More annual reports from Audio Pixels Holdings Limited:
2023 ReportAudio Pixels Holdings Limited
ACN 094 384 273
www.audiopixels.com.au
2017
AnnUAL RePoRt
CORPORATE DIRECTORY
Directors
Fred Bart (Chairman)
Ian Dennis
Cheryl Bart AO
Company secretary
Ian Dennis
Registered off ice
Israel Corporate off ice
Suite 3, Level 12
75 Elizabeth Street
SYDNEY NSW 2000
Australia
3 Pekris Street
Rehovot
ISRAEL 76702
Telephone: +61 2 9233 3915
Facsimile: +61 2 9232 3411
Email:
iandennis@audiopixels.com.au
Telephone: + 972 73 232 4444
+ 972 73 232 4455
Facsimile:
danny@audiopixels.com
Email:
Bankers
St George Bank
200 Barangaroo Avenue
Barangaroo
SYDNEY NSW 2000
Australia
Website
www.audiopixels.com.au
Auditor
Deloitte Touche Tohmatsu
Chartered Accountants
Brindabella Circuit
Brindabella Business Park
Canberra Airport ACT 2609
Australia
share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
GPO Box 7045
Sydney NSW 1115
Australia
Telephone: 1300 855 080 or
Facsimile:
+61 3 9415 5000 outside Australia
1300 137 341
4892 Designed and Produced by RDA Creative www.rda.com.au
Contents
2
9
10
Directors’ Report
Auditor’s Independence Declaration
Independent Audit Report
15 Directors’ Declaration
16
Consolidated Statement of Profit or Loss and Other Comprehensive Income
18 Consolidated Statement of Financial Position
19 Consolidated Statement of Changes in Equity
20 Consolidated Statement of Cash Flows
21 Notes To and Forming Part of the Financial Statements
47 ASX Additional Information
48 Twenty Largest Ordinary Shareholders
1
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
The Directors of Audio Pixels Holdings Limited submit herewith the financial report of the company for the financial year
ended 31 December 2017. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:
The names and particulars of the directors of the company during or since the end of the financial year are:
name
Fred Bart
Ian Dennis
Cheryl Bart
AO
Particulars
Chairman and Chief Executive Officer. A director since 5 September 2000. He has been Chairman
and Managing Director of numerous private companies since 1980, specialising in manufacturing,
property and marketable securities. Mr Bart is also Chairman of Immunovative Therapies Limited,
an Israeli company involved in the manufacture of cancer vaccines for the treatment of most
forms of cancer. He is a member of the Audit Committee and a member of the Nomination and
Remuneration Committee.
Non‑executive director and Company Secretary. Ian is a chartered accountant with experience
as director and secretary in various public listed and unlisted technology companies. He has
been involved in the investment banking industry and stockbroking industry for the past thirty
years. Prior to that, Ian was with KPMG, Chartered Accountants in Sydney. Appointed to the
Board on 5 September 2000. He is a member of the Audit Committee and Nomination and
Remuneration Committee.
Non‑executive director. Appointed to the Board on 26 November 2001. Cheryl Bart is a lawyer and
company director. She is non‑executive director of SG Fleet Australia Limited, ME Bank, Invictus
Games Sydney 2018, Prince’s Trust Australia, Football Federation of Australia (FFA), Ted X Sydney and
the Australian Himalayan Foundation. She is immediate past director of ABC (Australian Broadcasting
Corporation), SA Power Networks (formerly ETSA Utilities), Spark Infrastructure Limited, and the Local
Organising Committee of the 2015 Australian Asian Cup. She is a fellow of the Australian Institute
of Company Directors, Patron of SportsConnect and a member of Chief Executive Women. She is a
member of the Audit Committee and a member of the Nominations and Remuneration Committee.
Directorships of Other Listed Companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are
as follows:
name
Fred Bart
Ian Dennis
Cheryl Bart
Company
Electro Optic Systems Holdings Limited
Electro Optic Systems Holdings Limited
Spark Infrastructure Group Limited
SG Fleet Australia Limited
Principal Activities
Period of directorship
Since May 2000
Since May 2000
November 2005 to May 2015
Since February 2014
The principal activity of the Company is an investment in Audio Pixels Limited of Israel. Audio Pixels Limited is engaged in
the development of digital speakers.
Results
The net loss for the financial year ended to 31 December 2017 was $5,914,957 (31 December 2016 ‑ $5,054,771).
Dividends
The directors recommend that no dividend be paid and no amount has been paid or declared by way of dividend since the
end of the previous financial year and up to the date of this report.
2
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Review of Operations
During the reporting period there were no significant
changes in the nature of the company’s principal
activities which were predominately focused on the
refinement of the fabrication processes required to mass
produce a commercial version of the Company’s proven
groundbreaking Micro Electro Mechanical Structures
(“MEMS”) based digital loudspeaker.
Audio Pixels is a world leader in the digital transformation
of sound reproduction; combining the emergence of
a multibillion‑dollar MEMS device industry together
with the multibillion‑dollar loudspeaker market that has
over the course of a century become an indispensable
fixture of daily life throughout a myriad of industries
and applications.
The Company’s primary efforts remained focused on
commercialising its ground breaking MEMS based
digital sound wave transducer platform into an industry
compliant microchip that will propel audio loudspeakers,
systems and ultrasonic sensors from their century old
analog origins into the advanced digital era of today.
During this reporting period the Company received
MEMS wafers that had already undergone a previous
announced refinement of the device’s “dissipation layers”.
The refinements implemented to layers that come
into contact with each other during normal operation,
were based on results attained from a comprehensive
research program aimed at delivering practical solutions
for the rather unique operational requirements of our
MEMS devices.
As was announced (6 December 2017) these wafers
failed to meet a very basic electrical specification, which
was ultimately traced to faulty manufacturing processes
used to fabricate the internal electrical interconnects
of the device. The interconnects (often referred to as
“through‑silicon via” or TSV’s), provide the electrical
interconnections between different layers of the chip.
The faulty process introduced an imperfection in the
interconnect that degraded the device’s internal current
flow which adversely increased the time it takes for the
device to react to the input signals.
Upon discovery the vendor immediately identified
and rectified the defective process which they then
definitively proved through a number of rapid trial runs.
At the same time the vendor launched and fast tracked
a new fabrication run of wafers that meet the required
specifications. Reflective of the vendor’s resolute
commitment to ensure the successful completion of the
fabrication development processes, the vendor instituted
an unprecedented number of additional verification
points throughout the fabrication process. At each such
check point wafers are randomly selected and removed
and exhaustively tested for compliance by the vendor, the
Company, and in some cases third parties’ experts. So far
all testing conducted including the recently delivered
wafers containing “half structures” have all validated and
verified that the current fabrication run measurements
adhere to our precise specifications. These include
specifications pertaining to the newly optimised
dissipation layers and electrical interconnects. This was
announced to ASX on 26 February 2018.
As was also announced, the Company undertook an
exploratory effort to try and develop a method that
might repair the electrical properties of the previously
received wafers. Utilising highly unconventional
techniques the Company managed to rectify individual
interconnects, which allowed the combined teams to
substantiate that the degradation of the device’s internal
current flow was directly attributed to (and limited to) the
electrical interconnects. The team’s attention has since
been focused on trying to evolve the intricate techniques
used to repair individual interconnects into a workable
process that is able to address the many interconnects of a
single chip. Despite many associated challenges, the team
continues this “rectification effort” at least until such time
that the Company receives the newly fabricated wafers
from its vendors.
Maturing a reliable manufacturing process for any MEMS
device let alone a revolutionary device such as ours,
makes it near impossible to accurately predict how long
it will take to resolve all the challenges, or even predict if
new ones might arise. That being said the progress and
unwavering commitment of the Company and its vendor
to achieve the Company’s mass production requirements
are certainly bearing noteworthy results. Among others
this is evident by the dramatic reduction in the length
of time it now takes to go from start‑to‑finish of the
MEMS fabrication process. The ever‑shrinking timeline
substantiates the fact that the overwhelming majority
of production steps required to fabricate our MEMS chip
have been completed and refined into reliable mass
manufacturing processes.
The vendor further advises that delivery of the
newly fabricated wafers remains on track with their
previous advised delivery timelines (as stated in the
6 December 2018 Announcement), whereby they
anticipate beginning to deliver the newly fabricated
wafers on our about the end of Q1‑2018.
3
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Throughout the period the Company continued to refine
the capabilities of its ASIC, electronic controls, software
algorithms, the chip assembly and packaging process as
well as our proprietary measurement systems. To better
cope with the receipt of what are expected to be fully
functioning wafers and the ensuing demonstration
and introduction phases, management has been
actively seeking to expand its engineering workforce.
Management continues to maintain very active
communications with its ever growing pool of future
customers, ranging from industry conglomerates to
start‑ups wanting to utilise our devices for a wide range
of new and fascinating applications.
The Company continues to expand it intellectual
property portfolio, now standing at 32 applications
with 102 patents granted in various global jurisdictions.
Additionally, during the reporting period two additional
applications have been drafted for submission to the
applicable patent offices.
Further information concerning the operations and
financial condition of the entity can be found in the
financial report and in releases made to the Australian
Stock Exchange (ASX) during the year.
Changes in State of Affairs
There was no significant change in the state of affairs of
the company or the consolidated entity other than that
referred to in the financial statements or notes thereto.
Significant Events After
Balance Date
There has not been any matter or circumstance that has
arisen since the end of the financial year which is not
otherwise dealt with in this report or in the financial
statements, that has significantly affected or may
significantly affect the operations of the company or the
consolidated entity, the results of those operations or the
state of affairs of the company or the consolidated entity
in subsequent financial years.
Future Developments
The consolidated entity will continue to focus on the
development of its digital speaker technology.
Environmental Regulations
In the opinion of the directors the company and the
consolidated entity is in compliance with all applicable
environmental legislation and regulations.
Indemnification and Insurance
of Officers and Auditors
During the financial year, the company paid a premium in
respect of a contract insuring the Directors and Officers
of the Company and any related body corporate against a
liability incurred as such a Director or Officer to the extent
permitted by the Corporations Act 2001. The contract
of insurance prohibits disclosure of the nature of the
coverage provided and the amount of the premium.
The Company has agreed to indemnify the current
Directors, Company Secretary and Executive Officers
against all liabilities to other persons that may arise from
their position as Directors or Officers of the Company
and its controlled entities, except where to do so would
be prohibited by law. The agreement stipulates that the
Company will meet the full amount of any such liabilities,
including costs and expenses.
The Company has not, during or since the financial year
indemnified or agreed to indemnify an auditor of the
company or of any related body corporate against any
liability incurred as such an auditor.
Directors’ Interests and Benefits
The relevant interest of each director in the share capital of
the Company as notified by the directors to the Australian
Stock Exchange in accordance with Section 205G(1) of the
Corporations Act as at the date of this report are:
name
Fred Bart
Ian Dennis
Cheryl Bart
ordinary shares
5,592,765
320,167
500,000
There has been no movement in Directors’ shareholdings
during the 2017 year apart from the sale by Ian Dennis of
249,883 as part of a Family Law settlement.
4
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Remuneration Report (Audited)
Since the end of the previous financial year no director of the Company has received or become entitled to receive
any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by
directors as shown in the financial statements) because of a contract made by the Company or related corporation with
the director or with a firm of which the director is a member, or with a company in which the director has a substantial
financial interest. There are no employment contracts for any of the directors.
This report outlines the remuneration arrangements in place for Directors and key management personnel of the Company.
The Directors are responsible for remuneration policies and packages applicable to the Board members of the Company.
The entire Board makes up the Nomination and Remuneration Committee. The Board remuneration policy is to ensure the
remuneration package properly reflects the person’s duties and responsibilities.
There are currently no performance based incentives to directors or executives based on the performance of the Company.
There are no employment contracts in place with any Director of the Company. There are standard employment contracts
for the executives of including at will employment and a notice period of three months for termination.
The key management personnel of Audio Pixels Holdings Limited during the year were:
Fred Bart
Cheryl Bart
Ian Dennis
Chairman and Chief Executive Officer
Non executive director
Non executive director and company secretary
Danny Lewin
CEO and director of Audio Pixels Limited
Yuval Cohen
Chief Technical Officer of Audio Pixels Holdings Limited
Shay Kaplan
Chief Scientist of Audio Pixels Limited
The Directors fees are not dependent on the earnings of the Company and the consequences of the Company’s
performance on shareholder wealth. On 24 September 2010, the maximum total directors fees were increased to a
total of $250,000 per annum in line with the increased activities of the company. The actual directors fees paid were
within the approved limit of $250,000 per annum approved by shareholders at the Annual General Meeting held on
24 September 2010.
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for
the last 5 financial years.
Year ended
31 December
2017
$
Year ended
31 December
2016
$
Year ended
31 December
2015
$
Year ended
31 December
2014
$
Year ended
31 December
2013
$
Revenue
Net (loss) before tax
Net (loss) after tax
65,624
(5,914,957)
(5,914,957)
103,630
(5,054,771)
(5,054,771)
25,073
(1,840,940)
(1,840,940)
181,583
(2,796,787)
(2,796,787)
304,536
(2,147,576)
(2,147,576)
Year ended
31 December
2017
$
Year ended
31 December
2016
$
Year ended
31 December
2015
$
Year ended
31 December
2014
$
Year ended
31 December
2013
$
14.15
16.82
0.00
8.45
14.15
0.00
9.86
8.45
0.00
3.80
9.86
0.00
5.60
3.80
0.00
Share price at start of
year/period
Share price at end of
year/period
Dividend Paid
5
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
The aggregate compensation of the key management personnel of the company is set out below:
Short‑term employee benefits
Post employment benefits
31 December
2017
$
31 December
2016
$
775,262
169,339
944,601
737,818
163,284
901,102
The following table sets out each key management personnel’s equity holdings (represented by holdings of fully paid
ordinary shares in Audio Pixels Holdings Limited).
Balance at
1/1/17
no.
5,592,765
500,000
570,050
1,709,092
1,928,971
881,604
Granted as
remuneration
no.
Received on
exercise of
options
no.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
net other
change
no.
‑
‑
(249,883)
‑
‑
‑
Balance at
31/12/17
no.
5,592,765
500,000
320,167
1,709,092
1,928,971
881,604
Mr Fred Bart
Mrs Cheryl Bart
Mr Ian Dennis
Mr Danny Lewin
Mr Yuval Cohen
Mr Shay Kaplan
Convertible Note Issued to Key Management Personnel
On 22 June 2015, shareholders approved the issue of a convertible note of $1.5m to 4F Investments Pty Limited, company
controlled by Mr Fred Bart. On 31 May 2016 shareholders approved the extension of the note to 31 December 2016.
On 28 December 2016, the Company announced that the convertible notes would be extended for a further term of
12 months to 31 December 2017 which received shareholder approval on 31 May 2017. On 29 December 2017, the
Company announced that the convertible notes would be extended for a further term of 12 months to 31 December 2018
subject to shareholder approval. The terms of the issue were as follows:
Face Value:
Date of issue:
Interest rate:
Term:
Listing status:
Security:
Conversion terms:
$1,500,000
26 June 2015
8% payable quarterly
12 months to 31 December 2018 (following extension)
Unlisted
Unsecured
Convertible to ordinary shares based on the lower of the five day volume weighted average
share price of Audio Pixels Holdings Limited on the date of the agreement ($9.68) or the five
day volume weighted average share price of Audio Pixels Holdings Limited immediately prior
to conversion.
Transactions with Related Entities
During the year ended 31 December 2017, the Company paid a total of $107,857 (year ended 31 December 2016 ‑ $107,857)
to 4F Investments Pty Limited, a company associated with Mr Fred Bart in respect of directors fees and superannuation for
Mr Fred Bart and Mrs Cheryl Bart.
6
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
During the year ended 31 December 2017, the Company paid interest of $119,407 (year ended 31 December 2016 ‑ $119,671)
on a convertible note to 4F Investments Pty Limited, a company associated with Mr Fred Bart. The convertible note of $1.5m
was issued on 26 June 2015 following shareholder approval at an Extraordinary General Meeting. The convertible note was
extended twice during the year ended 31 December 2016, the most recent of which being on 28 December 2016, which
was approved by shareholders. On 29 December 2017, The Company announced a further extension to 31 December 2018,
subject to shareholder approval.
During the year ended 31 December 2017, the Company paid a total of $41,063 (year ended 31 December 2016 ‑ $41,063)
to Dennis Corporate Services Pty Limited, a company associated with Mr Ian Dennis in respect of directors
fees and superannuation.
During the year, the Company paid $30,000 (31 December 2016 ‑ $30,000) to Dennis Corporate Services Pty Limited, a
company associated with Mr Ian Dennis in respect of consulting fees for company secretarial and accounting services.
On 8 May 2014, the company entered into a lease in respect of office premises at Level 12, 75 Elizabeth Street Sydney for
a period of forty eight months to 30 March 2018. The Company recharged $22,954 of the rent and other tenancy charges
to Electro Optic Systems Holdings Limited, a company of which Fred Bart and Ian Dennis are directors and $24,762 to
4F Investments Pty Limited, a company controlled by Fred Bart.
The following table sets out the remuneration of each key management personnel of the Company:
short term
Post employment
total
December 2017
Fred Bart
Cheryl Bart
Ian Dennis
Danny Lewin
Yuval Cohen
Shay Kaplan
December 2016
Fred Bart
Cheryl Bart
Ian Dennis
Danny Lewin
Yuval Cohen
Shay Kaplan
Directors fees/
salary
$
non‑monetary
$
superannuation
$
61,000
37,500
67,500*
157,122
179,775
150,353
653,250
61,000
37,500
67,500*
152,420
168,369
145,771
632,560
‑
‑
‑
37,846
39,988
44,178
122,012
‑
‑
‑
36,606
30,782
37,870
105,258
5,794
3,563
3,563
‑
‑
‑
12,920
5,794
3,563
3,563
‑
‑
‑
12,920
social
security
$
‑
‑
‑
51,581
55,429
49,409
156,419
‑
‑
‑
49,034
53,967
47,363
150,364
$
66,794
41,063
71,063
246,549
275,192
243,940
944,601
66,794
41,063
71,063
238,060
253,118
231,004
901,102
* The amounts disclosed for Ian Dennis include directors fees of $37,500 and consulting fees of $30,000.
Audit Committee
The Audit Committee was formally constituted on 29 August 2014 with all three directors appointed to the Audit Committee.
Ian Dennis was appointed chair of the Audit Committee.
7
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoR’s RePoRt
Directors’ Meetings
During the year the Company held three meetings of directors, two meetings of the Audit Committee and no meetings of
the Nomination and Remuneration Committee. The attendances of the directors at meetings of the Board were:
Directors
Mr Fred Bart
Mrs Cheryl Bart
Mr Ian Dennis
Board of directors
Audit committee
nomination and
Remuneration committee
Held
Attended
Held
Attended
Held
Attended
3
3
3
3
3
3
2
2
2
2
2
2
‑
‑
‑
‑
‑
‑
All current board members are on the Audit Committee and the Nomination and Remuneration Committee.
Non‑audit Services
Details of amounts paid or payable to the auditor for non‑audit services provided during the year by the auditor are
outlined in Note 4 to the financial statements.
The directors are satisfied that the provision of non‑audit services, during the 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 disclosed in Note 4 to the financial statements do not compromise the
external auditors’ independence 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 Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & 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.
Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 9.
Signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
I A Dennis
Director
Dated at Sydney this 28 day of February 2018
8
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 9
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 10
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 1111
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 12
12
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 12
13
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 4 to 7
5 to 7
14
15
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 DIReCtoRs’ DeCLARAtIon
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe the company will be able to pay its debts as and when
they become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and give a true and fair view of the financial position and
performance of the company and the consolidated entity;
(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001; and
(d) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in
note 1 to the financial statements.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
I A Dennis
Director
Dated at Sydney this 28 day of February 2018.
15
15
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 ConsoLIDAteD stAteMent oF PRoFIt oR Loss AnD
otHeR CoMPReHensIVe InCoMe
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
Consolidated
Year ended
31 December
2017
$
Consolidated
Year ended
31 December
2016
$
note
Revenue
2
65,624
103,630
Administrative expenses
Amortisation
Depreciation
Directors fees and superannuation
Exchange (losses)/ gains
Interest expense
Fair value movement of derivative liability
Gain/ (Loss) on derecognition of convertible notes
Marketing
Research and development expenses
(Loss) before income tax
Income tax benefit
(Loss) for the year
(750,704)
(1,108,384)
(79,637)
(79,639)
(148,920)
(1,767,526)
(593,179)
(157,996)
285,600
(16,906)
(80,483)
(73,493)
(148,920)
350,531
(419,595)
(511,648)
(223,400)
(21,233)
2
3
(2,671,674)
(2,921,776)
(5,914,957)
(5,054,771)
‑
‑
(5,914,957)
(5,054,771)
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit and loss
Exchange differences arising on translation of foreign operations
14
1,676,117
(136,506)
Other comprehensive (loss) for the year, net of tax
1,676,117
(136,506)
Total comprehensive (loss) for the year
(4,238,840)
(5,191,277)
Notes to the financial statements are included on pages 21 to 46.
16
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017
ConsoLIDAteD stAteMent oF PRoFIt oR Loss AnD
otHeR CoMPReHensIVe InCoMe
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
Consolidated
Year ended
31 December
2017
Consolidated
Year ended
31 December
2016
note
(5,914,957)
(5,054,771)
(4,238,840)
(5,191,277)
(Loss) attributable to:
Owners of the company
Total comprehensive (loss) attributable to:
Owners of the company
Earnings per share
Basic and diluted (cents per share)
18
(21.99)
(19.02)
Notes to the financial statements are included on pages 21 to 46.
17
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 ConsoLIDAteD stAteMent oF FInAnCIAL PosItIon
As At 31 DeCeMBeR 2017
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
TOTAL CURRENT ASSETS
NON CURRENT ASSETS
Goodwill
Intangible asset
Property, plant and equipment
Trade and other receivables
TOTAL NON CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Derivative liability
Provisions
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
NET (LIABILITIES)/ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Equity attributable to owners of the company
TOTAL EQUITY
Consolidated
December
2017
$
Consolidated
December
2016
$
note
5
6
7
8
9
6
10
11
11
12
13
14
15
2,700,577
3,046,113
5,746,690
5,083,948
86,118
5,170,066
2,189,025
2,300,905
513,773
324,610
16,108
3,043,516
8,790,206
887,770
6,388,489
1,486,884
240,319
9,003,462
9,003,462
639,850
166,587
11,873
3,119,215
8,289,281
471,870
2,648,387
1,169,870
640,463
4,930,590
4,930,590
(213,256)
3,358,691
45,228,931
45,228,931
(21,934,777)
(24,277,787)
(23,507,410)
(17,592,453)
(213,256)
(213,256)
3,358,691
3,358,691
Notes to the financial statements are included on pages 21 to 46.
18
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 ConsoLIDAteD stAteMent oF CHAnGes In eQUItY
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
December 2017 ‑
Consolidated
Balance at
1 January 2017
Other comprehensive
income for the year
(Loss) for the year
Equity reserve on issue
of convertible notes
Balance at
31 December 2017
December 2016 ‑
Consolidated
Balance at
1 January 2016
Other comprehensive
income for the year
(Loss) for the year
Share placement
at $6.60
Balance at
31 December 2016
equity
settled
option
Reserve
$
Issued
Capital
$
exchange
translation
reserve
$
Minority
Acquisition
Reserve
$
Convertible
note equity
Reserve
$
Accumulated
Losses
$
total
$
45,228,931
4,512,898
(3,251,993)
(25,538,692)
‑
‑
‑
‑
‑
‑
1,676,117
‑
‑
‑
‑
‑
‑
‑
‑
(17,592,453)
3,358,691
‑
1,676,117
(5,914,957)
(5,914,957)
666,893
‑
666,893
45,228,931
4,512,898
(1,575,876)
(25,538,692)
666,893
(23,507,410)
(213,256)
equity
settled
option
Reserve
$
Issued
Capital
$
exchange
translation
reserve
$
Minority
Acquisition
Reserve
$
Convertible
note equity
Reserve
$
Accumulated
Losses
$
total
$
37,398,942
4,512,898
(3,115,487)
(25,538,692)
‑
‑
7,829,989
‑
‑
‑
(136,506)
‑
‑
‑
‑
‑
45,228,931
4,512,898
(3,251,993)
(25,538,692)
‑
‑
‑
‑
‑
(12,537,682)
719,979
‑
(136,506)
(5,054,771)
(5,054,771)
‑
7,829,989
(17,592,453)
3,358,691
Notes to the financial statements are included on pages 21 to 46.
19
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 ConsoLIDAteD stAteMent oF CAsH FLoWs
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
Cash flows from operating activities
Payments to suppliers and employees
Interest paid
Interest received
Consolidated
Year ended
31 December
2017
$
Consolidated
Year ended
31 December
2016
$
notes
(3,387,969)
(4,126,693)
(239,046)
65,624
(179,507)
103,630
Net cash (used by) operating activities
16
(3,561,391)
(4,202,570)
(263,958)
(263,958)
(72,700)
(72,700)
13
‑
7,829,989
1,500,000
1,500,000
(2,325,349)
5,083,948
(58,022)
2,700,577
‑
7,829,989
3,554,719
1,523,016
6,213
5,083,948
Cash flows from investing activities
Payment for property, plant and equipment
Net cash (outflows) from investing activities
Cash flows from financing activities
Proceeds from placement
Convertible note
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate fluctuations on the balances of cash held in
foreign currencies
Cash and cash equivalents at the end of the financial year
5
Notes to the financial statements are included on pages 21 to 46.
20
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies
statement of compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
the Corporations Act 2001, Accounting Standards and
Interpretations, and complies with other requirements
of the law. Accounting Standards include Australian
equivalents to International Financial Reporting
Standards (“AASBS”). Compliance with AASBS ensures
that the financial statements and notes comply with
International Financial Reporting Standards (“IFRS”).
For the purposes of preparing the consolidated financial
statements, the Company is a for profit entity.
The financial statements were authorised for issue by the
Directors on 28 February 2018.
Basis of preparation
The financial report has been prepared on the basis
of historical cost, except for the revaluation of the
derivative liability. Cost is based on the fair values of the
consideration given in exchange for assets. All amounts
are expressed in Australian dollars.
(a) Borrowings
Borrowings are recorded initially at fair value, net of
transaction costs. Subsequent to initial recognition,
borrowings are measured at amortised cost with any
difference between the initial recognised amount and the
redemption value being recognised in profit or loss over
the period of the borrowing using the effective interest
rate method.
(b) Going concern
The financial report has been prepared on the going
concern basis which assumes continuity of normal
business activities and the realisation of assets and the
settlement of liabilities in the ordinary course of business.
The consolidated entity incurred a net loss during
the year of $5,914,957 (2016: $5,054,771) and as at
31 December 2017 had net current liabilities of $3,256,772
(2016: net current assets of $239,476). Net cash used by
operating activities was $3,561,391 (2016: $4,202,570).
As at 31 December 2017, the consolidated entity had
cash of $2,700,577 (2016: $5,083,948) of which $53,092
(2016 ‑ $52,036) is restricted as it secures future lease
payments. The cash will become unrestricted once the
contracts are concluded or renegotiated. Further, in the
event that they are not converted to ordinary shares
or the maturity date extended, the consolidated
entity has $7,500,000 due on convertible notes on
31 December 2018.
In the opinion of the directors, the ability of the company
and consolidated entity to continue as going concerns
and pay their debts as and when they become due and
payable is dependent upon:
the ability of the company to secure additional
funding from existing or new investors to fund
continued development and enable the repayment
of convertible notes to the extent that they are not
converted to ordinary shares. The directors consider
that the company has a number for financing options
available to it at this stage of the commercialisation of
the product;
the successful completion of the development stage
of the technology; and
the future trading prospects of the consolidated
entity including obtaining commercial contracts.
If the company and the consolidated entity are unable
to achieve successful outcomes in relation to the above
matters, significant uncertainty would exist as to the ability
of the company and the consolidated entity to continue
as going concerns and therefore, they may be required
to realise their assets and extinguish their liabilities other
than in the normal course of business and at amounts
different from those stated in the financial report.
No adjustments have been made to the financial
report relating to the recoverability and classification
of recorded asset amounts or to the amounts and
classification of liabilities that might be necessary should
the company and the consolidated entity not continue as
going concerns.
(c) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand,
cash in banks and investments in money market
instruments maturing within less than 3 months at the
date of acquisition, net of outstanding bank overdrafts.
Bank overdrafts are shown within borrowings in current
liabilities in the Statement of Financial Position.
(d) Employee benefits
Provision is made for benefits accruing to employees
in respect of wages and salaries, annual leave, and long
service leave when it is probable that settlement will be
required and they are capable of being measured reliably.
21
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies (Cont.)
(g) Foreign currency
Foreign currency transactions
Provisions made in respect of short term employee
benefits are measured at their nominal values using
the remuneration rate expected to apply at the time
of settlement.
Provisions made in respect of long term employee
benefits are measured as the present value of the
estimated future cash outflows to be made by the
consolidated entity in respect of services provided
by employees up to the reporting date.
Defined contribution plans ‑ Contributions to defined
benefit contribution superannuation plans are expensed
when incurred.
(e) Financial assets
Financial assets are classified into loans and receivables.
The classification depends on the nature and purpose of
the financial assets and is determined at the time of the
initial recognition.
Loans and receivables
Trade receivables, loans and other receivables are
recorded at amortised cost less impairment.
(f) Financial instruments issued by
the company
Debt and equity instruments
Debt and equity instruments are classified as either
liabilities or as equity in accordance with the substance
of the contractual arrangement and the definition of a
financial liability and an equity instrument.
transaction costs on the issue of
equity instruments
Transaction costs arising on the issue of equity
instruments are recognised directly in equity as a
reduction of the proceeds of the equity instruments to
which the costs relate. Transaction costs are the costs
that are incurred directly in connection with the issue of
those equity instruments and which would not have been
incurred had those instruments not been issued.
Interest
Interest is classified as an expense consistent with the
Statement of Financial Position classification of the
related debt.
All foreign currency transactions during the financial
year are brought to account using the exchange rate in
effect at the date of the transaction. Foreign currency
monetary items at reporting date are translated at the
exchange rate existing at reporting date. Non‑monetary
assets and liabilities carried at fair value and historic cost
that are denominated in foreign currencies are translated
at the rates prevailing at the date when the fair value
was determined.
Exchange differences are recognised in profit and loss in
the period they arise.
Foreign operations
On consolidation, the assets and liabilities of the consolidated
entity’s overseas operations are translated at exchange
rates prevailing at the reporting date. Income and expense
items are translated at the average exchange rates for
the period unless exchange rates fluctuate significantly.
Exchange differences arising, if any, are recognised in the
foreign currency translation reserve, and recognised in profit
and loss on disposal of the foreign operation.
(h) Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item
of expense; or
ii.
for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables.
Cash flows are included in the Statement of Cash Flows
on a gross basis. The GST component of cash flows
arising from investing and financing activities which is
recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
22
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies (Cont.)
(i) Goodwill
Goodwill arising in a business combination is recognised
as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of
the sum of the consideration transferred, the amount of
any non‑controlling interests in the acquiree, and the fair
value of the acquirer’s previously held equity interest in
the acquiree (if any) over the net of the acquisition‑date
amounts of the identifiable assets acquired and the
liabilities assumed.
If, after reassessment, the Group’s interest in the fair
value of the acquiree’s identifiable net assets exceeds the
sum of the consideration transferred, the amount of any
non‑controlling interests in the acquiree and the fair value
of the acquirer’s previously held equity interest in the
acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
Goodwill is not amortised but is reviewed for impairment
at least annually. For the purpose of goodwill impairment
testing, there was one cash‑generating unit, relating
to the digital speakers segment. The cash‑generating
unit is tested for impairment annually. If the recoverable
amount of the cash‑generating unit is less than its
carrying amount, the impairment loss is allocated first to
reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the unit pro‑rata
on the basis of the carrying amount of each asset in
the unit. An impairment loss recognised for goodwill is not
reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of
goodwill is included in the determination of the profit or
loss on disposal.
(j) Impairment of assets
At each reporting date, the entity reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the entity estimates the
recoverable amount of the cash‑generating unit to which
the asset belongs.
If the recoverable amount of an asset (or cash‑generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash‑generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised in profit or loss immediately.
Where an impairment loss subsequently reverses,
the carrying amount of the asset (cash‑generating
unit) is increased to the revised estimate of its
recoverable amount, but only to the extent that the
increased carrying amount does not exceed the
carrying amount that would have been determined
had no impairment loss been recognised for the asset
(cash‑generating unit) in prior years. A reversal of an
impairment loss is recognised in profit or loss immediately.
(k) Income Tax
Current tax
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. It is calculated
using tax rates and tax laws that have been enacted or
substantively enacted by reporting date. Current tax
for current and prior periods is recognised as a liability
(or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is recognised on temporary differences
between the carrying amount of assets and liabilities in
the financial statements and the corresponding tax base
of those items.
In principle, deferred tax liabilities are recognised for
all taxable temporary differences. Deferred tax assets
are recognised to the extent that it is probable that
sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses
and tax offsets can be utilised. However, deferred tax
assets and liabilities are not recognised if the temporary
differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result
of business combination) which affects neither taxable
income nor accounting profit.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when
the assets and liability giving rise to them are realised
or settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted by reporting date.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the entity expects, at the reporting
date, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the company intends to settles its current
tax assets and liabilities on a net basis.
23
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies (Cont.)
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or
income in profit or loss, except when it relates to items
credited or debited directly to equity, in which case
the deferred tax is also recognised directly in equity,
or where it arises from the initial accounting for a business
combination, in which case it is taken into account in the
determination of goodwill or excess.
(l) Intangible assets
Intangible assets acquired in a
business combination
Intangible assets acquired in a business combination
are identified and recognised separately from goodwill
where they satisfy the definition of an intangible asset and
their fair value can be measured reliably. Subsequent to
initial recognition, intangible assets acquired in a business
combination are reported at cost less accumulated
amortisation and accumulated impairment losses, on
the same basis as intangible assets acquired separately.
The intangible asset acquired is written off on a straight
line basis. Expenditure on research activities is recognised
as an expense in the period in which it is incurred.
(m) Leasing
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as
operating leases.
the Group as lessor
Income from operating leases is recognised on a
straight‑line basis over the term of the relevant lease.
Initial direct costs incurred in negotiating and arranging
an operating lease are added to the carrying amount of
the leased asset and recognised on a straight‑line basis
over the lease term.
the Group as lessee
Operating lease payments are recognised as an expense
on a straight‑line basis over the lease term, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating
leases are recognised as an expense in the period in which
they are incurred. In the event that lease incentives are
received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives
is recognised as a reduction of rental expense on a
straight‑line basis, except where another systematic basis is
more representative of the time pattern in which economic
benefits from the leased asset are consumed.
(n) Payables
Trade payable and other accounts payable are recognised
when the entity becomes obliged to make future payments
resulting from the purchase of goods and services.
(o) Provisions
Provisions are recognised when the entity has a present
obligation as a result of a past event, the future sacrifice
of economic benefits is probable, and the amount of the
provision can be measured reliably.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it
is virtually certain that recovery will be received and the
amount of the receivable can be measured reliably.
The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation,
taking into account the risks and uncertainties surrounding
the obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying
amount is the present value of those cash flows.
(p) Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Company and entities
controlled by the Company. Control is achieved when
the Company:
Has power over the investee;
Is exposed, or has rights, to variable returns from its
involvement with the investee; and
Has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above.
Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when
the Company loses control of the subsidiary. Specifically,
income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated
statement of profit or loss and other comprehensive
income from the date the Company gains control until the
date when the Company ceases to control the subsidiary.
All intragroup assets and liabilities, equity, expenses and
cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
24
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies (Cont.)
(q) Property, plant and equipment
Property, plant and equipment are stated at cost
less accumulated depreciation and accumulated
impairment losses.
Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives, using the straightline method. The estimated useful
lives, residual values and depreciation method are reviewed
at each year end, with the effect of any changes in estimate
accounted for on a prospective basis.
Assets and disposal groups are classified as held for sale
if their carrying amount will be recovered principally
through a sale transaction rather than through
continuing use. This condition is regarded as met only
when the sale is highly probable and the non‑current asset
(or disposal group) is available for immediate sales in the
present condition. Management must be committed to the
sale, which should be expected to qualify as a completed
sale within one year from the date of classification.
Non‑current assets (and disposal groups) classified as held
for sale are measured at the lower of their previous carrying
amount and fair value less costs to sell.
The following estimated useful lives are used in the
calculation of depreciation:
Computers and related equipment
5 to 15 years
Leasehold improvements
Office furniture and equipment
3 to 5 years
5 to 15 years
(r) Financial liabilities
Classification as debt or equity
The Company has on issue convertible notes.
The component parts of the convertible notes issued
by the Group are classified separately as borrowings,
derivative liability and equity in accordance with the
substance of the contractual arrangements and the
definitions of a financial liability and an equity instrument.
A conversion option that will be settled by the exchange
of a fixed amount of cash or another financial asset
for a fixed number of the Company’s own equity
instruments is an equity instrument. A conversion
option that will be settled by the exchange of a fixed
amount of cash or another financial asset for a variable
number of the Company’s own equity instruments is a
derivative liability instrument. The value of a conversion
option classified as a derivative liability instrument is
recognised at fair value on issue. The derivative liability is
subsequently measured at fair value through profit or loss.
The conversion option classified as equity is determined
by deducting the amount of liability component from the
fair value of the compound instrument as a whole. This is
recognised and included in equity and is not subsequently
remeasured. This will remain in equity until the conversion
option is exercised or at maturity. No gain or loss is
recognised in profit or loss upon expiration or conversion.
On initial recognition, the face borrowing or liability
component is measured at fair value. This is subsequently
recognised on an amortised cost basis using the effective
interest method until extinguished upon conversion or at
the instrument’s maturity date.
(s) Revenue Recognition
Revenue comprises interest income on bank deposits.
Interest income received is recognised on an accrual basis.
(t) Application of New and Revised
Accounting Standards
The Group has adopted all of the new and revised
Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant
to their operations and effective for the current year.
New and revised Standards and amendments thereof
and Interpretations effective for the current year that are
relevant to the Group include:
AASB 2016‑1 Amendments to Australian Accounting
Standards ‑ Recognition of Deferred Tax Assets for
Unrealised Losses
AASB 2016 ‑2 Amendments to Australian Accounting
Standards ‑ Disclosure Initiative: Amendments to
AASB 107
AASB 2017‑2 Amendments to Australian Accounting
Standards ‑ Further Annual Improvements
2014‑2016 Cycle
The application of the above has not had any material
impact on the amounts recognised in the consolidated
financial statements.
25
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant Accounting Policies (Cont.)
(t) Application of New and Revised Accounting Standards (Cont.)
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
standard/Interpretation
AASB 9 Financial Instruments, and the relevant amending standards
AASB 15 Revenue from Contracts with Customers AASB 2014‑5
Amendments to Australian Accounting Standards arising from AASB 15
and AASB 2015‑8 Amendments to Australian Accounting Standards ‑
Effective Date of AASB 15
AASB 2016‑3 Amendments to Australian Accounting Standards ‑
Clarifications to AASB 15
AASB 16 Leases
2017‑1 Amendments to Australian Accounting Standards ‑ Transfers
of Investment Property, Annual Improvements 2014‑2016 Cycle and
Other Amendments
2017‑5 Amendments to Australian Accounting Standards ‑ Effective Date
of Amendments to AASB 10 and AASB 128 and Editorial Corrections
AASB 2016‑5 Amendments to Australian Accounting
Standards ‑ Classification and Measurement of Share‑based
Payment Transactions
effective for annual
reporting periods
beginning on or
after
expected to be
initially applied in
the financial year
ending
1 Jan 2018
1 Jan 2018
31 Dec 2018
31 Dec 2018
1 Jan 2019
1 Jan 2018
31 Dec 2019
31 Dec 2018
1 Jan 2018
31 Dec 2018
1 Jan 2018
31 Dec 2018
The directors are still assessing the impact of AASB 9, AASB 15 and AASB 16. The directors anticipate that the adoption of all
other Standards and Interpretations in future periods will have no material financial impact on the financial statements of
the company or the consolidated entity but may change disclosures made.
(u) Share based payments
Equity‑settled share‑based payments are measured at fair value at the date of the grant. Fair value is measured by use of
a Black‑Scholes Option Pricing model. The expected life used in the model has been adjusted, based on management
best estimates, for the effects of non‑transferability, exercise restrictions and behavioural considerations. The fair value
determined at the grant date of the equity‑settled share based payments is expensed on a straight‑line basis over the
vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.
26
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
1. Summary of Significant
Accounting Policies (Cont.)
(v) Critical accounting judgements
In the application of the consolidated entity’s accounting
policies, management is required to make judgements,
estimates and assumptions about carrying values of
assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions
are based on historical experience and various other
factors that are believed to be reasonable under the
circumstance, the results of which form the basis of
making these judgements. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the
period of the revision and future periods if the revision
affects both current and future periods.
Key sources of estimation uncertainty
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty
at the balance sheet date, that have a significant risk of
causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year:
Intangible asset/Goodwill
The directors made a critical judgement in relation to the
value of the intangible asset included in Note 8 and the
impairment model used in assessing the carrying amount
of the goodwill (see Note 7).
Deferred tax
The directors made a critical judgement in relation to
not recognising the deferred tax balances described in
Note 3(b). Given the current stage of development, the
directors do not currently consider it’s probable that
sufficient taxable amounts will be available against which
deductible temporary differences can be utilised.
Valuation of face borrowing and derivative liability
The directors made a critical judgement in relation to the
interest rate applied in valuing the face borrowing and the
expected share price volatility used to value the derivative
liability included in Note 11.
Functional Currency
The directors made a critical judgement in relation to
the functional currency of Audio Pixels Holdings Limited.
The directors consider AUD to be the appropriate
functional currency, as financing activities of the entity
occur in AUD.
Investment in subsidiary and intercompany receivable
The directors made a critical judgement in relation to
the recoverability of the investment in subsidiary ‑ Audio
Pixels Limited and the receivable from this subsidiary.
The assessment of the recoverability of these assets is
considered concurrently with the recoverability of the
intangible asset/goodwill. These assets are discussed in
Note 23 as part of current and non‑current assets:
Investment in subsidiary ‑$2,428,209
(non‑current assets)
Intercompany receivable ‑ $22,985,266 (included in
current assets)
27
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
2. (Loss) from Operations
(a) Revenue
Interest received ‑ other entities
Total revenue
(b) Expenses
Amortisation
Depreciation
Interest expense
Rental payments
Rental amounts recharged to sub tenants
Net rental expense
Fair value movement in derivative liability
Employee benefits expense:
Salary and other employee benefits
Superannuation
3. Income Taxes
(a) Income tax recognised in profit or loss
Tax expense comprises:
Tax expense/(income) ‑ prior year
Deferred tax expense/(income)
Total tax expense/(income)
The prima facie income tax expense on pre‑tax accounting profit reconciles to the
income tax expense in the financial statements as follows:
(Loss) from operations
Amortisation
Convertible note adjustments
Consolidated
Year ended
31 December
2017
$
Consolidated
Year ended
31 December
2016
$
65,624
65,624
103,630
103,630
79,637
79,639
593,179
123,375
(97,533)
25,842
80,483
73,493
419,595
116,770
(93,248)
23,522
(157,996)
511,648
1,137,068
12,920
1,149,988
1,579,756
12,920
1,592,676
‑
‑
‑
‑
‑
‑
(5,914,957)
(5,054,771)
79,637
224,009
80,483
915,301
(5,611,311)
(4,058,987)
28
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
3. Income Taxes (Cont.)
Income tax expense calculated at 30%
Effect of different tax rates of subsidiaries operating in other jurisdictions
Deferred tax benefit not brought to account
31 December
2017
$
31 December
2016
$
(1,683,363)
(1,217,696)
159,975
1,523,388
‑
189,622
1,028,074
‑
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law and 25% under Israeli law. There has been no change in the corporate tax rate when
compared with the previous reporting period.
(b) Unrecognised deferred tax balances
The following deferred tax assets have not been bought to account as assets:
Tax losses ‑ revenue
Tax losses ‑ capital
Temporary differences
(c) Franking account balance
Adjusted franking account balance
(d) Israeli tax Ruling
5,412,932
168,038
60,080
5,641,050
3,889,544
168,030
(160,166)
3,897,408
86,721
86,721
On July 16th 2012 a Tax Ruling was issued by the Israeli Tax Authorities (ITA) under which the ITA confirmed that the Merger
carried out between Audio Pixels Ltd, a private Israeli company (P.C 513853606) and Audio Pixels Holdings Limited, a public
Australian company, complied with the conditions stipulated in Section 103T of the Israeli Ordinance. Consequently,
the transfer of the rights by the transferring rights holders in exchange for the issuance of shares in the Australian company
is not taxable at the date of the Merger pursuant to the provisions of Section 103T of the Israeli Ordinance.
29
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
4. Remuneration of Auditors
(i) Auditor of the parent entity
Audit or review of the financial statements
Taxation service
(ii) Network firm of the parent entity auditor
Audit or review of the financial statements
Taxation service
The auditor of Audio Pixels Holdings Limited is Deloitte Touche Tohmatsu.
5. Cash and Cash Equivalents
Cash on hand and at bank
Weighted average interest rate received on cash
6. Trade and Other Receivables
Current
GST receivable
Convertible note proceeds receivable
Prepayments and other debtors
Non Current
Other debtors
Other debtors comprise security deposits with government bodies.
31 December
2017
$
31 December
2016
$
37,249
2,704
39,953
17,998
2,000
19,998
36,225
3,575
39,800
18,625
2,070
20,695
2,700,577
5,083,948
0.36%
2.21%
10,167
3,000,000
35,946
3,046,113
8,827
‑
77,291
86,118
16,108
11,873
30
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
7. Goodwill
Being goodwill acquired on the acquisition of Audio Pixels Limited. The goodwill
is allocated to the cash generating unit of digital speakers by Audio Pixels Limited
of Israel.
Balance at 1 January
Net foreign currency exchange
Balance at 31 December
31 December
2017
$
31 December
2016
$
2,189,025
2,300,905
2,300,905
(111,880)
2,189,025
2,166,391
134,514
2,300,905
The recoverable amount of this cash generating unit is determined based on a fair value less costs of disposal calculation
which uses cash flow projections based on financial budgets approved by the directors covering an 11 year period,
with a growth rate reflecting the expected future growth in the product market, and a discount rate of 24% per annum.
The assumed growth rate is based on the forecast future global MEMS market. Given the nature of the product, the forecast
cash flows are managements’ best estimate and reflect the risks inherent in the initial take up of the product. The cash flow
projections used in the impairment model extend beyond 5 years as the intangible assets generating the cash flows within
relate to new technology and hence reflect a longer operating cycle and time to market. Cash flow projections during
the budget period are based on the same expected gross margins and raw materials price inflation during the budget
period and factor in a probability of the viability of the product. The fair value less costs of disposal calculation is sensitive
to changes in the percentage likelihood of completion. Increases in the percentage likelihood of completion increases the
recoverable amount and vice versa. Movements in the value of the goodwill are a result of the retranslation of the goodwill
from the functional currency of the cash generating unit to which it is attributed.
8. Intangible Asset
Being the independent valuation of In Process Development determined at the
acquisition date of 24 September 2010 by Ernst & Young, Israel in their report dated
17 August 2011.
Exchange differences on translation
Less accumulated amortisation
868,000
868,000
151,987
(506,214)
513,773
198,427
(426,577)
639,850
The intangible asset is allocated to the digital speaker cash‑generating unit when assessed for impairment. Refer to Note 7
for commentary on cash‑generating unit.
31
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017
notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
9. Property, Plant and Equipment
Computers and related equipment ‑ at cost
Less accumulated depreciation
Leasehold improvements ‑ at cost
Less accumulated depreciation
Office furniture and equipment ‑ at cost
Less accumulated depreciation
31 December
2017
$
31 December
2016
$
351,372
(331,920)
19,452
324,269
(216,887)
107,382
1,059,881
(862,105)
197,776
362,977
(344,624)
18,353
241,873
(226,061)
15,812
1,043,341
(910,919)
132,422
Total net book value of Property, Plant and Equipment
324,610
166,587
Cost
Computers and related equipment
Balance at 1 January
Additions
Disposals
Net foreign currency exchange differences
Balance as at 31 December
Leasehold improvements
Balance at 1 January
Additions
Disposals
Net foreign currency exchange differences
Balance as at 31 December
362,977
18,586
(4,744)
(25,447)
351,372
241,873
105,997
(4,760)
(18,841)
324,269
356,676
4,364
(3,068)
5,005
362,977
226,429
12,266
‑
3,178
241,873
32
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
9. Property, Plant and Equipment (Cont.)
Office furniture and equipment
Balance at 1 January
Additions
Disposals
Net foreign currency exchange differences
Balance as at 31 December
Accumulated depreciation
Computers and related equipment ‑ at cost
Balance as at 1 January
Net foreign currency exchange differences
Disposals
Depreciation expense
Balance at 31 December
Leasehold improvements
Balance as at 1 January
Net foreign currency exchange differences
Disposals
Depreciation expense
Balance at 31 December
Office furniture and equipment
Balance as at 1 January
Net foreign currency exchange differences
Disposals
Depreciation expense
Balance at 31 December
31 December
2017
$
31 December
2016
$
1,043,341
139,375
(38,732)
(84,103)
1,059,881
973,609
56,070
‑
13,662
1,043,341
(344,624)
(327,468)
24,637
3,994
(15,927)
(331,920)
(226,061)
17,988
911
(9,725)
(4,705)
3,068
(15,519)
(344,624)
(223,338)
(2,124)
‑
(599)
(216,887)
(226,061)
(910,919)
75,893
26,908
(53,987)
(862,105)
(841,330)
(12,214)
‑
(57,375)
(910,919)
33
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
10. Trade and Other Payables
Current
Trade payables and accruals
The payables are non interest bearing and have an average credit period of 30 days.
31 December
2017
$
31 December
2016
$
887,770
471,870
11. Borrowings
On 4 May 2015, the Company announced its intention to issue two convertible notes of $1,500,000 each at a coupon rate
of 8% per annum, raising $3,000,000.
One convertible note was issued to an unrelated party on 28 May 2015 and one convertible note was issued to
4F Investments Pty Limited, a company associated with Mr Fred Bart. The convertible note to 4F Investments Pty Limited
received shareholder approval at an Extraordinary General Meeting held on 22 June 2015 and was issued on 26 June 2015.
The unrelated party holding one convertible note of $1,500,000 agreed to extend their convertible note to
31 December 2016 on 22 March 2016. On 31 May 2016 shareholders approved the extension of the convertible note to
4F Investments Pty Limited to 31 December 2016.
On 28 December 2016, the Company reached agreement with both holders of the convertible notes to extend the
expiry date by 12 months to 31 December 2017. Shareholder approval for the extension of the convertible note held by
4F Investments Pty Limited was received at the Annual General Meeting of the Company held on 31 May 2017.
On 29 December 2017, the Company reached agreement with both holders of the convertible notes to extend the
expiry date by 12 months to 31 December 2018. Shareholder approval for the extension of the convertible note held by
4F Investments Pty Limited will be sought at the next Annual General Meeting of the Company.
For accounting purposes these extensions have been treated as the derecognition of the original convertible notes and the
recognition of two new convertible note instruments. The difference in valuation is recognised as a gain or loss in the profit
and loss.
The two convertible notes initially issued on 28 May 2015 and 22 June 2015 amounting to $3,000,000 now have a term of
12 months to 31 December 2018. These notes are unsecured, not listed and are convertible to ordinary shares based on
the lower of the five day volume weighted average share price of Audio Pixels Holdings Limited on the date of the original
agreement ($9.68) or the five day volume weighted average share price of Audio Pixels Holdings Limited immediately prior
to conversion.
On 5 January 2018, The Company announced it had raised $4,500,000 from a new convertible note issue to sophisticated
unrelated investors pursuant to agreements dated 29 December 2017. In addition, 4F Investments Pty Limited, a company
associated with Mr Fred Bart also agreed to take up a further $500,000 of convertible notes on the same terms and
conditions subject to shareholder approval at the next Annual General Meeting of the Company.
These new convertible notes have a term of 12 months to 31 December 2018, are unsecured, not listed and convertible
into ordinary shares based on the five day volume weighted average share price of Audio Pixels Holdings Limited on the
date of the agreement ($16.71).
34
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
11. Borrowings (Cont.)
Borrowings ‑ Convertible note
Carrying amount at start of period
Face value of notes issued
Gain on derecognition of convertible notes
Convertible note equity reserve ‑ fair value initially recognised
Amortised interest
Current Liability at end of period
Derivative liability
Carrying value at start of the period
Loss on derecognition of convertible notes
Fair value movement to the end of the reporting period
Derivative liability
Total borrowings
12. Provisions
Employee benefits
13. Issued Capital
Issued and paid up capital
Fully paid Ordinary Shares
Balance at the beginning of the financial year
Placement for cash at $6.60 per share
Balance at the end of the financial year
Fully paid Ordinary Shares
Balance at the beginning of the financial year
Placement for cash at $6.60 per share
Balance at the end of the financial year
31 December
2017
$
31 December
2016
$
2,648,387
4,500,000
(444,618)
(666,893)
6,036,876
351,613
6,388,489
1,169,870
159,018
157,996
1,486,884
7,875,373
2,735,439
‑
(267,305)
‑
2,468,134
180,253
2,648,387
167,517
490,705
511,648
1,169,870
3,818,257
240,319
640,463
45,228,931
‑
45,228,931
number
26,893,409
‑
26,893,409
37,398,942
7,829,989
45,228,931
number
25,707,047
1,186,362
26,893,409
Fully paid ordinary shares carry one vote per share and carry the rights to dividends.
Changes in the Corporations Law abolished the authorised capital and par value concept in relation to share capital from
1 July 1998. Therefor the company does not have a limited amount of authorised capital and issued shares do not have a
par value.
In 2016, a share placement occurred. 151,515 shares were issued to a company associated with Fred Bart. 1,034,847 shares
were issued to unrelated parties.
35
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
14. Reserves
Foreign currency translation
Balance at the beginning of the financial year
Translation of foreign operations
Balance at end of financial year
Foreign currency translation
31 December
2017
$
31 December
2016
$
(3,251,993)
(3,115,487)
1,676,117
(136,506)
(1,575,876)
(3,251,993)
Exchange differences relating to the translation of the results and net assets of the Group’s foreign operations from their
functional currencies to the Group’s presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive
income and accumulated in the foreign currency translation reserve. Exchange differences previously accumulated in the
foreign currency translation reserve are reclassified to profit and loss on the disposal of the foreign operation.
Equity settled option reserve
Balance at the beginning of the financial year
Balance at end of financial year
The above equity‑settled option reserve relates to share options granted by the Company.
Minority acquisition reserve
Balance at the beginning of the financial year
Balance at end of financial year
The non‑controlling interest reserve comprises amounts related to the acquisition of a
non‑controlling interest shareholding in a subsidiary company in a prior period.
4,512,898
4,512,898
4,512,898
4,512,898
(25,538,692)
(25,538,692)
(25,538,692)
(25,538,692)
Convertible Note Equity Reserve
Balance at the beginning of the financial year
Increase as a result of derivative liability recognised on the issue of convertible
notes treated as equity
Balance at end of financial year
‑
666,893
666,893
‑
‑
‑
Total Reserves
(21,934,777)
(24,277,787)
36
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
15. Accumulated Losses
Balance at the beginning of the financial year
(Loss) for the year attributable to owners of the company
Balance at the end of the financial year
16. Notes to the Statement of Cash Flows
(a) Reconciliation of cash and cash equivalents
31 December
2017
$
31 December
2016
$
(17,592,453)
(12,537,682)
(5,914,957)
(5,054,771)
(23,507,410)
(17,592,453)
For the purposes of the statement of cash flows, cash includes cash on hand and at call deposits with banks or financial
institutions, investments in money market instruments maturing within less than 3 months at the date of acquisition.
Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows is reconciled to the
related items in the statement of financial position as follows:
Cash and cash equivalents
2,700,577
5,083,948
(b) Restricted cash
Cash held as security for future lease payments
53,092
52,036
(c) Reconciliation of (loss) for the period to net cash flows from operating activities
(Loss) after related income tax
Amortisation
Convertible note adjustments
Depreciation
Foreign exchange gains
Changes in assets and liabilities
(Increase)/ decrease in assets
Current trade and other receivables
Non‑current trade and other receivables
Increase /(decrease) in liabilities
Provisions
Current trade payables
(5,914,957)
(5,054,771)
79,637
224,009
79,639
80,483
915,301
73,493
1,918,755
(286,844)
40,005
(4,235)
(400,144)
415,900
(42,392)
(5,036)
115,556
1,640
Net cash (used in) operating activities
(3,561,391)
(4,202,570)
37
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
17. Related Party Transactions
(a) Directors
The Directors of Audio Pixels Holdings Limited in office during the year were Fred Bart, Ian Dennis and Cheryl Bart.
(b) KMP Remuneration
The aggregate compensation of the key management personnel of the company is set out below:
Short‑term employee benefits
Post employment benefits
31 December
2017
$
31 December
2016
$
775,262
169,339
944,601
737,818
163,284
901,102
The remuneration above relates to directors fees, consultancy fees and superannuation paid to entities associated with
Fred Bart, Cheryl Bart and Ian Dennis and the remuneration of the three senior executives of Audio Pixels Limited in Israel.
(c) Transactions with related entities
During the year ended 31 December 2017, the Company paid a total of $107,857 (year ended
31 December 2016 ‑ $107,857) to 4F Investments Pty Limited, a company associated with Mr Fred Bart in respect of
directors fees and superannuation for Mr Fred Bart and Mrs Cheryl Bart.
During the year ended 31 December 2017, the Company paid a total of $41,063 (year ended 31 December 2016 ‑ $41,063) to
Dennis Corporate Services Pty Limited, a company associated with Mr Ian Dennis in respect of directors fees and superannuation.
During the year ended 31 December 2017, the Company paid interest of $119,407 (year ended
31 December 2016 ‑ $119,671) on a convertible note to 4F Investments Pty Limited, a company associated with Mr Fred
Bart. The convertible note of $1.5m was issued on 26 June 2015 following shareholder approval at an Extraordinary General
Meeting. The convertible note was extended twice during the year ended 31 December 2016 and once during the year
ended 31 December 2017, the most recent of which being on 29 December 2017, which is subject to shareholder approval.
The note now expires on or before 31 December 2018.
During the year, the Company paid $30,000 (31 December 2016 ‑ $30,000) to Dennis Corporate Services Pty Limited,
a company associated with Mr Ian Dennis in respect of consulting fees for company secretarial and accounting services.
On 8 May 2014, the company entered into a lease in respect of office premises at Level 12, 75 Elizabeth Street Sydney
for a period of forty eight months to 30 March 2018. The company recharged $22,955 of the rent and other tenancy
charges to Electro Optic Systems Holdings Limited, a company of which Fred Bart and Ian Dennis are directors, $22,762
to 4F Investments Pty Limited, a company controlled by Fred Bart and $45,910 to another tenant who is a shareholder in
the company.
38
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
18. Earnings per Share
Basic (loss) per share
Diluted (loss) per share (b)
(Loss) (a)
31 December
2017
31 December
2016
(21.99) cents
(19.02) cents
(21.99) cents
(19.02) cents
(5,914,957)
(5,054,771)
Weighted average number of Ordinary Shares
26,893,409
26,571,894
(a)
(Loss) used in the calculation of basic earnings per share are the same as the net (loss) in the Statement of profit or loss
and other comprehensive income.
(b) There are potential ordinary shares to be issued in relation to the convertible notes of $3m which expire on
31 December 2018. The convertible note holders have the option of receiving their $3m back with interest or
converting their convertible notes into ordinary shares based on the lower of the five day volume weighted average
share price of Audio Pixels Holdings Limited on the date of the agreement ($9.68) or the five day volume weighted
average share price of Audio Pixels Holdings Limited immediately prior to conversion. The convertible notes have not
been included in dilutive EPS, as they are anti‑dilutive.
(c) There are potential ordinary shares to be issued in relation to the convertible notes of $4.5m which expire on
31 December 2018. The convertible note holders have the option of receiving their $4.5m back with interest or
converting their convertible notes into ordinary shares based on the five day volume weighted average share price of
Audio Pixels Holdings Limited on the date of the agreement ($16.71). The convertible notes have not been included in
dilutive EPS, as they are anti‑dilutive.
19. Segment Information
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to
assess performance.
The identification of the Group’s reportable segments has not changed from those disclosed in the previous 2016 report.
The consolidated entity operates in Australia and Israel.
Products and services within each segment
Digital speakers
The subsidiary company in Israel is developing a digital speaker and has not reached the stage of generating any revenue
from the technology.
Segment Revenues
Digital speakers
Total of all segments
Segment Results
Digital speakers
(Loss) before income tax
Income tax gain/ (expense)
(Loss) for the period
65,624
65,624
103,630
103,630
(5,914,957)
(5,914,557)
‑
(5,054,771)
(5,054,771)
‑
(5,914,957)
(5,054,771)
39
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
19. Segment Information (Cont.)
segment Assets and Liabilities
Digital speakers
Total all segments
Unallocated
Consolidated
Assets
Liabilities
31 December
2017
$
31 December
2016
$
31 December
2017
$
31 December
2016
$
8,790,206
8,790,206
‑
8,289,281
8,289,281
‑
9,003,462
9,003,462
‑
4,930,591
4,930,591
‑
8,790,206
8,289,281
9,003,462
4,930,591
Assets used jointly by reportable segments are allocated on the basis of the revenue earned by the individual reportable segments.
other segment Information
Depreciation and amortisation
of segment assets
Acquisition of segment assets
31 December
2017
$
31 December
2016
$
31 December
2017
$
31 December
2016
$
159,276
159,276
‑
153,976
153,976
‑
263,958
263,958
‑
159,276
153,976
263,958
72,700
72,700
‑
72,700
Digital speakers
Total all segments
Unallocated
Consolidated
Information on Geographical segments
Revenue
from external
Customers
$
65,624
‑
65,624
103,630
‑
103,630
segment
Assets
$
8,028,778
761,428
8,790,206
4,543,183
3,746,098
8,289,281
Acquisition
of segment
Assets
$
‑
263,958
263,958
‑
72,700
72,700
Geographical segments
31 December 2017
Australia
Israel
Total
31 December 2016
Australia
Israel
Total
40
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
20. Financial Risk Management Objectives and Policies
The consolidated entity’s principal financial instruments comprise receivables, payables, borrowings, derivative liabilities,
cash and short term deposits.
Due to the small size of the group significant risk management decisions are taken by the board of directors. These risks
include market risk (including fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity
risk. The Directors do not plan to eliminate risk altogether, rather they plan to identify and respond to risks in a way that
creates value for the company and its shareholders. Directors and shareholders appreciate that in order for the consolidated
entity to compete and grow, a long term strategy needs to involve risk taking for reward.
The consolidated entity does not use derivative financial instruments to hedge these risk exposures.
Risk exposures and Responses
(a) Interest rate risk
The Group’s exposure to market interest rates relates primarily to the consolidated entity’s cash holdings and short term deposits.
At balance date, the consolidated entity had the following mix of financial assets exposed to Australian interest rate risk that are
not designated in cash flow hedges:
Financial assets
Cash and cash equivalents
31 December
2017
$
31 December
2016
$
2,700,577
5,083,948
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of
existing positions, alternative financing and the mix of fixed and variable interest rates.
At 31 December 2017, if interest rates had moved, as illustrated in the table below, with all other variables held constant,
post tax (loss) and equity would have been affected as follows:
Judgements of reasonably
possible movements
Post tax Profit
Higher/(Lower)
equity
Higher/(Lower)
Consolidated entity
+1% (100 basis points)
‑0.5% (50 basis points)
31 December
2017
$
31 December
2016
$
31 December
2017
$
31 December
2016
$
27,006
(3,710)
50,839
(25,420)
27,006
(3,710)
50,839
(25,420)
The movements in profits are due to higher/lower interest rates on cash and cash equivalents balances. The cash and cash
equivalents balances were lower in December 2017 than in December 2016 and accordingly the sensitivity is lower.
41
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
20. Financial Risk Management Objectives and Policies (Cont.)
(b) Foreign currency risk
The consolidated entity has a foreign currency risk since the acquisition of Audio Pixels Limited. Audio Pixels Limited
operates in Israel and all transfer of funds to Audio Pixels Limited are denominated in US dollars. The consolidated entity
does not hedge its US dollar exposure.
The carrying amounts of the Group’s foreign currency (US$) denominated monetary assets and monetary liabilities at the
end of the reporting period are as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Liabilities
Assets
31 December
2017
$
31 December
2016
$
31 December
2017
$
31 December
2016
$
‑
‑
‑
‑
850,406
374,591
406,585
35,946
‑
745,611
77,291
‑
All US$ denominated financial instruments were translated to A$ at 31 December 2017 at the exchange rate of 0.7805
(2016: 0.7197).
At 31 December 2017 and 31 December 2016, had the Australian Dollar moved, as illustrated in the table below, with all
other variables held constant, post tax loss and equity would have been affected as follows:
Judgements of reasonably
possible movements
Post tax Loss
Higher/(Lower)
equity
Higher/(Lower)
Consolidated
AUD/USD +10%
AUD/USD ‑5%
2017
$
2016
$
2017
$
2016
$
290,884
(168,427)
344,768
(199,603)
290,884
(168,427)
344,768
(199,603)
Management believes the balance date risk exposures are representative of risk exposure inherent in financial instruments.
(c) Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to
the Group. The consolidated entity has adopted a policy of only dealing with creditworthy counterparties which are
continuously monitored.
The credit risk on liquid funds is limited because the counterparties are major banks with high credit‑ratings assigned by
international credit agencies.
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Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
20. Financial Risk Management Objectives and Policies (Cont.)
(d) Liquidity risk management
The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due. The consolidated entity’s investments in money market instruments all have a
maturity of less than 3 months.
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate risk
management framework for the management of the consolidated entity’s short, medium and long term funding and liquidity
requirements. The consolidated entity manages liquidity by maintaining adequate cash reserves by continuously monitoring
forecast and actual cash flows and managing maturity profiles of financial assets.
The following tables detail the consolidated entity’s remaining contractual maturity for its non‑derivative financial assets and
non‑derivative financial liabilities. The tables have been drawn up based on the undiscounted contractual maturities of the
financial assets and financial liabilities including interest that will be earned on these assets except where the consolidated
entity anticipates that the cash flow will occur in a different period.
Weighted
average effective
interest rate
%
Less than
1 month
$
1‑3 months
$
3 months
to 1 year
$
1‑5 years
$
31 December 2017
Assets
Non interest bearing
Fixed rate instruments
Liabilities
Convertible notes
31 December 2016
Assets
Non interest bearing
Fixed rate instruments
Liabilities
Convertible notes
0.00
0.36
8.00
0.00
2.21
8.00
306,095
2,394,462
‑
‑
‑
150,000
7,950,000
714,569
4,378,720
‑
18,375
‑
84,306
‑
‑
‑
499,633
‑
60,000
3,180,000
‑
All financial liabilities are expected to be settled under commercial terms of within 12 months. The derivative liability
amount if converted will be settled in equity, so no associated cash outflows.
(e) Commodity price risk
The consolidated entity has no exposure to commodity price risk.
(f) Other price risks
The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
43
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
21. Financial Instruments
Fair value of financial instruments
This note provides information about how the Group determines fair values of various financial assets and financial liabilities.
Financial liabilities
(a) The original convertible note with a face value of $3,000,00 derivative liability is valued as sold call options with a strike
price of $9.68 using the Black‑Scholes option pricing model. An input into the Black‑Scholes option pricing model is
the expected share price volatility over the remaining term of the options. The expected share price volatility used in
the option valuation at reporting date was 50.00% which was based on historical share price volatility.
(b) The new convertible note with a face value of $4,500,000 derivative liability is valued as sold call options with a strike
price of $16.71 using the Black‑Scholes option pricing model. An input into the Black‑Scholes option pricing model is
the expected share price volatility over the remaining term of the options. The expected share price volatility used in
the option valuation at reporting date was 59.65% which was based on historical share price volatility
The fair value of the derivative liability is sensitive to changes in share price volatility. Increases in volatility increase the fair
value of the derivative liability and vice versa.
The fair value hierarchy was Level 3. A movement schedule is included in Note 11.
22. Subsequent Events
The Directors are not aware of any significant events since the end of the financial year and up to the date of this report.
44
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
23. Parent Entity Disclosures
Financial position
Assets
Current assets
Non‑current assets
Total assets
Liabilities
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
(Accumulated losses)/Retained earnings
Total equity
Financial performance
(Loss) for the period
Other comprehensive income
24. Controlled Entity
name of entity
Parent Entity
31 December
2017
$
31 December
2016
$
28,311,243
2,428,209
26,282,355
2,428,209
30,739,452
28,710,564
7,912,737
3,915,537
‑
‑
7,912,737
22,826,715
3,915,537
24,795,027
45,228,931
45,228,931
(20,358,901)
(21,025,794)
(2,043,315)
591,890
22,826,715
24,795,027
(2,635,205)
(1,181,840)
‑
‑
(2,635,205)
(1,181,840)
Country of
Incorporation
31 December
2017
%
31 December
2016
%
Audio Pixels Holdings Limited
Australia
Controlled Entities
Audio Pixels Limited
Audio Pixels Technologies Pty Limited ‑ incorporated on
11 May 2016
Israel
100.00
100.00
Australia
100.00
100.00
45
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2017
25. Leases
operating leases ‑ leasing arrangements (the Company as lessee)
On 8 May 2014, the parent company entered into a lease in respect of office premises at Level 12, 75 Elizabeth Street
Sydney for a period of forty eight months from 31 March 2014 to 30 March 2018. The company recharges 20% of the
rent and other tenancy charges to Electro Optic Systems Holdings Limited, a company of which Fred Bart and Ian Dennis
are directors, 20% to 4F Investments Pty Limited, a company controlled by Fred Bart and 40% to another tenant who is a
shareholder in the Company.
Non‑cancellable operating lease payables
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
31 December
2017
$
31 December
2016
$
31,125
‑
‑
102,321
21,879
‑
31,125
124,200
The Company recovers 80% of the lease payments and other tenancy charges from director related entities and another
party on a month to month basis.
26. Contingent Liability
The parent company has been advised of a potential derivative action in Israel by an individual shareholder of BE4 Limited
(a company with no financial interest in Audio Pixels Holdings Limited), an Israeli company in bankruptcy proceedings. The Central
District Court of Israel dismissed the motion to file a derivative action against Audio Pixels Limited and impose costs and expenses
on the petitioner. At the date of this report the period in which to appeal the decision his still open. The Directors do not believe
the Company has a case to answer, and is prepared to vigorously defend any action if commenced.
27. Commitments
The subsidiary company, Audio Pixels Limited of Israel has entered into various purchase orders and commitments of
$451,745 (2016: $1,754,896) with various strategic partners which will become payable once qualified products are
delivered to the company.
28. Additional Company Information
Audio Pixels Holdings Limited is a listed public company, incorporated and operating in Australia.
Registered office and Principal Place of Business
Suite 3, Level 12
75 Elizabeth Street
Sydney NSW 2000
Australia
Tel: (02) 9233 3915
Fax: (02) 9232 3411
www.audiopixels.com.au
The Company has 11 (2016: 11) employees in Israel.
46
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 AsX ADDItIonAL InFoRMAtIon
Additional information required by the Australian Stock Exchange Listing Rules and not disclosed elsewhere in this report.
Home Exchange
The Company’s ordinary shares are quoted on the Australian Stock Exchange Limited under the trading symbol “AKP”.
The Home Exchange is Sydney. The Company also has a Level 1 American Depositary Receipts (ADR) program and
quotation on the OTC market in the United State of America under the code “ADPXY” which is under the NASDAQ
International Designation program.
Substantial Shareholders
At 21 February 2018 the following substantial shareholders were registered:
Fred Bart Group
Voting Rights
ordinary shares
Percentage of total
ordinary shares
5,592,765
20.80%
At 21 February 2018 there were 2,208 holders of fully paid ordinary shares.
Rule 74 of the Company’s Constitution stipulates the voting rights of members as follows:
“Subject to any rights or restrictions for the time being attached to any class or classes of shares and to this Constitution:
(a) on a show of hands every person present in the capacity of a Member or a proxy, attorney or representative (or in more
than one of these capacities) has one vote; and
(b) On a poll every person present who is a Member or proxy, attorney or representative has member present has:
(i) For each fully paid share that the person holds or represents ‑ one vote; and
(ii) For each share other than a fully paid share that the person holds or represents ‑ that proportion of one vote that
the amount paid (not credited) on the shares bears to the total amount paid and payable on the share (excluding
amounts credited).”
Other Information
In accordance with Listing Rule 4.10.19, the Company has used the cash and assets in a form readily convertible to cash that
it had at the time of admission in a way consistent with its business objectives.
Distribution of Shareholdings
At 21 February 2018 the distribution of ordinary shareholdings were:
Range
1‑1,000
1,001 ‑ 5,000
5,001 ‑ 10,000
10,001 ‑ 100,000
100,001 and over
There were 32 ordinary shareholders with less than a marketable parcel.
There is no current on‑market buy‑back.
ordinary
shareholders
number of
shares
1,278
548
187
161
34
2,208
504,296
1,418,051
1,545,200
4,581,881
18,843,981
26,893,409
47
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2017 CORPORATE DIRECTORY
tWentY LARGest oRDInARY sHAReHoLDeRs
Twenty Largest Ordinary Shareholders
Directors
At 21 February 2018 the 20 largest ordinary shareholders held 62.85% of the total issued fully paid quoted ordinary shares
of 26,893,409.
Fred Bart (Chairman)
Ian Dennis
Cheryl Bart AO
Fully Paid
ordinary shares
Percentage of
total
shareholder
1. Altshuler Shacham Trusts Ltd
Company secretary
2. Landed Investments (NZ) Limited
3. HSBC Custody Nominees (Australia) Limited
Ian Dennis
4. BNP Paribus Nominees Pty Ltd
Registered off ice
5. Frederick Bart
Israel Corporate off ice
6. Link Traders (Aust) Pty Limited
7. Bart Superannuation Pty Limited
8. Kam Superannuation Fund Pty Limited
9. Jamber Investments Pty Ltd
Suite 3, Level 12
75 Elizabeth Street
SYDNEY NSW 2000
Australia
10. Cheryl Bart
3 Pekris Street
Rehovot
ISRAEL 76702
3,768,078
3,565,000
1,196,645
1,161,438
994,325
897,532
744,295
650,000
508,050
500,000
11. Altshuler Shacham Trusts Limited
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