Boise Cascade Company
Annual Report 2019

Plain-text annual report

13 September 2019 The Manager Market Announcements Platform Australian Securities Exchange Annual Report for Year Ending 30 June 2019 The Company has great pleasure in releasing its Annual Report for the Year Ending 30 June 2019 including the Chairman’s Report and the Corporate Governance Statement, as well as the Directors’ Report and the audited FY2019 Financial Statements and Notes to the Accounts. Yours faithfully Dennis Payne Company Secretary A N N U A L R E P O R T 2 0 1 9 Innovation Design Satellite IoT M2M Beam Communications Holdings Limited DIRECTORATE NON EXECUTIVE CHAIRMAN Mr Simon Lister Wallace MANAGING DIRECTOR Mr Michael Ian Capocchi NON EXECUTIVE DIRECTORS Mr Carl Cheung Hung Mr David Paul James Stewart COMPANY SECRETARY Mr Dennis Frank Payne REGISTERED OFFICE Beam Communications Holdings Limited Unit 5/8 Anzed Court Mulgrave, VIC, 3170 Ph: (03) 8561 4200 Fax: (03) 9560 9055 Email: CONTENTS Directorate Chairman’s Report Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement investor@beamcommunications.com Consolidated Financial Statements 1 2 4 18 22 30 SHARE REGISTER Link Market Services Ltd Locked Bag A14 Sydney South, NSW, 1235 Ph: 1300 554 474 Fax: (02) 9287 0303 SOLICITORS TO THE COMPANY GrilloHiggins Lawyers Level 20, 31 Queens Street Melbourne, VIC, 3000 Ph: (03) 8621 8880 AUDITOR RSM Australia Partners Level 21, 55 Collins Street Melbourne, VIC, 3000 Ph: (03) 9286 8000 Fax: (03) 9286 8199 ASX OFFICE Based in Melbourne ASX CODE BCC Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position 31 Consolidated Statement of Changes in Equity 32 Consolidated Statement of Cash Flows 33 Notes to the Consolidated Financial Statements 34 Directors’ Declaration Auditor’s Report Australian Securities Exchange Information 54 56 60 1 ANNUAL REPORT 2016 ANNUAL REPORT 2019CHAIRMAN’S REPORT CHAIRMAN’S REPORT I am pleased to provide the following Chairman’s Report on the Beam FY2021. In addition to the expected continued growth in Beam and Communications Holdings Group of companies for the year ended 30 SatPhone’s organic business, there is the sixth order for 5000 Iridium June 2019. I encourage you to read the full Directors’ Report which GO!® units in FY2020 and we are also quite optimistic about our contains more extensive information. However, I would like to present commercial prospects in India, given the new opportunities and appetite to you the highlights. for Inmarsat products in that enormous market. Profit Performance and Major Impacts This is my third report to you as Chairman and I am very delighted to report this year on a vastly improved performance by the Group and a return to a strongly profitable performance. Record revenue and pre-tax profit in FY2019 were the outcome of consistent trading momentum throughout the year and healthy contributions from the two significant contracts that the Group secured in previous years for Thuraya WE and Iridium GO!®. The Group recorded total revenue of $18.5m (up 60% year on year), a Net Profit Before Tax of $0.72m (a turnaround of $2.15m) and EBITDA of $2.1m. Outside the satellite space, a range of LTE devices for industrial IoT applications are being soft-launched this month, with others currently being trialled and tested for the Australian and global markets. We anticipate that substantial new revenues can be achieved in this category during FY2020. Recently, Beam was selected to partner Iridium in the development of a new generation of products that utilises the Certus 9770 transceiver following the US$3bn upgrade of the Iridium satellite constellation, known as Iridium NEXT. The enhanced speeds and IP capabilities of this product present new market opportunities, with release of new products expected before mid FY2021. Iridium’s appointment of Beam Looking back on FY2017 and FY2018, as we shared with investors at the as a core partner in this development is also a strong endorsement of time, those were in effect preparatory years when Beam was focussed our global reputation, engineering capability and ingenuity. on completing the major Thuraya WE development and investigating the opportunities that exist in the market outside the purely satellite space. Those annual results were marred by delays (particularly to the WE project which, although largely outside Beam’s control, was frustrating for all stakeholders), false starts (as in the Inmarsat BRM development for which the board took the conservative decision to write-back 100% of the investment in FY2018, at a net cost of $0.66m) and a lull in global demand for docking units and accessories, which has proved to be an aberration. In FY2019, we were proud to effect shipments of 3,000 WE units to Thuraya, completing the initial contract, and gratified with the $3.85m in revenue the fulfilment of that major order delivered to the Group. The balance of the fourth order for Iridium GO!® and 100% of the fifth order were all delivered in FY2019, adding $2.75m in revenue. Roadpost Inc, a very experienced seller of satellite solutions in USA/ Canada, has joined with Beam to develop, manufacture and market an innovative mobile satellite messaging and SOS device that is aimed at untapped but large and fast-growing global markets. The new terminal, trademarked ‘ZOLEO’, will utilise the upgraded Iridium satellite network. The new solution is anticipated to significantly grow Beam’s recurring income stream from FY2021. More details will be announced to the market prior to launch. The FY2020 outlook for orders of the Thuraya WE, and the shared airtime revenues that are derived from those units, is more difficult to predict given the delay to Thuraya’s market launch plans. Follow-up orders from Thuraya are not expected until the initial product pipeline requires refilling which, prudently, we should not expect before FY2021. The improving impetus in Beam’s organic product sales in late FY2018, It is still anticipated that Thuraya WE will be a major contributor to the noted in my Chairman’s Report of last year, continued into and Group’s financial wellbeing in future years. throughout FY2019, and SatPhone Shop sales were up 18% with record revenues posted for this division in the June quarter. Cash and Funding Outlook The Group’s bank facilities were undrawn at 30 June 2019 with an in-funds balance of $2.5m, bolstered by the Australian Government R&D grant of The outlook for the Group should encourage stakeholders, including $832,000 received just before the close of the year. The Group’s approved existing and prospective shareholders, with a number of exciting new bank loan facilities total $740,000. Pleasingly, our improved trading ventures to be announced, developed or delivered in FY2020 and activities generated cash inflows of $2.1m net of all operating costs. T R O P E R S ’ N A M R I A H C D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 2 “The outlook for the Group should encourage stakeholders, including existing and prospective shareholders, with a number of exciting new ventures to be announced, developed or delivered in FY2020 and FY2021.” This strong cash performance comes at a time when Beam is increasing Staff and Board its investment in developing and launching a range of new products, as Your board remains committed to investing in our future and insulating previously announced, and expenditure on major development projects your Company from the vicissitudes of the markets in which we operate. is presently the most significant application of cash for the Group. In Ours is a small company, with significant but not indulgent aspirations. FY2019, $2.0m was expended on product developments. As I noted in We would invite investors to contrast our prudent approach to building last year’s Chairman’s Report, our result this year is directly attributable our business sustainably with other strategies which would appear to be to the previous willingness of the board to support projects that will focussed on adding scale at any cost. That is not, and should never be, deliver lasting and significant revenues. our goal. To assist funding of these development projects and ensure the Your board applies rigorous examination to all forecasts, opportunities availability of cash while also limiting our reliance on existing debt and performances, as it should. The result this year is an outcome we facilities, the Group arranged two non-bank facilities with SGV1 should expect not to be our ceiling, but our floor. Holdings Limited and Roadpost. I would like to thank my fellow Non-executive Directors, Carl Hung and In late 2016, a secured loan facility of up to $US2.0m was negotiated David Stewart for their respective valuable insights. with SGV1 at market interest rates. Early in the financial year, the Group’s bank overdraft facilities were regularly accessed and Beam drew US$0.66m from SGV1 in the September quarter of 2018. It is not anticipated that there will be more drawings. Under the ZOLEO JV Agreement, Roadpost will provide Beam with an interest-free loan of up to US$600,000 to assist in Beam’s funding of the JV’s start-up costs. The loan is repayable by Beam at any time and at Beam’s sole discretion. In the June quarter, and to date, Beam has received US$450,000 in respect of that arrangement. In addition, I again express my appreciation to our Managing Director and CEO, Michael Capocchi, as well as Michael’s executive team and staff, for the successes achieved this year. Collectively, we are pleased to have delivered for you, our shareholders, in FY2019, but that should be your expectation. We look forward to sharing with you the next chapter of the Beam story and have every prospect that it will be one that is compelling to existing and potential investors alike. My very best wishes and thanks to all staff, clients and shareholders of Directors and Investors our Group. I was re-elected as a Director at the last Annual General Meeting on 26 October 2018 and continue as Chairman of the Board. David Stewart’s appointment to our board in November 2017 was also confirmed at the AGM and David is a keen advisor to senior management, especially in the pursuit of non-satellite opportunities. David remains Beam’s major shareholder, holding 19.93% of the Company. Director Carl Hung is the President and CEO of Season Group, a major trading partner of Mr Simon Wallace Chairman Beam. Carl is also Managing Director of SGV1 Holdings Limited, which Date: 13 September 2019 holds 10.23% of the shares in the Company. Our Executive Director on the board is Michael Capocchi, who holds the positions of Managing Director and Chief Executive Officer for all companies in the Group. Michael is also a significant shareholder in the Company. You can read more about all members of the board in the Directors’ Report. No new securities have been issued since September 2017. C H A I R M A N ’ S R E P O R T A N N U A L R E P O R T 2 0 1 9 3 DIRECTORS’ REPORT Your Directors present their report on the Company and its controlled entities for the financial year ended 30 June 2019. On 22 November 2018 the Company changed its name from World Reach Limited to Beam Communications Holdings Limited (ASX: BCC). DIRECTORS The persons who have been a Director of the Company since the start of the financial year to the date of this report are: Simon Lister Wallace Michael Ian Capocchi Carl Cheung Hung David Paul James Stewart The qualifications, experience and special responsibilities of each of the directors who held office during the year are: T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 4 Simon Lister Wallace Non Executive Chairman Age: 45 Simon Wallace is a corporate lawyer and, based in Melbourne, he is presently an equity partner of Dentons, which is the largest law firm in the world. Simon has extensive legal and commercial proficiency, with particular expertise in the areas of project finance, fundraising and corporate governance. He also has substantial professional experience in the areas of investment banking, structured and direct equity investments, product formulation and sales. More recently, he was a director of ASX- listed Hastings Rare Metals Limited (now known as Hastings Technology Metals Limited) until November 2014. Simon is admitted to practise as a barrister and solicitor of the Supreme Court of Victoria, the Federal Court of Australia and the High Court of Australia, and he holds degrees from the Australian National University in both Law and Commerce. Simon has been a Director since 5 February 2015 and was elected Chairman on 22 December 2016. Michael Ian Capocchi Managing Director Carl Cheung Hung Non Executive Director David Paul James Stewart Non Executive Director Age: 48 Age: 35 Age: 65 Michael Capocchi has over 20 years’ Carl Hung has a Bachelor of Commerce David Stewart is an experienced CEO and experience in the ICT industry and has degree from the University of British successful entrepreneur with more than held several senior management positions. Columbia and an Executive Masters of 30 years in management and business Michael is based in Chicago, USA, which Business Administration from University leadership roles. David founded Banksia places him closer to the important centres of Western Ontario’s (UWO) Richard Ivey Technology Pty Limited in 1988 and for satellite communications in the USA School of Business. He is a Six Sigma Black successfully managed the company as a and UK/Europe. Belt certified by SGS. He is also a Certified fast growing and highly profitable business. Management Accountant. In 1996 he instigated the successful Michael joined Beam Communications takeovers of a number of his competitors, Holdings Limited as the General Manager Carl is President and CEO of Season Group including NetComm Limited, which was of the subsidiary, Beam Communications International Inc, a global Electronic completed in November 1997. David Pty Ltd, in 2003 and was appointed Manufacturing Services provider. He has assumed the role of CEO and Managing as Managing Director of Beam helped grow the company from USD15 Director until retiring in December 2016. Communications Holdings Limited in million in 2002 to USD161 million in 2016, A year later David was appointed as a Non- March 2008. expanding the company’s footprint from Executive Director of NetComm Wireless China, Canada and Malaysia to include the Limited, a position he held until 30 June Prior to joining Beam, Michael was the USA, Mexico and UK. 2019 when NetComm was acquired by Regional Sales Director for Iridium US-based Casa Systems. Satellite LLC, directly managing the sales, Season Group has been the preferred distribution and channel management contract manufacturer for Beam In June 2016 David was recognised for strategies for the Asia-Pacific region. Communications Pty Ltd for several years his significant and valuable contribution Michael has held senior management Beam’s manufacturing and supply industry with the presentation of the positions as the Sales and Marketing processes. Carl has been a Director of Communications Ambassador 2016 Director of Pacific Internet responsible Beam Communications Holdings Limited award. The Australian Communications and has been instrumental in rationalising to the Australian communications for establishing the Australian operations since 21 February 2013. of the company and with Optus Communications and Myer Stores Limited. Michael Capocchi is an integral part of the Beam business, including managing the day to day operations of the group which occasions extensive domestic and international travel. Ambassador award is the highest honour presented by ACOMMS Communications Alliance and CommsDay each year. Since retiring, David began working with a number of tech startups in an advising and investing capacity. He was announced as Chairman for Pycom on 1 July 2017 and a Director of Beam Communications Holdings Limited on 9 November 2017, following investments in both. The start of 2018 saw David join the board of Lockbox Technologies and on 14 August 2019 he was announced as a board member for MyNetFone Group Limited. D I R E C T O R S ’ R E P O R T 5 ANNUAL REPORT 2019 Indemnification of Directors and Officers During the year, the economic entity has paid premiums in respect of an insurance contract to indemnify it’s directors and officers against liabilities that may arise from their positions. Directors and officers indemnified include the Company Secretary, all directors and all executive officers participating in the management of the economic entity. Further disclosure required under section 300(9) of the Corporations Law is prohibited under the terms of the insurance contract. Directorships of Other Listed Companies David Stewart was a non-executive director of NetComm Wireless Limited until 30 June 2019. No other director of Beam Communications Holdings Limited has been a director of a listed company in the three years immediately before the end of the financial year. On 14 August 2019 David was appointed a non-executive director of MyNetFone Group Limited (ASX:MNF). COMPANY SECRETARY Dennis Frank Payne has held the position of Company Secretary since 2010. Dennis joined the Company in 2005 and has also served since that date as Chief Financial Officer. Prior to joining Beam Communications Holdings Limited Dennis held senior financial and commercial roles at Cadbury Schweppes and Optus Communications. He has a Bachelor of Economics and is a qualified CPA. PRINCIPAL ACTIVITIES The activities of the company and its controlled entities during year were the development and marketing of a range of communication products and services, mainly satellite based. T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 6 I D R E C T O R S ’ R E P O R T 7 ANNUAL REPORT 2019 Revenue Deduct Cost of goods sold, research & development, administrative, marketing and corporate expenses Operating profit (loss) before amortisation, depreciation, interest and tax Deduct Depreciation Interest Profit (loss) before income tax Net profit (loss) for the year Total comprehensive Loss for the year Performance and Profit OPERATING RESULTS AND REVIEW OF ACTIVITIES The Consolidated Group reports a total existing Beam and SatPhone Shop to the Thuraya WE development, which is products, with consistent growth enjoyed being amortised over four years from March across the whole year. 2018. This was partly offset by the recording of Australian Government R&D grants worth $741,000, the majority of which also related to the Thuraya WE project. comprehensive income of $339,129 for the The principal activity of the Group during FY2019 year on total revenue of $18,520,528 FY2019 continued to be the manufacture and global distribution of satellite (2018: total comprehensive loss of $1,565,134 on revenue of $11,638,170). A summary of the result for the year is as follows: 2019 $000 2018 $000 18,521 11,638 16,417 12,245 communication terminals, docking units and Partial utilisation of the Group’s deferred handheld phone accessories. tax assets (mainly accumulated tax losses) As previously advised, issues during FY2018, which were largely outside Beam’s control, interrupted the finalisation of the Thuraya WE device and delayed the final deliveries until well into FY2019, completing the 3000 unit initial order. Having completed for Iridium the fourth order of Iridium GO! ® units in July 2018, Beam fulfilled 50% of the fifth order for 5,000 units in January 2019 and the balance was shipped in May 2019, bringing the total delivered so far to 35,000 units since mid-2014. against the year’s taxable profit resulted in an accounting tax expense of $365,000 in Australia. The Group’s USA subsidiary incurred taxes of $18,000, which are unable to be claimed against Australian tax losses. Although the Directors expect sufficient future profitability to enable the full value of the deferred tax assets to be utilised, (these now stand at $863,000 and are mainly derived from accumulated tax losses carried forward), the decision has been taken not to increase the proportion (currently 60%) taken up at this time, with a further The improving demand for Beam’s base demonstration of the Group’s return to products, including docking units, fixed sustained profitability required before the terminals and accessories was evident in the board intends to consider doing so. 2,104 (607) later months of FY2018 and the momentum continued throughout FY2019. This recovery contributed significantly to the Group’s Cash and Funding Amortisation 1,179 694 positive net profit position in FY2019, The greatly increased Group sales revenues Tax expense (383) (133) 63 140 77 54 especially in the second half of the year which were a major factor in generating stronger did not benefit from the major delivery of WE cash inflows. In the 12 months to 30 June 2019, units shipped in the first half. trading activities generated $2.1m cash inflow, 722 (1,432) SatPhone Shop, our on-line retail business and Telstra dealership, continues to expand its product range and sales volumes. Revenue from this division in FY2019 was up 18% 339 (1,565) on FY2018, to $1.25m, with record sales net of all operating costs. The continued growth in the SatPhone Shop business and Beam-branded product sales provided improved monthly cash to support the cash flows from major contracted revenues. achieved in the June Quarter of 2019. This The growth in cash comes at a time when 339 (1,565) included a growing number of sales to larger Beam is increasing its investment in organisations and semi-government bodies, developing and launching a range of new and a steady expansion of the market for products over the next few months, as rental equipment and pre-paid SIM cards. previously announced, and expenditure on The Beam Group’s activities and results for the year ended 30 June 2019 reflect a vastly improved performance with a record revenue and pre-tax profit result for the Group in a major turnaround from FY2018. The Group’s much-improved sales revenues increased gross profit before operating costs to $7.1m, well ahead of FY2018’s $4.2m. Operating costs grew at a slower pace than revenue growth to $5.8m, from Total Group revenue for the year increased last year’s $4.6m. Cost controls offset some major development projects is presently the most significant application of cash for the Group. In FY2019, $2.0m was expended on product developments and the June quarter saw an increase in the level of this investment, to $667,000 for the period. by nearly 60% over the previous year. of the rise, which was caused by a number of On 29 June 2019, $832,000 was received Highlights included: - Two major shipments of WE units to Thuraya Telecommunications in October and November 2018, which alone accounted for $3.85m in revenue and completed the initial contract quantity. good reasons, some beyond Beam’s control. from the Australian Government R&D fund, Operating costs included foreign exchange which encourages Australian investment losses totaling $99,000, start-up costs of in research and development. That amount Zoleo Inc. amounting to $327,000 (Beam’s related to Beam’s R&D expenditure in 50% share), $150,000 associated with new FY2018 on three projects. but can mainly be product development processes and increased aligned with the Thuraya WE product. The finance costs of $86,000. The end result R&D grants are only brought to profit on - Three deliveries to Iridium, each of was a Net Profit Before Tax of $722,000, a monthly straight-line basis matching the 2,500 Iridium GO! ® units, in July 2018, representing an improvement of $2.154m on amortisation of the related development January 2019 and May 2019, were valued FY2018, and an EBITDA of $2.1m. project over the relevant product’s useful life at $2.75m in total. The total cost of project amortisation for the once sales commence. - A significant lift in sales orders for FY2019 year was $1.18m, wholly attributable T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 8 The Group’s bank facilities were undrawn on-going creation of custom applications Roadpost has a 28-year track record in at 30 June 2019 with an in-funds balance of (Apps) to source information such as selling cellular and satellite solutions to the $2.5m, bolstered by the R&D grant received weather, mail and maritime charting. Beam North American markets. The new solution is just before the close of the year. The available is anticipating further orders from Iridium as anticipated to grow Beam’s recurring income bank loan facilities total $740,000. The cash the market’s confidence in its new network stream significantly from FY2021. The new balance and the bank facilities are expected continues to be reflected in increased product and service offering is in the final to be employed periodically during FY2020 in consumer appetite for its products. stages of development and more details will be order to fund the Group’s ongoing investment activities in this year. Demand for Beam’s base products announced to the market prior to launch. contributed significantly to the Group’s Also announced earlier this year was Beam’s Early in the financial year the Group’s positive net profit position in FY2019. This initial entry into the Indian satellite market. overdraft facilities were regularly accessed robust and sustained revenue experience First orders reached US$250,000 by 30 June and the decision was made to make partial indicates growth in our organic business 2019, and further sales are expected as the drawings on the facility from SGV1 Holdings rather than the usually anticipated drop Inmarsat service offers increased market Limited, arranged in late 2016, to ensure off in demand so often seen in mature applications and awareness in India. the availability of funding for Beam’s full communications devices and accessories. development program. Beam drew US$0.66m from this US$2m facility in the September quarter of 2018. It is not anticipated that there will be more drawings made on that facility and full retirement of that debt is expected to be made before the expiry date of the facility on 1 January 2020. The Board remains determined to continue The expectation for SatPhone Shop is that the investments in innovative technologies, and revenue growth experienced in FY2019 will although some of these new projects will continue into FY2020 and beyond, thereby require significant cash development funds, providing an increasing contribution to the other products are likely to require much Group’s performance. As SatPhone Shop’s less engineering time. The recent and now market-reach and penetration improves, it sustained revenue trends in our organic is increasingly used as an ordering portal business and the new opportunities augur On 19 August 2019 Beam announced details for larger organisations, resulting in bigger well for FY2020 and beyond. of a joint venture with Roadpost Inc of Canada volume sales. Rental revenue, although (further details under ‘Outlook and Projects’). relatively small at present, is expected to grow Directors and Investors Under the JV Agreement Roadpost agreed steadily in FY2020. to provide Beam with an interest-free loan of up to US$600,000 to assist in Beam’s funding of the JV’s start-up costs. The loan is repayable by Beam at any time and at Beam’s sole discretion. In the June quarter, and to date, Beam has received US$450,000 in respect of that arrangement, but transferred US$300,000 for start-up cash to Zoleo Inc., the entity formed to operate the JV business. Additional cash will be drawn as required by Zoleo Inc. as it seeks to launch its innovative product later in calendar 2019. No new securities have been issued since Beam was selected as a beta partner by September 2017 and the Board of Directors has Iridium to develop a new generation of remained the same since November 2017. products that utilises the upgraded Certus 9770 transceiver. Beam will also enhance its existing offerings following the US$3bn upgrade of the Iridium satellite network, known as Iridium NEXT. The new constellation will facilitate enhanced speeds and IP capabilities not previously available on the Mr Simon Wallace was re-elected as a Director by shareholders at the Annual General Meeting of 26 October 2018. With lengthy and detailed expertise in legal and commercial matters, Simon continues as Chairman of the Board and is also a shareholder in the Company. Iridium network. Some of our new product Mr David Stewart joined our board in November developments to service these new market 2017, with his appointment confirmed at the opportunities have been brought forward and following AGM. David has been a keen advisor will commence early in FY2020, with release to senior management in the rationalisation Outlook and Projects of the products before mid FY2021. of development expenditure and provides As mentioned above, Beam experienced issues Opportunities with new LTE devices for largely outside its control that delayed the industrial IoT applications outside the purely finalisation of the Thuraya WE unit’s software. satellite communications space have been Unfortunately, those issues delayed the final investigated over the last 12 months. A deliveries and postponed Thuraya’s market range of products is being soft-launched this launch plans. This inevitably means follow-up month, with a number of others currently hands-on assistance in the selection of trading partners for innovative new product opportunities. David remains Beam’s major shareholder, holding 19.93% of the shares in the Company, while he assists the Group to expand in the satellite and non-satellite space. orders from Thuraya are not expected to be being trialed and tested for Australian Beam Director Mr Carl Hung is also the received until the initial product deliveries have and global markets. Starting with modest President and CEO of Season Group, a major filled the pipeline and gained acceptance in the monthly revenues, incremental to the trading partner of Beam for over nine years. marketplace. This may not happen until FY2021. existing business, the Group believes the Season provides Beam with a range of sub- major sales potential can be fully achieved contract services including manufacturing, On 19 February 2019, Beam announced the securing of a sixth order from Iridium for before the end of FY2020. Iridium GO! ® units, again to be delivered Details of the Zoleo joint venture were over two shipments, with the first 2500 units expected to be delivered this month, August released on 19 August 2019. Roadpost Inc has joined with Beam to develop, manufacture 2019, and the balance in Q3 of FY2021. The and market a mobile satellite messaging and engineering, tool making and testing facilities in Guangdong, China. Carl is Managing Director of SGV1 Holdings Limited, a company associated with Season, which holds 10.23% of the shares in the Company. total units ordered of this remarkable product SOS device that is aimed at untapped but Mr Michael Capocchi is an Executive Director is now 40,000, signaling a significantly longer large and fast-growing global markets. The and holds the positions of Managing Director product lifecycle than other communication new terminal, trademarked ‘ZOLEO’, will and Chief Executive Officer for all companies devices, due to its rugged design and the utilise the upgraded Iridium satellite network. in the Group, including the USA subsidiary. His D I R E C T O R S ’ R E P O R T 9 ANNUAL REPORT 2019 base in the USA enables him to more easily visit DIRECTORS’ INTERESTS the Middle East and UK/Europe, where so many of the Group’s core clients are based, as well as domestically within the US. Michael travels to Australia every 4-6 weeks and is in daily contact with management. Michael is also a significant shareholder in the Company. The Directors are confident that the return to a significant profit situation in FY2019 is an indicator of the Group’s successful efforts to improve core and new product offerings and sales strategies, as well as expanding the business’s scale and investment capacity via incremental yet sustainable revenue and profit expansion. The relevant interests of the Directors in the securities of the Company are detailed in the Remuneration Report as part of the Directors’ Report. SHARES UNDER OPTION At the date of this report, the unissued ordinary shares of the Company under option are as follows: Issue Date Date of Exercise Expiry Price Number Under Option 31.03.15 31.03.20 $0.1950 789,525 REMUNERATION REPORT (Audited) This report details the nature and amount of remuneration for each director of Beam Communications Holdings Limited, and for the executives receiving the highest remuneration. Remuneration Policy The Company is committed to remunerating its executive directors and senior executives in a manner that is market-competitive, consistent with best practice and which supports the interests of shareholders. The Company aims to align the interests of executive directors and senior executives with those of shareholders by remunerating SIGNIFICANT CHANGES IN STATE OF 24.12.15 31.08.20 $0.1950 789,525 through performance and long-term incentive 24.12.15 30.11.20 $0.1950 907,500 plans in addition to fixed remuneration. 2,486,550 The remuneration of Non-executive Directors is determined by the Board having regard to AFFAIRS Other than those noted above, there were no significant changes in the state of affairs of the Consolidated Group during the financial year. EVENTS AFTER REPORTING DATE On 30 July 2019 the Company released to the ASX a statement that an entity controlled by non-executive Director Carl Hung had sold 3.8 million Beam shares, or 42% of its holding in Beam, to raise cash for its Chinese businesses. On 19 August 2019 the Company announced the formation of a joint venture with Roadpost Inc., a Canadian company, to develop and market a new satellite messaging DIRECTORS’ MEETINGS During the year ended 30 June 2019 the Company held 16 meetings of Directors (including Audit Committee meetings). Attendances by each Director during the year were: Directors meetings Commitees the following elements: the level of fees paid to non-executive directors by other companies of similar size and stature and in aggregate must not exceed the maximum annual amount approved by the Company’s shareholders, currently $500,000, as determined at the General Meeting held on 3 August 2007. Senior executives’ remuneration consists of - fixed salary; - short-term incentive bonus where applicable based on performance; - long-term incentive share option scheme; and - other benefits including superannuation. Fixed Salary The salary of senior executives is determined from a review of the market and reflects core performance requirements and expectations. In addition, the Company considers the following: - The scope of the individual’s role; and SOS device. Director Other than the above, there have been no significant events since 30 June 2019. d e d n e t t A m u m i x a M e l b i s s o P d e d n e t t A d e d n e t t A m u m i x a M e l b i s s o P DIVIDENDS PROPOSED OR RECOMMENDED No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. ENVIRONMENTAL ISSUES M Capocchi 12 D Stewart C Hung S Wallace 12 12 12 12 12 12 12 0 0 4 4 0 0 4 4 Each Director attended every scheduled - The individual’s level of skill and experience; The Consolidated Group’s operations are not meeting of the Board and of each regulated by any significant environmental Committee of which he is a member. regulation under any Commonwealth, State or Territory laws. FUTURE DEVELOPMENTS The company will continue the development of the Satellite Communications Services and related businesses. SHARES ISSUED ON THE EXERCISE OF OPTIONS No ordinary shares of the Company were issued during the year ended 30 June 2019 on the exercise of options. - Legal and industrial obligations; - Labour market conditions; and - The complexity of the Company’s business. Performance Bonus The purpose of the performance bonus is to reward an individual’s actual achievement of performance objectives and for materially improved Company performance. Consequently, performance-based remuneration is paid where a clear contribution to successful outcomes for the company is demonstrated and the individual attains and excels against pre-agreed key performance indicators during a performance cycle. T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 10 For FY2019 the Managing Director had a beyond the direct control of senior performance bonus potential of 15% of the executives, or indeed the Board. By way of Group operating profit before interest, tax, example, this was the case in FY2018 when depreciation and amortisation (EBITDA) above the delayed completion of the Thuraya WE $1,000,000 for the financial year, plus $15,000 project severely impacted the Group’s overall and a 1% increase in fixed salary for FY2020, financial results for that period. payable upon the achievement of each of 5 KPIs set by the Board at the beginning of the financial Long-term Incentives year. The Group achieved an EBITDA of The Company’s Share Options Incentive Plan, $2,103,706 and therefore the potential in which executive directors and senior performance bonus became payable. In addition executives may participate, was approved by the Managing Director achieved 3 of the KPIs. shareholders on 27 October 2017 and Two senior sales executives have contractual performance based bonus entitlements having authorises the Directors to issue up to 10% of the shares on issue at a given time. achieved above their minimum sales related The Company ensures that the payment of target levels in FY2019. No other key equity-based executive remuneration is made management executive has a contractual in accordance with thresholds set in plans performance bonus entitlement. approved by shareholders. In assessing the relative performance of the No options were issued to key management senior executives and the Group as a whole personnel or Directors during FY2018 or measured against the primary objective of FY2019 while the Company evaluates the enhancing shareholder value over time, the effectiveness of share options as incentives. Board has regard to key financial indicators. In accordance with Section 300A of the Other Benefits Corporations Act 2001 the following table Senior executives are entitled to statutory summarises the Group’s performance over the superannuation and other bonus payments 9 1 0 2 8 1 0 2 7 1 0 2 6 1 0 2 5 1 0 2 subject to the discretion of the Managing Director and the Board. Employment Contracts Employment Contracts of Senior Executives An employment contract for the Managing Director was executed by the Company and 772 (1,432) (423) 417 645 Michael Capocchi on 30 June 2018 under 2,104 (607) 129 1,363 2,571 earnings per 0.64 (3.07) (1.29) 1.12 5.13 which he will continue as Managing Director and CEO of the Company and all subsidiaries until at least 30 June 2020 (the minimum term) with extension beyond that date possible by mutual agreement. The terms of Mr Capocchi’s contract were negotiated such that, compared to his employment terms that applied prior to that date, his fixed base salary was reduced and a greater portion of his 0.27 0.16 0.13 0.23 0.31 remuneration was at risk. The contract can be terminated by either the Company or Mr Capocchi, with a minimum of 9 months’ notice, subject to completion of the minimum term. All other key management personnel are permanent employees. 14.28 8.46 5.61 9.93 13.38 Nil Nil Nil Nil Nil last 5 years. Net profit(loss) before tax ($’000) EBITDA ($’000) Basic share (cents) Share price at 30 June ($) Market Capitalisation at 30 June ($m) Dividends per share The Board believes the above table illustrates the positive, albeit not linear, direction the Group has taken over the past 5 years and is reflective of the performance of senior executives during that period. Due to the nature of the Group’s business there are often major influences on a particular financial year’s profit result that are largely D I R E C T O R S ’ R E P O R T 11 ANNUAL REPORT 2019 REMUNERATION REPORT (continued) (a) Names and positions held of consolidated group and parent entity Key Management Personnel in office at any time during the financial year are: Directors Mr S Wallace Non-Executive Chairman Mr M Capocchi Executive Managing Director Mr C Hung Mr D Stewart Non-Executive Director Non-Executive Director Other key management personnel Mr D Payne Mr W Christie Chief Financial Officer and Company Secretary Chief Technical Officer (b) Details of remuneration for the year The remuneration for each director and each of the other key management personnel of the consolidated group receiving the highest remuneration during the year was as follows: Short-term employee benefits Post- employment benefits Other long- term benefits Termi- nation benefits Share- based payments Cash salary & fees $ Cash bonus & Commissions $ Motor vehicle & other allowances $ Employee benefits payable [b] $ Super- annuation $ Employee benefits payable $ Eligible termi- nation benefits $ Options [a] $ Total $ Performance related % Remuneration consisting of options % 2019 Directors Mr S Wallace 41,666 Mr M Capocchi [c] 418,688 215,806 27,335 23,725 41,723 8,297 Mr C Hung 41,666 Mr D Stewart 41,666 Other Mr D Payne 189,547 Mr W Christie 172,549 - - - - - (1,142) 18,007 (8,379) (8,165) 16,392 4,306 Total 905,782 215,806 27,335 14,418 76,122 4,224 - - - - - - - - 41,666 0.00% 735,574 29.34% 41,666 0.00% 41,666 0.00% 0.00% 0.00% 198,033 0.00% 185,082 0.00% 0.00% 0.00% 1,243,687 Short-term employee benefits Post- employ- ment benefits Other long- term benefits Termi- nation benefits Share- based payments Cash salary & fees $ Cash bonus & Commissions $ Motor vehicle & other allowances $ Employee benefits payable [b] $ Super- annuation $ Employee benefits payable $ Eligible termi- nation benefits $ Options [a] $ Total $ Performance related % Remuneration consisting of options % 2018 Directors Mr S Wallace 44,216 Mr M Capocchi [c] 477,107 Mr C Hung 44,216 Mr D Stewart 27,777 Other Mr D Payne 188,147 Mr W Christie 171,275 Total 952,738 - - - - 47,031 24,599 45,303 9,138 - - (812) 17,874 (5,519) (2,641) 16,271 3,299 47,031 21,146 79,448 6,918 - - - - - - - - 44,216 0.00% 603,178 0.00% 44,216 0.00% 27,777 0.00% 199,690 0.00% 188,204 0.00% 1,107,281 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% [a] Option based compensation relates to the value of options issued to date and brought to account pro-rata to the time period from the date of granting to the date of vesting, except where Accounting Standard AASB 2 required expensing to begin from the commencement of service related to those options, notwithstanding that the issue of those options, in the case of Directors was subject to shareholder approval, and in the case of key management employees, subject to performance review. [b] Employee benefits payable represents net increase in benefits payable charged to the consolidated statement of profit or loss and other comprehensive income in the current year. [c] The majority of Mr Capocchi’s remuneration is in US dollars. For 2019 his remuneration has been converted into AU dollars at the exchange rate on 30 June 2019 of 0.7013. T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 12 Short-term employee benefits employment term Post- Other long- Termi- nation Share- based benefits benefits benefits payments Cash Cash salary & bonus & fees Commissions $ $ Motor vehicle & other Employee benefits payable allowances $ [b] $ Super- annuation $ Employee benefits payable $ Eligible termi- nation benefits $ Options Performance [a] $ Total $ related % Remuneration consisting of options % 2019 Directors Mr S Wallace 41,666 Mr C Hung 41,666 Mr D Stewart 41,666 Other - - - Mr M Capocchi [c] 418,688 215,806 27,335 23,725 41,723 8,297 735,574 29.34% Mr D Payne 189,547 (1,142) 18,007 (8,379) Mr W Christie 172,549 (8,165) 16,392 4,306 - - 198,033 0.00% 185,082 0.00% 0.00% 0.00% Total 905,782 215,806 27,335 14,418 76,122 4,224 - 1,243,687 41,666 0.00% 41,666 0.00% 41,666 0.00% 0.00% 0.00% - - - - - - - [a] Option based compensation relates to the value of options issued to date and brought to account pro-rata to the time period from the date of granting to the date of vesting, except where Accounting Standard AASB 2 required expensing to begin from the commencement of service related to those options, notwithstanding that the issue of those options, in the case of Directors was subject to shareholder approval, and in the case of key management employees, subject to performance review. [b] Employee benefits payable represents net increase in benefits payable charged to the consolidated statement of profit or loss and other comprehensive income in the current year. [c] The majority of Mr Capocchi’s remuneration is in US dollars. For 2019 his remuneration has been converted into AU dollars at the exchange rate on 30 June 2019 of 0.7013. REMUNERATION REPORT (continued) (c) (i) Options granted as part of remuneration for the year 2019 Grant date Granted number Value per option at grant date $ Value of options granted during the year $ Value of options exercised during year $ Value of options lapsed during year $ Total $ Directors Mr S Wallace Mr M Capocchi Mr C Hung Mr D Stewart Other Mr D Payne Mr W Christie - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2018 Grant date Granted number Value per option at grant date $ Value of options granted during the year $ Value of options exercised during year $ Value of options lapsed during year $ Total $ Directors Mr S Wallace Mr M Capocchi Mr C Hung Mr D Stewart Other Mr D Payne Mr W Christie - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (81,900) (81,900) - - - - - - - - D I R E C T O R S ’ R E P O R T 13 ANNUAL REPORT 2019 REMUNERATION REPORT (continued) (c) (ii) Options granted and/or vested during the year 2019 Vested No. Granted No. Grant date Value per option at grant date $ Exercise price $ Expiry date First exercise date Last exercise date Terms & conditions for each grant Directors Mr S Wallace Mr M Capocchi Mr C Hung Mr D Stewart Other Mr D Payne Mr W Christie Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2018 Vested No. Granted No. Grant date option at Exercise price $ Expiry date grant date $ Terms & conditions for each grant Value per First exercise Last exercise date date Directors Mr S Wallace Mr M Capocchi Mr C Hung Mr D Stewart Other Mr D Payne Mr W Christie Total - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 14 REMUNERATION REPORT (continued) (d) Option holdings The number of options over ordinary shares in the Company held during the financial year by each key management person including their personally related parties is set out below. Balance 1.07.18 Granted as Remuneration Issued as Equity Investment Options Exercised Options Lapsed Balance 30.06.19 Total Vested 30.06.19 Exercisable 30.06.19 Unexer- cisable 30.06.19 2019 Directors Mr S Wallace - Mr M Capocchi 907,500 Mr C Hung Mr D Stewart - - Other Mr D Payne 381,150 Mr W Christie 544,500 Total 1,833,150 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 907,500 907,500 907,500 - - - - - - 381,150 381,150 381,150 544,500 544,500 544,500 1,833,150 1,833,150 1,833,150 - - - - - - - Balance 1.07.17 Granted as Remuneration Issued as Equity Investment Options Exercised Options Lapsed Balance 30.06.18 Total Vested 30.06.18 Exercisable 30.06.18 Unexer- cisable 30.06.18 2018 Directors Mr S Wallace - Mr M Capocchi 1,507,500 Mr C Hung Mr D Stewart - - Other Mr D Payne 381,150 Mr W Christie 544,500 - - - - - - Total 2,433,150 - - - - - - - - - - - - - - - - - - (600,000) 907,500 907,500 907,500 - - - - - - - - 381,150 381,150 381,150 544,500 544,500 544,500 - - - - - - (600,000) 1,833,150 1,833,150 1,833,150 - D I R E C T O R S ’ R E P O R T 15 ANNUAL REPORT 2019 REMUNERATION REPORT (continued) (e) Share Holdings The number of shares in the Company held during the financial year by each key management person including their personally related parties are set out below. 2019 Directors Balance 1.07.18 Received as Remuneration Options Exercised Placement Net Change Issue [b] Other [a] Balance 30.06.19 Mr S Wallace 178,600 Mr M Capocchi 1,603,899 Mr C Hung 9,243,207 Mr D Stewart 10,540,000 Other Mr D Payne 328,570 Mr W Christie 62,778 21,957,054 - - - - - - - - - - - - - - - - - - - - - - - - - 178,600 1,603,899 9,243,207 10,540,000 328,570 62,778 21,957,054 Balance 1.07.17 Received as Remuneration Options Exercised Placement Net Change Issue [b] Other [a] Balance 30.06.18 2018 Directors Mr S Wallace 178,600 Mr M Capocchi 1,603,899 Mr C Hung 9,243,207 Mr D Stewart - Other Mr D Payne 328,570 Mr W Christie 62,778 11,417,054 - - - - - - - - - - - - - - - - - - - - 178,600 1,603,899 9,243,207 9,700,000 840,000 10,540,000 - - - - 328,570 62,778 9,700,000 840,000 21,957,054 [a] Net Change Other refers to shares purchased or sold on-market or off-market at current market prices during the financial year. [b] Placement Issue refers to the placement of ordinary shares to Glenayr Pty Ltd, a company owned by Mr Stewart, on 12 September 2017 T R O P E R ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 16 REMUNERATION REPORT (continued) (f) Shares issued on exercise of remuneration options No options were exercised by key management personnel during the financial year ended 30 June 2019 or the comparative year ended 30 June 2018. (g) Voting and comments made at the Company’s 2018 Annual General Meeting (AGM) At the Company’s most recent AGM, a resolution to adopt the prior year remuneration report was put to the vote and at least 75% of ‘yes’ votes were cast for adoption of that report. No comments were made on the remuneration report at the AGM. AUDITOR RSM Australia Partners was appointed Company auditor on 28 November 2013 and will continue in office in accordance with section 327 of the Corporations Act 2001. Pursuant to section 324 DAB of the Corporations Act 2001, the Board of 4 April 2018, following a recommendation from the Audit Committee, approved that Jason Croall, a partner of RSM Australia Partners may continue to play a significant role in the audit of the company for a further 2 years until the financial year ended 30 June 2020. Reasons for the extension include continuity of knowledge and experience that Jason has accumulated over the years, as well as, key relationships formed during this period’ is considered a material benefit to maintaining the quality of audit work for a further period covering the two financial years ending 30 June 2019 and 2020. The Board is satisfied that the extension of the auditor rotation period is consistent with maintaining the quality of the audit and would not give rise to conflict of interest situation. RSM Australia Partners has agreed to extend the above extension. NON AUDIT SERVICES No non audit services were undertaken by the external auditors during the year ended 30 June 2019. AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s Independence Declaration is attached and forms part of the Directors’ Report. Signed in accordance with a resolution of the Board of Directors dated 29 August 2019. Mr Simon Wallace Chairman Date: 29 August 2019 I D R E C T O R S ’ R E P O R T 17 [a] Net Change Other refers to shares purchased or sold on-market or off-market at current market prices during the financial year. [b] Placement Issue refers to the placement of ordinary shares to Glenayr Pty Ltd, a company owned by Mr Stewart, on 12 September 2017 ANNUAL REPORT 2019 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Beam Communications Holdings Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 29 August 2019 Melbourne, Victoria N O I T A R A L C E D S ’ R O T I D U A D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 18 19 ANNUAL REPORT 2019D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 20 21 ANNUAL REPORT 2019CORPORATE GOVERNANCE may be conducted by separate committees in • approving and monitoring financial and The Directors of Beam Communications Holdings Limited (BCC or the Company) (formerly named World Reach Limited) are committed to protecting and enhancing shareholder value and conducting the company’s business ethically and in accordance with the highest standards of corporate governance. In accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations: 3rd Edition (the Principles), this corporate governance statement reports on the Company’s adoption of the Principles on an exception basis. This statement provides specific information whereby disclosure is required of any recommendations that have not been adopted by the Company, together with the reasons why they have not been adopted. The Company’s corporate governance principles and policies are therefore structured with reference to the Principles, which are as follows: 1. Lay solid foundations for management and oversight. 2. Structure the Board to add value. 3. Act ethically and responsibly. a larger company such as Directors Nomination, Risk Management and Remuneration are dealt with by the full Board as separate and specific agenda items in accordance with the principles and policies other reporting. Chairman’s Appointment and Responsibilities The Chairman is appointed by the board from the non-executive directors. The Chairman: set down in the Company’s corporate • provides appropriate leadership to the governance programme. The Company has adopted a Board Charter which details the functions and responsibilities of the Board of Directors. A copy of the Board Charter is on the Company’s website. The employment contract between the Company and the Chief Executive Officer and the letter of engagement for the Chief Financial Officer and senior executives details the terms of employment, job specifications and responsibilities. The Role of the Board of Directors The BCC is responsible to its shareholders for the protection and enhancement of long term shareholder value. board and the Company; • ensures membership of the board is balanced and appropriate for the Company’s needs; • facilitates board discussions to ensure the core issues facing the organisation are addressed; • maintains a regular dialogue and mentor relationship with the Chief Executive Officer; • monitors board performance; and • guides and promotes the on-going effectiveness and development of the board and individual directors. Conduct of Board Business To fulfil this role the Board is responsible for: The Board normally holds monthly formal • oversight of the Group, including its controls, risk management, financial structures and accountability systems; 4. Safeguard integrity in corporate reporting. • setting strategic direction for 5. Make timely and balanced disclosure. 6. Respect the rights of security holders. 7. Recognise and manage risk. 8. Remunerate fairly and responsibly. 1. Lay Solid Foundations for Management and Oversight Recommendation 1.1: The Board and Senior Management – Roles and Responsibilities Board Processes The Board recognises that its responsibilities should accord with the following general principles: • the Board should be made up of a majority of Independent Directors; • the Chairman of the Board should be an Independent Director; • the roles of Chairman and Chief Executive Officer should not be exercised by the same person; • the Board should meet on a monthly basis; • all available information in connection with items to be discussed at a meeting of the Board shall be provided to each Director prior to that meeting; and • Directors are entitled to seek independent professional advice. To assist in the execution of its responsibilities the Board has established an Audit Committee with a formalised charter and operating principles. Activities which management with a view to maximising shareholder value; • input into and final approval of strategic plans and goal and performance objectives and key operational and financial matters; • determining dividend payments; • selecting, appointing and reviewing the performance of the Chief Executive Officer (CEO); • ratifying the appointment and, where appropriate, the removal of the Chief Financial Officer (CFO) and Company Secretary; • approval of annual and half yearly financial reports and related Australian Stock Exchange reports; • selecting and appointing new non-executive directors; • approving major capital expenditure and acquisitions; • evaluating the Board’s performance and that of individual directors; • reviewing and ratifying systems of risk management and internal compliance and control, codes of conduct and legal compliance; • monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources are available; • dealing with approaches to take over the company; and Board meetings and will also meet whenever necessary to carry out its responsibilities. In the year ended 30 June 2019, the Board and/or its committees met 16 times. When conducting Board business, Directors have a duty to question, request information, raise any issue of concern, and fully canvas all aspects of any issue confronting the Company and vote on any resolution according to their own judgment. Directors keep confidential, board discussions, deliberations and decisions that are not publicly known. Access to Information Directors are encouraged to access members of the senior management team at any time to request relevant information in accordance with protocols adopted by the Board. Where Directors perceive an irregularity in a Company related matter, they are entitled to seek independent advice at the Company’s expense. Directors must ensure that the costs are reasonable and must inform the Chairman before the advice is sought. The advice must be made available to the rest of the Board. Independent Professional Advice Each Director has the right to seek independent legal and other professional advice at the Company’s expense concerning any aspect of the Company’s operations or undertakings in order to fulfil their duties and responsibilities as directors. Conflicts of Interest Directors are required to continually monitor and disclose any potential conflicts of interest that may arise. Directors must: E C N A N R E V O G E T A R O P R O C D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 22 • disclose to the Board any actual or Given the nature and size of the Company, are appropriate for the Board to fulfil its potential conflicts of interest that may the Board considers that as a 4-member Board role. The Company Secretary is responsible exist as soon as the situation arises; of a small public company the selection and to the Board for ensuring compliance with • take necessary and reasonable steps to appointment of Directors is such an important Board procedures and governance matters. resolve any conflict of interest within task that it should be the responsibility of The Company Secretary is accountable an appropriate period, if required by the entire Board to consider the nominations directly to the Board, through the Chair, on the Board or deemed appropriate by process. The structure of the Board is all matters to do with the proper functioning that director; and reviewed annually as to qualifications, skills, of the Board. The Company Secretary is also • comply with the Corporations Act experience and diversity to ensure the Board responsible for overseeing and co-ordinating requirements about disclosing has an appropriate mix. In a 4-member Board disclosure of information to the ASX as well interests and restrictions on voting. the highest requirement is for appropriate as communicating with the ASX. Directors should discuss with the Chairman any other proposed Board or executive appointments they are considering undertaking and advise the Company of their skill. Where a vacancy exists or there is a need for particular skills, the Board will determine Recommendation 1.5: Diversity Policy the selection criteria and identify and appoint a suitable candidate. The Company has taken measures to establish a corporate culture in which the principles of appointments to other companies as soon as The Company will undertake appropriate diversity are embedded. By promoting and possible after the appointment is made. checks before appointing a person, or supporting transparent recruiting processes, putting forward a candidate for election flexible work practices, an enlightened code as a Director, and provide shareholders of conduct, equal employment opportunity with this information. Candidates will be policies and clear reporting of outcomes, the assessed through interviews, meetings and Board feels that the objectives of diversity background reference checks as appropriate. will be achieved. The results of recruiting External advisors may be used in and the composition of staff are reported by this process. The Company will provide the Chief Executive Officer and reviewed at shareholders with all material information monthly Board meetings. The same requirement exists for related party transactions including financial transactions with the Company. Related party transactions are reported in writing to the Company Secretary and where appropriate, raised for consideration at the next board meeting. Retirement of Directors One-third of the Directors are required to retire by rotation at each Annual General Meeting (AGM). The Directors to retire at each AGM are those who have been longest in office since their last election. Where Directors have served for equal periods, they may agree amongst themselves or determine by lot who will retire. A Director must retire at the third AGM since last elected or re-elected. A Director appointed as an additional or casual director by the Board will hold office in its possession relevant to the decision on whether or not to elect (or re-elect) a Director, either in the notice of the meeting at which the election of the Director is to be held, or by including in the notice a clear reference to the location on the Company’s website, Annual Report or other document lodged with ASX where the information can be found. Directors appointed by the Board must stand for re-election at the next meeting of shareholders. until the next AGM when the Director may be Further information regarding Director re-elected. This re-election will be in addition nominations can be found in the Company’s to any rotational retirements. Election of Directors Policy as posted on the A CEO, if also a Managing Director, is not subject to retirement by rotation and is not Company’s website. to be taken into account in determining the Recommendation 1.3: Terms of Appointment – rotation of retirement of Directors. Directors and Senior Executives Each new Non-Executive Director will Functions of Senior Executives receive a letter formalising their appointment The Chief Executive Officer reports to the and outlining the material terms of their Board and is responsible for the operation and appointment. Non-Executive Directors of the administration of the Company including the Company have not been appointed for fixed implementation of the Company’s strategies, terms. Senior Executives will generally have plans, policies and control programmes. He written employment agreements with the is supported by a management team whose Company setting out their duties, obligations responsibilities are delineated by formal and remuneration. authority delegations. The team meets regularly to co-ordinate activities and to review and monitor performance. Recommendation 1.2: Board Nominations The remuneration paid/payable to the Company’s ‘key management personnel’ is outlined within the Remuneration Report in the Company’s latest Annual Report. Appointment of Directors The Company has not established a Recommendation 1.4: The Company Secretary The Company Secretary is appointed by the nomination committee for recommending the Board and is responsible for developing and appointment of Directors. maintaining the systems and processes that The Board, at this time, has not established an explicit policy on diversity or measurable objectives for achieving gender diversity. Because of the size of the Company (40 staff including Board members, as at the date of this report), the Board is of the view that the scale and nature of the Company’s operations does not currently lend itself to an effective and meaningful application of a targeted diversity policy. Rather, the Board recognises the positive benefits for the organisation of increased diversity, especially gender, and has sought to integrate diversity objectives within the existing policies and procedures of the Company. The Board intends to reconsider the adoption of a formal diversity policy periodically. At the date of this report the Company has a total staff excluding Board members of 36 employees of which 28% (10 employees) are women. The Senior Executive team is made up of 4 managers including one female. At this time there are no women on the Board which comprises 4 positions. Recommendation 1.6 and 1.7 – Performance Review and Evaluation Evaluating the Performance of Directors The Board has adopted a self-evaluation process to measure its own performance and the performance of its Committees. C O R P O R A T E G O V E R N A N C E 23 ANNUAL REPORT 2019 On an annual basis, the Chairman facilitates Recommendation 2.2: Skills, Knowledge and • Mr David Stewart, a Non-Executive a discussion and evaluation of the Board’s performance in accordance with this Experience Directors are appointed based on the specific Director, is not regarded as being independent, as two companies process. This includes discussions about business, industry and governance skills and associated with and/ or controlled by the Board’s role, processes, performance experience as required by the Company. The Mr Stewart in total hold a relevant and other relevant issues. Each Director’s Board recognises the need for Directors interest in 10,540,000 shares in the performance is reviewed by the Chairman to have a relevant and applicable range of Company, representing 19.93% of the and Board prior to the Director standing for skills and personal experience in a range issued capital of the Company and Mr re-election. Performance evaluations will take of disciplines as required for the proper Stewart is thereby a substantial holder. place during September at the same time as management and oversight of the Company’s those for all staff members. A performance operations, as having regard to the scale and The names, qualifications and experience of evaluation was undertaken during the nature of its activities. reporting period. The Board skills matrix set out below describes If the contribution of a Non-Executive Director the skills, experience and expertise that the appears to a majority of Directors to be less Board would look to maintain and build on: than adequate, they may direct the Chairman to inform that Director accordingly and ask that person to consider his or her position on the Board. If the Director takes no action in response, a circulated minute signed by a majority of Directors will authorise the Company Secretary to inform the shareholders that the Board will not support the re-election of the Director at the general meeting where they are next due to offer for re-election. • • • • • capital markets; corporate finance; regulatory and compliance; operations; legal; sales; • • marketing • corporate governance; and • financial and business acumen. Evaluating the Performance of Senior Executives Recommendations 2.3 and 2.4: Independent Directors Arrangements put in place by the Board to Directors Independence monitor the performance of the Group’s key executives include: At the date on which the Directors’ report is made out, the Company’s Board has 4 • regular monthly reporting submitted Directors. The Board currently consists of to the Board and attendance at all three Non-Executive Directors. At this time Board Meetings by the Chief Executive only one (Mr Simon Wallace) of the three Non- Officer and Chief Financial Officer; Executive Directors is considered by the Board • a review by the Board of the Group’s to be independent, and as such the Company financial performance and revised does not comply with Recommendation forecast results on a monthly and 2.4 of the Corporate Governance Council, annual basis at Board meetings at which recommends that a majority of Board which reports are presented by the key members should be independent. However, the executives; and Board considers that both its structure and • an evaluation of the detailed composition are appropriate given the size of presentations made by the Chief the Group and that the interests of shareholders Executive Officer and his direct reports are well met. each Director of the Company are detailed in the Directors’ Report in the Annual Report. Recommendation 2.5: Independent Chairman The Chairman, Mr Simon Wallace, is the only independent Non-Executive Director of the Company at this time. Mr Wallace was appointed as Chairman of the Company on 22 December 2016, based on his extensive experience in legal and commercial matters, project finance and fundraising background and his experience as a Director including of an ASX-listed entity. The Chief Executive Officer of the Company is Mr Michael Capocchi. Recommendation 2.6: Induction of New Directors The Company has a program for inducting new Directors. This includes giving new Directors a full briefing about the nature of the business, current issues, the corporate strategy and the expectations of the Board concerning the performance of the Directors and access to all employees to gain full background to the Company’s operations. Directors are encouraged to attend director training and professional development courses, as may be required to enable them to develop and maintain the skills and knowledge needed to effectively perform their roles as Directors, at the Company’s expense (as approved by the Chairman and or the Board, as appropriate and applicable). during business planning / strategy meetings which are at least bi-annual. The Board regularly assesses its composition of the Board, having regard to the nature and 3. Act Ethically and Responsibly A performance evaluation was undertaken size of its operations and the relevant skills, during the reporting period. knowledge, and experience. 2. Structure Board to Add Value Recommendation 2.1: Nomination Committee Due to the small size of the Board and the Company’s current level of operations, the Company does not have a separate nomination committee. Nominations for positions on the Board are considered by the entire Board. In the interest of clear disclosure: • Mr Carl Hung, a Non-Executive Director, is also the President and CEO of Season Group. The Company has subcontracted manufacturing on an arms-length basis to Season Group and Mr Hung, through SGV1 Holdings Limited, holds an interest at the date of this report in 10.23% of the Company’s Recommendation 3.1: Act Ethically and Responsibly Code of Conduct and Corporate Ethics As part of the Board’s commitment to the highest standard of personal and corporate behaviour, the Company adopts a Code of Conduct to guide executives, management and employees in carrying out their duties and responsibilities. The code of conduct covers such matters as: issued shares and is thereby a • responsibilities to shareholders; substantial holder. • compliance with laws and regulations; • relations with customers and suppliers; E C N A N R E V O G E T A R O P R O C D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 24 • ethical responsibilities including • the Committee should have at least The Committee invites the CEO, the CFO, responsibility for reporting and investigating unethical practices; • employment practices including a fair and open approach to all forms of diversity; and • responsibilities to the environment and the community. 3 members. While recognising these recommendations, the Board is restricted by having currently only four Board positions. The Board’s small size is a function of the relatively small scale of the Company’s operations. The Company may assess the composition of the Board from time The Code of Conduct is available at the to time, with a view to considering compliance the Company’s remaining Director and the external auditors to attend Committee meetings where appropriate. The Committee also meets with and receives regular reports from the external auditors concerning any matters which arise in connection with the performance of their respective roles, including the adequacy of internal controls. Company’s website. with the recommendation that the Audit The Company’s Audit Committee met 4 times In addition to the Code of Conduct, the Company has established a specific Corporate Committee have a majority of Independent during the course of the financial year ended Directors. 30 June 2019. Ethics Policy setting out the Company’s The one Independent Director on the Board The Company’s Audit Committee has a formal behavioural expectations of its employees is a member of the Audit Committee. Mr charter setting out the Committee’s role and when conducting business in Australia and Carl Hung although not an Independent responsibilities. The charter is posted on the internationally and specifically aims to Director was appointed Chairman of the Company’s website. maintain the good standing and reputation Audit Committee due to his accounting of the Company along with highlighting the qualifications and commercial experience. Recommendation 4.2: Approval of importance of anti-corruption practices to its employees and directors. The Corporate Ethics Policy is also available at the website. The Audit Committee assists the Board to discharge its corporate governance responsibilities, in regard to the business’ The Company’s objective is to maintain and relationship with, and the independence of, further develop its business to increase the external auditors. It especially: Financial Statements The Board receives regular reports about the financial condition and operational results of the Company and its controlled entities. The CEO and CFO periodically provide formal statements to the Board that, in all material shareholder value while also adding value for customers, employees and other stakeholders. To ensure this occurs, the Group conducts its business within the ethical responsibilities documented and outlined in the Company’s Code of Conduct and Corporate Ethics Policy. 4. Safeguard Integrity in Corporate Reporting Recommendation 4.1: Audit Committee The Board has established an Audit • recommends appointment of external aspects, the Company’s financial statements auditors and fees; present a true and fair view of the Company’s • ensures reliability and integrity of financial condition and operational results. disclosure in the financial statements and external related financial communications, although ultimate responsibility rests with the full Board; • reviews compliance with statutory responsibilities; • reviews budgets and accounting policy; The CEO and the CFO each provide declarations to the Board in accordance with Section 295A of the Corporations Act 2001 confirming that in their opinion, with regard to risk management and internal compliance and control systems: Committee to consider certain issues and • ensures maintenance of an effective i. the statements made with respect to functions in further detail. The chairman of framework of business risk the integrity of financial statements the Audit Committee reports to the Board management including compliance and and notes thereto are founded on a on any matters of substance at the next full internal controls and monitoring of the sound system of risk management board meeting. The Audit Committee has internal audit function; and internal control systems which, its own terms of reference, approved by the • reviews adequacy of the Company’s in all material respects, implement Board and reviewed annually, with additional insurance program, including directors’ the policies adopted by the Board of review when appropriate. and officers’ professional indemnity Directors; and The members of the Committee at the date of this report are Mr Carl Hung and Mr Simon Wallace. Carl Hung is the current Chairman of the Audit Committee. Details of the qualifications, experience and attendance at Committee meetings by each Committee and other liability insurance cover; ii. the risk management and internal • promotes and ensures an ethical control systems are operating financial culture is embedded throughout the Company; and effectively and efficiently in all material respects in relation to financial • undertakes any special investigations reporting risks. required by the Board. Member is included in the Directors’ Report The Audit Committee provides a forum for in the Annual Report. The ASX Corporate Governance Council has made recommendations for the composition the effective communication between the Board and external auditors. The Committee reviews: Auditor independence Best practice in financial and audit governance is rapidly evolving and the independence of the external auditor is particularly important to shareholders of the Audit Committee: • the annual and half-year financial and the Board. The Company’s practices • the Committee should consist only of Non-Executive Directors; • it should have a majority of Independent Directors; • it should be chaired by an independent Director who is not Chairman of the Board; report prior to their approval by the in this area are reviewed regularly by Board; the Board to ensure they are in line with • the effectiveness of management emerging practices both domestically and information systems and systems of internationally. The Company’s current internal control; and approach in relation to independence of its • the efficiency and effectiveness of auditor encompasses the following: external audit functions, including reviewing the respective audit plans. C O R P O R A T E G O V E R N A N C E 25 ANNUAL REPORT 2019 • rotation of the senior audit partner disclosed, but the Company is not in a • Risk Management Policy; every five years; position to issue an announcement promptly • Remuneration Policy; • annual confirmation by the auditor and without delay, the Company may request • Securities Trading Policy; that it has satisfied all professional that the ASX grant a trading halt or suspend • CEO and CFO Declarations; regulations relating to auditor the Company’s securities from quotation. • Whistle Blower Policy; independence; Management of the Company may consult • Code of Conduct; • half yearly reporting on the levels of external professional advisers and the ASX • Election of Directors Policy; audit and non-audit fees; and in relation to whether a trading halt or • Disclosure Policy; • specific exclusion of the audit firm from suspension is required. work which may give risk to a conflict. Recommendation 4.3: Auditor attendance at AGM The Company’s external Auditor attends the Company’s AGMs and is available to answer shareholder questions about the conduct of the audit and the preparation and content of the Auditor’s Report. 5. Make Timely and Balanced Disclosure Recommendation 5.1: Continuous Disclosure Policy The Board and senior management are aware of the continuous disclosure requirements The Company’s Continuous Disclosure Policy is available on the Company’s website. • Shareholder Communication Policy; • Health and Safety Policy; • Environmental and Community Relations Policy; • Corporate Ethics Policy; and 6. Respect the Rights of Security Holders • Related Parties and Conflicts Policy Recommendation 6.1: Communication to All of the above information/policy Shareholders and Investors The Company is committed to increasing the transparency and quality of its communication and to be regarded by our shareholders as an outstanding corporate citizen. Our approach to communication with shareholders and financial markets is set out in the Company’s Shareholder Communication Policy document. documents were updated on 22 November 2018 in connection with the Company’s name change from World Reach Limited, as appropriate. Recommendation 6.2 Investor Relations Program Two-way communication between the Company and its shareholders is facilitated primarily via the Company’s AGM. The Board of the ASX and have written policies and Information is communicated to shareholders encourages shareholder participation at procedures in place, including a Continuous through the distribution of the Company’s the AGM and other general meetings of the Disclosure Policy. Annual Report and other communications. shareholders. The Chairman encourages The guiding principle of this policy is that the Company must immediately notify the market via an announcement to the ASX of any information concerning the Company that a reasonable person would expect to have a ‘material’ effect on the price or value of the Company’s securities. All significant information is posted on the questions and comments from shareholders Company’s website as soon as it is disclosed and seeks to ensure that shareholders are to the ASX. All investors will have equal and given ample opportunity to participate. timely access to information on the Company’s Shareholders who are unable to attend financial position, performance, ownership and the AGM or a general meeting may submit governance. Shareholders who wish to send questions and comments before the meeting and receive communications with the Company to the Company and/or to the Auditor (in the electronically should contact the Company case of the AGM). The Board must ensure that Company Secretary, Mr Dennis Payne. announcements: The Company ensures that shareholders are • are made in a timely manner; informed of all major developments affecting Recommendation 6.3: Shareholders Participation at General Meetings • are factual; the Group promptly through the issue of All shareholders are encouraged to attend • do not omit material information; and ASX announcements and commentary on and participate in shareholder meetings. All • are expressed in a clear and objective operations in quarterly reports. All ASX Directors, senior managers, Auditors and the manner that allows investors to assess announcements and quarterly reports are Company Secretary attend these meetings the impact of the information when posted on the ASX website for the Company and respond to shareholder questions in making investment decisions. and on the Company’s website. Where that information, however, is All shareholders receive copies of incomplete or confidential, or its disclosure is shareholders notices by email or post and a illegal, no disclosure is required. The Directors copy of the annual report is distributed to and senior management of the Company all shareholders who elect to receive one ensure that the Company Secretary is aware (hardcopy in the mail or electronically). The relation to specific agenda items and general business. The Annual General Meeting features an address by the Chairman and an extensive presentation by the CEO which is also released as an ASX announcement for shareholders who cannot attend the meeting. of all information to be presented at briefings Company’s most recent annual report is also A description of the arrangements the with analysts, stockbrokers, shareholders, the available on the Company’s website. Company has to promote communications media and the public. Prior to being presented, information that has not already been the Website Information with shareholders is detailed in the Shareholder Communication Policy, available subject of disclosure to the market and is The Company has established a website at www. at the Company’s website. not generally available to the market is the subject of disclosure to the ASX. Only when beamcommunications.com, where shareholders can access information about the Company’s confirmation of receipt of the disclosure and corporate governance policies and practices. release to the market by the ASX is received Information lodged on this website in a specific may the information be presented. corporate governance section includes: If the Company becomes aware of market- • Board Charter; sensitive information which ought to be • Audit Committee Charter; E C N A N R E V O G E T A R O P R O C D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 26 Recommendation 6.4: Electronic Communication Shareholders may elect to send communication to and receive • assist management to discharge its and compliance with laws and regulations corporate and legal responsibilities; are operating effectively. Details of the and Audit Committee are also set out in the • assure management and the Board Risk Management Policy, available at the communications from the Company and its that the framework is effective. Company’s website. Share Registry electronically. The contact email address for the Company is investor@ beamcommunications.com and shareholders may submit electronic queries to the Company’s Share Registry via its website www.linkmarketservices.com.au 7. Recognise and Manage Risk Responsibility for control and risk management is delegated to the appropriate Recommendation 7.4: Exposure to Risks levels of management within the Company The Company regularly undertakes reviews and the CEO has ultimate responsibility of risks that may be material to its business. to the Board for risk management and The review examines the processes and control. Areas of significant business risk to procedures that the Company must initiate the Company are detailed in the Business to control and/or mitigate these risks from Plan presented to the Board by the CEO at impacting upon the performance of the Recommendation 7.1: Risk Committee the start of each financial year. The Board Company. The key risk categories to which Due to the size of the Company and the nature of the Company’s operations, a formal Risk Committee has not been established. The Board is responsible for ensuring appropriate measures are in place in order to manage risk in line with the Company’s risk reviews and approves the parameters under the Company is exposed, and how it manages which significant business risks will be or intends to manage those risks, are set managed before adopting the Business Plan. out in the Risk Management Policy on the Risk parameters and compliance information Company’s website. are reported monthly to the Board by the CEO and CFO. 8. Remunerate Fairly and Responsibly strategy. An external consultant has assisted The Board has adopted reporting procedures Recommendation 8.1: Remuneration the Board in this process. which allow it to: The Board has required management to • monitor the Company’s compliance with implement internal control systems to manage the continuous disclosure requirements the Company’s material business risks and to of the ASX; and report on whether risks are being effectively • assess the effectiveness of its risk managed. management and control framework. Committee The Board considers that, due to its small size, and the current level of the Company’s operations, all members of the Board should be involved in determining remuneration levels. Accordingly it has not established a separate remuneration Arrangements put in place by the Board to The Company recognises, in particular, committee. Instead time is set aside at two monitor risk include: the environmental and social risks to Board meetings each year specifically to • review of risk areas at monthly Board meetings; • regular monthly reporting to the Board in respect of operations, the financial position of the Company and new contracts; • reports by the Chairman of the Audit Committee; which it may be exposed. The Company address the matters usually considered considers environmental risk to be the by a remuneration committee. Executive ability to continue its undertakings without Directors absent themselves during compromising the health of the ecosystems discussion of their remuneration. in which it operates. The Company views social sustainability as the ability to continue operations in a manner that is acceptable to At these two meetings the Board reviews the following: social norms. • the Company’s remuneration, • attendance and reports by the Managing The Board does not consider that the Director, CFO and the Company’s Company currently has any material management team at Board Meetings; exposure to environmental or social and sustainability risk, however the Board • any Director may request that intends to manage such risks in accordance operational and project audits be undertaken either internally or be with the Company’s Risk Management Policy, if such risks should be identified in the future. recruitment, retention and termination policies and procedures for senior executives; • senior executives remuneration and incentives; • superannuation arrangements; • remuneration framework for Directors; and external consultants. The Company reviews its risk management • remuneration by gender. Recommendation 7.2: Risk Management Framework The Company has implemented a risk framework on at least an annual basis. Such a review took place in the 2019 financial year. The Company’s Risk Management Policy is management program that enables the available on the Company’s website. business to identify and assess risks, respond appropriately and monitor risks and controls. The Company is exposed to risk from operations (employee health and safety, environmental, insurance, litigation, disaster, business continuity), compliance issues and financial risks (interest rate, foreign currency, credit and Recommendation 7.3: Internal Audit Function The Audit Committee assists the Board in fulfilling its responsibilities in this regard by reviewing the financial and reporting aspects of the Group’s risk management and control framework. liquidity). To mitigate these risks, the Company The Audit Committee meets regularly to has established risk and assurance policies and ensure, amongst other things, that the risk procedures, which aim to: management internal control structures C O R P O R A T E G O V E R N A N C E 27 ANNUAL REPORT 2019 Recommendation 8.2: Remuneration of remuneration is paid where a clear of the various jurisdictions in which Executive and Non-Executive Directors contribution to successful outcomes for transactions may take place. The remuneration structure of Non- Executive Directors and executives is disclosed in the Remuneration Report within the Directors’ Report in the Annual the Company is demonstrated and the individual attains and excels against pre- agreed key performance indicators during a performance cycle. Purchase or sale of the Company’s shares and/or options over such shares by Directors, executives and staff of the Company should only occur in circumstances where the market Report. The remuneration of Non-Executive Directors is determined by the Board having Other Benefits Senior executives are entitled to statutory is considered to be fully informed of the Company’s activities. This policy requires regard to the level of fees paid to Non- superannuation and may also receive other that the relevant person notify the Company Executive Directors by other companies of bonus payments subject to the discretion of Secretary of their intention to trade in the similar size and stature. the Board. The aggregate amount payable to the Company’s Non-Executive Directors must not exceed the maximum annual amount approved by the Company’s shareholders, currently $500,000 as determined at the General Meeting held on 3 August 2007. its Executive Directors and senior executives in a manner that motivates them to pursue the long-term growth and success of the Company and is consistent with best practice. The Company aims to align the interests of Executive Directors and senior executives with those of shareholders through short- term and long-term incentive plans which Long-Term Incentives The Company has a share options scheme which is discussed further below which is Chairman. The Board recognises that it is designed to provide long-term incentives to the individual responsibility of each Director senior executives. Company’s shares and/or options over such shares prior to the transaction and that the Company Secretary be required to discuss the proposed trading intentions with the to comply with this policy. Breaches of this policy may lead to disciplinary action being taken, including dismissal in serious cases. The Company’s Securities Trading Policy is available on the Company’s website. Senior executives may be entitled to a payment upon termination of employment from the Company. Where so entitled, the The Corporations Act prohibits the key termination payment has been agreed in the management personnel of an ASX listed senior executive’s contract of employment company established in Australia, or a and it is not payable where termination of closely related party of such personnel, from employment is for misconduct. entering into an arrangement that would have The Company is committed to remunerating Termination Payments the effect of limiting their exposure to risk relating to an element of their remuneration that either has not vested or has vested but remains subject to a holding lock. demonstrate a clear relationship between Further details in relation to the Company’s performance and remuneration. remuneration policies are contained in the Consequently, Executive Directors and senior executives’ remuneration consists of the following elements: • fixed salary; Remuneration Report within the Directors’ Report in the Annual Report. The Company’s Remuneration Policy is available on the Company’s website. • short-term incentive bonus based on Recommendation 8.3: Equity Based performance; Remuneration • long-term incentive share/option scheme; and • other benefits including superannuation. Fixed Salary The salary of Executive Directors and senior executives is determined from a review of the market and reflects core performance requirements and expectations. In addition, the Company considers the following: • the scope of the individual’s role; • the individual’s level of skill and experience; • the Company’s legal and industrial obligations; • labour market conditions; and Long-Term Incentives The Company has a share option scheme in which senior executives may be invited to participate. The Share Option Incentive Plan was approved by shareholders on 27 October 2017 and authorises the Directors to issue options up to 10% of the shares issued by the Company. The number of shares and options issued under the scheme is reasonable in relation to the existing capitalisation of the Company and all payments under the scheme are made in accordance with thresholds set in plans approved by shareholders. Any issue of options to Executive and Non-Executive Directors must be approved by Shareholders. The Company has a Securities Trading Policy which aims to: • the size and complexity of the Company’s • protect stakeholders’ interests at all business. times; Performance Bonus The purpose of the performance bonus is to reward actual achievement by the individual of performance objectives and for materially improved Company performance. Consequently, performance-based • ensure that directors and employees do not use any information they possess for their personal advantage or the Company’s detriment; and • ensure that Directors and employees comply with insider trading legislation E C N A N R E V O G E T A R O P R O C D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 28 29 ANNUAL REPORT 2019BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Revenue Changes in inventories Note 2(a) Year ended 30 June 2019 30 June 2018 $ $ 18,520,528 11,638,170 (1,421,131) 1,533,096 Raw materials, consumables and other costs of sale 2(b) (9,307,401) (8,491,173) Employee benefits expense Depreciation expense Amortisation expense Impairment expense Finance costs expense Auditor remuneration expense Accounting, share registry and secretarial expense Consultancy and contractor expense Legal, insurance and patent expense Marketing and ICT expense Share of loss from interest in Joint Venture Other expenses Profit (loss) before income tax Tax expense Profit (loss) for the year Other comprehensive income 8(a) 10(a) 10(a) 2(c) 20 7 2(d) (3,329,910) (2,804,827) (63,233) (76,599) (1,178,889) (694,447) (33,910) (793,922) (139,587) (68,000) (88,194) (298,981) (175,364) (362,563) (327,692) (54,300) (68,000) (74,055) (227,279) (172,609) (265,315) - (1,003,677) (880,670) 721,997 (1,431,929) 3(a) (382,867) (133,205) 339,129 (1,565,134) - - Total comprehensive income (loss) for the year 339,129 (1,565,134) Net Profit (loss) and total comprehensive loss are both fully attributable to owners of the Company Earnings per share (cents) Diluted earnings per share (cents) 22 22 0.64 0.64 (3.07) (3.07) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 30 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2019 30 June 2019 30 June 2018 Note $ $ Current assets Cash and cash equivalents Inventories Trade and other receivables Total current assets Non-current assets Interest in joint venture Plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Other financial liabilities Provisions Total current liabilities Non-current liabilities Other financial liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 2,532,285 2,737,022 2,189,620 7,458,927 100,227 102,957 863,745 5,580,260 6,647,190 528,925 4,158,153 1,747,412 6,434,490 - 122,998 1,228,857 4,835,509 6,187,364 14,106,117 12,621,854 4 5 6 7 8 9 10 11 12 13 12 13 3,502,547 950,615 1,190,085 5,643,247 641,665 32,713 674,378 6,317,625 7,788,492 14 7,646,641 411,189 (269,338) 7,788,492 4,447,866 - 704,706 5,152,572 - 19,919 19,919 5,172,491 7,449,363 7,646,641 411,189 (608,467) 7,449,363 The above Statement of Financial Position should be read in conjunction with the accompanying notes. F I N A N C I A L S T A T E M E N T S 31 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 Issued capital $ Reserves $ Retained earnings $ Total equity $ Balance at 1 July 2017 5,784,925 493,089 874,767 7,152,781 Total loss and comprehensive income for the year - Transactions with owners in their capacity as owners: - Shares issued, net of transaction costs 1,861,716 - - (1,565,134) (1,565,134) - 1,861,716 - Adjustment for employee share options lapsed - (81,900) 81,900 - Balance at 30 June 2018 7,646,641 411,189 (608,467) 7,449,363 Balance at 1 July 2018 7,646,641 411,189 (608,467) 7,449,363 Total profit and other comprehensive income for the year - - 339,129 339,129 Balance at 30 June 2019 7,646,641 411,189 (269,338) 7,788,492 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 32 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 Year ended 30 June 2019 30 June 2018 Note $ $ Cash flow from operating activities Receipts from customers 17,919,076 12,116,540 Payments to suppliers and employees (15,705,440) (13,685,446) Interest received 3,192 13,608 Interest and finance charges paid (139,587) (54,300) Income tax paid (17,755) (12,273) Net cash (used in)/ provided by operating activities 17(a) 2,059,485 (1,621,871) Cash flow from investing activities Purchases of plant and equipment 8(a) (44,341) (50,418) Development costs capitalised (1,957,551) (1,985,468) Research and development grant 831,603 1,729,233 Interest in joint venture (436,443) - Net cash used in investing activities (1,606,732) (306,653) Cash flow from financing activities Net cash proceeds on share placement / rights issue - 1,861,715 Net loan payments 1,550,607 - Net cash used in financing activities 1,550,607 1,861,715 Net decrease in cash and cash equivalents 2,003,360 (66,809) Cash and cash equivalents at beginning of year 528,925 595,734 Cash and cash equivalents at end of financial year 17(b) 2,532,285 528,925 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. F I N A N C I A L S T A T E M E N T S 33 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. Summary of significant accounting policies (i) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”) and the Corporations Act 2001 and comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Reporting Basis and Conventions Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by AASB that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (ii) New or amended Accounting Standards and Interpretations adopted Impact of adoption: AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers were adopted using the modified retrospective approach and as such comparatives have not been restated. There has been no material impact as a result of the adoption of these new Accounting Standards as compared to the treatment under previous Accounting Standards. Therefore no adjustments were deemed necessary in the current reporting period. The revenue policy and trade and other receivables policy applied by the consolidated entity in accordance with the new standard are stated below. (iii) Accounting policies The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied to all years presented, unless otherwise stated. When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (a) Principles of consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Beam Communications Holdings Limited) and all of the subsidiaries which are entities the parent controls. A list of the subsidiaries is provided in Note 25. (b) Income tax Income tax expense (benefit) for the year comprises current income tax expense and deferred income tax expense (benefit). A net deferred tax expense has been recognised in the current year reflecting the movements in deferred tax assets and liabilities for the period. Deferred tax is accounted for using the liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the statement of profit or loss and other comprehensive income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. At each reporting date, the consolidated group re-assesses unrecognised deferred tax assets as to the extent that it has become probable that future tax profit will enable recognition. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 34 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (b) Income tax (continued) Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Beam Communications Holdings Limited and its wholly owned Australian subsidiaries have formed a tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own tax expense and deferred tax. The current tax liability of each group entity and deferred tax assets arising from tax losses are immediately assumed by the parent entity. (c) Plant & equipment Plant and equipment is carried at cost less any accumulated depreciation and impairment losses, where applicable. The carrying amount of plant and equipment is reviewed at each reporting date by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Repairs and maintenance to plant and equipment is charged to the statement of profit or loss and other comprehensive income during the financial period in which it is incurred. The depreciable amount of plant and equipment is depreciated on a straight line basis over their useful lives to the consolidated group commencing from the time the asset is held ready for use. The straight line depreciation rates for plant and equipment were: Office furniture and equipment Computer and test equipment Rental equipment 10% - 20% 33% 20% - 33% The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. (d) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials and direct labour. (e) Intangible assets – development costs Development costs are capitalised only when it is probable that the expected future economic benefits would flow to the company and can be measured reliably. Development costs have a finite life and are amortised on a systematic basis matched to future production. Expenditure not related to the creation of a new product is recognised as an expense when incurred. The amortisation rate for capitalised development costs is dependent on an assessment of the minimum useful life of each project. Recent projects/products have been assessed at 4 years giving a 25% amortisation rate during 2019. (f) Employee benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and long service leave entitlements are recognised as provisions in the statement of financial position. F I N A N C I A L S T A T E M E N T S 35 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (f) Employee benefits (continued) Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Any re- measurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. Option based compensation relates to the value of options issued to date and brought to account pro-rata to the time period from the date of issue to the date of vesting, except in the case of Director’s where Accounting Standard AASB 2 requires expensing to begin from the commencement of service related to those options, notwithstanding that the issue of those options is subject to shareholder approval. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. (g) Financial instruments Financial instruments in the form of trade receivables, trade payables and other financial assets and liabilities are initially measured at fair value adjusted by transactions costs on trade date when the related contractual rights or obligations arise. Realised and unrealised gains or losses arising from changes in the fair value of these assets or liabilities are included in the statement of profit or loss and other comprehensive income in the period in which they arise. At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. Impairment losses are recognised in the statement of profit or loss and other comprehensive income. Refer Note 15 for a detailed review of the group’s financial instruments. The Group does not designate any interests in subsidiaries as being subject to the requirements of Financial Instruments accounting standards. (h) Impairment of assets At each reporting date, the group reviews the carrying values of its tangible assets to determine whether there is an indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the assets carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The group uses an Expected Credit Loss model in assessing impairment of trade and other receivables or loans and other instruments that fall within the scope AASB 9 impairment requirements. The model includes a simplified approach in accounting for trade and other receivables as well as contract assets, and records the loss allowance at the amount equal to the expected lifetime credit losses. Under this simplified approach, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses. (i) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Where applicable, bank overdrafts are disclosed within other financial liabilities in current liabilities on the statement of financial position. (j) Revenue recognition Revenue from the sale of goods or services is brought to account upon fulfilment of the relevant performance obligations of the contract with the customer. Performance obligations are fulfilled upon delivery of the goods or services to the customer at which point the transaction price is brought to account as revenue. The transaction price is the amount of consideration to which the group expects to be entitled in exchange for transferring promised goods or services to a customer. Interest revenue and rental income are recognised when they become receivable. Other revenue is recognised when the right to receive the revenue has been established. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 36 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (k) Government grants Government grants in the form of refundable Research and Development Tax Offsets received in respect of capitalised Development Costs are initially recognised as deferred income upon receipt, and brought to account as income on a systematic basis over the useful life of the related Development Cost assets. Export market development grants are brought to account in the statement of profit or loss and other comprehensive income in the period received. There are no unfulfilled conditions or other contingencies attaching to government grants recognised in the financial statements. (l) Interest in joint venture A joint venture represents the contractual sharing if control between parties in a business venture where unanimous decisions about relevant activities are required. Where the Group is a party to a joint venture, the Group recognises its interests in the joint venture using the equity method whereby the investment in the joint venture is carried in the statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the joint venture. The statement of profit or loss and other comprehensive income reflects the Group’s share of the results of operations of the joint venture. Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the interest in the joint venture. (m) Foreign currency transactions and balances Functional and presentation currency The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the statement of profit or loss and other comprehensive income. (n) Leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. (o) Goods and Services Tax (GST) Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the asset or expense cost. Receivables and Payables are shown in the statement of financial position as inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities which are disclosed as operating cash flows. (p) Critical accounting estimates and judgments The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group. Accounting estimates and judgements made in relation to the recognition of deferred tax assets are indicated in Note 3(c). F I N A N C I A L S T A T E M E N T S 37 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (q) New accounting standards for application in future periods Accounting Standards and Interpretations issued by AASB that are not yet mandatorily applicable to the Group, together with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods, are discussed below: - AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019). When effective, this standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related interpretations. AASB 16 introduces a single lease accounting model that eliminates the requirement for leases to be classified as operating or finance leases and recognises a right to use asset, depreciation and liability for all leases (excluding short term leases with less than 12 months of tenure and leases relating to low value assets), with additional disclosure requirements. The transitional provisions of AASB 16 permit a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. The directors’ preliminary review of AASB 16 shows that its adoption will have an impact on the Group’s financial statements with leases greater than 12 months to be recognised on the balance sheet as a lease liability and a related right to use asset. It is anticipated that the Net Present Value of the Group’s lease commitments greater than 12 months will be brought to account on the balance sheet as an asset and current and non-current liability from FY2020. The net present value of the commitments currently shown in Note 16 is $592,222. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 38 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 2 Profit (loss) before income tax (a) Revenue Sales revenue - Equipment sales - Airtime - Other Other income - Research and Development grant - Interest (b) Cost of sales Opening inventories Add: Purchases and other stock adjustments Closing inventories (Note 5) (c) Finance costs expense Interest expense on financial liabilities (d) Other expenses include: - Product development costs expensed - Operating lease payments 3 Income tax (a) The components of tax expense comprise: Current tax - Current tax expense (d) - Current movement of temporary difference in net deferred tax assets - Movement in deferred tax asset associated with carry forward tax losses Income tax expense transferred to statement of profit or loss and other comprehensive income (b) Reconciliation of income tax expense and tax at statutory rate: Year ended 30 June 2019 30 June 2018 $ $ 17,179,648 10,671,739 526,060 70,958 428,878 42,325 17,776,666 11,142,943 740,671 3,192 743,863 481,619 13,608 495,227 18,520,528 11,638,170 4,158,153 9,307,401 13,465,554 (2,737,022) 10,728,532 2,625,058 8,491,173 11,116,231 (4,158,153) 6,958,078 139,587 54,300 311,516 232,125 309,148 227,581 17,755 (7,550) 372,662 382,867 12,273 57,129 63,803 133,205 Profit (loss) from ordinary activities 721,997 (1,431,929) Income tax expense (benefit) at statutory rate of 27.5% (2018: 27.5%) 198,549 (393,781) Add / (Less): Tax effect of: - Tax reconciling items - Deferred tax assets expensed Income tax expense attributable to the Consolidated Group (180,794) 365,112 382,867 406,053 120,932 133,205 F I N A N C I A L S T A T E M E N T S 39 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 3 Income tax (continued) (c) The deferred tax expense reflects the movements in the deferred assets and liabilities. The directors have maintained a conservative approach and have recognised 60% (2018: 60%) of the deferred tax assets and liabilities inclusive of carried forward tax losses. Although the Directors expect sufficient future profitability to enable the full value of all deferred tax assets to be utilized, the decision has been taken not to increase the proportion taken up at this time, with longer demonstration of the Group’s return to profitability required before the Board would consider doing so. The amount of unused net deferred tax assets relating to tax losses which have not been brought to account (being the 40% portion) is $982,008 (2018: $1,230,449); and capital tax losses of $1,850,085 (2018: $1,850,085). The amount of net deferred tax assets which may be realised in the future is dependent on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Consolidated Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (d) Income tax expense includes current year tax of $17,755 incurred by the Group’s USA subsidiary which is unable to be claimed against Australian tax losses. (e) There are no franking credits available to equity holders. 4 Cash and cash equivalents Cash at bank and on hand 5 Inventories Raw materials Work in Progress Finished Goods 6 Trade and other receivables (a) Current Trade receivables Less: Provision for impairment of receivables Other receivables and prepayments Rental & other security deposits 6 Trade and other receivables (continued) Year ended 30 June 2019 30 June 2018 $ $ 2,532,285 528,925 702,936 - 2,034,086 2,737,022 599,097 1,696,743 1,862,313 4,158,153 1,207,740 1,161,464 - 867,517 114,364 2,189,620 - 469,918 116,030 1,747,412 (b) Ageing reconciliation Gross amount Within trade Past due but not impaired (days overdue) terms 31 - 60 61 - 90 90+ Past due & impaired 2019 Current Trade receivables Other receivables Rental & other security deposits 114,364 114,364 867,517 867,517 - - - - - - 1,207,740 572,116 462,159 4,993 168,472 2018 Current Trade receivables Other receivables Rental & other security deposits 1,124,442 506,940 116,030 615,271 506,940 116,030 63,979 100,449 344,744 - - - - - - All trade receivables past due terms but not impaired are expected to be received in the normal course of business. - - - - - - S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 40 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 7 Interest in joint venture Investment in joint venture Group’s share of loss from Zoleo Inc joint venture for the year ended 30 June 2019 The Group has a 50% share in a joint venture company, Zoleo Inc , which was incorporated in Canada in August, 2018. Zoleo Inc had no contingent liabilities or capital commitments as at 30 June 2019 Summarised financial information: Summarised statement of financial position: Current Assets Total Assets Current Liabilities Non -current Liabilities Total Liabilities Net Asset Deficiency Share Capital Accumulated Losses Net Equity Summarised statement of profit or loss and other comprehensive income: Revenue Expenses: Operating Expenses Marketing Professional services Other Expenses Loss for the year Group’s share of loss for the year ended 30 June, 2019 Year ended 30 June 2019 30 June 2018 $ - - $ 427,919 (327,692) 100,227 Zoleo Inc 30/06/2019 530,756 530,756 330,301 855,554 1,185,855 (655,099) 285 (655,384) (655,099) - 427,777 81,388 100,162 46,057 655,384 327,692 F I N A N C I A L S T A T E M E N T S 41 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 8 Plant and equipment Office furniture and equipment - at cost Less: Accumulated depreciation and impairment Computer and test equipment - at cost Less: Accumulated depreciation and impairment Rental equipment - at cost Less: Accumulated depreciation and impairment Year ended 30 June 2019 30 June 2018 $ $ 481,592 (428,195) 53,398 370,110 (331,187) 38,923 36,199 ( 25,562) 10,637 458,261 (407,999) 50,262 357,313 (293,382) 63,931 30,537 (21,731) 8,806 Total plant and equipment (a) Movements in carrying amounts 102,957 122,998 Movements in the carrying amounts of each class of plant and equipment between the beginning and the end of the current financial year Balance at 1 July 2017 Additions Disposals Depreciation expense Balance at 30 June 2018 Additions Disposals Depreciation expense Balance at 30 June 2019 9 Tax Non-current Deferred tax assets Deferred tax assets: Office Furniture & Computer & Test Equipment Equipment Rental Equipment Total 59,537 8,710 - (17,985) 50,262 23,332 - (20,196) 53,398 70,759 41,334 - (48,163) 63,931 12,797 - (37,805) 38,924 39,136 374 (20,252) (10,452) 8,806 8,212 (1,148) (5,233) 10,637 169,432 50,418 (20,252) (76,599) 122,998 44,341 (1,148) (63,233) 102,957 Opening balance Charged to Income Closing balance Carrying amount of patents and capital raising costs 326 Accruals Provisions Tax losses Deferred tax liability: Product development costs Balance as at 30 June 2019 34,786 145,930 1,845,674 2,026,716 (797,859) 1,228,857 (91) 38,284 92,241 (372,662) (242,228) (122,884) (365,112) 235 73,070 238,171 1,473,012 1,784,489 (920,743) 863,745 S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 42 Year ended 30 June 2019 30 June 2018 $ $ 14,089,443 12,131,893 (8,509,183) (7,296,384) 5,580,260 4,835,509 4,835,509 4,338,410 1,957,550 1,985,468 (1,178,889) (694,447) (33,910) (793,922) 5,580,260 4,835,509 1,310,299 1,533,060 2,192,248 2,914,806 3,502,547 4,447,866 950,615 641,665 - - BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 10 Intangible assets Development costs capitalised - at cost Accumulated amortisation and impairment (a) Movements in carrying amounts Balance at the beginning of the year Additional costs capitalised Amortisation expense Impairment expense Balance at the end of the year The Group has assessed the minimum useful life of products from recent development projects at 4 years giving a 25% amortisation rate on completed projects during FY2019. In line with the accounting policy detailed in Note 1 (iii) (h) the second Inmarsat BRM (BGAN Radio Module) development project carrying value was assessed and reduced to zero at a gross cost of $33,910. 11 Trade and other payables Current Trade payables and accruals Deferred income Included in Deferred Income at 30 June 2019 is $1,671,857 of deferred R&D grant income (2018: $1,580,925). The Group brings to account the R&D grant income over the same period as the amortisation of the related completed project cost. This resulted in $740,671 of R&D grant income being recognised in the statement of profit & loss for the year as shown in Note 2 (a). 12 Other financial liabilities Current Secured loan (a) Non Current Secured loan (b) Secured loans (a) The group has a secured loan finance facility with SGV1 Holdings Limited for US$2,000,000. In September quarter 2018 the Company drew US$666,666 on this facility which is the USD balance at 30 June 2019 (A$950,615). The security is a general security interest over the group’s assets and undertakings, ranking second behind the bank facilities. The secured loan facility is for a 36 month term expiring on 1 January 2020 and has been utilized mainly for the purposes of funding product development projects. (b) In addition the Company’s subsidiary Beam Communications Pty Ltd has a secured loan facility with Roadpost Inc. of up to US$600,000. Roadpost is a Canadian company and a joint venture partner with Beam Communications Pty Ltd to develop, market and distribute the Zoleo product, a satellite based messaging device, including associated airtime contracts. The Assistance Loan is to assist Beam to establish the business and is repayable at any time at Beam’s sole discretion. In June quarter 2019 Beam drew US$450,000 on this facility which is the USD balance at 30 June 2019 (A$641,665). The loan is secured by Beam’s pledge of shares in Zoleo Inc, an entity established with Roadpost to manage the Zoleo business. (c) Bank facilities All bank facilities are secured by first ranking Registered Mortgage Debenture over the Consolidated Group’s assets including uncalled capital and called but unpaid capital. At 30 June 2019, the company had the following unused bank facilities: - an Australian dollar overdraft with a limit of $300,000. The overdraft was not utilised at 30 June 2019. - a US dollar overdraft with a limit of US$320,000. The US dollar overdraft was not utilised at 30 June 2019. F I N A N C I A L S T A T E M E N T S 43 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 13 Provisions Current Employee benefits Warranty costs Non current Employee benefits (a) Movements in provisions for the year ended 30 June 2019 Balance at the beginning of the year Additional provisions Amounts used Balance at the end of the year 14 Issued capital Issued and paid up capital: Ordinary fully paid shares Year ended 30 June 2019 30 June 2018 $ $ 998,925 191,160 1,190,085 569,726 134,980 704,706 32,713 19,919 Employee benefits Warranty costs Total 589,645 879,343 (437,350) 1,031,638 134,980 70,044 (13,864) 191,160 724,625 949,387 (451,214) 1,222,798 Year ended 30 June 2019 30 June 2018 $ $ 7,646,641 7,646,641 Number of shares $ 52,873,452 7,646,641 - - 52,873,452 7,646,641 The Company has 52,873,452 ordinary shares on issue at 30 June 2019 (2018: 52,873,452). Balance at 30 June 2018 Shares Issued Balance at 30 June 2019 (a) Options over issued capital The total number of potential ordinary shares attributable to options outstanding as at 30 June 2019 is 2,486,550 (2018: 2,486,550), of which 1,579,050 (2018: 1,579,050) were issued to employees under the Company’s Share Option Incentive Plan and 907,500 (2018: 907,500) were issued to Directors following shareholder approval. Refer Note 19: Share Based Payments, for details of options issued, exercised and lapsed during the financial year and the options outstanding at year end. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 44 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 14 Issued capital (continued) (b) Capital management When managing capital, management’s objective is to ensure the Consolidated Group continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. No dividends have been paid or declared in respect of ordinary shares for the 2019 or prior years. The Consolidated Group effectively manages its capital by assessing the financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders, share issues, or convertible note issues. 15 Financial instruments The Consolidated Group undertakes transactions in a range of financial instruments including: - cash assets; - receivables; - payables; - deposits; Activities undertaken by entities within the Consolidated Group result in exposure to a number of financial risks, including market risk (interest rate risk, foreign currency risk), credit risk and liquidity risk. Due to the size of operation conducted by the Consolidated Group, risk management is monitored directly by the Board of Directors of the parent company with the aim of mitigation of the above risks and reduction of the volatility on the financial performance of the Group. The risks associated with material financial instruments and the Consolidated Group’s policies for minimising these risks are detailed below. (a) Interest rate risk management Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk for the Consolidated Group primarily arises from: - Bank Funding - Facilities are provided by the Consolidated Group’s bankers and if drawn upon are at variable interest rates based upon Business Overdraft Prime Indicator rates plus a risk margin. The group diligently manages the facilities and its accompanying rate risk in its daily operations by keeping the net debt portfolio at a minimum level or in an infunds position. These risk exposures related to the financial instruments are not considered material and therefore no sensitivity analysis has been provided. Financial Instrument Composition and Maturity: The Consolidated Group’s exposure to interest rate risk, and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: 2019 Floating Interest Fixed Interest Weighted Average Non-Interest Interest Rate bearing Financial asset Cash assets Receivables TOTAL Financial liability Payables (excluding deferred income) TOTAL 2018 Financial asset Cash assets Receivables TOTAL Financial liability Payables (excluding deferred income) TOTAL 2,532,285 - 2,532,285 - - 528,925 - 528,925 - - - - - - - - - - - - 0.02% 0.00% 0.00% 0.02% 0.00% 0.00% TOTAL 2,532,285 2,189,620 4,721,905 - 2,189,620 2,189,620 2,902,579 2,902,579 2,902,579 2,902,579 - 1,747,412 1,747,412 528,925 1,747,412 2,276,337 1,533,060 1,533,060 1,533,060 1,533,060 F I N A N C I A L S T A T E M E N T S 45 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 15 Financial instruments (continued) (b) Foreign currency risk management Foreign currency risk refers to the risk that the value of a financial commitment, recognised asset or liability will fluctuate due to changes in foreign currency rates. The Consolidated Group conducts the majority of its receivable and payable transactions in foreign currency, primarily in US Dollars. The Group’s foreign currency exchange risk arises from the holding of foreign currency deposits and transactions in normal trading operations resulting in trade receivables and payables being held at balance date. Foreign currency risk sensitivity: If foreign exchange rates were to increase/decrease by 10% from rates used to determine values as at reporting date then the impacts on profit and equity due to unrealised foreign currency exchange gains or losses on foreign currency deposits and trade receivables and payables are as follows: Impact on profit after tax Impact on equity Foreign currency movement +/- 10% +/- 10% Year ended 30 June 2019 30 June 2018 $ +/-76,142 +/-76,142 $ +/- 30,012 +/- 30,012 The above sensitivity reflects the low net holding of foreign currency financial instruments at balance date. Whilst foreign currency payables and receivables are largely offsetting during the year, the Group monitors and manages the associated currency risks in order to reduce the impact of market risk volatility, therefore no further sensitivity analysis has been provided. (c) Credit risk management Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause a financial loss to the Consolidated Group. The credit risk on financial assets of the Consolidated Group that have been recognised in the statement of financial position is the carrying amount, net of any provision for doubtful debts. The Consolidated Group minimises credit risk by performing credit assessments on all new customers, continuing major customers, and where necessary, obtaining advance payments. Ongoing credit evaluation is performed on the financial condition of customers and, where appropriate, an allowance for doubtful debts is raised. The Consolidated Group does not have any credit risk arising from money market instruments foreign currency contracts, cross currency and interest rate swaps. (d) Liquidity risk management Liquidity risk includes the risk that, as a result of the Consolidated Group’s operational liquidity requirements, the Group: - will not have sufficient funds to settle a transaction on the due date; - will be forced to sell financial assets at a value which is less than what they are worth; - may be unable to settle or recover a financial asset at all. To help reduce these risks the Consolidated Group: - has a liquidity policy which targets a minimum and average level of cash and cash equivalents to be maintained; and - monitors forecast cash flows and endeavours to ensure that adequate borrowing facilities are maintained and/or maturity dates are managed appropriately. The Consolidated Group’s exposure to liquidity risk on classes of financial assets and financial liabilities, is as follows: < 1 Year 1 - 5 Years Total contractual cash flows Carrying amount 2019 Asset class Cash and cash equivalents Receivables Payables (excluding deferred income) Net maturities 2018 Asset class Cash and cash equivalents Receivables Payables (excluding deferred income) Net maturities (e) Net fair values of financial assets and liabilities 2,532,285 2,075,256 (2,260,914) 2,346,627 528,925 1,631,382 (1,533,060) 627,247 - 114,364 (641,665) (527,301) - 116,030 - 116,030 2,532,285 2,189,620 (2,902,579) 1,819,326 528,925 1,747,412 (1,533,060) 743,277 2,532,285 2,189,620 (2,902,579) 1,819,326 528,925 1,747,412 (1,533,060) 743,277 Net fair values at balance date of each class of financial asset and liability do not materially differ from the carrying amounts disclosed in the statement of financial position. S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 46 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 16 Commitments and contingencies Operating lease commitments Future minimum rentals payable under non-cancellable operating leases contracted for but not capitalised in the financial statements are as follows: Not later than one year Later than one year but not later than five years Later than five years The Consolidated Group and parent entity negotiated a 2 year extension to the non-cancellable commercial rental property lease at Mulgrave in March 2017. The new lease expires in December 2023. There is an option to renew the lease for a further 6 year period but no committment has been entered into. The Consolidated Group also has a minor office equipment lease for a 5 year period expiring in March 2023. Capital expenditure commitments Capital expenditure projects Not longer than one year Longer than one year and not longer than five years Longer than five years Capital commitments relate to product development projects being undertaken by the subsidiary, Beam Communications Pty Ltd. Superannuation commitments Beam Communications Holdings Limited makes superannuation contributions to prescribed superannuation funds on behalf of employees and executive directors, as required by the Superannuation Guarantee legislation. The principal types of benefits are death, permanent disability and superannuation benefits upon retirement. 17 Notes to the statement of cash flows (a) Reconciliation of Profit / (loss) after income tax benefit to net cash flow from operating activities Profit / (loss) after tax Adjustments for Depreciation Amortisation Impairment Net loss on disposal of plant and equipment Share of loss in joint venture Unrealised foreign currency net losses / (gains) Changes in assets and liabilities: Increase in trade and other receivables (Increase) / Decrease in inventory Decrease in deferred tax assets Decrease in trade and other payables Increase in employee provisions Increase in provision for warranty costs Increase in provision for stock obsolescence Decrease in provision for doubtful debts Net cash (used in)/ provided by operating activities Year ended 30 June 2019 30 June 2018 $ $ 201,864 761,644 - 194,409 852,463 111,045 963,508 1,157,917 2,628,784 1,655,188 727,127 - - - 3,355,911 1,655,188 339,129 (1,565,134) 63,233 1,178,889 33,910 1,148 327,692 54,605 76,599 694,447 793,922 20,253 - - (446,617) (71,351) 1,351,131 (1,543,096) 365,112 120,932 (1,776,922) (176,783) 441,993 56,180 70,000 55,707 21,052 10,000 - (58,420) 2,059,485 (1,621,871) F I N A N C I A L S T A T E M E N T S 47 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 Year ended 30 June 2019 30 June 2018 $ $ 17 Notes to the statement of cash flows (continued) (b) Reconciliation of cash Cash at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to items in the consolidated statement of financial position as follows: Cash and cash equivalents (Note 4) 2,532,285 528,925 (c) Non cash financing and investing activities Non cash financing and investing activities undertaken by the Consolidated Group during the year are disclosed in Note 19. (d) Facilities At 30 June 2019, the Consolidated Group had the following unused bank facilities with the National Australia Bank: - an Australian dollar overdraft with a limit of $300,000. The overdraft was not utilised at 30 June 2019. - a US dollar overdraft with a limit of US$320,000. The US dollar overdraft was not utilised at 30 June 2019. Bank guarantee facilities of the Consolidated Group total $150,000 of which $100,000 has been allocated to a subsidiary company and $50,000 to the parent. Both were fully utilised at 30 June 2019. The Consolidated Group’s banking facilities are subject to the Group satisfying quarterly covenants set by the bank. While all covenants at 30 June 2019 were met, the Group did not meet all covenants during the year ended 30 June 2019 however the bank reconfirmed the banking facilities as continuing on 28 August 2019 The Consolidated Group had partly unused secured loan facilities with SGV1 Holdings Limited and Roadpost Inc. Refer to Note 12 for details. 18 Key management personnel disclosures Compensation by category The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits 1,163,341 1,020,915 Post-employee benefits Other long-term benefits Termination benefits Share-based payments 76,122 4,224 - - 79,448 6,918 - - 1,243,687 1,107,281 S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 48 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 19 Share based payments Share options are granted at the discretion of the directors based on terms and conditions set out in the Company’s Share Option Incentive Plan. The directors may at any time and from time to time determine eligible persons for the purposes of the option plan and select amongst those eligible persons participants who will be invited to participate in the option plan. Options issued to directors pursuant to the option plan will be subject to approval of shareholders in general meeting, in compliance with the Listing Rules. (a) The following share based payment arrangements existed at 30 June 2019: (i) 884,813 options were granted on 31 March 2015 to key employees with an expiry date of 31 March 2020 on the terms and conditions set out in the Company’s Share Option Incentive Plan. These options were exercisable from 30 June 2015 at $0.195 per share (Issue WRR55). 95,288 of these options lapsed or were cancelled in the periods prior to 30 June 2019. 789,525 of these options are outstanding as at 30 June 2019. (ii) 884,813 options were granted on 24 December 2015 to key employees with an expiry date of 31 August 2020 on the terms and conditions set out in the Company’s Share Option Incentive Plan. These options were exercisable from 30 June 2016 at $0.195 per share (Issue WRR56). 95,288 of these options lapsed or were cancelled in the periods prior to 30 June 2019. 789,525 of these options are outstanding as at 30 June 2019. (iii) 907,500 options were granted on 24 December 2015 to a director with an expiry date of 30 November 2020 on the terms and conditions set out in the Company’s Share Option Incentive Plan. These options were exercisable from 30 June 2016 at $0.195 per share (Issue WRR57). 907,500 of these options are outstanding as at 30 June 2019. (b) The following table illustrates the number (No.) and weighted average exercise prices (WAEP) and movements in share options issued during the year for the Company: 30 June 2019 30 June 2018 No. WAEP $ No. WAEP $ Outstanding at the beginning of the financial year 2,486,550 0.1950 3,086,550 0.2834 Granted during the financial year Lapsed during the financial year Cancelled during the financial year Exercised during the financial year Expired during the financial year - - - - - Outstanding at the end of the financial year 2,486,550 - - - - - - - - - - - - - - (600,000) 2,486,550 0.6500 0.1950 Exercisable at the end of the financial year - 2,486,550 0.1950 (c) Notes to Share Based Payments (i) The weighted average remaining contractual life for the share options outstanding as at 30 June 2019 is 1.12 years (2018: 2.12 years). The exercise price for options outstanding at the end of the year was $0.195 (2018: $0.195). The weighted average fair value of options granted during the year was $0 (none granted) (2018: $0 (none granted)). The fair value of equity-settled share options granted under the Company’s Share Option Incentive Plan is estimated as at grant date using the Binomial Option Valuation model, with Black Scholes crosscheck, taking into account the terms and conditions upon which the options were granted. F I N A N C I A L S T A T E M E N T S 49 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 20 Remuneration of auditors Remuneration of the Auditor for auditing or reviewing financial reports of the Consolidated Group 68,000 68,000 21 Related party transactions Related party transactions with the Seasons Group and SGV1 Holdings Limited, which are related to Year ended 30 June 2019 30 June 2018 $ $ Mr C Hung, a director of the company. Transactions with the Seasons Group - Purchases - Sales Amounts outstanding with the Seasons Group - Receivables - Payables Transactions with SGV1 Holdings Limited - Secured Loan Payable Mr C Hung is a director of the company, and is also the president and a director of Season Group. During the year ended 30 June 2019 the company subcontracted manufacturing on an arms length basis to Season Group, in accordance with a contract signed prior to his appointment as director. Transactions between the company and Season Group are on normal commercial terms and conditions no more favourable than those available to other parties. On 19 October 2016 the Group entered into a secured finance facility with a major shareholder, SGV1 Holdings Limited, a company associated with Mr Carl Hung. In July 2018 US$333,333 was drawn on the facility and a further US$333,333 was drawn in September 2018. Refer to Note 12 for more details. 22 Earnings per share Overall operations Basic earnings (loss) per share Basic earnings (loss) per share 3,764,783 3,273,218 (124,323) (259,410) 9,316 19,981 (47,187) (622,198) 950,615 - ¢ 0.64 0.64 No. ¢ (3.07) (3.07) No. Weighted average number of ordinary shares used in the calculation of Basic Earnings Per Share 52,873,452 50,933,452 Weighted average number of dilutive options on issue - - Weighted average number of ordinary shares and potential ordinary shares used in the calculation of Dilutive Earnings Per Share 52,873,452 50,933,452 Anti-dilutive options on issue not used in dilutive EPS calculation 2,486,550 2,486,550 Anti-dilutive options have not been considered in the dilutive earnings per share calculation due to the average market price being less than the exercisable price. $ $ Earnings: Earnings (loss) used in the calculation of Basic Earnings Per Share 339,129 (1,565,134) Earnings (loss) used in the calculation of Dilutive Earnings Per Share 339,129 (1,565,134) S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 50 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 23 Segment reporting (a) Sole operating segment The Consolidated Group has identified operating segments based upon internal reports that are reviewed and used by the Directors in assessing performance and determining the allocation of resources in respect of its satellite communications products services and online sales. As the online sales segment operated by SatPhone Shop Pty Ltd, a wholly owned subsidiary company, does not meet the quantitative threshold for separate disclosure, the company considers its aggregate segment as it sole segment. Accordingly, revenue and results are fully disclosed in the consolidated statement of profit or loss and other comprehensive income for this aggregated sole operating segment. Revenue and results are fully disclosed in the consolidated statement of profit or loss and other comprehensive income for the aggregated sole operating segment. The consolidated statement of financial position discloses the sole operating segment assets and liabilities which are held within Australia. (b) Revenue by geographical region Revenue attributable to external customers is disclosed below, based upon the location of the external customer. Sales by country Australia United States of America United Arab Emirates United Kingdom China Canada Japan Year ended 30 June 2019 Year ended 30 June 2018 $ % $ % 4,720,328 4,504,111 3,960,465 1,253,935 783,920 783,134 488,406 25.49% 24.32% 21.38% 6.77% 4.23% 4.23% 2.64% 3,336,752 2,721,418 1,048,097 1,222,954 251,945 1,135,482 610,956 28.67% 23.38% 9.01% 10.51% 2.16% 9.76% 5.25% Other foreign countries 2,026,228 10.94% 1,310,566 11.26% 18,520,528 100.00% 11,638,170 100.00% (c) Major customers The Consolidated Group has a number of customers to whom it provides products and services. The Consolidated Group supplied a single customer in the United Arab Emirates accounting for 20% of external revenue (2018: the largest customer was in the USA, 16%) and the second largest customer, located in the United States, accounted for 18% of external revenue (2018: the second largest customer was in the United Arab Emirates, 8%). The next most significant customer also accounted for 9% of external revenue (2018: 8%). F I N A N C I A L S T A T E M E N T S 51 ANNUAL REPORT 2019 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 24 Parent company disclosures Set out below is the supplementary information about the parent entity. (a) Statement of profit or loss and other comprehensive income Loss from continuing operations Tax expense Year ended 30 June 2019 30 June 2018 $ $ (1,276,759) (1,051,055) (365,112) (120,932) Loss for the year attributable to owners of the Company (1,641,871) (1,171,987) Other comprehensive income - - Total loss and other comprehensive income for the year attributable to owners of the Company (1,641,871) (1,171,987) (b) Statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities 1,144,869 799,728 956,065 1,343,049 2,100,934 2,142,777 4,467,017 2,879,788 32,713 19,919 4,499,730 2,899,707 Deficiency of net assets (2,398,796) (756,929) Equity Issued capital Reserves Accumulated losses Total equity 7,646,641 7,646,641 411,189 411,189 (10,456,626) (8,814,755) (2,398,796) (756,926) S T N E M E T A T S L A I C N A N I F D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 52 BEAM COMMUNICATIONS HOLDINGS LIMITED (Formerly World Reach Limited) ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2019 24 Parent company disclosures (continued) (c) Guarantees The parent company has no contractual guarantees in place. (d) Contractual commitments Parent entity operating lease commitments are the same as consolidated entity commitments as disclosed in Note 16. The parent entity has no capital expenditure commitments. (e) Significant accounting policies of the parent are the same as those for the consolidated entity. 25 Controlled entities Incorporated Share class Holding Investments in unquoted corporations being controlled entities: Beam Communications Pty Ltd Australia Ordinary SatPhonerental Pty Ltd SatPhone Shop Pty Ltd Beam Communications USA Inc Pacarc (PNG) Limited (Dormant) 26 Events after the Reporting Period Australia Ordinary Australia Ordinary USA Ordinary Papua New Guinea Ordinary 2019 100% 100% 100% 100% 100% 2018 100% 100% 100% 100% 100% On 30 July 2019 the Company released a statement that an entity controlled by non-executive Director Carl Hung had sold 3.8 million shares or 42% of it’s holding in Beam to raise cash for his Chinese businesses. On 19 August 2019 the Company announced the formation of a joint venture with Roadpost Inc., a Canadian company, to develop and market a new satellite messaging and SOS device. Other than the above, there have been no significant events since 30 June 2019. 27 Company details and principal place of business Beam Communications Holdings Limited is a limited company incorporated in Australia. The principal activities of the Company and subsidiaries are outlined in the Director’s Report. The address of its registered office and principal place of business is: 5 / 8 Anzed Court Mulgrave, VIC, 3170 Australia F I N A N C I A L S T A T E M E N T S 53 ANNUAL REPORT 2019 DIRECTORS’ DECLARATION The directors of Beam Communications Holdings Limited declare that: 1. The financial statements and notes as set out in pages 30 to 53 are in accordance with the Corporations Act 2001 and: (a) comply with Australian Accounting Standards, which, as stated in accounting policy Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards; (b) give a true and fair view of the financial position as at 30 June 2019 and of the performance for the year ended on that date of the company and consolidated group; and (c) any other matters that are prescribed by the regulations for the purposes of this declaration in relation to the financial statements and the notes for the financial year are also satisfied. 2. In the director’s opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer and Chief Financial Officer to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial year ending 30 June 2019. This declaration is made in accordance with a resolution of the Board of Directors on 29 August 2019. Mr Simon Wallace Chairman Date: 29 August 2019 N O I T A R A L C E D ’ S R O T C E R I D D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 54 55 ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT To the Members of Beam Communications Holdings Limited Opinion We have audited the financial report of Beam Communications Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. T R O P E R S ’ R O T I D U A D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 56 Key Audit Matters (Continued.) Key Audit Matter How our audit addressed this matter Impairment of Intangible Assets Refer to Note 9 in the financial statements The Group has intangible assets of $5.6m, being capitalised development costs relating to Thuraya and Marconi projects. The Thuraya asset was available for use from March 2018, and therefore amortisation commenced during FY18 and continued in FY19. The Marconi asset was not available for use as at 30 June 2019. Management have performed an impairment assessment for both assets based on a value in use calculation, which determined that no impairment had occurred. We identified this area as a Key Audit Matter due to the size of the intangible assets balance and the judgment involved in determining the value in use of the relevant assets based on the estimated future cash flows generated. Deferred Tax Asset – tax losses Refer to Note 3 and Note 8 in the financial statements Our audit procedures in relation to intangible assets included: • • • Assessing management’s impairment assessment by checking the mathematical accuracy of the cash flow model, and reconciling input data to supporting evidence, such as approved budgets and considering the reasonableness of these budgets; Challenging the reasonableness of key assumptions, including the cash flow and revenue projections, revenue growth rate, exchange rates, discount rates, and any sensitivities used; and Confirming our understanding of the nature of the intangible assets, the strategic purpose of the projects and its ability to generate future revenues through discussions with management. The Group has a material Deferred Tax Asset balance of $864k temporary differences. to operating losses and relating This is considered a key audit matter as there is a high degree of subjectivity and complexity in respect of the recognition of the deferred tax asset and the expectation that future taxable income against which the deferred tax asset can be utilised, is more likely than not. • Our audit procedures in relation to the deferred tax balance included: • Assessing management’s assumptions in relation to the recoverability of the deferred tax asset and the manner in which temporary differences would be reversed and losses utilised. This included reviewing and challenging management’s budgets and cash flow forecasts, and determining the historical accuracy of management’s assumptions; and Assessing the appropriateness and adequacy of disclosures made in the financial statements in note 3 Income Tax. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2019, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. A U D I T O R ’ S R E P O R T 57 ANNUAL REPORT 2019 Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Beam Communications Holdings Limited., for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 29 August 2019 Melbourne, Victoria T R O P E R S ’ R O T I D U A D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 58 59 ANNUAL REPORT 2019AUSTRALIAN SECURITIES EXCHANGE INFORMATION SUBSTANTIAL SHAREHOLDERS As at 31 August 2019. This section includes information required by ASX Listing Rules which is not disclosed elsewhere in this Annual Report. TWENTY LARGEST SHAREHOLDERS Number of Shares % of Class DAVID STEWART/GLENAYR P/L 10,540,000 19.93% FF OKRAM PTY LTD 8,634,258 16.33% SGV1 HOLDINGS LIMITED 5,409,874 10.23% Number % of Class - These shareholders do not hold any options to subscribe for ordinary shares. DAVID STEWART/GLENAYR P/L 10,540,000 19.93% FF OKRAM PTY LTD 8,634,258 16.33% DISTRIBUTION OF SHARES SGV1 HOLDINGS LIMITED 5,409,874 10.23% Size of Holdings WASHINGTON SOUL PATTINSON 2,000,000 3.78% 1 to 1,000 ARTPRECIATION PTY LTD 1,798,632 3.40% 1,001 to 5,000 J P MORGAN NOMINEES 1,743,491 3.30% 5,001 to 10,000 CAPOCCHI SUPER PTY LTD 1,603,899 3.03% 10,001 to 100,000 KILLARNEY PROPERTIES 1,212,245 2.29% 100,001 and over RAPAKI PTY LTD 1,076,473 2.04% Number of Number of Holders Shares % 249 146 74 197 47 71,874 0.14% 420,102 0.79% 575,648 1.09% 7,073,083 13.38% 44,732,745 84.60% VINCENT GALANTE 883,010 1.67% TOTAL 713 52,873,452 100.00% HOTTON FAMILY 832,052 1.57% EVERCITY PTY LTD 800,000 1.51% ORDINARY SHARES HOLDERS OF LESS THAN A MARKETABLE PARCEL OF QUOTED Number of % of Total Number of % of Total Holders Holders Shares Quoted Shares 298 41.80% 155,025 0.29% TOM BEKIARIS 731,835 1.38% IVAN & FELICITY TANNER 700,000 1.32% PETER LINCOLN SIMPSON 600,000 1.13% ROBERT MANSFIELD NIALL 527,200 1.00% TWARTZ FAMILY 416,666 0.79% TASMAN DOUGLAS LOVELL 410,000 0.78% HSBC CUSTODY NOMINEES 378,590 0.72% JOHN SELWYN INVESTMENTS 360,000 0.68% TOTAL TOP 20: 40,658,225 76.90% TOTAL ISSUED: 52,873,452 100.00% HOLDERS OF EACH CLASS OF EQUITY SECURITY The company has issued: - 52,873,452 ordinary fully paid shares to 713 shareholders. - 2,486,550 options to subscribe for ordinary shares to 7 option holders. No convertible notes remain on issue. VOTING RIGHTS There are 52,873,452 ordinary fully paid shares held by 713 members and these are the only class of share currently issued. The Company’s Constitution provides that every member present in person, by proxy or by corporate representative or by appointed attorney shall on the show of hands have one vote. N O I T A M R O F N I R E D L O H E R A H S D E T I M I L S G N I D L O H S N O I T A C I N U M M O C M A E B 60 61 ANNUAL REPORT 2019Beam Communications Holdings Limited ABN 39 010 568 804 5/8 Anzed Court, Mulgrave, VIC, Australia 3170 +61 3 8561 4200 +61 3 9560 9055 investor@beamcommunications.com www.beamcommunications.com Beam Communications Pty Ltd SatPhone Shop Pty Ltd SatPhonerental Pty Ltd Beam Communications USA Inc. ABN 97 103 107 919 ABN 40 099 121 276 ABN 18 114 959 992 Delaware Corporation No. 5228652 5/8 Anzed Court, Mulgrave, VIC, Australia 3170 +61 3 8588 4500 +61 3 9560 9055 5/8 Anzed Court, Mulgrave, VIC, Australia 3170 5/8 Anzed Court, Mulgrave, VIC, Australia 3170 C/- Martensen Wright PC One Capitol Mall, Suite 670 Sacramento, CA 95814 USA +61 1 300 368 611 +61 3 8669 4424 +61 1 300 368 611 +61 3 8669 4424 +1 800 250 5819 (USA only) +1 888 972 8037 info@beamcommunications.com info@satphoneshop.com rentals@satphoneshop.com support@beamcommunications.com www.beamcommunications.com www.satphoneshop.com www.satphonerentals.com.au www.beamcommunications.com 

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