More annual reports from Audio Pixels Holdings Limited:
2023 ReportAudio Pixels Holdings Limited
ACN 094 384 273
www.audiopixels.com.au
ANNUAL REPORT
2018
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
4946 Designed and Produced by RDA Creative www.rda.com.au
Contents
2
Directors’ Report
10 Auditor’s Independence Declaration
11
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
51 ASX Additional Information
52 Twenty Largest Ordinary Shareholders
1
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 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 2018. 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 a director 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, 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, the Local Organising Committee of the 2015 Australian Asian Cup, Prince’s
Trust Australia and Football Federation of Australia (FFA). 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
Weebit Nano Limited
Electro Optic Systems Holdings Limited
Spark Infrastructure Group Limited
SG Fleet Australia Limited
Principal Activities
Period of directorship
Since May 2000
Since March 2018
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 2018 was $4,519,721 (31 December 2017 ‑ $5,914,957).
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 2018 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 refinements to the
MEMS transducer and its associated fabrication processes
required to mass produce a commercial version of the
Company’s proven groundbreaking MEMS based digital
loudspeaker technologies.
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
commercializing 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 its century old analog
origins into the advanced digital era of today.
As has been previously reported, this was a period of
consequential achievements. Paramount among these
achievements has been the introduction and validation
of our newly developed charging or charge trapping
suppression mechanism. This patent‑pending innovation
appears to have finally resolved what was considered to
be the key technological obstacle hindering our path to
product commercialization.
In our efforts to expedite characterization of the newly
designed charging suppression mechanisms, simplified
structures were designed and fabricated. By removing the
pressure generating mechanisms from the device, the
simplified structures took less than half the fabrication
time, yet still delivered an accurate functional device that
mirrored the charging characteristics of the device.
Upon completion of electrical characterization,
the company introduced some of the pressure generating
elements to the simplified structures. This was done
in order to investigate the possible influence the
“aerodynamics” might have on the charging suppression
mechanisms. Prevailing acoustic theories intimated
that the natural actuation of these acoustic enabled
“Simplified Structures” would be unable to produce sound.
To our astonishment, the test devices not only generated
sound, they did so with exceptional efficiency throughout
the low (bass) frequency spectrum.
In‑depth characterization of the Simplified Structure
revealed that with relatively slight adjustments to the
structure design, and / or newly developed electronic and
algorithmic controls, the simplified structured devices can
be evolved into a commercially viable product that offers
a number of commercial advantages, not the least of
which would be a dramatic reduction in fabrication costs.
This effort is underway, running in parallel to our standing
technology commercialization plan associated with the
full structured devices.
Perhaps the most noteworthy achievements of this
period are associated with acoustic development
and testing using wafers that incorporate the newly
designed charge suppression mechanism. While the
fabricator is in the latter stages of refining the fabrication
processes, nonetheless early wafers delivered exhibited
performance and reliability that are incomparably
superior to anything the Company has received in the
past. These early deliveries have enabled the Company
to make tremendous strides measuring and refining the
drive electronics and acoustic output of the devices.
The devices have already been proven to play music!
In fact, early results are unprecedented with devices
reproducing frequencies below 100Hz (by comparison the
very best similar sized analog speakers have a lower limit
of roughly 800Hz or 3 octaves above ours).
No less exciting has been the recruitment and hiring of
additional staff. In order to maintain pace with our recent
achievements, the company has effectively doubled its
engineering staff over the past two months, recruiting
exceptional talent in a diversity of relevant skills.
These achievements (and more) attained during this
reporting period contribute to a very positive outlook
that the company is rapidly approaching the latter stages
of realizing its vision. Specifically, the invention and
implementation of an effective and reliable charging
suppression mechanism has removed what was
previously considered to be ‘the’ last technical hurdle in
the way of production of working full structure devices.
Added to this is the exciting discovery related to the
“Simplified Structure” design that paves new paths to
increased market potential and improved profitability.
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.
3
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
Changes in State of Affairs
Company will meet the full amount of any such liabilities,
including costs and expenses.
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
In prior year financial statements, the Company noted that
there was a contingent liability in relation to a derivative
action court case in Israel in relation to BE4 Limited which
the Company was defending. On 13 February 2019 the
Supreme Court of Israel dismissed the appeal from the
lower court and the matter is now concluded.
Apart from the above, 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.
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
5,780,640
320,167
500,000
During the year, a company controlled by Fred Bart
converted one convertible note of $1.5m into 154,959
ordinary shares at a price of $9.68 and one convertible
note of $500,000 into 32,916 ordinary shares at $15.19.
Future Developments
Remuneration Report (Audited)
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
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.
4
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
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 ‑ Retired 21 June 2018
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
2018
$
Year ended
31 December
2017
$
Year ended
31 December
2016
$
Year ended
31 December
2015
$
Year ended
31 December
2014
$
Revenue
Net (loss) before tax
Net (loss) after tax
86,961
(4,519,721)
(4,519,721)
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)
Year ended
31 December
2018
$
Year ended
31 December
2017
$
Year ended
31 December
2016
$
Year ended
31 December
2015
$
Year ended
31 December
2014
$
16.82
20.22
0.00
14.15
16.82
0.00
8.45
14.15
0.00
9.86
8.45
0.00
3.80
9.86
0.00
Share price at start of
year/period
Share price at end of
year/period
Dividend Paid
The aggregate compensation of the key management personnel of the Company is set out below:
Short‑term employee benefits
Post employment benefits
31 December
2018
$
31 December
2017
$
763,526
99,387
862,913
775,262
169,339
944,601
5
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
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
1/1/18
no.
5,592,765
500,000
320,167
1,709,092
1,928,971
881,604
Granted as
remuneration
no.
Received on
exercise of
options
no.
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
net other
change
no.
Balance at
31/12/18
no.
187,875
5,780,640
‑
‑
(278,273)
(498,152)
(881,064)
500,000
320,167
1,430,819
1,430,819
‑
Mr Fred Bart
Mrs Cheryl Bart
Mr Ian Dennis
Mr Danny Lewin
Mr Yuval Cohen
Mr Shay Kaplan*
*Shay Kaplan retired on 21 June 2018
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.
The convertible note was exercised on 7 November 2018 and resulted in the issue of 154,959 ordinary shares to
4F Investments Pty Limited.
6
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
On 7 May 2018, shareholders approved the issue of a convertible note of $500,000 to 4F Investments Pty Limited, company
controlled by Mr Fred Bart. The terms of the issue were as follows:
Face Value:
$500,000
Date of initial issue:
7 May 2018
Interest rate:
8% payable quarterly
Term:
Listing status:
Security:
7 months to 31 December 2018
Unlisted
Unsecured
Conversion terms:
Convertible to ordinary shares at $16.71
On 7 November 2018, 4F Investments Pty Limited agreed to exercise their convertible note earlier at a discounted price of
$15.19. The convertible note was subsequently exercised on 21 December 2018 after obtaining shareholder approval at an
Extraordinary General Meeting on that day and resulted in the issue of 32,916 ordinary shares to 4F Investments Pty Limited.
The discounted conversion price of $15.19 was the same conversion price as the other holders of this series of convertible
notes who also agreed to convert their notes early.
Transactions with Related Entities
During the year ended 31 December 2018, the Company paid a total of $107,857 (year ended 31 December 2017 ‑ $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 interest of $125,918 (year ended 31 December 2017 ‑ $119,407)
on convertible notes to 4F Investments Pty Limited, a company associated with Mr Fred Bart.
During the year, a company controlled by Fred Bart, 4F Investments Pty Limited, converted one convertible note of $1.5m into
154,959 ordinary shares at a price of $9.68 on 7 November 2018 and converted one convertible note of $500,000 into 32,916
ordinary shares at $15.19 on 21 December 2018 after shareholder approval was received.
During the year ended 31 December 2018, the Company paid a total of $41,063 (year ended 31 December 2017 ‑ $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 2017 ‑ $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 1 June 2018, the company exercised an option to renew a lease in respect of office premises at Suite 3, Level 12,
75 Elizabeth Street Sydney for a period of forty eight months to 30 March 2022. The Company recharged $28,441 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 $28,441 to 4F Investments Pty Limited, a company controlled by Fred Bart.
7
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
Remuneration Report (Cont.)
The following table sets out the remuneration of each key management personnel of the Company:
short term
Post employment
total
December 2018
Fred Bart
Cheryl Bart
Ian Dennis
Danny Lewin
Yuval Cohen
Shay Kaplan
December 2017
Fred Bart
Cheryl Bart
Ian Dennis
Danny Lewin
Yuval Cohen
Shay Kaplan
Directors fees/
salary
$
non‑monetary
$
superannuation
$
61,000
37,500
67,500*
159,034
220,008
118,528
663,570
61,000
37,500
67,500*
157,122
179,775
150,353
653,250
‑
‑
‑
54,499
21,810
23,647
99,956
‑
‑
‑
37,846
39,988
44,178
122,012
5,794
3,563
3,563
‑
18,996
‑
31,916
5,794
3,563
3,563
‑
‑
‑
12,920
social
security
$
‑
‑
‑
38,627
‑
28,844
67,471
‑
‑
‑
51,581
55,429
49,409
156,419
$
66,794
41,063
71,063
252,160
260,814
171,019
862,913
66,794
41,063
71,063
246,549
275,192
243,940
944,601
* 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.
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:
Board of directors
Audit committee
nomination and
Remuneration committee
Directors
Mr Fred Bart
Mrs Cheryl Bart
Mr Ian Dennis
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.
8
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 DIReCtoR’s RePoRt
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 10.
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 27 day of February 2019
9
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 10
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 11
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 12
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 13
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 4 to 8
14
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 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 27 day of February 2019.
15
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 ConsoLIDAteD stAteMent oF PRoFIt oR Loss AnD
otHeR CoMPReHensIVe InCoMe
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
Consolidated
Year ended
31 December
2018
$
Consolidated
Year ended
31 December
2017
$
note
Revenue
2
86,961
65,624
Administrative expenses
Amortisation
Depreciation
Directors fees and superannuation
Exchange (losses)/ gains
Interest expense
Fair value movement of derivative liability
Gain/ (Loss) on amendment of terms of convertible notes
Loss on sale of property, plant and equipment
Marketing
Research and development expenses
(Loss) before income tax
Income tax benefit
(Loss) for the year
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit and loss
(916,399)
(79,159)
(70,881)
(148,920)
2,723,660
(1,511,514)
(940,264)
(525,415)
(198)
(3,983)
(750,704)
(79,637)
(79,639)
(148,920)
(1,767,526)
(593,179)
(157,996)
285,600
‑
(16,906)
2
3
(3,133,609)
(2,671,674)
(4,519,721)
(5,914,957)
‑
‑
(4,519,721)
(5,914,957)
Exchange differences arising on translation of foreign operations
14
(2,461,611)
1,676,117
Other comprehensive income/(loss) for the year, net of tax
(2,461,611)
1,676,117
Total comprehensive (loss) for the year
(6,981,332)
(4,238,840)
Notes to the financial statements are included on pages 21 to 50.
16
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018
ConsoLIDAteD stAteMent oF PRoFIt oR Loss AnD
otHeR CoMPReHensIVe InCoMe
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
Consolidated
Year ended
31 December
2018
Consolidated
Year ended
31 December
2017
note
(4,519,721)
(5,914,957)
(6,981,332)
(4,238,840)
(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)
19
(16.67)
(21.99)
Notes to the financial statements are included on pages 21 to 50.
17
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 ConsoLIDAteD stAteMent oF FInAnCIAL PosItIon
As At 31 DeCeMBeR 2018
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 ASSETS/ (LIABILITIES)
EQUITY
Issued capital
Reserves
Accumulated losses
Equity attributable to owners of the company
TOTAL EQUITY
Consolidated
December
2018
$
Consolidated
December
2017
$
note
5
6
7
8
9
6
10
11
11
12
13
15
16
11,019,092
173,565
11,192,657
2,700,577
3,046,113
5,746,690
2,326,483
2,189,025
483,848
329,858
5,525
3,145,714
14,338,371
987,849
‑
‑
203,960
1,191,809
1,191,809
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
13,146,562
(213,256)
66,217,433
45,228,931
(25,043,740)
(21,934,777)
(28,027,131)
(23,507,410)
13,146,562
13,146,562
(213,256)
(213,256)
Notes to the financial statements are included on pages 21 to 50.
18
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 ConsoLIDAteD stAteMent oF CHAnGes In eQUItY
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
Transfer from reserve
715,097
December 2018 ‑
Consolidated
Balance at
1 January 2018
Other comprehensive
income for the year
(Loss) for the year
Issue of shares
for cash
Issue of shares
on conversion of
convertible notes
Recognition of share
based payments
Equity reserve on issue
of convertible notes
Balance at
31 December 2018
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
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
(1,575,876)
(25,538,692)
666,893
(23,507,410)
(213,256)
‑
‑
9,500,003
10,773,402
‑
‑
‑
‑
‑
(2,461,611)
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
(715,097)
‑
‑
(2,461,611)
(4,519,721)
(4,519,721)
‑
‑
‑
‑
9,500,003
10,773,402
‑
19,541
48,204
‑
48,204
‑
‑
19,541
‑
66,217,433
4,532,439
(4,037,487)
(25,538,692)
‑
(28,027,131)
13,146,562
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)
Notes to the financial statements are included on pages 21 to 50.
19
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 ConsoLIDAteD stAteMent oF CAsH FLoWs
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
Cash flows from operating activities
Payments to suppliers and employees
Interest paid
Interest received
Consolidated
Year ended
31 December
2018
$
Consolidated
Year ended
31 December
2017
$
notes
(4,148,731)
(3,387,969)
(530,959)
86,961
(239,046)
65,624
Net cash (used by) operating activities
17
(4,592,729)
(3,561,391)
Cash flows from investing activities
Payment for property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash (outflows) from investing activities
Cash flows from financing activities
Proceeds from share placement
Convertible note
Net cash provided by financing activities
(46,043)
316
(45,727)
13
9,500,003
3,500,000
13,000,003
(263,958)
‑
(263,958)
‑
1,500,000
1,500,000
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
8,361,547
2,700,577
(2,325,349)
5,083,948
(43,032)
11,019,092
(58,022)
2,700,577
Notes to the financial statements are included on pages 21 to 50.
20
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies
1(a) 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 27 February 2019.
1(b) 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.
1(c) Adoption of new and
revised standards
New and amended IFRS Standards that
are effective for the current year
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 its operations and effective for an accounting period
that begins on or after 1 January 2018.
New and revised Standards and amendments thereof
and Interpretations effective for the current financial year,
and which have been applied in the preparation of this
general purpose financial report, that are relevant to the
Group include:
AASB 9 Financial Instruments and related
amending Standards
AASB 15 Revenue from Contracts with Customers and
related amending Standards
AASB 9 Financial Instruments
In the current year, the Group has applied AASB 9 Financial
Instruments (as revised) and the related consequential
amendments to other Accounting Standards for the
first time. AASB 9 introduces new requirements for
1) the classification and measurement of financial assets
and financial liabilities, 2) impairment for financial assets
and 3) general hedge accounting. Details of these new
requirements as well as their impact on the Group’s
consolidated financial statements are described below.
The Group has applied AASB 9 in accordance with the
transition provisions set out in AASB 9.
Classification and measurement of
financial assets
The date of initial application (i.e. the date on which
the Group has assessed its existing financial assets and
financial liabilities in terms of the requirements of AASB 9)
is 1 January 2018. Accordingly, the Group has applied the
requirements of AASB 9 to instruments that have not been
derecognised as at 1 January 2018 and has not applied
the requirements to instruments that have already been
derecognised as at 1 January 2018.
Subsequent to initial recognition, all recognised financial
assets that are within the scope of AASB 9 are required to
be measured at amortised cost or fair value on the basis
of the entity’s business model for managing the financial
assets and the contractual cash flow characteristics of the
financial assets.
Specifically:
Debt investments that are held within a business
model whose objective is to collect the contractual
cash flows, and that have contractual cash flows
that are solely payments of principal and interest on
the principal amount outstanding, are subsequently
measured at amortised cost,
Debt investments that are held within a business
model whose objective is both to collect the
contractual cash flows and to sell the debt
instruments, and that have contractual cash flows
that are solely payments of principal and interest on
the principal amount outstanding, are subsequently
measured at fair value through other comprehensive
income (FVTOCI),
All other debt investments and equity investments
are subsequently measured at fair value through
profit or loss (FVTPL).
21
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
Despite the aforegoing, the Group may make the
following irrevocable election/designation at initial
recognition of a financial asset:
The Group may irrevocably elect to present
subsequent changes in fair value of an equity
investment that is neither held for trading nor
contingent consideration recognised by an
acquirer in a business combination to which
AASB 3 Business Combinations applies in other
comprehensive income,
The Group may irrevocably designate a debt
investment that meets the amortised cost or FVTOCI
criteria as measured at FVTPL if doing so eliminates or
significantly reduces an accounting mismatch.
In the current year, the Group has not taken any of the
elections above.
When a debt investment measured at FVTOCI is
derecognised, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified
from equity to profit or loss as a reclassification
adjustment. In contrast, for an equity investment
designated as measured at FVTOCI, the cumulative gain
or loss previously recognised in other comprehensive
income is not subsequently reclassified to profit or loss.
Debt instruments that are subsequently measured at
amortised cost or at FVTOCI are subject to impairment.
The directors of the Company reviewed and assessed the
Group’s existing financial assets as at 1 January 2018 based
on the facts and circumstances that existed at that date
and concluded that the initial application of AASB 9 has
had the following impact on the Group’s financial assets as
regards their classification and measurement:
Financial assets classified as held‑to‑maturity and
loans and receivables under AASB 139 that were
measured at amortised cost continue to be measured
at amortised cost under AASB 9 as they are held
within a business model to collect contractual
cash flows and these cash flows consist solely of
payments of principal and interest on the principal
amount outstanding;
As a result of the above, there was no impact on
the Group’s financial position, profit or loss, other
comprehensive income or total comprehensive income
for the period.
Impairment of financial assets
In relation to the impairment of financial assets, AASB 9
requires an expected credit loss model as opposed to an
incurred credit loss model under AASB 139. The expected
credit loss model requires the Group to account for
expected credit losses and changes in those expected
credit losses at each reporting date to reflect changes in
credit risk since initial recognition of the financial assets.
In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognised.
Specifically, AASB 9 requires the Group to recognise a loss
allowance for expected credit losses (‘ECL’) on i) trade
receivables, ii) debt investments subsequently measured
at amortised cost or at FVTOCI, iii) lease receivables,
iv) contract assets and v) loan commitments and
financial guarantee contracts to which the impairment
requirements of AASB 9 apply.
In particular, AASB 9 requires the Group to measure the
loss allowance for a financial instrument at an amount
equal to the lifetime ECL if the credit risk on that financial
instrument has increased significantly since initial
recognition, or if the financial instrument is a purchased
or originated credit‑impaired financial asset. On the other
hand, if the credit risk on a financial instrument has not
increased significantly since initial recognition (except for
a purchased or originated credit‑impaired financial asset),
the Group is required to measure the loss allowance for
that financial instrument at an amount equal to 12m ECL.
AASB 9 also provides a simplified approach for measuring
the loss allowance at an amount equal to lifetime ECL for
trade receivables, contract assets and lease receivables in
certain circumstances.
As at 1 January 2018, the directors of the Company
reviewed and assessed the Group’s existing financial
assets, amounts due from customers and financial
guarantee contracts for impairment using reasonable and
supportable information that is available without undue
cost or effort in accordance with the requirements of
AASB 9 to determine the credit risk of the respective items
at the date they were initially recognised, and compared
that to the credit risk as at 1 January 2018. No further
cumulative additional loss allowance was recognised as a
result of this assessment.
Classification and measurement of
financial liabilities
One major change introduced by AASB 9 in the
classification and measurement of financial liabilities
relates to the accounting for changes in the fair value of
a financial liability designated as at FVTPL attributable to
changes in the credit risk of the issuer.
22
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant Accounting Policies (Cont.)
Specifically, AASB 9 requires that the changes in the fair value of the financial liability that is attributable to changes in the
credit risk of that liability be presented in other comprehensive income, unless the recognition of the effects of changes in
the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss.
Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss, but are
instead transferred to retained earnings when the financial liability is derecognised. Previously, under AASB 139, the entire
amount of the change in the fair value of the financial liability designated as at FVTPL was presented in profit or loss.
This change in accounting policy has not affected the Group’s accounting in relation to the convertible notes as fair values
ascribed to these instruments already reflect the Group’s own credit risk.
Apart from the above, the application of AASB 9 has had no impact on the classification and measurement of the Group’s
financial liabilities.
General hedge accounting
The Group does not undertake hedging activities and hence is not impacted by the changes in relation to hedging.
Disclosures in relation to the initial application of AASB 9
The table below illustrates the classification and measurement of financial assets and financial liabilities under AASB 9 and
AASB 139 at the date of initial application, 1 January 2018.
Category
Trade and other
receivables
Cash and bank
balances
Trade and other
payables
Borrowings
Derivative
liabilities
original
measurement
category under
AAsB 139
Loans and
receivables
Loans and
receivables
Financial
liabilities at
amortised cost
Financial
liabilities at
amortised cost
Financial
liabilities at
FVTPL
new
measurement
category under
AAsB 9
Financial assets
at amortised cost
Financial assets
at amortised cost
Financial
liabilities at
amortised cost
Financial
liabilities at
amortised cost
Financial
liabilities at
FVTPL
original
carrying
amount under
AAsB 139
Additional loss
allowance
new carrying
amount under
AAsB 9
3,062,221
2,700,577
(887,770)
(6,388,489)
(1,486,884)
‑
‑
‑
‑
‑
3,062,221
2,700,577
(887,770)
(6,388,489)
(1,486,884)
The application of AASB 9 has had no impact on the financial statements, including the consolidated cash flows of the
Group or its earnings per share.
AASB 15 Revenue from Contracts with Customers
The Group has applied AASB 15 Revenue from Contracts with Customers (as amended) for the first time in the current
period. AASB 15 introduces a 5‑step approach to revenue recognition. Far more prescriptive guidance has been added
in AASB 15 to deal with specific scenarios. Details of these new requirements as well as their impact on the Group’s
consolidated financial statements are described below.
AASB 15 uses the terms ‘contract asset’ and ‘contract liability’ to describe what might more commonly be known as ‘accrued
revenue’ and ‘deferred revenue’, however the Standard does not prohibit an entity from using alternative descriptions in the
statement of financial position. The Group has adopted the terminology used in AASB 15 to describe such balances.
Apart from providing more extensive disclosures on the Group’s revenue transactions, the application of AASB 15 has not
had any impact on the financial position and/or financial performance of the Group. This is because the Group’s revenue is
primarily interest received which is outside the scope of AASB 15.
23
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
New and revised AASB Standards in issue
but not yet effective
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 future years that are
relevant to the Group include:
AASB 16 Leases
Annual Improvements to AASB Standards 2015‑2017
Cycle Amendments to AASB 3 Business Combinations,
AASB 11 Joint Arrangements, AASB 12 Income Taxes
and AASB 23 Borrowing Costs
Amendments to AASB 19 Employee Benefits Plan
Amendment, Curtailment or Settlement AASB 10
Consolidated Financial Statements and AASB 28
(amendments) Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture
IFRIC 23 Uncertainty over Income Tax Treatments
The directors do not expect that the adoption of the
Standards listed above will have a material impact on the
financial statements of the Group in future periods, except
as noted below:
AASB 16 Leases
General impact of application of AAsB 16 Leases
AASB 16 provides a comprehensive model for
the identification of lease arrangements and their
treatment in the financial statements for both lessors
and lessees. AASB 16 will supersede the current lease
guidance including AASB 117 Leases and the related
Interpretations when it becomes effective for accounting
periods beginning on or after 1 January 2019. The date
of initial application of AASB 16 for the Group will be
1 January 2019.
The Group has chosen the modified retrospective
application of AASB 16 in accordance with AASB
16:C5(b). Consequently, the Group will apply the
Standard retrospectively with the cumulative effect of
initially applying the Standard recognised at the date of
initial application.
In contrast to lessee accounting, AASB 16 substantially
carries forward the lessor accounting requirements in
AASB 117.
Impact of the new definition of a lease
The Group will make use of the practical expedient
available on transition to AASB 16 not to reassess whether
a contract is or contains a lease. Accordingly, the definition
of a lease in accordance with AASB 117 and IFRIC 4 will
continue to apply to those leases entered or modified
before 1 January 2019.
The change in definition of a lease mainly relates to the
concept of control. AASB 16 distinguishes between leases
and service contracts on the basis of whether the use of
an identified asset is controlled by the customer. Control is
considered to exist if the customer has:
The right to obtain substantially all of the economic
benefits from the use of an identified asset; and
The right to direct the use of that asset.
The Group will apply the definition of a lease and related
guidance set out in AASB 16 to all lease contracts entered
into or modified on or after 1 January 2019 (whether it is a
lessor or a lessee in the lease contract). In preparation for
the first time application of AASB 16, the Group has carried
out an implementation assessment. The assessment
has shown that the new definition in AASB 16 will not
change significantly the scope of contracts that meet the
definition of a lease for the Group.
Impact on Lessee Accounting
Operating leases
AASB 16 will change how the Group accounts for leases
previously classified as operating leases under AASB 117,
which were off balance sheet.
On initial application of AASB 16, for all leases (except as
noted below), the Group will:
a) Recognise right of use assets and lease liabilities
in the consolidated statement of financial position,
initially measured at the present value of the future
lease payments;
b) Recognise depreciation of right of use assets and
interest on lease liabilities in the consolidated statement
of profit or loss;
c) Separate the total amount of cash paid into a principal
portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated
cash flow statement.
Lease incentives (e.g. rentfree period) will be recognised
as part of the measurement of the right of use assets and
lease liabilities whereas under AASB 117 they resulted in
the recognition of a lease liability incentive, amortised as a
reduction of rental expenses on a straight line basis.
Under AASB 16, right of use assets will be tested for
impairment in accordance with AASB 136 Impairment
of Assets.
24
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
the company has a number for financing options
available to it at this stage of the commercialisation
of the product;
This will replace the previous requirement to recognise a
provision for onerous lease contracts.
the successful completion of the development stage
of the technology; and
For short term leases (lease term of 12 months or less) and
leases of low value assets (such as personal computers and
office furniture), the Group will opt to recognise a lease
expense on a straight line basis as permitted by AASB 16.
As at 31 December 2018, the Group has non cancellable
operating lease commitments of $456,144. (See Note 26)
A preliminary assessment indicates that all of these
arrangements relate to leases other than short term
leases and leases of low value assets, and hence the
Group will recognise a right of use asset of $424,881 and
a corresponding lease liability of $424,881 in respect
of all these leases. The impact on profit or loss is to
decrease administrative expenses by $41,885, to increase
depreciation by $10,622 and to increase interest expense
by $31,263.
Under AASB 17, all lease payments on operating leases are
presented as part of cash flows from operating activities.
The impact of the changes under AASB 16 would be to
reduce the cash generated by operating activities and to
increase net cash used in financing activities.
1(d) 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 $4,519,721 (2017: $5,914,957). Net cash used by
operating activities was $4,592,413 (2017: $3,561,391).
As at 31 December 2018, the consolidated entity had cash
of $11,019,092 (2017: $2,700,577) of which $54,959 (2017:
$53,092) is restricted as it secures future lease payments.
The cash will become unrestricted once the contracts are
concluded or renegotiated.
During the period, the company had $8,000,000 of
convertible notes on issue converted into fully paid
ordinary shares. In addition, on 30 October 2018 the
company completed a placement of $769,231 ordinary
shares at $13.00 per share to raise $10,000,000 which will
be used to provide working capital.
In the opinion of the directors, the ability of the
consolidated entity to continue as a going concern and
pay its 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. The directors consider that
the future trading prospects of the consolidated
entity including obtaining commercial contracts.
In the opinion of the directors, the consolidated entity
can continue as a going concern and pay its debts as and
when they become due and payable.
Given the current financial position, performance and
prospects of the consolidated entity the directors believe
it is appropriate to prepare the financial report on the
going concern basis.
1(e) Revenue Recognition
Interest revenue is recognised on an accrual basis.
1(f) Financial assets
Classification
From 1 January 2018, the Group classifies its financial
assets in the following measurement categories:
Those to be measured subsequently at fair value
(either through other comprehensive income, or
through profit or loss), and
Those to be measured at amortised cost.
The classification depends on the Group’s business
model for managing financial assets and the contractual
terms of the cash flows. For assets measured at fair value,
gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in debt
instruments, this will depend on the business model in
which the investment is held. For investments in equity
instruments that are not held for trading, this will depend
on whether the Group has made an irrevocable election
at the time of initial recognition to account for the equity
investment at fair value through other comprehensive
income. The Group reclassifies debt investments when
and only when its business model for managing those
assets changes.
Measurement
At initial recognition, the Group measures a financial
asset at its fair value plus, in the case of a financial asset
not at fair value through profit or loss, transaction costs
that are directly attributable to the acquisition of the
financial asset. Transaction costs of financial assets carried
at fair value through profit or loss are expensed in profit or
loss. Measurement of cash and cash equivalents and trade
and other receivables remains at amortised cost consistent
with the comparative period.
25
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
Debt instruments
Subsequent measurement of debt instruments depends
on the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three
measurement categories into which the Group classifies
its debt instruments:
Amortised cost: Assets that are held for collection
of contractual cash flows where those cash flows
represent solely payments of principal and interest
are measured at amortised cost. A gain or loss on
a debt investment that is subsequently measured
at amortised cost and is not part of a hedging
relationship is recognised in profit or loss when the
asset is derecognised or impaired. Interest income
from these financial assets is included in finance
income using the effective interest rate method.
Fair value through other comprehensive income
(FVOCI): Assets that are held for collecting contractual
cash flows and through sale on specified dates. A gain
or loss on a debt investment that is subsequently
measured at FVOCI is recognised in other
comprehensive income. No such assets are currently
held by the Group.
Fair value through profit or loss (FVPL): Assets that do
not meet the criteria for amortised cost or FVOCI are
measured at fair value through profit or loss. A gain
or loss on a debt investment that is subsequently
measured at fair value through profit or loss and is
not part of a hedging relationship is recognised in
profit or loss and presented net in the statement of
profit or loss within other gains/(losses) in the period
in which it arises. No such assets are currently held by
the Group.
equity instruments
The Group subsequently measures all equity investments
at fair value. Where the Group’s management has
elected to present fair value gains and losses on equity
investments in other comprehensive income, there is
no subsequent reclassification of fair value gains and
losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue
to be recognised in profit or loss as other income when
the Group’s right to receive payments is established.
Impairment losses (and reversal of impairment losses)
on equity investments measured at FVOCI are not
reported separately from other changes in fair value.
Changes in the fair value of financial assets at fair value
through profit or loss are recognised in other expenses in
the statement of profit or loss as applicable.
Impairment
The Group assesses on a forward looking basis the
expected credit losses associated with its debt instruments
carried at amortised cost and FVOCI. The impairment
methodology applied depends on whether there
has been a significant increase in credit risk. For trade
receivables, and lease receivables, the Group applies the
simplified approach permitted by AASB 9, which requires
expected lifetime losses to be recognised from initial
recognition of the receivables.
1(g) Financial Liabilities
Interest bearing liabilities
All loans and borrowings are initially recognised at
fair value, being the amount received less attributable
transaction costs. After initial recognition, interest bearing
liabilities are stated at amortised cost with any difference
between cost and redemption value being recognised
in the statement of profit or loss over the period of the
borrowings on an effective interest basis.
trade and other payables
Liabilities are recognised for amounts to be paid for goods
or services received. Trade payables are settled on terms
aligned with the normal commercial terms in the Group’s
countries of operation.
Derivative liabilities
Derivative liabilities are initially recognised at fair value
on issue. After initial recognition, they are subsequently
measured at fair value through profit or loss.
Classification as debt or equity
During the year the Company had 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.
26
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
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.
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.
1(h) Cash and cash equivalents
1(k) Goods and services tax
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.
1(i) 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.
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.
1(j) Foreign currency
Foreign currency transactions
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
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.
1(l) 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 acquire, and the
fair value of the acquirer’s previously held equity interest
in the acquire (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
acquire (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
27
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
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.
1(m) 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.
1(n) 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.
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.
1(o) 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.
28
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
1(p) 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.
1(q) 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.
1(r) 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.
1(s) 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
29
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
1. Summary of Significant
Accounting Policies (Cont.)
1(t) 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.
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 and conversion of borrowings and
derivative liability
The directors made a critical judgement in relation to the
interest rate applied in valuing the borrowing and the
expected share price volatility used to value the derivative
liability included in Note 11. Furthermore significant
judgements were made in determining the impact of the
change in conversion terms for all convertible note on issue.
1(u) Critical accounting judgements
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 ‑$2,447,750
(non‑current assets)
Intercompany receivable ‑ $29,122,871 (included in
current assets).
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).
30
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
Share based payments
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
Share based payments
Convertible note adjustments
Consolidated
Year ended
31 December
2018
$
Consolidated
Year ended
31 December
2017
$
86,961
86,961
65,624
65,624
79,159
70,881
1,511,514
147,906
(113,763)
34,143
940,264
79,637
79,639
593,179
123,375
(97,533)
25,842
157,996
1,390,360
1,137,068
19,541
31,916
1,441,817
‑
12,920
1,149,988
‑
‑
‑
‑
‑
‑
(4,519,721)
(5,914,957)
79,159
19,541
2,446,233
79,637
‑
224,009
(1,974,788)
(5,611,311)
31
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
(592,436)
(1,683,363)
237,099
355,337
‑
159,975
1,523,388
‑
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 23% (2017:25%) 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
5,768,269
5,412,932
168,038
54,246
168,038
60,080
5,990,553
5,641,050
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.
32
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
38,388
2,993
41,381
18,167
2,019
20,186
37,249
2,704
39,953
17,998
2,000
19,998
11,019,092
2,700,577
2.24%
0.36%
65,347
‑
108,218
173,565
10,167
3,000,000
35,946
3,046,113
5,525
16,108
33
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
2,326,483
2,189,025
2,189,025
137,458
2,326,483
2,300,905
(111,880)
2,189,025
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
201,221
(585,373)
483,848
151,987
(506,214)
513,773
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.
34
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018
notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
394,491
(374,022)
20,469
360,094
(252,699)
107,395
1,201,446
(999,452)
201,994
351,372
(331,920)
19,452
324,269
(216,887)
107,382
1,059,881
(862,105)
197,776
Total net book value of Property, Plant and Equipment
329,858
324,610
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
351,372
13,064
(7,157)
37,212
394,491
324,269
1,484
‑
34,341
360,094
362,977
18,586
(4,744)
(25,447)
351,372
241,873
105,997
(4,760)
(18,841)
324,269
35
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
1,059,881
1,043,341
31,495
(2,175)
112,245
1,201,446
139,375
(38,732)
(84,103)
1,059,881
(331,920)
(35,861)
7,157
(13,398)
(374,022)
(216,887)
(14,274)
‑
(21,538)
(252,699)
(862,105)
(103,037)
1,635
(35,945)
(999,452)
(344,624)
24,637
3,994
(15,927)
(331,920)
(226,061)
17,988
911
(9,725)
(216,887)
(910,919)
75,893
26,908
(53,987)
(862,105)
36
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
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
2018
$
31 December
2017
$
987,849
887,770
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 was obtained at the next Annual General Meeting of the Company held on 7 May 2018.
For accounting purposes these extensions were treated as the derecognition of the original convertible notes and the
recognition of two new convertible note instruments. The difference in valuation was recognised as a gain or loss in profit
and loss.
These notes were unsecured, not listed and were 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. These convertible
notes were converted to 309,918 ordinary shares on 7 November 2018, following receipt of agreement to the early
conversion from noteholders.
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 that was obtained at the Annual General Meeting of the Company held on
7 May 2018.
These new convertible notes had a term of 12 months to 31 December 2018, were 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).
On 7 November 2018, the Directors agreed with all the holders of the $5m convertible note to exercise their notes
earlier at a discounted price of $15.19. Shareholder approval was required for the $500,000 of convertible notes held by
4F Investments Pty Limited and this was received on 21 December 2018. $4.5m of these convertible notes were converted
to 296,246 ordinary shares on 7 November 2018 and the remaining $500,000 of convertible notes were converted to 32,916
ordinary shares on 21 December 2018.
37
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
11. Borrowings (Cont.)
Borrowings ‑ Convertible note
Carrying amount at start of period
Face value of notes issued
Gain on derecognition of convertible notes
Amortised interest expense
$3m of notes converted to equity at $9.68
$5m of notes converted to equity at $15.19
Convertible note equity reserve ‑ fair value initially recognised
Current Liability at end of period
Derivative liability
Carrying value at start of the period
Loss on derecognition of convertible notes
Conversion to equity
Fair value movement
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 $13.00 per share
Conversion of $3m of convertible notes at $9.68
Conversion of $5m of convertible notes at $15.19
Transfer from convertible note equity reserve
Balance at the end of the financial year
Fully paid Ordinary Shares
Balance at the beginning of the financial year
Placement for cash at $13.00 per share
Conversion of $3m notes at $9.68
Conversion of $5m notes at $15.19
Balance at the end of the financial year
38
31 December
2018
$
31 December
2017
$
6,388,489
500,000
‑
980,554
(2,929,321)
(4,891,518)
(48,204)
‑
1,486,884
‑
(2,427,148)
940,264
‑
‑
2,648,387
4,500,000
(444,618)
351,613
‑
‑
(666,893)
6,388,489
1,169,870
159,018
‑
157,996
1,486,884
7,875,373
203,960
240,319
45,228,931
45,228,931
9,500,003
5,416,932
5,356,470
715,097
‑
‑
‑
‑
66,217,433
45,228,931
number
number
26,893,409
26,893,409
769,231
309,918
329,162
‑
‑
‑
28,301,720
26,893,409
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
13. Issued Capital (Cont.)
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.
14. Employee Share Option Plan
The consolidated entity has an ownership‑based compensation scheme for employees (including directors) of the
company. In accordance with the provisions of the scheme, as approved by shareholders at a previous annual general
meeting, employees with more than three months service with the company may be granted options to purchase ordinary
shares at exercise prices determined by the directors based on market prices at the time the issue of options were made.
Each share option converts to one ordinary share in Audio Pixels Holdings Limited. No amounts are paid or payable by
the recipient on receipt of the options. The options carry neither rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the date of expiry.
The number of options granted is determined by the directors and takes into account the company’s and individual
achievements against both qualitative and quantitive criteria.
On 13 January 2011, shareholders approved the adoption of an Employee Share Option Plan.
(a) Unlisted Options issued under the Employee Share Option Plan
2018
2017
Weighted
average
exercise price
$
Weighted
average
exercise price
$
number
‑
16.20
‑
‑
16.20
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
number
‑
203,000
‑
‑
203,000
‑
Balance at the beginning of the
financial year (i)
Granted during the year (ii)
Exercised during the year (iii)
Lapsed during the year (iv)
Balance at the end of the financial year (v)
Exercisable at end of the year
(i) Balance at the beginning of the year
2018
2017
number
Grant date
expiry date
exercise Price
‑
‑
‑
‑
‑
‑
‑
‑
Fair value at
grant date
‑
‑
Staff options carry no rights to dividends and no voting rights.
39
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
14. Employee Share Option Plan (Cont.)
(ii) Granted during the year
2018
Staff options
2017
None
number
Grant date
expiry date
exercise Price
Fair value at
grant date
203,000
17/12/18
17/12/21*
16.20
$1,421,406
‑
‑
‑
‑
‑
The options issued were priced using the Black‑Scholes Option Pricing model. Where relevant, the expected life used in the
model has been adjusted based on management’s best estimate for the effects of non‑transferability, exercise restrictions
and behavioural conditions. Expected volatility is based on the historical share price volatility.
The following inputs were used in the model for the option grants made on 17 December 2018:
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
‑
65.40%
1.96%
1,095 days *
$15.90
$16.20
* These options commence to vest after 17 December 2020 and continuous employment on the basis of one twelfth of the total number each month in the
twelve month period to 17 December 2021.
(iii) exercised during the year
There were no options exercised during the year.
(iv) Lapsed during the year
No Staff options lapsed during the year.
(v) Balance at the end of the financial year
2018
Staff options
2017
Staff options
number
Grant date
expiry date
exercise Price
Fair value at
grant date
203,000
17/12/18
17/12/21
$16.20
1,421,406
‑
‑
‑
‑
‑
Staff options carry no rights to dividends and no voting rights.
All options granted to staff on 17 December 2018 commence to vest after 17 December 2020 and continuous employment
on the basis of one twelfth of the total number each month in the twelve month period to 17 December 2021.
The difference between the total market value of the options issued during the financial year, at the date of issue, and
the total amount received from the employees (nil) is recognised in the financial statements over the vesting period as
disclosed in Note 15 to the financial statements.
40
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
15. 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
2018
$
31 December
2017
$
(1,575,876)
(2,461,611)
(4,037,487)
(3,251,993)
1,676,117
(1,575,876)
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
Add share based payments in respect of options
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.
Convertible Note Equity Reserve
Balance at the beginning of the financial year
Increase as a result of derivative recognised on the issue of convertible notes
treated as equity
Transfer to contributed equity on conversion
Balance at end of financial year
4,512,898
19,541
4,532,439
4,512,898
‑
4,512,898
(25,538,692)
(25,538,692)
(25,538,692)
(25,538,692)
666,893
‑
48,204
(715,097)
666,893
‑
‑
666,893
Total Reserves
(25,043,740)
(21,934,777)
41
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
16. 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
17. Notes to the Statement of Cash Flows
(a) Reconciliation of cash and cash equivalents
31 December
2018
$
31 December
2017
$
(23,507,410)
(17,592,453)
(4,519,721)
(5,914,957)
(28,027,131)
(23,507,410)
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
11,019,092
2,700,577
(b) Restricted cash
Cash held as security for future lease payments
54,959
53,092
Restricted cash amounts are included in the cash and cash equivalents amounts above.
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
Loss on sale of property, plant and equipment
Share based payments
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
(4,519,721)
(5,914,957)
79,159
2,446,233
70,881
79,637
224,009
79,639
(2,635,871)
1,918,755
198
19,541
(127,452)
10,583
(36,359)
100,079
‑
‑
40,005
(4,235)
(400,144)
415,900
Net cash (used in) operating activities
(4,592,729)
(3,561,391)
42
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
18. 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
2018
$
31 December
2017
$
763,526
99,387
862,913
775,262
169,339
944,601
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 2018, the Company paid a total of $107,857 (year ended
31 December 2017 ‑ $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 2018, the Company paid a total of $41,063 (year ended 31 December 2017 ‑ $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 2018, the Company paid interest of $125,918 (year ended
31 December 2017 ‑ $119,407) on a convertible note to 4F Investments Pty Limited, a company associated with Mr Fred
Bart. During the year, a company controlled by Fred Bart, 4F Investments Pty Limited, converted one convertible note of
$1.5m into 154,959 ordinary shares at a price of $9.68 on 7 November 2018 and converted one convertible note of $500,000
into 32,916 ordinary shares at $15.19 on 21 December 2018 after shareholder approval was received.
During the year, the Company paid $30,000 (31 December 2017 ‑ $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 1 June 2018, the company exercised an option to renew a lease in respect of office premises at Suite 3, Level 12,
75 Elizabeth Street Sydney for a period of forty eight months to 30 March 2022. 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.
43
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
19. Earnings per Share
Basic (loss) per share
Diluted (loss) per share (b)
(Loss) (a)
31 December
2018
31 December
2017
(16.67) cents
(21.99) cents
(16.67) cents
(21.99) cents
(4,519,721)
(5,914,957)
Weighted average number of Ordinary Shares
27,112,427
26,893,409
(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 were potential ordinary shares in relation to the convertible notes of $8m which were converted during the
financial year. 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 issue of 203,000 unlisted employee options issued on
17 December 2018 at an exercise price of $16.20. These options expire on 17 December 2023. The unlisted employee
options have not been included in dilutive EPS, as they are anti‑dilutive.
20. 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 2017 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
44
86,961
86,961
65,624
65,624
(4,519,721)
(4,519,721)
‑
(5,914,957)
(5,914,557)
‑
(4,519,721)
(5,914,957)
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
20. Segment Information (Cont.)
segment Assets and Liabilities
Digital speakers
Total all segments
Unallocated
Consolidated
Assets
Liabilities
31 December
2018
$
31 December
2017
$
31 December
2018
$
31 December
2017
$
14,338,371
14,338,371
‑
8,790,206
8,790,206
‑
1,191,809
1,191,809
‑
9,003,462
9,003,462
‑
14,338,371
8,790,206
1,191,809
9,003,462
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
2018
$
31 December
2017
$
31 December
2018
$
31 December
2017
$
150,040
150,040
‑
159,276
159,276
‑
150,040
159,276
46,403
46,403
‑
46,403
263,958
263,958
‑
263,958
Digital speakers
Total all segments
Unallocated
Consolidated
Information on Geographical segments
Geographical segments
31 December 2018
Australia
Israel
Total
31 December 2017
Australia
Israel
Total
Revenue
from external
Customers
$
86,168
793
86,961
65,624
‑
65,624
segment
Assets
$
13,473,871
864,500
14,338,371
8,028,778
761,428
8,790,206
Acquisition
of segment
Assets
$
‑
46,403
46,403
‑
263,958
263,958
45
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
21. Financial Risk Management Objectives and Policies
The consolidated entity’s principal financial instruments held during the year 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
2018
$
31 December
2017
$
11,019,092
2,700,577
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 2018, 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
2018
$
31 December
2017
$
31 December
2018
$
31 December
2017
$
110,191
(55,095)
27,006
(3,710)
110,191
(55,095)
27,006
(3,710)
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 2018 than in December 2017 and accordingly the sensitivity is lower.
46
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
21. 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
2018
$
31 December
2017
$
31 December
2018
$
31 December
2017
$
‑
‑
‑
‑
933,743
850,406
1,518,208
74,268
‑
406,585
35,946
‑
All US$ denominated financial instruments were translated to A$ at 31 December 2018 at the exchange rate of 0.7058
(2017: 0.7805).
At 31 December 2018 and 31 December 2017, 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%
2018
$
2017
$
2018
$
2017
$
307,883
(144,973)
290,884
(168,427)
307.883
(144,973)
290,884
(168,427)
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.
47
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
21. 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 2018
Assets
Non interest bearing
Fixed rate instruments
Liabilities
Convertible notes
31 December 2017
Assets
Non interest bearing
Fixed rate instruments
Liabilities
Convertible notes
0.00
2.24
0.00
0.00
0.36
8.00
225,827
2,039,617
‑
9,041,050
‑
306,095
2,394,462
‑
‑
‑
‑
‑
‑
‑
150,000
7,950,000
‑
‑
‑
‑
‑
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.
48
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
22. 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 $3,000,000 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.
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.
23. Subsequent Events
In prior year financial statements, the Company noted that there was a contingent liability in relation to a derivative action
court case in Israel in relation to BE4 Limited which the Company was defending. On 13 February 2019 the Supreme Court
of Israel dismissed the appeal from the lower court and the matter is now concluded.
Apart from the above, the Directors are not aware of any significant events since the end of the financial year and up to the
date of this report.
24. 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)
Total equity
Financial performance
(Loss) for the period
Other comprehensive income
31 December
2018
$
31 December
2017
$
39,786,411
2,447,750
42,234,161
28,311,243
2,428,209
30,739,452
119,730
7,912,737
‑
‑
119,730
42,114,431
7,912,737
22,826,715
66,217,433
45,228,931
(21,006,253)
(20,358,901)
(3,096,749)
42,114,431
(2,043,315)
22,826,715
(1,053,434)
(2,635,205)
‑
‑
(1,053,434)
(2,635,205)
49
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 notes to AnD FoRMInG PARt oF tHe FInAnCIAL stAteMents
FoR tHe YeAR enDeD 31 DeCeMBeR 2018
25. Controlled Entity
name of entity
Parent Entity
Audio Pixels Holdings Limited
Controlled Entities
Audio Pixels Limited
Audio Pixels Technologies Pty Limited
26. Leases
Country of
Incorporation
31 December
2018
%
31 December
2017
%
Australia
Israel
Australia
100.00
100.00
100.00
100.00
operating leases ‑ leasing arrangements (the Company as lessee)
On 1 June 2018, the parent company exercised an option to renew a lease in respect of office premises at Suite 3, Level 12,
75 Elizabeth Street Sydney for a period of forty eight months from 31 March 2018 to 30 March 2022. 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
2018
$
31 December
2017
$
140,352
315,792
‑
456,144
31,125
‑
‑
31,125
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.
27. Commitments
The subsidiary company, Audio Pixels Limited of Israel has entered into various purchase orders and commitments of
$286,427 (2017: $451,745) 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 10 (2017: 11) employees.
50
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 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 22 February 2019 the following substantial shareholders were registered:
Fred Bart Group
Voting Rights
ordinary shares
Percentage of total
ordinary shares
5,780,640
20.43%
At 22 February 2019 there were 2,187 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 22 February 2019 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 24 ordinary shareholders with less than a marketable parcel.
There is no current on‑market buy‑back.
ordinary
shareholders
number of
shares
1,258
549
186
159
35
2,187
480,762
1,382,306
1,542,460
4,258,320
20,637,872
28,301,720
51
Audio Pixels Holdings Limited ACN 094 384 273Annual Report 2018 CORPORATE DIRECTORY
tWentY LARGest oRDInARY sHAReHoLDeRs
Twenty Largest Ordinary Shareholders
Directors
At 22 February 2019 the 20 largest ordinary shareholders held 65.60% of the total issued fully paid quoted ordinary shares
of 28,301,720.
Fred Bart (Chairman)
Ian Dennis
Cheryl Bart AO
Fully Paid
ordinary shares
Percentage of
total
shareholder
3,717,244
3,565,000
1,661,444
1,528,347
1,336,446
994,325
744,295
716,013
650,000
515,000
500,000
400,000
398,839
386,212
304,014
272,600
250,000
225,000
204,320
197,498
13.14%
12.60%
5.87%
5.40%
4.72%
3.51%
2.63%
2.53%
2.30%
1.82%
1.77%
1.41%
1.41%
1.36%
1.07%
0.96%
0.88%
0.80%
0.72%
0.70%
18,566,597
65.60%
1. Altshuler Shacham Trusts Ltd
Company secretary
2. Landed Investments (NZ) Limited
3. HSBC Custody Nominees (Australia) Limited
Ian Dennis
4. Link Traders (Aust) Pty Limited
5. BNP Paribus Nominees Pty Ltd
Registered off ice
6. Frederick Bart
7. Bart Superannuation Pty Limited
Suite 3, Level 12
75 Elizabeth Street
SYDNEY NSW 2000
Australia
8. James John Bart
9. Kam Superannuation Fund Pty Limited
Israel Corporate off ice
3 Pekris Street
Rehovot
ISRAEL 76702
10. Jamber Investments Pty Ltd
11. Cheryl Bart
Telephone: +61 2 9233 3915
Facsimile: +61 2 9232 3411
Email:
12. Decante Pty Limited
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