Connexion Media Limited
ABN 68 004 240 313
Annual Report - 30 June 2018
Connexion Media Limited
Contents
30 June 2018
Corporate directory
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Connexion Media Limited
Shareholder information
2
3
11
12
13
14
15
16
33
34
38
1
Connexion Media Limited
Corporate Directory
30 June 2018
Directors
David James Connolly
Mark Caruso
Robert Downey
Company secretary
Peter Torre
Registered office
Principal place of business
Share register
Auditor
Level 1, 11-19 Bank Place
Melbourne, VIC 3000
Phone: +61 3 9529 2655
Level 1, 11-19 Bank Place
Melbourne, VIC 3000
Boardroom Pty Limited
Level 12, 225 George Street
Sydney NSW 2000
Phone: +61 2 9290 9600
William Buck
Level 20, 181 William Street
Melbourne VIC 3000
Bankers
Commonwealth Banking Corporation Limited
Stock exchange listing
Connexion Media Limited shares are listed on the Australian Securities Exchange (ASX
code: CXZ)
Website
www.connexionltd.com
2
Connexion Media Limited
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'consolidated entity') consisting of Connexion Media Limited (referred to hereafter as the 'company' or 'parent entity') and
the entities it controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of Connexion Media Limited during the whole of the financial year and up to the date
of this report, unless otherwise stated.
Mark Caruso (Non-Executive Director)
David Connolly (Non-Executive Director)
Robert Downey (Non-Executive Director)
Principal activities
During the financial year the principal activities of the consolidated entity consisted of carrying out its endeavours to realise
revenue streams from its two core products, CXZ Telematics and miRoamer.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The profit for the consolidated entity after providing for income tax amounted to $361,804. (2017 loss: $3,971,672).
Total revenues from ordinary activities for the period were $1,105,485 (2017: $1,056,207). The consolidated entity also
recognised $1,339,455 ($1,522,074 less fees imposed by the ATO)in R&D tax incentive amounts receivable during the
half-year period (2017: $2,392,671). There was an overall decrease in employment costs and operating activities during
the period, following an increase in amortisation relating to our R&D activities.
The net assets of the consolidated entity increased during the half-year by $6,747,297 to a net asset surplus of $809,317.
The improvement in the net assets was a result of operational performance, conversion of the convertible notes and further
development of the Company’s intellectual properties.
The company has maintained a focus on increasing revenues and decreasing costs. Key achievement during the year
have been realizing revenues and project progress with key clients, extinguishing substantial debts, maintaining an
appropriate level of headcount through the period, and the assessment of other project opportunities.
General Motors Commercial Link
The Company’s revenue share project with General Motors to deliver the Commercial Link programs to fleet managers has
delivered anticipated revenues. We announced on 22 May 2017 the sales territory expansions to Canada and Mexico, the
project to localize the technology and operations to those territories has been substantially completed during the year. The
General Motors companies in those respective regions will seek to expand the adoption of Commercial Link, in line with
other OnStar services, as the new model vehicles are sold with connectivity to the OnStar platform.
From a product adoption perspective in the United States territory we have seen an increase in fleet managers using the
tool, from 300 in August 2017 to 445 in August 2018. With the increasing adoption of the Commercial Link program for
fleet management we have seen an increase in free trial usage.
Corporate
On 27 November 2017 the consolidated entity announced the conversion of all Series 1 and Series 2 Convertible Notes
and accrued interest at a share price of $0.0104. A total of 599,289,246 fully paid ordinary shares were issued upon
conversion. The consolidated entity had also completed a placement of 384,615 shares at a share price of $0.0130 to
cover the costs associated with the negotiations and conversions of the Convertible Notes.
3
Connexion Media Limited
Directors' report
30 June 2018
On 10 January 2018, the consolidated entity announced that it had entered into an exclusive binding term sheet to acquire
100% ownership of the Security Shift Group of companies (“SSG”). Completion of the acquisition was subject to the
satisfaction of a number of conditions precedent, as outlined in the Company’s announcements. These conditions were not
satisfied and the acquisition will not proceed. As such, the facility provided by Lucerne Investment Partners to assist with the
acquisition was not drawn down.
In December 2017, the consolidated entity issued a prospectus for the non-renounceable entitlement offer to issue 1 fully
paid ordinary share for every 6 shares held at an issue of $0.01 per share to raise up an approximate $1,195,995 (before
costs). The Offer closed on 19 January 2018, undersubscribed. The consolidated entity received applications for
15,208,377 from eligible shareholders, raising $152,084 (approximately 12.7% of all shares under the entitlement offer).
On 19 February 2018, the consolidated entity advised that it had received the net 2017 Research and Development Rebate
(R&D Rebate) of $1,339,455 ($1,522,074 less fees imposed by the ATO). Subsequent to this, the consolidated entity settled
the Short-Term Facility provided by Principis Master Fund SPC – Lucerne Composite Master Fund SP, which has an
outstanding balance of $808,100 (principal and capitalised interest), and proceeded to seek the release of any associated
security.
In the same month the other secured loan held by the Company was rolled forward for 12 months, with an effective interest
rate of 18.33% per annum, paid annually in advance.
On 27 February 2018, the consolidated entity received a claim for employment-related damages of approximately
US$193,000 from an ex-employee. The Board of Directors proceeded to defend the claim and settled the matter for an
immaterial amount, substantially less than the original claim.
Outlook:
As it relates to the General Motors relationship the company anticipates conservative growth of the Commercial Link
platform whilst continuing to bid for further project opportunities leveraging the OnStar Application Programming Interface
connectivity with the potential use cases for the OnStar data expanding. The Company’s competitive advantage in the
supply of these projects is the ability to reuse existing digital infrastructure and expand on substantial investments in high
capacity service bus connectivity.
Significant changes in the state of affairs
Other than disclosed elsewhere in this report, there were no significant changes in the state of affairs of the consolidated
entity during the financial year.
Matters subsequent to the end of the financial year
A dispute with a former employee was settled during the month of July 2018 for the amount USD$18,500. The accrued
amount is included in trade and other payables in the statement of financial position.
On 7th July 2018 7,133,617 unlisted options issued with an exercise price of $0.25 expired.
On 11 September 2018, the Company completed a placement of 109 million shares to raise $656,000 before costs.
On 3 August 2018 David Connolly transitioned to Non-Executive Director subsequent to the year end.
No matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
Other than matters already disclosed in the Review of operations, pursuant to sections 299(3) and 299A(3) of the
Corporations Act 2001, this Report omits information relating to likely developments in the company's operations in the future
because to do so will result, in the opinion of the Directors, in unreasonable prejudice to the consolidated entity.
4
Connexion Media Limited
Directors' report
30 June 2018
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State
law.
Information on directors
Name:
Title:
Experience and expertise:
Other current directorships:
Mr Mark Caruso
Non-Executive Chairman (Appointed 3 April 2017)
Mr Caruso is a successful executive and entrepreneur with a strong, transferrable
business acumen. He has substantial corporate experience driving growth and creating
value in small companies. Previously, Mr Caruso was the Chairman of Allied Gold
Mining PLC (AGMP) and was responsible for the delivery of the Gold Ridge Project in
the Solomon Island and the Simberi Gold Project in Papua New Guinea
Executive Chairman of Mineral Commodities Ltd since September 2000.
Former directorships (last 3 years): Non-Executive Director of Perpetual Resources Limited
Interests in shares:
Interests in options:
62,960,960 Fully Paid Ordinary Shares
Nil
Name:
Title:
Experience and expertise:
Mr David Connolly
Non-Executive Director (Appointed 22 November 2016)
Mr Connolly is currently a Platform Sales Executive at Oracle. He has a long track
record of successfully over-achieving on his sales targets across a range of industries
and has extensive experience in driving growth in early stage companies. Mr
Connolly is a Dean Scholarship-awarded graduate of the prestigious Swinburne
International Bachelor of IT program and an Inferno Award-winning graduate of the
IBM Global Sales School program
Nil
Other current directorships:
Former directorships (last 3 years): None
Interests in shares:
Interests in options:
Nil
Nil
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): None
Interests in shares:
Interests in options:
Nil
Nil
Mr Robert Downey
Non-Executive Director (Appointed 26 June 2017)
Robert is a qualified solicitor who has practised mainly in the areas of international
resources law, corporate law and initial public offerings as well as mergers and
acquisitions. He has extensive experience as an advisor, founder and director of
various ASX, TSX and AIM companies. Mr Downey is currently a partner at Dominion
Legal, a boutique law firm in Perth.
Nil
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities, unless otherwise stated.
Company secretary – Peter Torre
Peter is the principal of Torre Corporate – a specialist corporate advisory firm which provides corporate secretarial services
to a range of listed companies. Prior to establishing Torre Corporate, Peter was a partner and Chairman of the National
Corporate Services Committee of an internationally affiliated firm of Chartered Accountants working within its corporate
services division for over nine years.
5
Connexion Media Limited
Directors' report
30 June 2018
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2018, and
the number of meetings attended by each director were:
Mark Caruso
David Connolly
Robert Downey
Full Board
Attended
Held
5
5
5
5
5
5
The directors held further discussion on an ongoing and regular basis.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward
governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Board is responsible for determining and reviewing remuneration arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality of its directors and executives. The remuneration philosophy
is to attract, motivate and retain high performance and high quality personnel.
The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors'
fees and payments are reviewed annually by the Board. The chairman's fees are determined independently to the fees of
other non-executive directors based on comparative roles in the external market. The chairman is not present at any
discussions relating to the determination of his own remuneration. Non-executive directors do not receive share options or
other incentives.
6
Connexion Media Limited
Directors' report
30 June 2018
ASX listing rules require the aggregate non-executive directors remuneration be determined periodically by a general
meeting. The current aggregate remuneration limit is $250,000.
Executive remuneration
The consolidated entity aims to reward executives based on their position and responsibility, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments where applicable
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Board, based on individual and business unit performance, the overall performance of the consolidated entity and
comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and provides additional value to the
executive.
The Company did not offer a short or long-term incentive plan to its Directors and Key Management Personnel during the
year. As at the date of this report, plans are being established which will enable short and long term incentives to be
utilised during the 2018/19 financial year.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. A portion of cash bonus
and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash
bonus and incentive payments are at the discretion of the Board.
The Board is of the opinion that the continued improved results can be attributed in part to the adoption of performance based
compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the
coming years.
Voting and comments made at the company's 2017 Annual General Meeting ('AGM')
At the 2017 AGM, 97% of the votes received supported the adoption of the remuneration report for the year ended 30 June
2017. The company did not receive any specific feedback at the AGM regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables.
2018
Cash salary
and fees
$
Cash
bonus
$
Short-term benefits
Post-
employment
benefits
Super-
Non-
monetary
annuation
$
$
Long-term
benefits
Long service
leave
$
Share-based
payments
Equity-
settled
$
Total
$
Non-Executive
Directors:
Mark Caruso
Robert Downey
Executive
Directors:
David Connolly
30,000
30,000
30,0001
90,000
-
-
-
-
-
-
-
-
2,850
-
2,850
-
-
-
-
-
-
-
-
30,000
32,850
30,000
92,850
Mr Connolly transitioned to Non-Executive Director subsequent to the year end.
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Connexion Media Limited
Directors' report
30 June 2018
Short-term benefits
2017
Cash salary
and fees
$
Cash
bonus
$
Non-Executive
Directors:
John Conomos
Mark Caruso
Robert Downey
John
Dimitropoulos*
Executive
Directors:
David Connolly
Junior Barrett***
George
Parthimos**
Eric Jiang**
45,833
7,500
-
19,783
18,068
75,714
290,986
148,125
606,009
Post-
employment
benefits
Super-
Non-
monetary
annuation
$
$
Long-term
benefits
Long service
leave
$
Share-based
payments
Equity-
settled
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
28,750
-
28,750
4,354
-
-
217
1,716
-
30,375
14,072
50,734
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,187
7,500
-
20,000
19,784
75,714
350,111
162,197
685,493
John Dimitripoulos resigned 30 March 2017.
*
**
*** Salary is translated from USD to AUD.
George Parthimos resigned 25 June 2017. Eric Jiang resigned 5 May 2017.
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details
of these agreements were as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Mr David Connolly
Executive Director
22 November 2016
Continuous and concludes upon termination of services as employee
Details: Mr Connolly is remunerated at a level of $30,000 per annum. No bonuses were
paid in 2018.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018.
Options
There were no options issued, held or vested by Directors or Key Management Personnel during the current year.
8
Connexion Media Limited
Directors' report
30 June 2018
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Balance at
the start of
the year
Received
as part of
remuneration
Exercise of
Disposals/
options
Additions
other
Disposal
as a result
resignation
Balance at
the end of
the year
Ordinary shares
Mark Caruso
David Connolly
Robert Downey
4,319,680
-
-
4,319,680
-
-
-
-
- 58,641,280
-
-
-
-
- 58,641,280
-
-
-
-
-
-
-
-
62,960.960
-
-
62,960,960
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Connexion Media Limited under option at the date of this report are as follows:
Grant date
6 July 2016
Expiry date
7 July 2018
Exercise
price
Number
under option
$0.25
7,133,617
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the
company or of any other body corporate.
On 6 July 2016 7,133,617 unlisted options issued with an exercise price of $0.25 expiring on the second anniversary of
their issue date. The options have been included in the above table as they were issued as free-attaching options to other
equity instruments. These options expired, unexercised, on 7th July 2018.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility
on behalf of the company for all or part of those proceedings.
Non-audit services
During the year non-audit services were provided by the Company’s auditor. They provided advice in respect of the capital
raising prospectus to convert the Convertible Notes to equity in November 2017.
Officers of the company who are former partners of William Buck
There are no officers of the company who are former partners of William Buck.
9
Connexion Media Limited
Directors' report
30 June 2018
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.
Auditor
William Buck continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Mark Caruso
Chairman
18 September 2018
10
AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE
CORPORATIONS ACT 2001 TO THE DIRECTORS OF CONNEXION MEDIA LIMITED
I declare that, to the best of my knowledge and belief during the year ended 30 June 2018
there have been:
— no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
— no contraventions of any applicable code of professional conduct in relation to the
audit.
William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136
J. C. Luckins
Director
Dated this 18th day of September, 2018
Connexion Media Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Other income
Total Revenue
Cost of Sales
Gross Profit
Expenses
Corporate and administrative expenses
Selling, distribution and marketing expenses
Research and development costs
Depreciation and amortisation expenses
Finance costs
Profit/(Loss) before income tax expense
Income tax expense
Profit/(Loss) after income tax expense for the year attributable to the owners
of Connexion Media Limited
Other comprehensive income for the year, net of tax
Total comprehensive profit/(loss) for the year attributable to the owners of
Connexion Media Limited
Note
Consolidated
2018
$
2017
$
5
5
1,105,485
1,524,782
1,056,207
2,415,420
6
6
6
7
2,630,267 3,471,627
(109,436)
(494,903)
2,520,831
2,976,724
(875,855)
(9,508)
(314,954)
(151,867)
(838,884)
(5,388,174)
(241,296)
(793,905)
(1,999)
(523,022)
329,763
(3,971,672)
-
-
329,763
(3,971,672)
32,041
-
361,804
(3,971,672)
Cents
Cents
Basic profit/(loss) per share
Diluted profit/(loss) per share
26
26
0.07
0.07
(3.77)
(3.77)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
12
Connexion Media Limited
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventory
Total current assets
Non-current assets
Plant and equipment
Capitalised development costs
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Convertible notes
Borrowings
Total current liabilities
Non-current liabilities
Convertible notes
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Foreign currency translation reserve
Accumulated losses
Total equity/(deficiency)
Note
Consolidated
2018
$
2017
$
9
8
168,052
198,909
36,666
21,961
367,194
49,437
-
84,772
425,588
501,403
10
11
3,648
606,647
610,295
7,192
-
7,192
1,035,883
508,595
12
13
14
15
14
325,171
8,186
-
300,000
771,055
95,097
2,000,000
604,699
633,357
3,470,851
-
-
-
3,380,782
1,733
3,382,515
633,357
6,853,366
402,526
(6,344,771)
16
15,748,539
32,041
(15,378,054)
9,363,046
-
(15,707,817)
402,526
(6,344,771)
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
13
Connexion Media Limited
Statement of changes in equity
For the year ended 30 June 2018
Consolidated
Balance at 1 July 2016
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Issue of shares (note 16)
Net charges from option issuance/cancellation (note 16)
Balance at 30 June 2017
Consolidated
Balance at 1 July 2017
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of shares (note 16)
Issued
Capital
$
9,532,086
-
-
-
1,054,626
(1,223,666)
9,363,046
Foreign
Currency
Translation
Reserve
$
Accumulated
Losses
Total
equity
$
$
-
-
-
-
-
-
-
(12,959,811)
(3,427,725)
(3,971,672)
-
(3,971,672)
-
(3,971,672)
(3,971,672)
-
1,223,666
1,054,626
-
(15,707,817)
(6,344,771)
Issued
Capital
$
Foreign
Currency
Translation
Reserve
$
Accumulated
losses
Total equity
$
$
9,363,046
-
(15,707,817)
(6,344,771)
-
-
32,041
329,763
-
329,763
32,041
32,041
329,763
361,803
6,385,493
-
-
6,385,493
Balance at 30 June 2018
15,748,539
32,041
(15,378,054)
402,526
The above statement of changes in equity should be read in conjunction with the accompanying notes
14
Connexion Media Limited
Statement of cash flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Cash received from R&D tax refund
Interest received
Interest paid
Note
Consolidated
2018
$
2017
$
1,251,889
(1,998,777)
1,178,661
(6,915,981)
1,339,455
2,392,671
-
(189,620)
2,001
(523,022)
Net cash from/(used) in operating activities
25
402,947
(3,865,670)
Cash flows from investing activities
Net cash flows from the addition and disposal of plant and equipment
Payments for capitalised development costs
Security deposit release
Net cash from/(used) used in investing activities
Cash flows from financing activities
Proceeds from issues of shares, net of costs
Proceeds from issue of convertible notes, net of transaction costs
Cash flows from loans to other entities
Proceeds from / (repayments of) borrowings, net of costs
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
3,081
(758,051)
-
(1,379)
-
80,989
(754,970)
79,610
152,884
-
-
-
834,626
2,992,239
-
250,000
152,884
4,076,865
(199,139)
367,194
290,805
76,389
168,052
367,194
The above statement of cash flows should be read in conjunction with the accompanying notes
15
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 1. General information
The financial statements cover Connexion Media Limited (the Company) and the entities it controlled at the end of, or during,
the year (the consolidated entity). The financial statements are presented in Australian dollars, which is the presentation
currency of the consolidated entity.
Connexion Media Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 1, 11-19 Bank Pl,
Melbourne VIC 3000
A description of the nature of the consolidated entity's operations and its principal activities are included in the directors'
report, which is not part of the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. None of those
that were adopted materially impacted upon these financial statements.
16
Connexion Media Limited
Notes to the financial statements
30 June 2018
Going concern
The financial statements have been prepared on a going concern basis, which assumes the continuity of normal business
activities, the realisation of assets and the settlement of liabilities in the ordinary course of business. For the period ended
30 June 2018 the consolidated entity earned a net profit of $329,763 (2017: loss $3,971,672). Net cash flows from
operating, activities for the current year totalled $402,947 (2017: Outflows of $3,865,670). As at 30 June 2018 the
consolidated entity had an excess of current liabilities over current assets of $207,769 (2017: 2,969,448) and an excess of
total liabilities over total assets of $6,344,771 in 2017 to a net asset position of $402,526 in 2018.
The Board is of the view that sufficient inflow of funds through:
- Research and Development Tax Incentives
- Generation of Revenue from Customers
- Raising further equity where required will be generated to meet the reduced cash outflows and other commitments
arising throughout the coming year and approximately $656,000 has been raised as additional capital since 30 June
2018.
Accordingly, Directors believe the consolidated entity will be able to continue as a going concern and will be able pay its
debts as and when they fall due for a period of at least 12 months from the date of these financial statements. Accordingly,
these financial statements do not include any adjustments in relation to the recoverability or classification of recorded
assets or to the amounts of the classification of liabilities that may be necessary should the consolidated entity not be able
to continue as a going concern.
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, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, and apply the going concern basis of
accounting.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 3.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Connexion Media Limited as
at 30 June 2018 and the results of its controlled entities for the year then ended. Together these are referred to in these
financial statements as the 'consolidated entity'.
Controlled entities are all those entities over which the consolidated entity has control. The consolidated entity controls an
entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
17
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the consolidated entity loses control over an entity, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The
consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained
together with any gain or loss in profit or loss.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can
be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the
risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net
of sales returns and trade discounts.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
Government subsidies
Subsidies from the government including R&D tax incentive income, are recognised as income at their fair value where there
is reasonable assurance that the grant will be received, the consolidated entity will comply with attached conditions and the
R&D incentive is readily measurable.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
●
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
18
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Inventory consists of sophisticated telemetry devices, and is stated at the lower of cost and net realisable value. Cost
comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs
necessary to make the sale.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to
write off the net cost of each item of plant and equipment over their expected useful lives which are in between 3 - 10 years.
Capitalised Development Costs
Development costs are capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the Company is able to use or sell the assets; the Company has sufficient resources; and intent to
complete the development and its costs can be measured reliably. Capitalised development costs are amortised on a
straight-line basis over the period of their expected benefit, being their finite life of 3 years. Research costs are expensed in
the period in which they are incurred.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial
year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement
of financial position, net of transaction costs.
Convertible notes are initially classified as a financial liability on the amortised cost basis until extinguished on conversion or
redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The corresponding
interest on convertible notes is expensed to profit or loss.
Finance costs
Finance costs are expensed in the year that they are incurred.
19
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured as the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at
the reporting date on national corporate bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2018. The consolidated
entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the
consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial
recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income
('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own
credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting
requirements are intended to more closely align the accounting treatment with the risk management activities of the entity.
New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be
measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since
initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The
consolidated entity does not expect any material impact on implementation.
20
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated
entity will adopt this standard from 1 July 2018. The consolidated entity has made an assessment of the changes and
does not expect any material impact on implementation. The Company has adopted the modified retrospective approach.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured as the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months
or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy
choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred.
A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives
received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line
operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating
costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease,
the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117.
However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating
expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the
statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases. The consolidated entity will adopt this standard from 1 July 2019. The consolidated entity has made a
preliminary assessment of the changes and does not expect any material impact on implementation.
21
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and
assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Capitalised development costs
Development costs are capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the Company is able to use or sell the assets; the Company has sufficient resources; and intent to
complete the development and its costs can be measured reliably. Management continually evaluates its judgements and
estimates in relation to these capitalised costs. Management bases its judgements, estimates and assumptions on
historical experience and on other various factors, including expectations of future events, management believes to be
reasonable under the circumstances
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
Note 4. Operating segments
Identification of reportable operating segments
During the year ended 30 June 2018 the group operated in one segment, specialising in developing global information
technology solutions for automotive industries in Australia. For the year ended 30 June 2018 all of its sales revenue was
from one customer (2017: one customer).
Note 5. Revenue
Sales revenue
Sales
Other income
Interest
R&D tax offset
Revenue
Consolidated
2018
$
2017
$
1,105,485
1,056,207
1,105,485
1,056,207
2,708
1,522,074
1,524,782
22,749
2,392,671
2,415,420
2,630,267
3,471,627
22
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 6. Expenses
Profit/(Loss) before income tax includes the following specific expenses:
Finance costs
Interest and finance charges paid/payable
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Employee benefits expense excluding superannuation
Employee benefits expense excluding superannuation
Note 7. Income tax expense
Consolidated
2018
$
2017
$
838,884
523,022
77,760
87,450
41,493
231,596
526,160
4,273,972
Income tax expense has not been recognised for the period as the company is in an accumulated tax loss position.
Tax losses from previous periods have not been brought to account as utilisation of all of these losses is not probable. Income
tax losses can only be recovered by the company deriving future assessable income, conditions for deductibility imposed by
law being complied with and no charged in tax legislation adversely affecting the realisation of the benefit from the deductions.
Therefore, carry forward losses may not be available to offset future assessable income.
As at 30 June 2018 the group had accumulated losses, as set out in the statement of financial position that may be applied
in its calculation of carry-forward tax losses that may be potentially be offset against future assessable income. It is noted
that not all amounts in accumulated losses would be included in carry-forward tax losses which may or may not be available
to offset against assessable income which may arise in the future. However, this amount is not expected to be material.
Note 8. Current assets - Prepayments
Prepaid interest - Loan
Note 9. Trade and other receivables
Trade receivables
ATO receivable
Consolidated
2018
$
2017
$
36,666
36,666
-
-
Consolidated
2018
$
2017
$
36,843
162,066
84,772
-
198,909
84,772
23
Connexion Media Limited
Notes to the financial statements
30 June 2018
The ATO receivable relates to monies previously held by the Australian Taxation Office, which will be remitted back to the
Company.
Note 10. Non-current assets - Plant and equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Consolidated
2018
$
2017
$
6,110
(2,462)
9,191
(1,999)
3,648
7,192
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Disposals
Balance at 30 June 2018
Depreciation expense for the period
Balance at 30 June 2018
Note 11. Capitalised development costs
Development asset – at cost
Less: Accumulated amortisation
Office
equipment
$
7,192
-
(3,081)
4,111
(463)
3,648
Consolidated
2018
$
2017
$
758,051
(151,404)
606,647
-
-
-
From 1 July 2017, the Company recognized developed intangible assets in terms of its Aus Industry and ATO R&D tax
incentive programme. These intangible assets comprised the key technologies developed for use in the Company’s
operations – telematics and wireless communications.
Development costs are capitalised when it is probable that the project will be a success considering its commercial and
technical feasibility; the Company is able to use or sell the assets; the Company has sufficient resources; and intent to
complete the development and its costs can be measured reliably. Capitalised development costs are amortised on a
straight-line basis over the period of their expected benefit, being their finite life of 3 years. Research costs are expensed in
the period in which they are incurred.
The total R&D tax incentive receivable is apportioned between other income and the capitalised development asset based
on the split of expenditure in the claim.
24
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 12. Current liabilities - trade and other payables
Trade payables
Other payables
Refer to note 18 for further information on financial instruments.
Note 13. Current liabilities - employee benefits
Annual leave
Note 14. Convertible notes
Convertible notes payable – Series 1
Consolidated
2018
$
2017
$
256,249
68,922
250,356
520,699
325,171
771,055
Consolidated
2018
$
2017
$
8,186
95,097
8,186
95,097
Consolidated
2018
$
2017
$
-
2,000,000
In August 2015, the Company announced the completion of a capital raising through the issue of convertible notes to
sophisticated and professional investors, raising $2 million (“Series 1”).
The Series 1 notes were converted to equity on 27 November 2017. Details in Note 16 below.
Convertible notes payable – Series 2
Consolidated
2018
$
2017
$
-
3,380,782
On 22 June 2016, the Company announced a raising of $5 million through the issue of convertible notes to new and
existing sophisticated and professional investors. The raising was not fully subscribed, and $3,449,000 before transaction
costs was raised (“Series 2”).
The Series 2 notes were converted to equity on 27 November 2017. Details in Note 16 below.
Note 15. Borrowings
Line of credit
Secured loan
Consolidated
2018
$
2017
$
-
300,000
250,000
354,699
300,000
604,699
25
Connexion Media Limited
Notes to the financial statements
30 June 2018
Line of credit
At 30 June 2017, the Company announced the finalisation and execution of a Loan Facility Agreement with Lucerne
Composite Master Fund SP (“Lucerne”) for a facility of up to $1 million. The Facility is in the form of a revolving corporate
line of credit and will be secured by way of a charge over CXZ’s Research and Development (R&D) Tax Rebate. The first
$250,000 was received on 30 June 2017. The Facility incurs interest at 36% per annum, payable monthly in arrears, and
the principal will be repaid upon receipt of the R&D Tax Rebate or 6 months, whichever occurs earlier. This facility was fully
repaid during the year.
Secured loan
On 21 January 2013 the legal parent entity, Connexion Media Limited, entered into a loan agreement with a third party
investor. The loan's maturity date was extended to 28 January 2019. There is no share conversion to equity option
attached to the loan. The loan is secured by a registered charge over the company's real and intangible property. The loan
attracts an annual interest charge of 15% which is prepaid.
Note 16. Equity - issued capital
Consolidated
2018
2017
Number
Number
2018
$
2017
$
Ordinary shares - fully paid
Share options
732,805,112 117,822,774 15,748,539
-
7,133,617 10,175,789
9,363,046
-
739,938,729 127,998,563 15,748,539
9,363,046
Movements in ordinary share capital
Details
Date
#
Issue
price
$
Balance
Exercise of share options
Exercise of share options
Exercise of share options
Exercise of share options
Exercise of share options
Exercise of share options
Issue of shares
Issue of shares
Costs of issuing equity
Balance
Issue of shares
Issue of shares
Issue of shares
Issue of shares
Costs of issuing equity
30 June 2015
9 December 2015
18 December 2015
29 December 2015
31 December 2015
11 January 2016
14 January 2016
3 March 2016
3 May 2016
30 June 2016
19 August 2016
9 February 2017
3 April 2017
28 April 2017
84,619,770
50,000
550,000
1,211,505
890,000
265,667
75,000
4,999,999
9,267,233
-
101,929,174
$0.215
$0.215
$0.215
$0.215
$0.215
$0.215
$0.180
$0.180
-
2,000,000
3,711
13,888,889
1,000
$0.110
$0.200
$0.070
$0.070
5,196,817
10,750
118,250
260,474
191,350
57,118
16,125
900,000
1,668,102
(110,566)
8,308,420
220,000
742
1,000,000
72
(166,188)
Balance
30 June 2017
117,822,774
9,363,046
Conversion of Series 1 Notes
Conversion of Series 2 Notes
Issue of Shares
Issue of Shares
Costs of Issuing Equity
Issue of Shares
27 November 2017
27 November 2017
27 November 2017
8 December 2017
31 December 2017
25 January 2018
218,275,454
381,013,892
384,615
100,000
$0.0104
$0.0104
$0.0130
$0.0130
15,208,377
$0.0100
2,270,064
3,962,545
5,000
1,300
(5,500)
152,083
Balance
30 June 2018
732,805,112
15,748,539
26
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 16. Equity - issued capital (continued)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in
person or by proxy shall have one vote and upon a poll each share shall have one vote.
Movements in options
Details
Balance
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Balance
Issue of share options
Issue of share options
Exercise of options
Expiration of share options
Balance
Expiration of share options
Balance
Share options
Date
#
Issue price
$
30 June 2015
09 December 2015
18 December 2015
29 December 2015
31 December 2015
11 January 2016
14 January 2016
30 June 2016
6 July 2016
6 July 2016
9 February 2017
3 March 2017
84,619,770
(50,000)
(550,000)
(1,211,505)
(890,000)
(265,667)
(75,000)
81,577,598
$0.200
$0.200
$0.200
$0.200
$0.200
$0.200
1,269,298
(750)
(8,250)
(18,172)
(13,350)
(3,985)
(1,125)
1,223,666
3,042,172
7,133,617
(3,711)
(81,573,887)
$0.000
$0.000
$0.200
$0.200
-
-
(742)
(1,222,924)
30 June 2017
1 January 2018
10,175,789
(3,042,172)
$0.25
30 June 2018
7,133,617
-
-
-
On 6 July 2016, 3,042,172 unlisted options were issued with an exercise price of $0.25 expiring 1 January 2018, as well as
an additional 7,133,617 unlisted options issued with an exercise price of $0.25 expiring on the second anniversary of their
issue date. The options have been included in the above table as they were issued as free-attaching options to other equity
instruments. The 7,133,167 options expired on 6 July 2018, unexercised.
Capital risk management
The Company's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company would look to raise capital where an opportunity to invest in a business or company was seen as value
adding relative to the Company’s share price at the time of the investment. The Company is actively pursuing additional
investments in the short term that require capital to be raised as it continues to integrate and grow its existing businesses
in order to maximise shareholder return.
Note 17. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
27
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 18. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to two financial risks: market risk (interest rate risk) and liquidity risk. The
consolidated entity's overall risk management program focuses on the management of these risks through cashflow
forecasting capital management.
Risk management is carried out by management and the Board of Directors ('the Board') informally on a frequent periodic
basis. The process include identification and analysis of the risk exposure of the consolidated entity and appropriate
procedures, controls and risk limits.
Market risk
Interest rate risk
The consolidated entity's main interest rate risk arises from short-term borrowings. Borrowings issued at fixed rates expose
the consolidated entity to fair value interest rate risk. Current borrowings are all short-term, limiting fair value interest rate risk.
Borrowings currently held are at a fixed interest rate, and no interest rate risk applies.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Weighted
average
interest
rate
%
Between
0 – 6
months
$
Between
6 – 12
months
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Remaining
contractual
maturities
$
Consolidated – 2018
Non-derivatives
Non-interest bearing
Trade payables
Other loans
-
15.00%
325,171
-
-
300,000
Total non-derivatives
325,171
300,000
-
-
-
-
-
-
Weighted
average
interest
rate
%
Between
0 – 6
months
$
Between
6 – 12
months
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Other loans
Borrowings
Convertible notes
payable
-
15.00%
36.00%
771,055
354,699
250,000
9.95%
2,000,000
Total non-derivatives
3,375,754
-
-
-
-
-
-
-
-
3,380,782
3,380,782
-
-
-
-
-
28
-
-
-
-
-
-
-
-
325,171
300,000
625,171
Remaining
contractual
maturities
$
771,055
354,699
250,000
5,380,782
6,756,536
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 18. Financial instruments (continued)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 19. Key management personnel disclosures
Directors
The following persons were directors of Connexion Media Limited during the financial year:
Mark Caruso (Non-Executive Director)
David Connolly (Executive Director)
Robert Downey (Non-Executive Director)
Note 19. Key management personnel disclosures (continued)
Compensation
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-employment benefits
Note 20. Remuneration of auditors
Consolidated
2018
$
2017
$
90.000
2,850
634,759
50,734
92,850
685,493
During the financial year the following fees were paid or payable for services provided by William Buck, the auditor of the
company:
Audit services - William Buck
Audit or review of the financial statements
Other services - William Buck
Other assurance services
Note 21. Related party transactions
Parent entity
Connexion Media Limited is the parent entity.
Consolidated
2018
$
2017
$
38,000
46,000
5,000
-
43,000
46,000
Key management personnel
Disclosures relating to key management personnel are set out in note 19 and the remuneration report included in the
directors' report.
29
Connexion Media Limited
Notes to the financial statements
30 June 2018
Transactions with related parties
Legal consultation fees with Dominion Legal, totalling $73,316 were entered into during the year. Robert Downey is a partner
in Dominion Legal. There were no other transactions with related parties.
Receivable from and payable to related parties
The group has a trade payable balance of $73,316 due to Dominion Legal as at year end. There were no other trade
receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to/from related parties at the current and previous reporting date
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 22. Interest in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries
in accordance with the accounting policy described in note 1:
Name
Connexion Media Inc.
Flexvs Pty Ltd
miRoamer Pty Ltd
BC1125816
Trading as: Connexion
Media Limited
CXZ Mexico
Principal place of business
/ Country of incorporation
Ownership interest
2017
2018
%
%
United States of America
Australia
Australia
Canada
100.00
100.00
100.00
100.00
100.00
100.00
100.00
-
Mexico
100.00
-
Note 23. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(Loss) after income tax
Total comprehensive income (loss)
Parent
2018
$
2017
$
208,946
(2,348,104)
208,946
(2,348,104)
30
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 23. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity/(deficiency)
Parent
2018
$
2017
$
397,868
387,119
1,884,396
394,311
307,700
2,956,665
913,131
6,339,180
15,748,539
(14,777,275)
9,363,046
(15,307,915)
971,264
(5,944,869)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 30 June 2017.
Transactions between parent and its subsidiaries
The parent company performs research and development services on behalf of its subsidiary, Connexion Media Inc. The
respective revenue and expenses are determined at an arms-length basis, and are charged by intercompany loan. All
intercompany transactions are eliminated upon consolidation.
Contingent liabilities
There were no contingent liabilities at 30 June 2018
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Note 24. Events after the reporting period
A dispute with a former employee was settled during the month of July 2018 for the amount USD$18,500. The accrued
amount is included in trade and other payables in the statement of financial position.
On 7th July 2018 7,133,617 unlisted options issued with an exercise price of $0.25 expired.
On 11 September 2018, the Company completed a placement of 109 million shares to raise $656,000 before costs.
On 3 August 2018 David Connolly transitioned to Non-Executive Director subsequent to the year end.
Other than disclosed elsewhere in this report, no other matter or circumstance has arisen since 30 June 2018 that has
significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the
consolidated entity's state of affairs in future financial years.
31
Connexion Media Limited
Notes to the financial statements
30 June 2018
Note 25. Reconciliation of profit/(loss) after income tax to net cash used in operating activities
Profit/(Loss) after income tax expense for the year
Adjustments for:
Share based payments
Depreciation and amortisation
Finance charges included in loan payments
Foreign currency translation reserve
Change in operating assets and liabilities:
(Increase) / Decrease in other assets
(Increase) / Decrease in GST credits receivable
(Increase) / Decrease in inventory
Increase / (Decrease) in trade and other payables
Increase / (Decrease) in employee benefits
Net cash used in operating activities
Note 26. Profit/(Loss) per share
Consolidated
2018
$
2017
$
329,763
(3,971,672)
-
151,867
547,128
32,041
220,000
1,999
118,218
-
(186,138)
62,811
(445,881)
(88,644)
43,923
(3,915)
(84,772)
(243,232)
53,781
402,947
(3,865,670)
Consolidated
2018
$
2017
$
Profit/(Loss) after income tax attributable to the owners of Connexion Media Limited
329,763
(3,917,672)
Weighted average number of ordinary shares used in calculating basic earnings per share
447,652,957 105,390,712
Weighted average number of ordinary shares used in calculating diluted earnings per share 447,652,957 105,390,712
Number
Number
Basic profit / (loss) per share
Diluted profit / (loss) per share
Cents
Cents
0.07
0.07
(3.77)
(3.77)
The options held by option holders were not included in the weighted average number of ordinary shares used in calculating
dilutive earnings per share as they did not meet the requirements for inclusion as outlined in AASB 133 “Earnings per Share”.
The options were non-dilutive as they expired around the year end date and the impact would not be material to the financial
statements.
Note 27. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
Consolidated
2018
$
2017
$
-
79,750
32
Connexion Media Limited
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at
30 June 2018 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Mark Caruso
Chairman
18 September 2018
33
Connexion Media Limited
Independent auditor’s report to members
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Connexion Media Limited (the Company and its
subsidiaries (the Group)), which comprises the consolidated statement of financial position
as a 30 June 2018, 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 other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2018 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 believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the financial report, which indicates that the Company’s current
liabilities exceeded its current assets by $207,769. As stated in Note 2, these events or conditions,
along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast
significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.
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. In addition to the matter described in the material uncertainty
related to going concern section we have determined the matters described below to be key audit
matters to be communicated in our report.
How our audit addressed it
Our audit procedures included:
— Reviewed managements internal
documentation and policy in respect of
development costs; and
— Performed detailed testing over the
development cost balance at 30 June 2018.
We also assessed the adequacy of the Group’s
disclosures in respect of the capitalised
development costs.
CAPITALISATION OF DEVELOPMENTS COSTS
Area of focus
Refer also to notes 2 and 11
During the year the Group re-assessed its ability
to comply with the AASB 138 – Intangible
Assets requirements related to capitalisation of
development costs. In previous years the
Group expensed development costs through the
consolidated statement of profit or loss and
other comprehensive income.
During the year to 30 June 2018 the Group has
capitalised $0.75 million in respect of
development costs, which is offset by an
amortisation charge of $0.15 million.
Determining the that the requirements could be
met was complex and required judgements by
the Directors and Group management,
specifically in determining that the specific
criteria, for capitalisation, stipulated by
accounting standards has been addressed.
As a consequence we have determined this to
be a key area of focus in the current year.
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 2018, 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 has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:
www.auasb.gov.au/auditors_responsibilities/ar1.pdf .
This description forms part of our independent 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 2018.
In our opinion, the Remuneration Report of Connexion Media Limited, for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
William Buck Audit (Vic) Pty Ltd
ABN: 59 116 151 136
J. C. Luckins
Melbourne, 18 September 2018
Connexion Media Limited
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 12 September 2018.
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Holder
CITICORP NOMINEES PTY LIMITED
ZURICH BAY HOLDINGS PTY LTD
ROCSANGE PTY LTD
J F BYRNES SUPER PTY LTD
MR CHING KHOON TAN
KAPIRI HOLDINGS PTY LTD
NATIONAL NOMINEES LIMITED
RATIO NOMINEES PTY LTD
SHYMEA PTY LTD
No.
1
2
3
4
5
6
7
8
9
10 MR ROBERT CAMERON GALBRAITH
11
12 MS FELICITY JANSEN
13
COACH DEVELOPMENTS PTY LTD
14
KASSETT PTY LTD
MR MAURICE FORTE & MRS MARISA FORTE
BARBRIGHT AUSTRALIA PTY LTD
15
16 MS ELIZABETH ANN WHITE
17 WANNELL ENTERPRISES PTY LIMITED
18
MR MARINUS ADRIAN STRYBOSCH & MRS PENELOPE K
STRYBOSCH
HAMMOND ROYCE CORPORATION PTY LTD
19
20 MR MICHAEL MAGUIRE
Total Securities of Top 20 Holdings
Total of Securities
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
38
Shares
180,748,388
62,960,960
28,588,942
25,435,528
24,611,617
22,835,715
20,000,000
16,590,507
15,670,425
14,296,296
13,504,210
12,305,809
12,000,000
%
21.46%
7.48%
3.39%
3.02%
2.92%
2.71%
2.37%
1.97%
1.86%
1.70%
1.60%
1.46%
1.42%
11,615,577
1.38%
10,988,016
10,490,218
10,480,812
1.30%
1.25%
1.24%
10,467,813
1.24%
9,810,184
7,884,008
1.16%
0.94%
521,285,025
842,165,112
61.90%
Number
of holders
of ordinary
shares
812
243
169
370
310
1,904
1,528
Connexion Media Limited
Shareholder information
30 June 2018
Substantial holders
There following two shareholders are considered substantial holders in the company.
1. LUCERNE GROUP PTE LTS and its Associates
2. ZURICH BAY HOLDINGS PTY LTD
Voting rights
The voting rights attached to ordinary shares are set out below:
Shares
182,571,201
%IC
21.68%
62,960,960
7.48%
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Restricted securities
There are no restricted securities
Corporate Governance
In accordance with ASX Listing Rule 4.10.3, the Company’s Corporate Governance Statement can be found on its
website www.connexionltd.com.
39