial statements.
52
ANNUAL REPORT 2017 55
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Directors’ Report and ASX Additional Information, which we obtained prior to the date of this
auditor’s report, the other information also includes the annual report (but does not include the financial report
and our auditor’s report thereon) which is expected to be made available to us after that date.
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 on the other information that we obtained prior to the date of this
auditor’s report, 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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required
to communicate the matter to the directors and use our professional judgement to determine the appropriate
action.
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.
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 internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
56 AUDINATE GROUP LIMITED
53
Independent auditor’s report
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 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, related safeguards.
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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 11 to 19 of the Directors’ Report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Audinate Group Limited, for the year ended 30 June 2017, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on
the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Joshua Tanchel
Partner
Chartered Accountants
Sydney, 21 August 2017
54
ANNUAL REPORT 2017 57
SHAREHOLDER INFORMATION AS AT 14 SEPTEMBER 2017
Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not disclosed elsewhere in the
Report is set out below.
Substantial shareholders
The number of securities held by substantial shareholders and their associates, as advised to the Company and the ASX, are set out
below:
Name
Starfish Ventures Pty Ltd as responsible entity of the Starfish Pre–Seed Fund, Starfish Ventures Pty Ltd
as trustee of the IIFF Trust, John Dyson & Trudie Horsfall as trustees of the Trujon Family Trust,
and Michael Panaccio & Christina Panaccio as trustees of the Micana Family Trust
Innovation Capital Fund II, LP
Yamaha Corporation
Telstra Super Pty Ltd as trustee for Telstra Superannuation Scheme (Telstra Super)
Number of security holders and securities on issue
Audinate Group Limited has issued the following securities:
a. 56,787,843 quoted fully paid ordinary shares held by 349 shareholders;
b. 3,941,446 unquoted restricted fully paid ordinary securities held by 3 shareholders;
c. 1,939,842 unlisted options held by 45 option holders; and
d. 3,033,509 unlisted performance rights held by 22 performance right holders.
Number
%
12,255,799
20.59
10,862,208
6,289,308
5,696,722
18.25
10.57
9.57
Voting rights
The voting rights attached to ordinary shares are that on a show of hands, every member present, in person or proxy, has one vote
and upon a poll, each share shall have one vote for each share held.
Option holders and performance right holders do not have any voting rights on the options and rights held by them.
Distribution of security holders
a. Quoted securities
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
58 AUDINATE GROUP LIMITED
Fully Paid Ordinary shares
Holders
Shares
%
0.06
0.49
1.05
4.68
31,685
280,019
597,674
2,658,475
63
96
71
89
30
53,219,990
93.72
349
56,787,843
100.00
Shareholder information b. Unquoted securities
The Company has issued 3,941,446 restricted fully paid ordinary shares to 3 holders. For the purposes of ASX Listing Rule 4.10.7
each holder holds more than 100,001 restricted shares.
The distribution of holders of the Company’s options and performance rights are as follows:
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
3,033,509
100.00
Performance Rights
Holders
Rights
0
0
0
592,157
2,441,352
0
14,000
192,000
578,000
1,144,042
0
0
0
20
2
22
0
3
21
16
5
45
Options
Holders
Options
%
0.00
0.00
0.00
19.52
80.48
%
0
0.73
9.95
29.97
59.31
1,928,842
100.00
Unmarketable parcel of shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 13 based on Audinate Group Limited’s closing
share price of $2.03, on 14 September 2017.
ANNUAL REPORT 2017 59
Twenty largest shareholders of quoted equity securities
Details of the 20 largest shareholders by registered shareholding are:
No. Name
1
2
Innovation Capital Fund II LP
JP Morgan Nominees Australia Limited
3.
Starfish Ventures Pty Ltd
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