Boise Cascade Company
Annual Report 2020

Plain-text annual report

11 September 2020 The Manager Market Announcements Platform Australian Securities Exchange Annual Report for Year Ending 30 June 2020 The Company has great pleasure in releasing its Annual Report for the Year Ending 30 June 2020 including the Chairman’s Report and the Corporate Governance Statement, as well as the Directors’ Report and the audited FY2020 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 2 0 In novation Design Satellite M2 M IoT Bea m Comm unications Holdings Limite d 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: investor@beamcommunications.com 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 CONTENTS Directorate Chairman’s Report Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Consolidated Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 1 2 4 18 20 28 29 30 31 Notes to the Consolidated Financial Statements 32 Directors’ Declaration Auditor’s Report Australian Securities Exchange Information 53 55 60 1 ANNUAL REPORT 2016 ANNUAL REPORT 2020CHAIRMAN’S REPORT I am pleased to provide the following Chairman’s Report on the Beam This volatile environment prompted Beam to take the prudent measure of writing down $2 million in capitalised development expenses relating mostly to Thuraya WE. This one-off item led to a statutory net loss of $1.6 million for the year. Communications Holdings Group of companies for the year ended 30 The official launch of our innovative and unique ZOLEO satellite June 2020. While the full Directors’ Report contains more extensive messaging solution in late January in North America and Australia was information, I would like to present the following highlights. the main highlight of FY2020. Beam received orders of 10,000 units Profit Performance and Major Impacts in the second half of the financial year from the joint venture entity it set up with Roadpost Inc., a further order for 5,000 units in July and Beam has performed resiliently through what can only be described yet another order – the largest to date – received in September for as one of the most challenging periods for the global economy in our 7,750 devices as we service burgeoning demand for this extremely generation. As directors, we regularly stress-test our operations but competitive and highly regarded new product. the onset of COVID19, and the restrictions that followed, were both unforeseeable and unique, however, we are pleased that we moved as swiftly and as selflessly as we did to respond to these unprecedented events. At all times we have sought to insulate the Group’s exposure to these seismic changes to business activities world-wide. Most of those devices are earmarked for the North American market where demand has not been hindered as severely by restrictions on movement compared to Australia. Having said that, sales of ZOLEO in Australia have improved appreciably since May through direct sales to customers (from Satphone Shop, Amazon Australia and eBay Australia) Despite the severe economic dislocation caused by the COVID-19 and through an expanding network of dealers. pandemic, it is very reassuring to see that Beam’s core businesses have continued to perform, the new ZOLEO solution is gaining traction and our balance sheet remains strong with $3.7 million currently available in cash and debt funding. Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased 43% over the previous year to $3.0 million in FY2020 even though revenue declined 16% to $14.9 million as the group cycled from a record high revenue in FY19 that was bolstered by a large Thuraya WE order and the impact of COVID-19 in FY20. The improvement in Group EBITDA is largely driven by an increase in high-margin Airtime revenue, R&D tax refund and prudent cost control. Beam also received the seventh order for its Iridium GO! device in FY2020, which is to be delivered in FY2021. This latest order of 5,000 units from NASDAQ-listed Iridium takes the total number of units ordered to 45,000 over the past six years. Beam was also the only Australian company, and only one of seven worldwide, chosen by Iridium to develop the next generation of Iridium Certus® devices, which have data speeds that are more than 35 times faster than the previous generation of Iridium transceivers. Other notable highlights include repeat orders for Beam’s Inmarsat terminals from reseller partner Station Satcom for India, which is a new market for Beam, and the signing of a global reseller agreement Beam also managed to produce a positive underlying net profit before with Pivotel Satellite Pty Ltd. tax of $453,130 (FY19: $722,000) and an underlying net profit after tax of $341,419 (FY19: $339,000) despite difficult trading conditions, Outlook particularly in April and May when Australia first went into lockdown to While no one could have predicted how challenging the last financial contain the virus and as key overseas markets struggled with escalating year was going to be, currently the FY2021 outlook is positive for coronavirus cases. Gross revenues in these two months were around Beam even as economic conditions remain highly volatile. There are a 30% to 35% below the same period in FY2019. few reasons for the optimism. However, sales rebounded in the following month such that the June Firstly, sales of ZOLEO are expected to continue to grow significantly quarter revenue numbers were only 15% below those of the same over the next 12-months. The momentum achieved in the North period in 2019. What is also heartening is that the second, more severe, American market provides us confidence that we will experience lockdown in Victoria has not impacted on Beam as significantly. Yes, similar traction in the Australian market as social restrictions are ease, conditions remain highly unpredictable, but we have controlled the together with demand from other as-yet untapped markets globally. controllables and can see the underlying business starting to recover. Other major Australian retailers are also anticipated to join the 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 “Despite the severe economic dislocation caused by the COVID-19 pandemic, it is very reassuring to see that Beam’s core businesses have continued to perform, the new ZOLEO solution is gaining traction and our balance sheet remains strong.” ZOLEO reseller network, which already includes Cabela’s in Canada. which will commence in late September, as revenues may not be Cabela’s is part of BPS Direct, LLC (Bass Pro Shops), which is the sufficiently below those recorded in the corresponding period in 2019, world’s largest outdoor equipment retailer with 40,000 employees which is also a positive. with an annual turnover of around US$8 billion. Another growth opportunity for Beam is the development and launch of its Iridium Certus® devices. The first of these next-gen devices are anticipated to be launched in FY2022 Directors and Investors All directors of your Company hold shares in Beam Communications Holdings Limited. We, like you, have a personal interest in our future performance. The aggregated remuneration paid to non-executive Meanwhile, Beam’s base business is also well positioned to grow directors was also reduced by over 70%, in response to the pandemic. organically over the next 12 months. Demand for Iridium GO! is expected to remain robust for the next few years at least, and Beam You can read more about all members of the board in the Directors’ Report. is expecting to receive new orders for the device from Iridium in the No new securities have been issued since September 2017. current financial year. The opening of the Indian market to Inmarsat is likely to lead to further orders for Beam-branded terminals and accessories as these are the only devices, along with the Inmarsat handset, that are approved for sale using the Inmarsat GSPS service in India currently. The continued strength and resilience of Beam’s core business will help support the growth of ZOLEO and the development for Beam’s Iridium Certus® devices in FY2021 and beyond. Staff and Board In these times, I cannot sufficiently express my admiration and appreciation for Beam’s Board, senior management, and all our staff, who have remained focused and productive during this immensely uncertain and challenging time. Often the strength of a business can only be properly tested when it’s put under the greatest commercial tension, and that we have produced a year of robust underlying net profits and continued to deliver superior While Beam has written down the entire development cost of Thuraya products to market with an increasing appetite for them, is to our WE, we may still receive further orders from Thuraya for additional collective and immense credit. units to the 3,000 that were delivered in FY2019 as the Beam device remains the only dual mode (4G and satellite) hotspot in Thuraya’s product portfolio. Cash and Funding I thank you, as a Shareholder, for your support. The proportion of long- term owners of Beam shares who have reduced their holdings over this year has been miniscule, which is both an insight into and a validation of our strategy and performance. Beam’s cash holding at 30 June 2020 was $874,000 and had an I look forward to sharing with you more details of our progress over additional $2.8 million in undrawn debt facilities. Subsequent to the this financial year and wish you personal and professional health as we end of FY2020, the National Australia Bank provided a new $500,000 emerge from a period which none of us will ever forget. C H A I R M A N ’ S R E P O R T term debt facility to Beam, giving the Group total available funds of $4.2 million at 30 June. The new term facility is for three years with an interest rate of just 4.5%. Beam also delivered a positive operating cash position in the last three quarters of FY2020, which is a pleasing result given the disruption caused by COVID-19 and additional investments in ZOLEO and other new product development projects. Mr Simon Wallace Chairman The expenditure on major development projects in the financial year Date: 11 September 2020 amounted to $2.4 million and Beam expects to receive the government’s R&D tax rebate of $580,000 in October 2020. Beam benefited from the JobKeeper and BAS relief support packages, amounting to $332,500 in total for FY2020. Beam may not qualify for phase two of JobKeeper, A NN UA L R EPORT 2020 3 DIRECTORS’ REPORT Your Directors present their report on the Company and its controlled entities for the financial year ended 30 June 2020. 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 4 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Simon Lister Wallace Non Executive Chairman Age: 46 Simon Wallace is a corporate lawyer and, based in Melbourne, having previously been an equity partner of the largest law firm in the world, he is now the founder & Managing Partner of his own boutique legal practice. 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: 49 Age: 36 Age: 66 Michael Capocchi has over 25 years’ Carl Hung has a Bachelor of Commerce David Stewart is an experienced CEO experience in the ICT industry and has degree from the University of British and successful entrepreneur with more held several senior management positions. Columbia and an Executive Masters of than 30 years in management and Michael is based in Chicago, USA, which Business Administration from University business leadership roles. David founded places him closer to the important centres of Western Ontario’s (UWO) Richard Ivey Banksia Technology Pty Limited in 1988 for satellite communications in the USA and School of Business. He is a Six Sigma Black and successfully managed the company UK/Europe. Belt certified by SGS. He is also a Certified as a fast growing and highly profitable Management Accountant. business. In 1996 he instigated the Michael joined Beam Communications Holdings Limited as the General Manager of Carl is President and CEO of Season the subsidiary, Beam Communications Pty Group International Inc, a global Ltd, in 2003 and was appointed as Managing Electronic Manufacturing Services Director of Beam Communications Holdings provider and full stack IoT solutions Limited in March 2008. Prior to joining Beam, Michael was the provider with a footprint in Hong Kong, China, Malaysia, Mexico and the UK. Regional Sales Director for Iridium Satellite Season Group has been the preferred LLC, directly managing the sales, distribution contract manufacturer for Beam successful takeovers of a number of his competitors, including NetComm Limited, which was completed in November 1997. David assumed the role of CEO and Managing Director until retiring in December 2016. A year later David was appointed as a Non-Executive Director of NetComm Wireless Limited, a position he held until June 30, 2019 when NetComm and channel management strategies for the Communications Pty Ltd for several years was acquired by US-based Casa Systems. and has been instrumental in rationalising Beam’s manufacturing and supply processes. Carl has been a Director of Beam Communications Holdings Limited since 21 February 2013. Asia-Pacific region. Michael has held senior management positions as the Sales and Marketing Director of Pacific Internet responsible for establishing the Australian operations 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. In June 2016 David was recognised for his significant and valuable contribution to the Australian communications industry with the presentation of the Communications Ambassador 2016 award. The Australian Communications 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 July 1, 2017 and a Director of Beam Communications Holdings Limited on November 9, 2017, following investments in both. The start of 2018 saw David join the board of Lockbox Technologies and on August 14, 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 2020 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 June 30, 2019 and has been a non-executive director of MyNetFone Group Limited (ASX:MNF) since August 14, 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. 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 6 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D I D R E C T O R S ’ R E P O R T 7 “There honestly isn’t anything that we didn’t like about the ZOLEO Satellite Communicator.” ANNUAL REPORT 2020 T R O P E R ’ S R O T C E R I D OPERATING RESULTS AND REVIEW OF ACTIVITIES The Consolidated Group reports a total comprehensive income (loss) of $(1,629,234) for the FY2020 year, on total revenue and other income of $16,841,164 (2019: total comprehensive income of $339,129 on revenue and other income of $18,520,528). A summary of the result for the year is as follows: Thuraya may still place further orders for lockdown to contain the virus, and as key the dual-band hotspot device in the current overseas markets struggled with escalating financial year, management decided it was coronavirus cases. Revenue in these two prudent in this volatile environment to months were around 30% to 35% below the write-down the entire remaining capitalised same period in FY2019. development cost for the device. However, revenue rebounded in the following This resulted in the Group’s statutory net month such that the June quarter was only profit after tax (NPAT) declining to a loss 15% below that derived in the corresponding of $1.6 million due to the net $1.1 million period of 2019. What is also heartening Thuraya WE write-down and a $0.8 million is that the second more severe lockdown write off in respect to three discontinued in Victoria has not impacted on Beam’s Revenue Other income Deduct Cost of goods sold, research & development, administrative, marketing 2020 $000 2019 $000 projects, so that resources and priorities revenues as significantly as was sustained in could be focused on major ‘pay-off’ projects: the June quarter, although conditions remain ZOLEO product enhancements and highly unpredictable. 14,923 17,777 development of future Iridium Certus devices. 1,918 744 Excluding these one-off impairments, Beam’s underlying FY2020 NPAT was $341,419 (FY2019: $339,000). In spite of the sharp, but temporary impact from COVID-19, sales of Beam’s base products (i.e. docking units, fixed terminals and accessories) in total still managed to Notwithstanding the Thuraya WE setback, reach the same levels as FY2019 with many Beam recorded growth in other areas of items experiencing growth. and corporate expenses 13,832 16,417 its business. Some of the year’s highlights included: SatPhone Shop, Beam’s 100% owned on-line retail business and Telstra dealership, also 3,009 2,104 - Delivered and invoiced 6,276 ZOLEO enjoyed a similar rebound. Revenue from this units in FY2020, another 16,474 units on division in FY2020 increased 16% to $1.44 order for shipment this financial year, with million, its highest on record. Amortisation and impairment 4,311 1,179 further orders expected. The Group’s profits were also bolstered - Delivered and invoiced 5,000 Iridium GO!® by an increase in airtime revenue and Depreciation on fixed assets 53 63 units to Iridium under its sixth order, management’s quick and decisive cost control Interest excluding notional 163 140 with the seventh order to be delivered program, which was implemented at the in FY2021, taking total orders of this onset of the pandemic. Profit (loss) before income tax (1,518) 722 ingenious product to 45,000 units. Further Tax (expense) / benefit (112) (383) Net profit (loss) for the year (1,629) 339 Total comprehensive income (loss) for the year (1,629) 339 orders are expected during FY2021 Cash and Funding - Increased sales orders for existing Beam Beam’s cash holdings at 30 June 2020 were and SatPhone Shop products, driven in $874,000, supported by an additional $2.8 part by the opening of the Indian market million in undrawn debt facilities. In the 12 for the first time. Operating profit (loss) before amortisation, depreciation, interest and tax Deduct months to 30 June 2020 the Group generated $1.3m cash inflow from trading activities net of all operating costs. The FY2020 result without the application of AASB16 is immaterially different to the result shown The principal activity of the Group during FY2020 continued to be the manufacture in the above table. and global distribution of satellite Subsequent to the end of FY2020, the Performance and Profit handheld phone accessories. $500,000 term debt facility to Beam, which communication terminals, docking units and National Australia Bank provided a new Beam Communications Holdings Limited’s results for the year ended 30 June 2020 The launch of ZOLEO in January of this year is particularly significant for Beam as the were resilient despite being negatively solution will generate royalties and recurring provided the Group with total available funds of $4.2 million. The new term facility is for three years with an interest rate of just 4.5%. impacted in the last quarter by the global revenues for airtime subscriptions through the Beam also delivered a positive overall total COVID-19 pandemic as lockdowns and social Group’s part ownership of the Zoleo Inc. JV. cash movement in each of the last three restrictions across key markets impinged on demand for Beam’s products. Demand for ZOLEO in the North American market is outstanding as the region has Against this challenging backdrop, Beam not been hindered by restrictions on recorded earnings before interest, tax, movement to the same extent as Australia. quarters of FY2020, which is a pleasing result given the disruption caused by COVID-19 and additional investments for ZOLEO and other new product developments. depreciation and amortisation (EBITDA) of $3.0 million (FY2019: $2.1m) and trading revenue of $14.9 million (FY19: $17.8m) for the 2020 financial year ended 30 June. Sales of ZOLEO in Australia have improved The expenditure on major development appreciably since May through direct sales projects in the financial year amounted to to customers (from SatPhone Shop, Amazon $2.43 million and Beam is yet to receive the Australia and eBay Australia) and through an government’s R&D grant of approximately Beam’s FY2019 record revenue was expanding network of dealers. $0.5 million, expected in October 2020. While bolstered by a $3.85 million order for 3,000 The impact of COVID-19 was also felt in Thuraya WE units. The Group did not receive other parts of the business, particularly in a follow-on order in FY2020, and while April and May when Australia first went into 8 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Beam benefited from the JobKeeper support package in the amount of $270,000 and the BAS Cash Flow Boost of $62,500, this financial assistance was not material to the Group’s financial performance given the trading the Group in fund raising activities, strategic Other than the above, there have been no difficulties overcome during FY2020. Beam and corporate governance advice, significant events since 30 June 2020. may not qualify for phase two of JobKeeper, which will commence in late September. Mr David Stewart joined our board in November 2017. David has been a keen DIVIDENDS PROPOSED OR RECOMMENDED Outlook and Projects advisor to senior management in the No dividends were paid or declared rationalisation of development expenditure, since the start of the financial year. No While no one could have predicted how providing experienced insight into the recommendation for payment of dividends challenging the last financial year was communications industry both in Australia has been made. going to be, currently the FY2021 outlook and overseas. David remains Beam’s major is positive for Beam even as economic shareholder, holding 20.62% of the shares and ENVIRONMENTAL ISSUES conditions remain highly volatile. There are a assists the Group to expand in the satellite and few reasons for the optimism. non-satellite space. The Consolidated Group’s operations are not regulated by any significant environmental Firstly, sales of ZOLEO are expected to Beam Director Mr Carl Hung was re-elected regulation under any Commonwealth, State continue to grow significantly over the next as a Director by shareholders at the Annual or Territory laws. 12-months. The momentum achieved in the General Meeting of 22 November 2019 and North American market is an early indication is also the President and CEO of Season FUTURE DEVELOPMENTS that Beam will experience similar traction in Group, a major trading partner of Beam. the Australian market as social restrictions Season provides Beam with a range of sub- are eased, plus expansion into other new contract services including manufacturing markets globally. Beam is also close to signing new major retailers to sell ZOLEO, following the and engineering in China. Carl is Managing Director of SGV1 Holdings Limited, which holds 10.23% of the shares in the Company. JV’s partnership with Cabela’s in Canada. Mr Michael Capocchi is an Executive Director Cabela’s is part of BPS Direct, LLC (Bass Pro and holds the positions of Managing Director Shops), which is the world’s largest outdoor and Chief Executive Officer for all companies equipment retailer with 40,000 employees an in the Group. His base in the USA enables annual turnover of around US$8 billion. him to easily visit the Middle East and UK/ 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 2020 on the exercise of options. DIRECTORS’ INTERESTS Another growth opportunity for Beam is the development and launch of its Iridium Certus® devices. The first of these next-gen devices is anticipated to be launched in FY2021. Europe, where many core clients are based, as well as domestically within the US. Michael The relevant interests of the Directors in travelled to Australia every 4-6 weeks prior to the securities of the Company are detailed Australia’s travel restrictions, has seen little in the Remuneration Report as part of the interruption to his utility and client access as Directors’ Report. Meanwhile, Beam’s base business is also well a result of COVID-19 and retains direct and positioned to keep growing organically over daily contact with management. Michael is SHARES UNDER OPTION the next 12 months. Demand for Iridium GO! also a significant shareholder in the Company. At the date of this report, the unissued is expected to remain robust for the next few years at least, and Beam is expecting to receive new orders for the device from Iridium in the current financial year. The Directors believe the return to a significant ordinary shares of the Company under option profit in FY2019 and the underlying trading are as follows: profit in FY2020 indicate the Group’s successful efforts to improve core and new The opening of the Indian market to Inmarsat product offerings and sales strategies, as well as is likely to lead to further orders for Beam- expanding the business’s scale and investment branded terminals and accessories as these capacity via incremental yet sustainable are the only devices, along with the Inmarsat revenue and profit expansion while narrowing Issue Date of Exercise Date Expiry Price Number Under Option 24.12.15 31.08.20 $0.1950 789,525 handset, that are approved for sale using the the focus on future developments to major and 24.12.15 30.11.20 $0.1950 907,500 Inmarsat GSPS service in India currently. significant projects only. 1,697,025 The continued strength and resilience of Beam’s core business will help support the SIGNIFICANT CHANGES IN STATE OF AFFAIRS growth of ZOLEO and the development for Other than those noted above there were no Beam’s Iridium Certus® devices in FY2021 significant changes in the state of affairs of the and beyond. Consolidated Group during the financial year. Directors and Investors EVENTS AFTER REPORTING DATE No new securities have been issued since On 1 July 2020 the Group received a three- September 2017 and the Board of Directors has remained the same since November 2017. year term loan from the National Australia Bank of $500,000, partially secured by the Mr Simon Wallace, a shareholder in the Company, has been a Director for five years and is currently Chairman of the Board. Simon has lengthy and detailed expertise in legal and commercial matters and leads the Board and Australian government. On 20 August 2020 SGV1 Holdings Limited extended the expiry date of the US$2m secured loan facility provided to the Group from 1 January 2021 until 1 April 2022 (refer also Note 13). D I R E C T O R S ’ R E P O R T 9 ANNUAL REPORT 2020 DIRECTORS’ MEETINGS - long-term incentive share option scheme; Corporations Act 2001 the following table and summarises the Group’s performance over - other benefits including superannuation. the last 5 years. During the year ended 30 June 2020 the Company held 16 meetings of Directors (including Audit Committee meetings). Attendances by each Director during the year were: Directors meetings Commitees considers the following: Fixed Salary The salary of senior executives is determined from a review of the market and reflects core performance requirements and expectations. In addition, the Company - The scope of the individual’s role; - The individual’s level of skill and experience; - Legal and industrial obligations; - Labour market conditions; and - The complexity of the Company’s business. Performance Bonus The purpose of the performance bonus is to reward an individual’s actual achievement of performance objectives and for materially improved Company performance. Consequently, performance-based remuneration is paid where a clear contribution to successful outcomes for the company is demonstrated and the individual attains and excels against pre-agreed key performance indicators during a performance cycle. 0 2 0 2 9 1 0 2 8 1 0 2 7 1 0 2 6 1 0 2 Net profit/ (loss) before tax ($’000) (1,517) 772 (1,432) (423) 417 3,009 2,104 (607) 129 1,363 EBITDA ($’000) Basic earnings per share (0.31) 0.64 (3.07) (1.29) 1.12 Share price at 30 June ($) 0.17 0.27 0.16 0.13 0.23 Market Capitalisation at 30 June 8.99 14.28 8.46 5.61 9.93 Dividends per share Nil Nil Nil Nil Nil The Board believes the above table For FY2020 the Managing Director had a illustrates the positive, albeit not linear, performance bonus potential of 15% of the direction the Group has taken over the past Group operating profit before interest, tax, five years and is reflective of the depreciation and amortisation (EBITDA) performance of senior executives during above $1,000,000 for the financial year, plus that period. Due to the nature of the Group’s $20,000 and a 1% increase in fixed salary for business, there are often major influences on Director M Capocchi D Stewart C Hung S Wallace d e d n e t t A 13 13 13 13 m u m i x a M d e d n e t t A e l b i s s o P d e d n e t t A m u m i x a M d e d n e t t A e l b i s s o P 13 13 13 13 0 0 3 3 0 0 3 3 Each Director attended every scheduled meeting of the Board and of each Committee of which he is a member. 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 T R O P E R ’ S R O T C E R I D The Company is committed to FY2021, payable upon the achievement of a particular financial year’s profit result. In remunerating its executive directors and each of 5 KPIs set by the Board at the FY2020 the decision was made to terminate senior executives in a manner that is beginning of the financial year. The Group three development projects in order to focus market-competitive, consistent with best achieved an EBITDA of $3,009,121 and development efforts on ZOLEO practice and which supports the interests therefore the potential performance bonus improvements and Iridium Certus devices, at of shareholders. The Company aims to became payable. In addition, the Managing a cost of $820,000. In addition, the Group align the interests of executive directors Director achieved 1 of the KPIs. Since May took the conservative approach to the and senior executives with those of shareholders by remunerating through 2020 employees have contributed 20% of Thuraya WE project by writing off the their salary payments to COVID-19 relief remainder of that project’s capitalised value performance and long-term incentive plans savings and in a similar manner the at a net cost of $1,105,000. Excluding these in addition to fixed remuneration. Managing Director agreed to reduce his one-off write-downs, the underlying positive FY2020 bonus by 50%. NPBT and NPAT recognises the fundamental The remuneration of Non-executive Directors is determined by the Board having regard to the level of fees paid to non-executive directors by other Two senior sales executives, who have contractual performance-based bonus entitlements and have achieved above their companies of similar size and stature and in minimum sales-related target levels in aggregate must not exceed the maximum FY2020, have also agreed to reduce their annual amount approved by the Company’s bonus entitlements by approximately 50%. shareholders, currently $500,000, as No other key management executive has a determined at the General Meeting held on contractual performance bonus entitlement. 3 August 2007. In assessing the relative performance of the Senior executives’ remuneration consists of senior executives and the Group as a whole the following elements: - fixed salary; - short-term incentive bonus where applicable based on performance; measured against the primary objective of enhancing shareholder value over time, the Board has regard to key financial indicators. In accordance with Section 300A of the 10 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D strength in performance. Long-term Incentives The Company’s Share Options Incentive Plan, in which executive directors and senior executives may participate, was approved by shareholders on 27 October 2017 and authorises the Directors to issue options in respect to up to 10% of the shares on issue at a given time. The Company ensures that the payment of equity-based executive remuneration is made in accordance with thresholds set in plans approved by shareholders. No options were issued to key management personnel or Directors during FY2018 – FY2020 while the Company evaluates the effectiveness of share options as incentives. Other Benefits Senior executives are entitled to statutory superannuation and other bonus payments 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 Michael Capocchi on 30 June 2018 under which he continued as Managing Director and CEO of the Company for a minimum term of two years. 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. 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 remuneration was at risk. The renewal of Mr Capocchi’s contract is presently being negotiated. All other key management personnel are permanent employees. D I R E C T O R S ’ R E P O R T 11 ANNUAL REPORT 2020 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 Mr M Capocchi Mr C Hung Mr D Stewart Non-Executive Chairman Executive Managing Director 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 2020 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 % Directors Mr S Wallace 40,277 Mr M Capocchi [c] 448,645 160,684 4,906 34,220 43,087 9,778 Mr C Hung 31,250 Mr D Stewart 31,250 Other Mr D Payne 187,420 Mr W Christie 185,386 - - - T R O P E R ’ S R O T C E R I D - - (2,876) 17,767 (13,155) 12,187 17,574 16,742 Total 924,228 160,684 4,906 43,531 78,428 13,365 - - - - - - - - 40,277 0.00% 701,320 22.91% 31,250 0.00% 31,250 0.00% 0.00% 0.00% 189,156 0.00% 231,889 0.00% 0.00% 0.00% 1,225,142 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 % 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 41,666 0.00% 0.00% 198,033 185,082 0.00% 0.00% 1,243,687 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 2020 his remuneration has been converted into AU dollars at the exchange rate on 30 June 2020 of 0.6863. 12 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Short-term employee benefits employment term Post- Other long- Termi- nation Share- based benefits benefits benefits payments 2020 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 % Mr M Capocchi [c] 448,645 160,684 4,906 34,220 43,087 9,778 Directors Mr S Wallace 40,277 Mr C Hung 31,250 Mr D Stewart 31,250 Other Mr D Payne 187,420 Mr W Christie 185,386 - - - - - (2,876) 17,767 (13,155) 12,187 17,574 16,742 189,156 0.00% 231,889 0.00% 0.00% 0.00% Total 924,228 160,684 4,906 43,531 78,428 13,365 - 1,225,142 40,277 0.00% 701,320 22.91% 31,250 0.00% 31,250 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 2020 his remuneration has been converted into AU dollars at the exchange rate on 30 June 2020 of 0.6863. REMUNERATION REPORT (continued) (c) (i) Options granted as part of remuneration for the year 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 $ 2020 Grant date Directors Mr S Wallace Mr M Capocchi Mr C Hung Mr D Stewart Other Mr D Payne Mr W Christie - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Total $ - - - - - - - - (21,916) (31,309) (21,916) (31,309) 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - D I R E C T O R S ’ R E P O R T 13 ANNUAL REPORT 2020 REMUNERATION REPORT (continued) (c) (ii) Options granted and/or vested during the year 2020 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - T R O P E R ’ S R O T C E R I D 2019 Vested No. Granted No. Grant date option at Value per grant date $ Exercise price $ First Expiry date 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 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 1.07.19 Granted as Remuneration Issued as Equity Investment Options Exercised Options Lapsed Balance 30.06.20 Total Vested 30.06.20 Exercisable 30.06.20 Unexer- cisable 30.06.20 2020 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 - - - - - - (190,575) 190,575 190,575 190,575 (272,250) 272,250 272,250 272,250 (462,825) 1,370,325 1,370,325 1,370,325 - - - - - - - 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 - D I R E C T O R S ’ R E P O R T 15 ANNUAL REPORT 2020 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. 2020 Directors Balance 1.07.19 Received as Remuneration Options Exercised Placement Net Change Issue [b] Other [a] Balance 30.06.20 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 Mr W Christie 328,570 62,778 21,957,054 - - - - - - - - - - - - - - - - - - 21,400 - (3,833,333) 200,000 1,603,899 5,409,874 365,000 10,905,000 - - 328,570 62,778 3,446,933 18,510,121 T R O P E R ’ S R O T C E R I D Balance 1.07.18 Received as Remuneration Options Exercised Placement Net Change Issue [b] Other [a] Balance 30.06.19 2019 Directors 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 Mr W Christie 328,570 62,778 21,957,054 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 178,600 1,603,899 9,243,207 10,540,000 328,570 62,778 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. 16 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 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 2020 or the comparative year ended 30 June 2019. (g) Voting and comments made at the Company’s 2019 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 continues in office in accordance with section 327 of the Corporations Act 2001. NON AUDIT SERVICES No non audit services were undertaken by the external auditors during the year ended 30 June 2020. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors’ report. Signed in accordance with a resolution of the Board of Directors dated 27 August 2020. Mr Simon Wallace Chairman Date: 28 August 2020 D I 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. ANNUAL REPORT 2020 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 2020, 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. N O I T A R A L C E D S ’ R O T I D U A RSM AUSTRALIA PARTNERS M PARAMESWARAN Partner Dated: 28 August 2020 Melbourne, Victoria 18 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D M G 2 0 0 LT E G a t e w a y M G 4 0 0 LT E G a t e w a y Increased high speed performance makes the MG gateways perfect for all your outback adventures! 4G 4G LTE durable dual sim fast connectivity 19 ANNUAL REPORT 2020E C N A N R E V O G E T A R O P R O C CORPORATE GOVERNANCE a larger company such as Directors Chairman’s Appointment and Responsibilities The Directors of Beam Communications Holdings Limited (BCC or the Company) 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. Nomination, Risk Management and The Chairman is appointed by the board from Remuneration are dealt with by the full Board the non-executive directors. The Chairman: as separate and specific agenda items in accordance with the principles and policies set down in the Company’s corporate governance programme. • provides appropriate leadership to the board and the Company; • ensures membership of the board is balanced and appropriate for the The Company has adopted a Board Charter which Company’s needs; details the functions and responsibilities of the • facilitates board discussions to ensure Board of Directors. A copy of the Board Charter is the core issues facing the organisation on the Company’s website. The employment are addressed; contract between the Company and the Chief • maintains a regular dialogue and Executive Officer and the letter of engagement mentor relationship with the Chief for the Chief Financial Officer and senior Executive Officer; executives details the terms of employment, job • monitors board performance; and specifications and responsibilities. • guides and promotes the on-going effectiveness and development of the The Role of the Board of Directors board and individual directors. The BCC is responsible to its shareholders for the protection and enhancement of long term Conduct of Board Business shareholder value. To fulfil this role the Board is responsible for: • oversight of the Group, including its controls, risk management, financial The Board normally holds monthly formal Board meetings and will also meet whenever necessary to carry out its responsibilities. In the year ended 30 June 2020, the Board and/or its committees met 16 times. When structures and accountability systems; conducting Board business, Directors have a 4. Safeguard integrity in corporate reporting. • setting strategic direction for duty to question, request information, raise 5. Make timely and balanced disclosure. 6. Respect the rights of security holders. 7. Recognise and manage risk. 8. Remunerate fairly and responsibly. management with a view to maximising any issue of concern, and fully canvas all shareholder value; aspects of any issue confronting the Company • input into and final approval of and vote on any resolution according to their strategic plans and goal and own judgment. Directors keep confidential, performance objectives and key board discussions, deliberations and 1. Lay Solid Foundations for Management and operational and financial matters; decisions that are not publicly known. Oversight • determining dividend payments; Recommendation 1.1: The Board and Senior Management – Roles and Responsibilities • selecting, appointing and reviewing the Access to Information performance of the Chief Executive Directors are encouraged to access members Officer (CEO); of the senior management team at any time to Board Processes • ratifying the appointment and, where request relevant information in accordance The Board recognises that its responsibilities appropriate, the removal of the Chief with protocols adopted by the Board. Where should accord with the following general Financial Officer (CFO) and Company Directors perceive an irregularity in a 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 Secretary; Company related matter, they are entitled to • approval of annual and half yearly seek independent advice at the Company’s financial reports and related Australian expense. Directors must ensure that the costs 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 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 compliance and control, codes of undertakings in order to fulfil their duties and conduct and legal compliance; • monitoring senior management’s performance and implementation of strategy, and ensuring appropriate resources are available; responsibilities as directors. Conflicts of Interest Directors are required to continually monitor and disclose any potential conflicts of interest responsibilities the Board has established an • dealing with approaches to take over that may arise. Directors must: Audit Committee with a formalised charter the company; and and operating principles. Activities which • approving and monitoring financial and may be conducted by separate committees in other reporting. • disclose to the Board any actual or potential conflicts of interest that may exist as soon as the situation arises; 20 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D • take necessary and reasonable steps to Board of a small public company the to the Board for ensuring compliance with resolve any conflict of interest within selection and appointment of Directors is Board procedures and governance matters. an appropriate period, if required by such an important task that it should be the The Company Secretary is accountable the Board or deemed appropriate by responsibility of the entire Board to consider directly to the Board, through the Chair, on that director; and the nominations process. The structure of the all matters to do with the proper functioning • comply with the Corporations Act Board is reviewed annually as to qualifications, of the Board. The Company Secretary is also requirements about disclosing skills, experience and diversity to ensure responsible for overseeing and co-ordinating interests and restrictions on voting. the Board has an appropriate mix. In a disclosure of information to the ASX as well Directors should discuss with the Chairman any other proposed Board or executive appointments they are considering undertaking and advise the Company of their appointments to other companies as soon as 4-member Board the highest requirement is as communicating with the ASX for appropriate skill. Where a vacancy exists or there is a need for particular skills, the Board will determine the selection criteria and Recommendation 1.5: Diversity Policy The Company has taken measures to establish identify and appoint a suitable candidate. a corporate culture in which the principles of possible after the appointment is made. The Company will undertake appropriate 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 until the next AGM when the Director may be checks before appointing a person or putting forward a candidate for election as a Director and provide shareholders with this information. Candidates will be assessed through interviews, meetings and background reference checks as appropriate. External advisors may be used in this process. The Company will provide shareholders with all material information diversity are embedded. By promoting and supporting transparent recruiting processes, flexible work practices, an enlightened code of conduct, equal employment opportunity policies and clear reporting of outcomes, the Board feels that the objectives of diversity will be achieved. The results of recruiting and the composition of staff are reported by the Chief Executive Officer and reviewed at monthly Board meetings. in its possession relevant to the decision The Board, at this time, has not established on whether or not to elect (or re-elect) a an explicit policy on diversity or measurable Director, either in the notice of the meeting objectives for achieving gender diversity. at which the election of the Director is to Because of the size of the Company (37 staff be held, or by including in the notice a clear including Board members, as at the date of reference to the location on the Company’s this report), the Board is of the view that the website, Annual Report or other document scale and nature of the Company’s operations lodged with ASX where the information does not currently lend itself to an effective can be found. Directors appointed by the and meaningful application of a targeted Board must stand for re-election at the next diversity policy. meeting of shareholders. Rather, the Board recognises the positive re-elected. This re-election will be in addition Further information regarding Director benefits for the organisation of increased to any rotational retirements. nominations can be found in the Company’s diversity, especially gender, and has sought to Election of Directors Policy as posted on the integrate diversity objectives within the existing A CEO, if also a Managing Director, is not subject to retirement by rotation and is not to be taken into account in determining the Company’s website. policies and procedures of the Company. The Board intends to reconsider the adoption of a formal diversity policy periodically. rotation of retirement of Directors. Recommendation 1.3: Terms of Appointment – Functions of Senior Executives Directors and Senior Executives Each new Non-Executive Director will At the date of this report the Company has a total staff excluding Board members of 33 The Chief Executive Officer reports to the receive a letter formalising their appointment employees of which 21% ([7 employees) are Board and is responsible for the operation and and outlining the material terms of their women. The Senior Executive team is made administration of the Company including the appointment. Non-Executive Directors of the up of 4 managers including one female. At this implementation of the Company’s strategies, Company have not been appointed for fixed time there are no women on the Board which plans, policies and control programmes. He terms. Senior Executives will generally have comprises 4 positions. is supported by a management team whose written employment agreements with the responsibilities are delineated by formal Company setting out their duties, obligations Recommendation 1.6 and 1.7 – Performance authority delegations. The team meets and remuneration. Review and Evaluation regularly to co-ordinate activities and to review and monitor performance. Recommendation 1.2: Board Nominations Appointment of Directors The Company has not established a nomination committee for recommending the appointment of Directors. Given the nature and size of the Company, the Board considers that as a 4-member The remuneration paid/payable to the Evaluating the Performance of Directors Company’s ‘key management personnel’ is The Board has adopted a self-evaluation outlined within the Remuneration Report in process to measure its own performance and the Company’s latest Annual Report. the performance of its Committees. Recommendation 1.4: The Company Secretary The Company Secretary is appointed by the Board and is responsible for developing and maintaining the systems and processes that are appropriate for the Board to fulfil its role. The Company Secretary is responsible On an annual basis, the Chairman facilitates a discussion and evaluation of the Board’s performance in accordance with this process. This includes discussions about the Board’s role, processes, performance and other relevant issues. Each Director’s C O R P O R A T E G O V E R N A N C E 21 ANNUAL REPORT 2020 performance is reviewed by the Chairman of disciplines as required for the proper The names, qualifications and experience of and Board prior to the Director standing for management and oversight of the Company’s each Director of the Company are detailed in re-election. Performance evaluations will take operations, as having regard to the scale and the Directors’ Report in the Annual Report. place during September at the same time as nature of its activities. those for all staff members. A performance evaluation was undertaken during the reporting period. If the contribution of a Non-Executive Director appears to a majority of Directors to be less 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. The Board skills matrix set out below describes the skills, experience and expertise that the Board would look to maintain and build on: • • • • • capital markets; corporate finance; regulatory and compliance; operations; legal; sales; • • marketing • corporate governance; and • financial and business acumen. 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. Recommendations 2.3 and 2.4: Independent Directors Directors Independence Recommendation 2.6: Induction of New Directors The Company has a program for inducting new Directors. This includes giving new Evaluating the Performance of Senior At the date on which the Directors’ report Directors a full briefing about the nature of Executives is made out, the Company’s Board has 4 the business, current issues, the corporate Arrangements put in place by the Board to Directors. The Board currently consists of strategy and the expectations of the Board monitor the performance of the Group’s key three Non-Executive Directors. At this time concerning the performance of the Directors executives include: only one (Mr Simon Wallace) of the three Non- and access to all employees to gain full E C N A N R E V O G E T A R O P R O C • regular monthly reporting submitted to the Board and attendance at all Board Meetings by the Chief Executive Officer and Chief Financial Officer; • a review by the Board of the Group’s financial performance and revised forecast results on a monthly and annual basis at Board meetings at which reports are presented by the key executives; and Executive Directors is considered by the Board background to the Company’s operations. to be independent, and as such the Company Directors are encouraged to attend director does not comply with Recommendation training and professional development 2.4 of the Corporate Governance Council, courses, as may be required to enable them which recommends that a majority of Board to develop and maintain the skills and members should be independent. However, the knowledge needed to effectively perform Board considers that both its structure and their roles as Directors, at the Company’s composition are appropriate given the size of expense (as approved by the Chairman and or the Group and that the interests of shareholders the Board, as appropriate and applicable). are well met. • an evaluation of the detailed The Board regularly assesses its composition, 3. Act Ethically and Responsibly presentations made by the Chief having regard to the nature and size of the Recommendation 3.1: Act Ethically and Executive Officer and his direct reports Company’s operations and the relevant skills, Responsibly during business planning / strategy knowledge, and experience of each Board member. Code of Conduct and Corporate Ethics meetings which are at least bi-annual. A performance evaluation was undertaken during the reporting period. 2. Structure Board to Add Value Recommendation 2.1: Nomination Committee Due to the small size of the Board and the In the interest of clear disclosure: As part of the Board’s commitment to the • 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 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: Company’s current level of operations, Limited, holds a relevant interest in the Company does not have a separate 5,409,874 shares in the Company, nomination committee. Nominations for representing 10.23% of the Company’s positions on the Board are considered by the issued shares and is thereby a entire Board. substantial holder. • responsibilities to shareholders; • compliance with laws and regulations; • relations with customers and suppliers; • ethical responsibilities including responsibility for reporting and Recommendation 2.2: Skills, Knowledge and Experience Directors are appointed based on the specific • Mr David Stewart, a Non-Executive Director, is not regarded as being investigating unethical practices; • employment practices including a independent, as two companies fair and open approach to all forms of associated with and/ or controlled by diversity; and business, industry and governance skills and Mr Stewart in total hold a relevant • responsibilities to the environment and experience as required by the Company. The interest in 10,905,000 shares in the the community. Board recognises the need for Directors Company, representing 20.62% of the to have a relevant and applicable range of issued capital of the Company and Mr skills and personal experience in a range Stewart is thereby a substantial holder. The Code of Conduct is available at the Company’s website. 22 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D In addition to the Code of Conduct, the The one Independent Director on the Board is a The Company’s Audit Committee has a formal Company has established a specific Corporate member of the Audit Committee. Mr Carl Hung charter setting out the Committee’s role and Ethics Policy setting out the Company’s although not an Independent Director was responsibilities. The charter is posted on the behavioural expectations of its employees appointed Chairman of the Audit Committee Company’s website. when conducting business in Australia and due to his accounting qualifications and internationally and specifically aims to commercial experience. maintain the good standing and reputation of the Company along with highlighting the importance of anti-corruption practices to its employees and directors. The Corporate Ethics Policy is also available at the website. The Company’s objective is to maintain and further develop its business to increase 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 The Audit Committee assists the Board to discharge its corporate governance responsibilities, in regard to the business’ relationship with, and the independence of, the external auditors. It especially: Recommendation 4.2: Approval of 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 • 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; • ensures maintenance of an effective framework of business risk 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: i. the statements made with respect to the integrity of financial statements Committee to consider certain issues and management including compliance and and notes thereto are founded on a functions in further detail. The chairman of internal controls and monitoring of the sound system of risk management the Audit Committee reports to the Board internal audit function; and internal control systems which, on any matters of substance at the next full • reviews adequacy of the Company’s in all material respects, implement board meeting. The Audit Committee has insurance program, including directors’ its own terms of reference, approved by the and officers’ professional indemnity Board and reviewed annually, with additional and other liability insurance cover; review when appropriate. 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 • promotes and ensures an ethical financial culture is embedded throughout the Company; and • undertakes any special investigations reporting risks. required by the Board. the policies adopted by the Board of Directors; and ii. the risk management and internal control systems are operating effectively and efficiently in all material respects in relation to financial qualifications, experience and attendance The Audit Committee provides a forum for at Committee meetings by each Committee the effective communication between the Member is included in the Directors’ Report Board and external auditors. The Committee in the Annual Report. 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 The ASX Corporate Governance Council has made recommendations for the composition • the annual and half-year financial report prior to their approval by the Board; and the Board. The Company’s practices in this area are reviewed regularly by of the Audit Committee: • the effectiveness of management the Board to ensure they are in line with • 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 information systems and systems of emerging practices both domestically and internal control; and internationally. The Company’s current • the efficiency and effectiveness of approach in relation to independence of its external audit functions, including auditor encompasses the following: reviewing the respective audit plans. • rotation of the senior audit partner The Committee invites the CEO, the CFO, every five years; Chairman of the Board; the Company’s remaining Director and • the Committee should have at least the external auditors to attend Committee • annual confirmation by the auditor that it has satisfied all professional 3 members. meetings where appropriate. The Committee regulations relating to auditor 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 also meets with and receives regular reports independence; from the external auditors concerning any • half yearly reporting on the levels of matters which arise in connection with the performance of their respective roles, including the adequacy of internal controls. audit and non-audit fees; and • specific exclusion of the audit firm from work which may give risk to a conflict. the composition of the Board from time to time, The Company’s Audit Committee met 3 times with a view to considering compliance with the during the course of the financial year ended recommendation that the Audit Committee have 30 June 2020. a majority of Independent Directors. C O R P O R A T E G O V E R N A N C E 23 ANNUAL REPORT 2020 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 of the ASX and have written policies and procedures in place, including a Continuous Disclosure Policy. 6. Respect the Rights of Security Holders Recommendation 6.1: Communication to 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. 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 encourages shareholder participation at the AGM and other general meetings of the shareholders. The Chairman encourages questions and comments from shareholders and seeks to ensure that shareholders are given ample opportunity to participate. Shareholders who are unable to attend Information is communicated to shareholders the AGM or a general meeting may submit through the distribution of the Company’s questions and comments before the meeting Annual Report and other communications. to the Company and/or to the Auditor (in the All significant information is posted on the case of the AGM). The guiding principle of this policy is that the Company’s website as soon as it is disclosed Company must immediately notify the market to the ASX. All investors will have equal and Recommendation 6.3: Shareholders via an announcement to the ASX of any timely access to information on the Company’s information concerning the Company that a financial position, performance, ownership and Participation at General Meetings All shareholders are encouraged to attend reasonable person would expect to have a governance. Shareholders who wish to send and participate in shareholder meetings. All ‘material’ effect on the price or value of the and receive communications with the Company Directors, senior managers, Auditors and the Company’s securities. electronically should contact the Company Company Secretary attend these meetings E C N A N R E V O G E T A R O P R O C The Board must ensure that Company announcements: • are made in a timely manner; • are factual; • do not omit material information; and • are expressed in a clear and objective manner that allows investors to assess the impact of the information when making investment decisions. Where that information, however, is incomplete or confidential, or its disclosure is illegal, no disclosure is required. The Directors and senior management of the Company ensure that the Company Secretary is aware of all information to be presented at briefings with analysts, stockbrokers, shareholders, the media and the public. Prior to being presented, information that has not already been the subject of disclosure to the market and is not generally available to the market is the subject of disclosure to the ASX. Only when confirmation of receipt of the disclosure and release to the market by the ASX is received may the information be presented. If the Company becomes aware of market- sensitive information which ought to be disclosed, but the Company is not in a position to issue an announcement promptly and without delay, the Company may request that the ASX grant a trading halt or suspend the Company’s securities from quotation. Management of the Company may consult external professional advisers and the ASX in relation to whether a trading halt or suspension is required. The Company’s Continuous Disclosure Policy Secretary, Mr Dennis Payne. and respond to shareholder questions in The Company ensures that shareholders are informed of all major developments affecting the Group promptly through the issue of ASX announcements and commentary on operations in quarterly reports. All ASX announcements and quarterly reports are posted on the ASX website for the Company and on the Company’s website. relation to specific agenda items and general business. In light of the Covid-19 pandemic and restrictions on in-person gatherings and travel which may be in place at the time of the Company’s 2020 Annual General Meeting, the Company will consider available methods of facilitating virtual attendance by shareholders at the Annual General Meeting. Further details regarding the All shareholders receive copies of nature of the Annual General Meeting and shareholders notices by email or post and a how shareholders may ask questions about copy of the annual report is distributed to agenda items will be contained in the notice all shareholders who elect to receive one of meeting. The Annual General Meeting (hardcopy in the mail or electronically). The features an address by the Chairman and an Company’s most recent annual report is also extensive presentation by the CEO which is available on the Company’s website. also released as an ASX announcement for Website Information The Company has established a website at www.beamcommunications.com, where shareholders can access information about the Company’s corporate governance policies and practices. Information lodged on this website in a specific corporate governance section includes: • Board Charter; • Audit Committee Charter; • Risk Management Policy; • Remuneration Policy; • Securities Trading Policy; • CEO and CFO Declarations; • Whistle Blower Policy; • Code of Conduct; • Election of Directors Policy; • Disclosure Policy; • Shareholder Communication Policy; • Health and Safety Policy; • Environmental and Community shareholders who cannot attend the meeting. A description of the arrangements the Company has to promote communications with shareholders is detailed in the Shareholder Communication Policy, available at the Company’s website. Recommendation 6.4: Electronic Communication Shareholders may elect to send communication to and receive communications from the Company and its Share Registry electronically. The contact email address for the Company is info@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 Recommendation 7.1: Risk Committee Due to the size of the Company and the nature of the Company’s operations, a formal Risk Committee has not been established. is available on the Company’s website. Relations Policy; • Corporate Ethics Policy; and • Related Parties and Conflicts Policy. 24 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D The Board is responsible for ensuring parameters and compliance information are Risk Management Policy, available at the appropriate measures are in place in order to reported monthly to the Board by the CEO Company’s website. manage risk in line with the Company’s risk and CFO. strategy. An external consultant has assisted the Board in this process. The Board has required management to implement internal control systems to manage the Company’s material business risks and to report on whether risks are being effectively managed. Arrangements put in place by the Board to monitor risk include: The Board has adopted reporting procedures which allow it to: • monitor the Company’s compliance with the continuous disclosure requirements of the ASX; and Recommendation 7.4: Exposure to Risks The Company regularly undertakes reviews of risks that may be material to its business. The review examines the processes and procedures that the Company must initiate to control and/or mitigate these risks from • assess the effectiveness of its risk impacting upon the performance of the management and control framework. Company. The key risk categories to which The Company recognises, in particular, the environmental and social risks to • review of risk areas at monthly Board which it may be exposed. The Company meetings; considers environmental risk to be the • regular monthly reporting to the Board ability to continue its undertakings without in respect of operations, the financial compromising the health of the ecosystems position of the Company and new in which it operates. The Company views contracts; social sustainability as the ability to continue • reports by the Chairman of the Audit operations in a manner that is acceptable to Committee; social norms. the Company is exposed, and how it manages or intends to manage those risks, are set out in the Risk Management Policy on the Company’s website. 8. Remunerate Fairly and Responsibly Recommendation 8.1: Remuneration 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 committee. Instead time is set aside at two Board meetings each year specifically to address the matters usually considered by a remuneration committee. Executive Directors absent themselves during discussion of their remuneration. The Board does not consider that the Company currently has any material exposure to environmental or social sustainability risk. Since the beginning of the ongoing Covid-19 pandemic, the Board has continued to monitor the impact of the pandemic on the Company’s operations, compliance obligations and finances, and risks to the Company resulting from the pandemic associated with macroeconomic factors such as reduced merchant and At these two meetings the Board reviews customer activity and growth. The Company the following: has provided and intends to continue to provide updates to the market on the impact of Covid-19 on the Company periodically. • the Company’s remuneration, recruitment, retention and termination policies and procedures for senior The Board intends to manage risks related to executives; Covid-19 and other social and environmental • senior executive remuneration and risks in accordance with the Company’s Risk incentives; Management Policy, if such risks should be • superannuation arrangements; identified in the future. • remuneration framework for Directors; • attendance and reports by the Managing Director, CFO and the Company’s management team at Board Meetings; and • any Director may request that operational and project audits be undertaken either internally or be external consultants. Recommendation 7.2: Risk Management Framework The Company has implemented a risk management program that enables the 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 liquidity). To mitigate these risks, the Company has established risk and assurance policies and The Company reviews its risk management procedures, which aim to: • assist management to discharge its corporate and legal responsibilities; and framework on at least an annual basis. Such a review took place in the 2019-2020 financial year with input from external consultants. The Company’s Risk Management Policy is • assure management and the Board that available on the Company’s website. the framework is effective. Responsibility for control and risk management is delegated to the appropriate levels of management within the Company and the CEO has ultimate responsibility to the Board for risk management and control. Areas of significant business risk to the Company are detailed in the Business Plan presented to the Board by the CEO at the start of each financial year. The Board reviews and approves the parameters under which significant business risks will be managed before adopting the Business Plan. Risk 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. The Audit Committee meets regularly to ensure, amongst other things, that the risk management internal control structures and • whether there is any gender or other inappropriate bias in remuneration for directors, senior executives or other employees. Recommendation 8.2: Remuneration of Executive and Non-Executive Directors The remuneration structure of Non- Executive Directors and executives is disclosed in the Remuneration Report within the Directors’ Report in the Annual Report. The remuneration of Non-Executive Directors is determined by the Board having regard to the level of fees paid to Non- Executive Directors by other companies of similar size and stature. and compliance with laws and regulations The aggregate amount payable to the are operating effectively. Details of the Audit Committee are also set out in the Company’s Non-Executive Directors must not exceed the maximum annual amount C O R P O R A T E G O V E R N A N C E 25 ANNUAL REPORT 2020 approved by the Company’s shareholders, currently $500,000 as determined at the Long-Term Incentives The Company has a share options scheme Company Secretary be required to discuss the proposed trading intentions with the Chairman. General Meeting held on 3 August 2007. which is discussed further below which is The Board recognises that it is the individual The Company is committed to remunerating 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 demonstrate a clear relationship between designed to provide long-term incentives to responsibility of each Director to comply with senior executives. Termination Payments Senior executives may be entitled to a this policy. Breaches of this policy may lead to disciplinary action being taken, including dismissal in serious cases. The Company’s payment upon termination of employment Securities Trading Policy is available on the from the Company. Where so entitled, the Company’s website. termination payment has been agreed in the senior executive’s contract of employment and it is not payable where termination of employment is for misconduct. The Corporations Act prohibits the key management personnel of an ASX listed company established in Australia, or a closely related party of such personnel, from entering performance and remuneration. Further details in relation to the Company’s into an arrangement that would have the effect Consequently, Executive Directors and senior executives’ remuneration consists of the following elements: remuneration policies are contained in the of limiting their exposure to risk relating to an Remuneration Report within the Directors’ element of their remuneration that either has Report in the Annual Report. The Company’s not vested or has vested but remains subject to Remuneration Policy is available on the a holding lock. E C N A N R E V O G E T A R O P R O C • fixed salary; • short-term incentive bonus based on Company’s website. performance; Recommendation 8.3: Equity Based • long-term incentive share/option scheme; and • other benefits including superannuation. Fixed Salary Remuneration 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 The salary of Executive Directors and 2017 and authorises the Directors to issue senior executives is determined from options up to 10% of the shares issued by the a review of the market and reflects Company. The number of shares and options core performance requirements and issued under the scheme is reasonable in expectations. In addition, the Company relation to the existing capitalisation of the considers the following: • the scope of the individual’s role; • the individual’s level of skill and experience; • the Company’s legal and industrial 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. obligations; The Company has a Securities Trading Policy • labour market conditions; and which aims to: • the size and complexity of the Company’s business. • protect stakeholders’ interests at all times; Performance Bonus • ensure that directors and employees do 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 remuneration is paid where a clear contribution to successful outcomes for the Company is 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 of the various jurisdictions in which transactions may take place. demonstrated and the individual attains and Purchase or sale of the Company’s shares excels against pre-agreed key performance and/or options over such shares by Directors, indicators during a performance cycle. executives and staff of the Company should Other Benefits Senior executives are entitled to statutory superannuation and may also receive other bonus payments subject to the discretion of the Board. only occur in circumstances where the market is considered to be fully informed of the Company’s activities. This policy requires that the relevant person notify the Company Secretary of their intention to trade in the Company’s shares and/or options over such shares prior to the transaction and that the 26 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Count on your connection, anywhere everytime. ZOLEO Global Satellite Communicator two-way messaging sos alert check-in weather 27 ANNUAL REPORT 2020BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020 Revenue Other income Year ended 30 June 2020 30 June 2019 $ $ 14,923,300 17,776,666 1,917,865 743,863 Note 2(a) 2(b) Changes in inventories of raw materials, finished goods and work in progress 839,059 (1,421,131) Raw materials, consumables and other costs of sale 2(c) (9,192,850) (9,307,401) Employee benefits expense Depreciation expense Amortisation expense Impairment expense Finance costs expense Auditor remuneration expense S T N E M E T A T S L A I C N A N I F 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) 11(a) 11(a) 2(d) 22 7 2(e) (2,665,464) (3,329,910) (211,015) (63,233) (1,520,080) (1,178,889) (2,791,218) (33,910) (271,516) (139,587) (75,800) (68,000) (103,423) (88,194) (486,783) (298,981) (182,413) (175,364) (405,785) (362,563) (389,617) (327,692) (901,782) (1,003,677) (1,517,523) 721,997 3(a) (111,711) (382,867) (1,629,234) 339,129 - - Total comprehensive income (loss) for the year (1,629,234) 339,129 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) 24 24 (0.31) (0.31) (0.64) (0.64) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 28 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020 Current assets Cash and cash equivalents Inventories Trade and other receivables Total current assets Non-current assets Interest in joint venture Plant and equipment Right-of-use assets Deferred tax assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Other financial liabilities Lease liabilties Provisions Total current liabilities Non-current liabilities Other financial liabilities Lease liabilties Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 30 June 2020 30 June 2019 Note $ $ 4 5 6 7 8 9 10 11 12 13 14 15 13 14 15 873,960 2,532,285 3,576,082 2,737,022 2,337,993 2,189,620 6,788,035 7,458,927 404,918 93,811 519,068 100,227 102,957 - 1,015,413 863,745 3,803,161 5,580,260 5,836,371 6,647,190 12,624,406 14,106,117 2,785,037 3,502,547 971,392 182,930 950,615 - 1,294,111 1,190,085 5,233,471 5,643,247 818,737 514,606 47,120 641,665 - 32,713 1,380,463 674,378 6,613,934 6,317,625 6,010,472 7,788,492 16 7,646,641 7,646,641 320,394 411,189 (1,956,563) (269,338) 6,010,472 7,788,492 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 29 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020 Balance at 1 July 2018 Profit for the year Other comprehensive income for the year, net of income tax Issued capital $ Reserves $ Retained earnings $ Total equity $ 7,646,641 411,189 (608,467) 7,449,363 - - - - 339,129 339,129 - - Balance at 30 June 2019 7,646,641 411,189 (269,338) 7,788,492 Balance at 1 July 2019 7,646,641 411,189 (269,338) 7,788,492 Effect of initial application of AASB 16 - (Note 1) Deferred tax effect of initial application of AASB 16 (Note 1) - - - - (178,190) (178,190) 29,403 29,403 Balance at 1 July 2019 - As restated 7,646,641 411,189 (418,125) 7,639,705 Profit for the year Other comprehensive income for the year, net of income tax Transactions with owners in their capacity as owners: - Adjustment for employee share options lapsed - - - (1,629,234) (1,629,234) - - - - - (90,795) 90,795 Balance at 30 June 2020 7,646,641 320,394 (1,956,563) 6,010,472 S T N E M E T A T S L A I C N A N I F The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 30 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2020 Cash flow from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and finance charges paid Income tax paid COVID-19 relief Note Year ended 30 June 2020 30 June 2019 $ $ 15,393,052 17,919,076 (13,614,662) (15,705,440) 717 3,192 (220,743) (139,587) (233,977) (17,755) 230,000 - Net cash (used in)/ provided by operating activities 19(a) 1,554,387 2,059,485 Cash flow from investing activities Purchases of plant and equipment 8(a) (56,595) (44,341) Development costs capitalised Research and development grant Interest in joint venture Net cash used in investing activities Cash flow from financing activities Net loan payments Lease liability repayments Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year (2,534,199) (1,957,551) - 831,603 (689,997) (436,443) (3,280,791) (1,606,732) 220,978 1,550,607 (152,900) - 68,078 1,550,607 (1,658,326) 2,003,360 2,532,285 528,925 Cash and cash equivalents at end of financial year 19(b) 873,960 2,532,285 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 31 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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. (ii) New or amended Accounting Standards and Interpretations adopted The Group 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. AASB 16 Leases AASB 16 Leases became mandatorily effective on 1 July 2019. Therefore this standard has been applied for the first time in this set of financial statements. The transition approach and impact of this standard have been described below. AASB 16 ‘Leases’ replaces AASB 117 ‘Leases’. The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting AASB 16 being recognised in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated. The transition impact upon initial adoption of AASB 16 on statement of financial position (increase/ (decrease)) is as follows: Right-of-use assets Deferred tax assets Lease liabilities Retained earnings Operating lease commitments disclosed under AASB 117 as at 30 June 2019 New lease commitments as at 1 July 2019 Low value leases not recognised as a right-of-use asset Adjustment in relation to variable lease payments Operating lease liabilities before discounting Discounted using incremental borrowing rate Lease liability recognised under AASB 16 as at 1 July 2019 Right-of-use asset recognised under AASB 16 as at 1 July 2019 Reduction in opening retained earnings as at 1 July 2019 Deferred tax effect of initial application of AASB 16 as at 1 July 2019 1 July 2019 $ 677,829 29,403 (856,019) (148,787) 1 July 2019 $ 963,508 32,916 - 9,700 1,006,124 (150,105) 856,019 677,829 (148,787) 29,403 S T N E M E T A T S L A I C N A N I F When measuring lease liabilities for lease that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 July 2019. The weighted average rate applied is 7.3% to 8%. Leases accounting policy The Group assesses whether a contract is or contains a lease, at inception of the contract. The entity recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. 32 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. Summary of significant accounting policies (continued) (ii) New or amended Accounting Standards and Interpretations adopted (continued) The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the entity uses its incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received, any initial direct costs and an estimate of any costs to dismantle and remove the asset at the end of the lease. They are subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. They are subject to impairment or adjusted for remeasurement. AASB Interpretation 23 Uncertainty over Income Tax Treatment The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 112. It does not apply to taxes or levies outside the scope of AASB 112, nor does it include specific requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses the following: The assumptions an entity makes about the examination of tax treatments by taxation authorities • Whether an entity considers uncertain tax treatments separately or collectively • • • How an entity considers changes in facts and circumstances How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credit credits and tax rates Upon adoption of the interpretation, the Group considered whether it has any uncertain tax positions, particular those relating to transfer pricing. The Company’s and the subsidiaries’ tax fillings in different jurisdictions include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Group determined, based on its tax compliance and transfer pricing study,that it is probable that its tax treatments (including those for the subsidiaries) will be accepted by the taxation authorities. The interpretation did not have an impact on the consolidated financial statements of the Group. (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 27. (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. F I N A N C I A L S T A T E M E N T S 33 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (b) Income tax (continued) S T N E M E T A T S L A I C N A N I F 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 2020. (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. 34 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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 17 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. F I N A N C I A L S T A T E M E N T S 35 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (k) Government grants S T N E M E T A T S L A I C N A N I F 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) 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. (o) Critical accounting estimates, judgments and assumptions The preparation of the Group’s consolidated financial statement requires management to make judgements, estimates and assumptions. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. Information about areas of estimation uncertainty and critical assumptions are described in the following notes: • Note 3 Deferred tax asset - tax losses • Note 11 Impairment of intangible assets • Note 14 Lease liabilities - Estimating the incremental borrowing rate • Note 21 Share-based payment - Determination of valuation model and assumptions about incentive plan 36 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 1. Summary of significant accounting policies (continued) (iii) Accounting policies (continued) (p) New accounting standards for application in future periods The below are Accounting Standards and Interpretations issued by the AASB that are not yet mandatorily applicable to the Group, with an assessment of the potential impact of such pronouncements on the Group when adopted in future periods: Accounting Standards and Interpretations • AASB 2019-1 Conceptual Framework for Financial Reporting Amendments to Australian Accounting Standards - Reference to conceptual framework • AASB 2018-6 Amendments to AASs Definition of a Business • AASB 2018-7 Amendments to AASs Definition of Material • AASB 2019-3 Amendments to AASs Interest Rate Benchmark Reform Business • AASB 2019-5 Amendments to AASs Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia Business • AASB 2020-1 Amendments to AASs Classification of Liabilities as Current or Non-current Business • AASB 2014-10 Amendments to AASs – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Applicable to annual reporting periods beginning on or after 1 July 2020 1 July 2020 1 July 2020 1 July 2020 1 July 2020 1 July 2022 1 July 2022 The Group is in the process of reviewing these amended standards and interpretations however it is not expected that this will have a significant impact on the Group’s consolidated financial statements. F I N A N C I A L S T A T E M E N T S 37 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 2 Profit (loss) before income tax (a) Disaggregation of revenue: Type of goods or services - Equipment sales - Airtime - Other Geographical markets - Australia - United States of America - United Arab Emirates - United Kingdom - China - Canada - Japan - Other foreign countries Timing of revenue recognition - Goods and services transferred at a point in time - Goods and services transferred over time (b) Other income - Research and Development grant - Interest - COVID-19 relief - Other The Research and Development grant $1,414,549 includes $865,394 brought to account upon full amortisation of the capitalised Thuraya WE terminal, in accordance with the accounting policy detailed in Note 1 (iii) (k). (See also Note 11 (a).) The interest income includes interest-free benefit of $163,470 recognised on a U$600,000 loan from Roadpost. (See also Note 13 (b).) The Group was eligible to receive a JobKeeper allowance of $270,000 and a Cash Flow Boost payment of $62,500 from the Australian government. (See also Note 28.) (c) Cost of sales Opening inventories Add: Purchases and other stock adjustments Closing inventories (Note 5) (d) Finance costs expense Interest expense on financial liabilities Interest expense on lease liabilities (e) Other expenses include: - Product development costs expensed - Operating lease payments 3 Income tax (a) The components of tax expense comprise: S T N E M E T A T S L A I C N A N I F 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 - Deferred tax effect of initial application of AASB 16 (Note 1) 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: Profit (loss) from ordinary activities Income tax expense (benefit) at statutory rate of 27.5% (2019: 27.5%) Add / (Less): Tax effect of: - Tax reconciling items - Current year tax loss - Deferred tax assets (gain) / loss - Deferred tax effect of initial application of AASB 16 (Note 1) Income tax expense attributable to the Consolidated Group 38 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Year ended 30 June 2020 $ 30 June 2019 $ 13,023,662 1,514,365 385,273 14,923,300 17,179,648 526,060 70,958 17,776,666 3,115,480 4,045,000 1,048,492 1,321,229 284,976 2,168,610 450,198 2,489,314 14,923,299 3,976,465 4,504,112 3,960,465 1,253,935 783,920 783,134 488,406 2,026,228 17,776,666 13,023,662 1,899,638 14,923,300 17,179,648 597,018 17,776,666 1,414,549 164,187 332,500 6,629 1,917,865 740,671 3,192 - - 743,863 2,737,022 9,192,850 11,929,872 (3,576,082) 8,353,790 4,158,153 9,307,401 13,465,554 (2,737,022) 10,728,532 213,864 57,652 271,516 273,796 47,005 139,587 - 139,587 311,516 232,125 233,977 (368,234) 216,565 29,403 111,711 17,755 (7,550) 372,662 - 382,867 (1,517,523) (417,319) 721,997 198,549 446,721 233,977 (122,266) (29,403) 111,711 (198,549) 17,755 365,112 - 382,867 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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% (2019: 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 $837,632 (2019: $982,008); and capital tax losses of $1,850,085 (2019: $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 $233,977 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 Finished goods Less: Provision for stock obsolescence 6 Trade and other receivables (a) Current Trade receivables Less: Provision for expected credit losses Other receivables and prepayments Rental & other security deposits Year ended 30 June 2020 30 June 2019 $ $ 873,960 2,532,285 795,681 829,686 3,025,401 2,102,336 (245,000) (195,000) 3,576,082 2,737,022 1,342,615 1,207,740 - 881,854 113,523 - 867,517 114,363 2,337,993 2,189,620 (b) Ageing reconciliation Gross amount Within trade Past due but not impaired (days overdue) terms 31 - 60 61 - 90 90+ Past due & impaired 2020 Current Trade receivables Other receivables Rental and other security deposits Expected credit loss rate 2019 Current Trade receivables Other receivables Rental & other security deposits Expected credit loss rate 1,342,615 1,135,181 202,932 881,854 113,523 0% 881,854 113,523 0% - - 0% 66 - - 0% 4,436 - - 0% 1,207,740 867,517 114,363 0% 572,116 867,517 114,363 0% 462,159 4,993 168,472 - - 0% - - 0% - - 0% - - - 0% - - - 0% All trade receivables past due terms but not impaired are expected to be received in the normal course of business. F I N A N C I A L S T A T E M E N T S 39 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 7 Interest in joint venture Investment in joint venture Group’s accumulated share of loss from Zoleo Inc joint venture 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 2020. The Group contributed U$475,000 to the joint venture during the year, which was recognised as an increase in investment as per the equity accounting method. Summarised financial information: Summarised statement of financial position: S T N E M E T A T S L A I C N A N I F 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 Cost of goods sold Expenses: Operating Expenses Marketing Professional services Other Expenses Total Expenses Loss for the year Group’s share of loss for the year ended 40 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Year ended 30 June 2020 30 June 2019 $ $ 1,117,717 427,919 (712,799) (327,692) 404,918 100,227 Zoleo Inc 30 June 2020 30 June 2019 1,430,190 1,430,190 530,756 530,756 620,365 2,258,488 330,301 855,554 2,878,853 1,185,855 (1,448,663) (655,099) 291 285 (1,448,954) (655,384) (1,448,663) (655,099) 2,174,203 2,196,968 - - 572,107 427,777 21,626 59,190 103,545 756,468 81,388 100,162 46,057 655,384 (779,233) (655,384) (389,617) (327,692) BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 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 Total plant and equipment (a) Movements in carrying amounts Movements in the carrying amounts of each class of plant and equipment between the beginning and the end of the current financial year Year ended 30 June 2020 $ 30 June 2019 $ 491,431 481,592 (448,980) (428,195) 42,451 53,398 390,971 370,110 (356,412) (331,187) 34,559 38,923 44,458 (27,657) 16,801 36,199 (25,562) 10,637 93,811 102,957 Balance at 1 July 2018 Additions Disposals Depreciation expense Balance at 30 June 2019 Additions Disposals Depreciation expense Balance at 30 June 2020 9 Right-of-use assets Balance recognised at the beginning of the year Additions Disposals Balance at the end of year Accumulated depreciation Balance recognised at the beginning of the year Charge for the year Disposals Balance at the end of year Carrying amount Office Furniture & Equipment Computer & Test Equipment Rental Equipment 50,262 23,332 - (20,196) 53,398 9,839 - (20,785) 42,452 63,930 12,797 - (37,805) 38,922 20,861 - (25,225) 34,558 8,806 8,212 (1,148) (5,233) 10,637 25,895 (13,486) (6,245) 16,801 Total 122,998 44,341 (1,148) (63,234) 102,957 56,595 (13,486) (52,255) 93,811 Year ended 30 June 2020 $ 30 June 2019 $ F I N A N C I A L S T A T E M E N T S 41 - - - - - - - - - 677,829 - - 677,829 - (158,761) - (158,761) 519,068 158,761 57,652 1,200 22,558 The Group leases several assets which includes building, forklift and printers and the lease term of these assets are 9 years, 3 years and 5 years respectively. However the lease term left at the end of current reporting period is less then 4 years. There are no variable lease payment terms in any lease contracts. There are no extension or termination options on the leases. The Group received a rental relief for the office buildings in light of COVID-19. 15% of May and June rents were deferred for 24 months and another 15% waived. The deferred amount of $4,934 will be paid in split amounts in May and June 2022. Amount recognised in profit or loss Depreciation expense on right-of-use assets Interest expense on lease liabilities Expense relating to short-term leases Expense relating to leases of low value assets ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 10 Tax Non-current Deferred tax assets Deferred tax assets: Carrying amount of patents and capital raising costs Accruals Provisions Lease Liabilities Tax losses Deferred tax liability: Product development costs Right-of-Use Assets S T N E M E T A T S L A I C N A N I F 11 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 Balance at Charged to Balance at 1 July2019 Income 30 June 2020 235 73,070 238,171 (91) 18,736 26,919 - 115,093 144 91,806 265,090 115,093 1,473,012 (216,565) 1,256,447 1,784,488 (55,908) 1,728,580 (920,743) 293,222 (627,521) - (85,646) (85,646) 863,745 151,668 1,015,413 Year ended 30 June 2020 30 June 2019 $ $ 16,623,642 14,089,443 (12,820,481) (8,509,183) 3,803,161 5,580,260 5,580,260 4,835,509 2,534,199 1,957,550 (1,520,080) (1,178,889) (2,791,218) (33,910) 3,803,161 5,580,260 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 FY2020. In line with the accounting policy detailed in Note 1 (iii) (h) the carrying value of assets is reviewed to determine whether there is an indication that those assets have been impaired. At 30 June 2020 the Group decided that three projects should have their carrying value reduced to zero at a cost of $820,565 as they had been terminated. In addition in the absence of further orders after the initial contractual quantity was delivered in November 2018, the Group has decided to reduce the partially amortised carrying value of the Thuraya WE terminal at a cost of $1,970,653. Also in line with accounting policy the remaining relevant deferred R&D grant received has been brought to account giving an offsetting credit of $865,394. (See also Note 2 (b)). 12 Trade and other payables Current Trade payables and accruals Deferred income Included in Deferred Income at 30 June 2020 is $257,307 of deferred R&D grant income (2019: $ $1,671,857). 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 $1,414,549 of R&D grant income being recognised in the statement of profit & loss for the year as shown in Note 2 (b). 42 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 2,258,898 1,310,299 526,139 2,785,037 2,192,248 3,502,547 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 13 Other financial liabilities Secured loan (a) Non Current Secured loan (b) Unsecured loan (c) Secured loans (a) The Group has a secured loan finance facility with SGV1 Holdings Limited for US$2,000,000. As at 30 June 2020, US$666,666 (A$971,392) has been drawn down. The security is a general security interest over the group’s assets and undertakings, ranking second behind the bank facilities. It has been utilized mainly for the purposes of funding product development projects. On 20 August 2020, SGV1 Holdings Limited extended the U$2mil secured loan facility from 1 January 2021 out until 1 April 2022. Year ended distribute the Zoleo product, a satellite based messaging device, including associated airtime contracts. (b) In addition the Company 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 The interest-free Assistance Loan is to assist Beam to establish the business and is repayable at Beam’s sole discretion. The interest-free benefit was recognised at $163,470. (See also Note 2 (b).) As at 30 June 2020, US$600,000 (A$758,703) has been drawn down. The total loan balance of A$758,703 represents the fair value of the loan at 30 June 2020. The loan is secured by Beam’s pledge of shares in Zoleo Inc, an entity established with Roadpost to manage the Zoleo business. (c) The Group has an unsecured loan facility with supplier DEK Technologies Pty. Ltd. for A$400,000 to fund the GO2 development costs. Beam pays 50% of each invoice by the due date and the remaining 50% is taken to the loan facility. The unsecured loan facility is for a 24 months term from the first invoice payable date, unless Beam repays the loan in full prior to the expiration of the 24 month period. 30 June 2020 30 June 2019 $ $ 16,623,642 14,089,443 (12,820,481) (8,509,183) 3,803,161 5,580,260 5,580,260 4,835,509 2,534,199 1,957,550 (1,520,080) (1,178,889) (2,791,218) (33,910) 3,803,161 5,580,260 14 Lease liabilities (a) Carrying amounts and movements: At beginning of the year Additional Decrease in liability At the end of the year Disclosed as: Current Non-current 2,258,898 1,310,299 526,139 2,785,037 2,192,248 3,502,547 The entity does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group’s treasury function. The incremental borrowing rate applied to various lease liabilities recognised under AASB 16 ranges between 7.30% - 8%. The maturity analysis of lease liabillities are disclosed in Note 17(d). 11 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 FY2020. In line with the accounting policy detailed in Note 1 (iii) (h) the carrying value of assets is reviewed to determine whether there is an indication that those assets have been impaired. At 30 June 2020 the Group decided that three projects should have their carrying value reduced to zero at a cost of $820,565 as they had been terminated. In addition in the absence of further orders after the initial contractual quantity was delivered in November 2018, the Group has decided to reduce the partially amortised carrying value of the Thuraya WE terminal at a cost of $1,970,653. Also in line with accounting policy the remaining relevant deferred R&D grant received has been brought to account giving an offsetting credit of $865,394. (See also Note 2 (b)). 12 Trade and other payables Current Trade payables and accruals Deferred income Included in Deferred Income at 30 June 2020 is $257,307 of deferred R&D grant income (2019: $ $1,671,857). 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 $1,414,549 of R&D grant income being recognised in the statement of profit & loss for the year as shown in Note 2 (b). Year ended 30 June 2020 30 June 2019 $ $ 971,392 950,615 758,703 641,665 60,034 - 818,737 641,665 Year ended 30 June 2020 30 June 2019 $ 856,019 - (158,483) 697,536 182,930 514,606 697,536 $ - - - - - - - F I N A N C I A L S T A T E M E N T S 43 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 15 Provisions Current Employee benefits Warranty costs Non current Employee benefits (a) Movements in provisions Balance at the beginning of the year Additional provisions Amounts used Balance at the end of the year S T N E M E T A T S L A I C N A N I F 16 Issued capital Issued and paid up capital: Ordinary fully paid shares The Company has 52,873,452 ordinary shares on issue at 30 June 2020 (2019: 52,873,452). Balance at 30 June 2019 Shares Issued Balance at 30 June 2020 (a) Options over issued capital The total number of potential ordinary shares attributable to options outstanding as at 30 June 2020 is 1,697,025 (2019: 2,486,550), of which 789,525 (2019: 1,579,050) were issued to employees under the Company’s Share Option Incentive Plan and 907,500 (2019: 907,500) were issued to Directors following shareholder approval. Refer Note 21: Share Based Payments, for details of options issued, exercised and lapsed during the financial year and the options outstanding at year end. Year ended 30 June 2020 30 June 2019 $ $ 1,082,979 211,132 998,925 191,160 1,294,111 1,190,085 47,120 32,713 Employee Warranty benefits costs Total 1,031,638 191,160 1,222,798 516,827 34,076 550,904 (418,366) (14,104) (432,471) 1,130,099 211,132 1,341,231 Year ended 30 June 2020 $ 30 June 2019 $ 7,646,641 7,646,641 Number of shares $ 52,873,452 7,646,641 - - 52,873,452 7,646,641 44 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 16 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 2020 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. 17 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: 2020 Financial asset Cash assets Receivables TOTAL Financial liability Payables (excluding deferred income) Lease liabilities TOTAL 2019 Financial asset Cash assets Receivables TOTAL Floating Interest Fixed Interest Weighted Average Interest Rate Non-Interest bearing TOTAL 873,960 - 873,960 - - - - - - 1,031,426 697,536 1,728,962 0.00% 0.00% 10.00% 7.36% - 873,960 2,337,993 2,337,993 2,337,993 3,211,953 3,017,601 4,049,027 - 697,536 3,017,601 4,746,563 2,532,285 - 2,532,285 - - - 0.02% 0.00% - 2,532,285 2,189,620 2,189,620 2,189,620 4,721,905 Financial liability Payables (excluding deferred income) TOTAL - - 905,615 905,615 10.00% 1,996,964 1,996,964 2,902,579 2,902,579 F I N A N C I A L S T A T E M E N T S 45 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 17 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 Year ended 30 June 2020 $ 30 June 2019 $ +/- 10% +/- 10% +/-68,382 +/-68,382 +/-76,142 +/-76,142 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: S T N E M E T A T S L A I C N A N I F 2020 Asset class Cash and cash equivalents Receivables < 1 Year 1 - 5 Years Total contractual cash flows Carrying amount 873,960 2,224,471 - 873,960 873,960 113,522 2,337,993 2,337,993 Payables (excluding deferred income) (3,230,290) (818,737) (4,049,027) (4,049,027) Lease liabilities Net maturities 2019 Asset class Cash and cash equivalents Receivables (182,930) (514,606) (697,536) (697,536) (314,789) (1,219,821) (1,534,610) (1,534,610) 2,532,285 2,075,256 - 2,532,285 2,532,285 114,364 2,189,620 2,189,620 Payables (excluding deferred income) (2,260,914) (641,665) (2,902,579) (2,902,579) Net maturities 2,346,627 (527,301) 1,819,326 1,819,326 (e) Net fair values of financial assets and liabilities Secured loan with Roadpost lnc. was measured at fair value under AASB 13 and classified as Level 3 in the fair value hierarchy. The Group received a financing benefit, being non-cash consideration, in the form of an interest free loan. The Group has used discount rate of 6% to calculate its interest free benefit. This assumption is not directly observable. The increase in the discount rate would decrease the fair value of the loan. 46 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 18 Capital expenditure commitments 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. 19 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 Interest free benefit Notional interest expense Changes in assets and liabilities: Increase in trade and other receivables (Increase) / Decrease in inventory (Increase) / 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 Net cash (used in)/ provided by operating activities Year ended 30 June 2020 30 June 2019 $ $ 2,707,924 2,628,784 295,754 727,127 - - 3,003,678 3,355,911 (1,629,234) 339,129 211,015 63,233 1,520,080 1,178,889 2,791,218 13,486 389,617 158,113 (163,470) 50,773 33,910 1,148 327,692 54,605 - - (281,325) (446,617) (889,059) 1,351,131 (122,266) 365,112 (662,993) (1,776,922) 98,461 19,972 50,000 441,993 56,180 70,000 1,554,387 2,059,485 F I N A N C I A L S T A T E M E N T S 47 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 Year ended 30 June 2020 30 June 2019 $ $ 19 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) 873,960 2,532,285 (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 21. (d) 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 2020, 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 2020. - a US dollar overdraft with a limit of US$320,000. The US dollar overdraft was not utilised at 30 June 2020. 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 2020. The Consolidated Group’s banking facilities are subject to the Group satisfying quarterly covenants set by the bank. The Group did not meet all covenants during the year ended 30 June 2020, due mainly to the timing of major sales orders, however the bank reconfirmed the banking facilities as continuing on 18 August 2020. The Consolidated Group had partly unused secured loan facilities with SGV1 Holdings Limited and S T N E M E T A T S L A I C N A N I F Roadpost Inc. Refer to Note 13 for details. 20 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 Post-employee benefits Other long-term benefits Termination benefits Share-based payments 1,133,349 1,163,341 78,428 13,365 76,122 4,224 - - - - 1,225,142 1,107,281 48 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 21 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 2020: (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). 884,813 of these options lapsed or were cancelled in the periods prior to 30 June 2020. None of these options are outstanding as at 30 June 2020. (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 2020. 789,525 of these options are outstanding as at 30 June 2020. (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 2020. (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: Outstanding at the beginning of the financial year 2,486,550 0.1950 3,086,550 0.2834 30 June 2020 30 June 2019 No. WAEP $ No. WAEP $ 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 - - - - (789,525) - - - - - - - - - - - - - (600,000) 0.6500 Outstanding at the end of the financial year 1,697,025 0.1950 2,486,550 0.1950 Exercisable at the end of the financial year 1,697,025 0.1950 2,486,550 0.1950 (c) Notes to Share Based Payments The weighted average remaining contractual life for the share options outstanding as at 30 June 2020 is 0.30 years (2019: 1.12 years). The exercise price for options outstanding at the end of the year was $0.195 (2019: $0.195). The weighted average fair value of options granted during the year was $0 (none granted) (2019: $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 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 22 Remuneration of auditors Remuneration of the Auditor for auditing or reviewing financial reports of the Consolidated Group 75,800 68,000 23 Related party transactions Related party transactions with the Seasons Group and SGV1 Holdings Limited, which are related to Mr C Year ended 30 June 2020 30 June 2019 $ $ 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 S T N E M E T A T S L A I C N A N I F 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 2020 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 13 (a) for more details. 24 Earnings per share Overall operations Basic earnings (loss) per share Diluted earnings (loss) per share 2,450,879 3,764,783 (87,978) (124,323) 16,854 9,316 (45,893) (47,187) 971,392 950,615 ¢ (0.31) (0.31) No. ¢ 0.64 0.64 No. Weighted average number of ordinary shares used in the calculation of Basic Earnings Per Share 52,873,452 52,873,452 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 Anti-dilutive options on issue not used in dilutive EPS calculation 52,873,452 52,873,452 1,697,025 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 Earnings (loss) used in the calculation of Dilutive Earnings Per Share $ $ (1,629,234) (1,629,234) 339,129 339,129 50 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D Year ended 30 June 2020 30 June 2019 $ $ 2,450,879 3,764,783 (87,978) (124,323) 16,854 9,316 (45,893) (47,187) 971,392 950,615 ¢ (0.31) (0.31) No. ¢ 0.64 0.64 No. 22 Remuneration of auditors 23 Related party transactions Hung, a director of the company. Transactions with the Seasons Group - Purchases - Sales - Receivables - Payables Amounts outstanding with the Seasons Group 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 2020 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 13 (a) for more details. 24 Earnings per share Overall operations Basic earnings (loss) per share Diluted earnings (loss) per share Weighted average number of ordinary shares used in the calculation of Basic Earnings Per Share 52,873,452 52,873,452 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 Anti-dilutive options on issue not used in dilutive EPS calculation 52,873,452 52,873,452 1,697,025 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 Earnings (loss) used in the calculation of Dilutive Earnings Per Share $ $ (1,629,234) (1,629,234) 339,129 339,129 Remuneration of the Auditor for auditing or reviewing financial reports of the Consolidated Group 75,800 68,000 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 Related party transactions with the Seasons Group and SGV1 Holdings Limited, which are related to Mr C 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 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 25 Segment reporting (a) Sole operating segment The consolidated statement of financial position discloses the sole operating segment assets and liabilities which are held within Australia. (b) 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 States accounting for 19% of external revenue (2019: the largest customer was in the United Arab Emirates, 20%) and the second largest customer, located in Canada, accounted for 7% of external revenue (2019: second largest customer was in the United States, 18%). The next most significant customer also accounts for 6% of external revenue (2019: 8%). 26 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 Loss for the year attributable to owners of the Company Other comprehensive income Year ended 30 June 2020 30 June 2019 $ $ (694,156) (1,276,759) 122,266 (365,112) (571,890) (1,641,871) - - Total loss and other comprehensive income for the year attributable to owners of the Company (571,890) (1,641,871) (b) Statement of financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Deficiency of net assets Equity Issued capital Reserves Accumulated losses Total equity 412,459 1,144,869 1,611,491 956,065 2,023,950 2,100,934 4,750,545 4,467,017 561,726 32,713 5,312,271 4,499,730 (3,288,321) (2,398,796) 7,646,641 7,646,641 320,394 411,189 (11,255,356) (10,456,626) (3,288,321) (2,398,796) F I N A N C I A L S T A T E M E N T S 51 ANNUAL REPORT 2020 BEAM COMMUNICATIONS HOLDINGS LIMITED ABN 39 010 568 804 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2020 26 Parent company disclosures (continued) (c) Guarantees The parent company has no contractual guarantees in place. (d) Contractual commitments The parent entity has no capital expenditure commitments. (e) Significant accounting policies of the parent are the same as those for the consolidated entity. 27 Controlled entities Investments in unquoted corporations being controlled entities: Beam Communications Pty Ltd SatPhonerental Pty Ltd SatPhone Shop Pty Ltd Beam Communications USA Inc Pacarc (PNG) Limited (Dormant) 28 COVID-19 outbreak Incorporated Share class Holding Australia Ordinary Australia Ordinary Australia Ordinary USA Ordinary Papua New Guinea Ordinary 2020 2019 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Conditions created by the COVID-19 pandemic remain highly fluid and are constantly evolving in Australia and world-wide. However, Beam is cautiously optimistic as sales have largely rebounded from the initial and continuing COVID-19 lockdowns internationally. Beam’s operations of sales, warehousing and distribution, based out of Australia, have continued to operate without significant impact and overseas production resumed quickly in China and also in Malaysia although under restictions there. While gross revenues in April and May were 30-35% lower than the same months last year, June recovered significantly such that June quarter was approximately 15% lower than in 2019 and only the April month produced a negative Group operating result. The Australian government announced the implementation of measures to mitigate the impact of COVID-19 and Beam qualified to receive a JobKeeper allowance of $90,000 per month starting in April. Additionally, the Group received a 3 year term loan from the National Australia Bank of $500,000 partially secured by the Australian government immediately after the Reporting period. The impact of COVID-19 has not thus far been as severe as revised modelling had contemplated. Since the start of June, Beam has observed a notable improvement in world-wide interest from consumers for ZOLEO and the inclination for consumers to pursue leisure activities in countries which are not in strict lockdowns such as USA and Canada. This bodes well for the outlook for satellite communication devices however the duration and future direction of the COVID-19 crisis cannot be predicted. 29 Events after the reporting period The Group received a 3 year term loan from the National Australia Bank of $500,000 partially secured by the Australian government on 1 July 2020. On 20 August 2020, SGV1 Holdings Limited extended the US$2m secured loan facility provided to the Group from 1 January S T N E M E T A T S L A I C N A N I F 2021 out until 1 April 2022 (Refer also Note 13). Other than the above, there have been no significant events since 30 June 2020. 30 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 52 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D DIRECTORS’ DECLARATION The directors of Beam Communications Holdings Limited declare that: 1. The financial statements and notes as set out in pages 28 to 52 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 2020 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 2020. This declaration is made in accordance with a resolution of the Board of Directors on 27 August 2020. Mr Simon Wallace Chairman Date: 28 August 2020 D I R E C T O R S ’ D E C L A R A T I O N 53 ANNUAL REPORT 2020 Keeping everyone connected and safe — wherever work takes them. Iridium GO! voice calls sos alert sms two-way gps tracking 54 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 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 2020, 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 2020 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. A U D I T O R ’ S R E P O R T 55 ANNUAL REPORT 2020 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. Key Audit Matter How our audit addressed this matter Impairment of Intangible Assets Refer to Note 11 in the financial statements The Group has intangible assets of $3.8m, being capitalised development costs relating the Marconi and GO! SFX projects. to The Marconi asset was available for use from 29 January 2020, and amortisation commenced during FY20. The GO! SFX project was not available for use as at 30 June 2020. therefore Further, management have determined that an impairment of $2.79m was required on three other projects, including the Thuraya asset. Management have performed an impairment assessment for all other material project assets in use calculation, which based on a value impairment had determined occurred. that no further required judgement We identified this area as a Key Audit Matter due to the size of the intangible assets balance, the management to assess whether any indicators of impairment exist, and where any impairment existed, management judgement involved in determining the value in use of the relevant assets based on the estimated future cash flows generated. Fair Value of Interest Free Loan indicators of T R O P E R S ’ R O T I D U A Our audit procedures in relation to intangible assets included: • Assessing management’s indicators of impairment; review for any • Where existed, indicators assessing management’s impairment assessment by checking the mathematical accuracy of the cash flow model, and reconciling to supporting evidence, such as approved budgets and considering the reasonableness of these budgets; input data • • • the reasonableness Challenging key assumptions, including the cash flow and revenue projections, revenue growth rate, exchange rates, discount rates, and any sensitivities used; and of 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. Reviewing the adequacy of disclosures against the requirements of AASB 136. Refer to Note 13 in the financial statements The group received a $0.87m loan that bears no interest. Our audit procedures in relation to the accounting for interest free loans included: Given the nature of the loan, the determination of the fair value of the loan can be complex and requires significant management estimate and judgement. Further, the correct accounting treatment between the fair value of the loans and the face value of the loans can be complex. For the reasons noted above, accounting for the above loan was considered a key audit matter. • • • • Reviewing loan agreement to verify loan amount, interest rate and maturity date; Obtaining confirmation from the lender verifying he loan balance at balance date; in Assessing management’s determining the fair value of the loan, including the discount rate/market interest rate used; and Reviewing the accounting treatment for the difference between fair value of the loan and the face value of the loan. assumptions 56 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 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 2020, 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. 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 2020. In our opinion, the Remuneration Report of Beam Communications Holdings Limited., for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. A U D I T O R ’ S R E P O R T 57 ANNUAL REPORT 2020 Report on the Remuneration Report (continued) 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 M PARAMESWARAN Partner Dated: 28 August 2020 Melbourne, Victoria T R O P E R S ’ R O T I D U A 58 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D A U D I T O R ’ S R E P O R T Designed & built in Australia for Australian conditions. 4G 59 4G LTE durable weatherproof vibration & shock resistant ANNUAL REPORT 2020 AUSTRALIAN SECURITIES EXCHANGE INFORMATION SUBSTANTIAL SHAREHOLDERS Number of Shares % of Class DAVID STEWART/GLENAYR P/L 10,905,000 20.62% FF OKRAM PTY LTD SGV1 HOLDINGS LIMITED 8,634,258 16.33% 5,409,874 10.23% - These shareholders do not hold any options to subscribe for ordinary shares. DISTRIBUTION OF SHARES Size of Holdings 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Number of Number of Holders 252 210 102 235 Shares 72,369 634,715 823,181 % 0.14% 1.20% 1.56% 8,661,201 16.38% 50 42,681,986 80.72% TOTAL 849 52,873,452 100.00% HOLDERS OF LESS THAN A MARKETABLE PARCEL OF QUOTED ORDINARY SHARES Number of % of Total Number of % of Total Holders Holders Shares Quoted Shares 316 37.22% 181,951 0.34% As at 31 August 2020. This section includes information required by ASX Listing Rules which is not disclosed elsewhere in this Annual Report. TWENTY LARGEST SHAREHOLDERS Number % of Class DAVID STEWART/GLENAYR P/L 10,905,000 FF OKRAM PTY LTD SGV1 HOLDINGS LIMITED ARTPRECIATION PTY LTD 8,634,258 5,409,874 1,798,632 WASHINGTON SOUL PATTINSON 1,636,144 CAPOCCHI SUPER PTY LTD VINCENT GALANTE RAPAKI PTY LTD HOTTON FAMILY EVERCITY PTY LTD TOM BEKIARIS HSBC CUSTODY NOMINEES CITICORP NOMINEES PTY LTD ROBERT MANSFIELD NIALL G CHAN PENSION PTY LTD TWARTZ FAMILY ANTHONY FRANK MASON RICHARD ANTONY PRESS INVIA CUSTODIAN PTY LTD PAUL RIETHMAIER 1,603,899 1,111,146 1,076,473 832,052 780,000 731,835 608,590 529,977 527,200 499,988 416,666 400,000 391,000 348,731 326,565 20.62% 16.33% 10.23% 3.40% 3.09% 3.03% 2.10% 2.04% 1.57% 1.48% 1.38% 1.15% 1.00% 1.00% 0.95% 0.79% 0.76% 0.74% 0.66% 0.62% TOTAL TOP 20: 38,568,030 72.94% 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 849 shareholders. - 1,697,025 options to subscribe for ordinary shares to 7 option holders. VOTING RIGHTS There are 52,873,452 ordinary fully paid shares held by 849 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 60 BEA M COM MU NIC ATI O NS HOLD ING S LIM ITE D 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) info@beamcommunications.com info@beamcommunications.com info@satphoneshop.com rentals@satphoneshop.com www.beamcommunications.com www.beamcommunications.com www.satphoneshop.com www.satphonerentals.com.au 

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