Crowd Media Annual Report 2019

Plain-text annual report

Crowd Media Holdings Limited (ASX:CM8) For year ended 30 June 2019 1 “ We are extremely excited in being able to secure Invincible Investment Consortium (IIC) both in terms of funding and human resource. The Consortium participants are proven performers who will greatly assist Crowd with both our existing operations and, more importantly, new opportunities that we are able to capitalise on following the recent restructure of the Company. Domenic Carosa Chief Executive Oﬃcer 9 1 0 2 t r o p e R l a u n n A 2 2 Contents Contents Corporate Directory Chairman’s letter Chief Executive Oﬃcer’s report 3 4 5 7 Directors’ report 10 Auditor’s independence declaration 26 Statement of proﬁt or loss and other comprehensive income 27 Statement of ﬁnancial position 28 Statement of changes in equity 29 Statement of cash ﬂows 30 Notes to the ﬁnancial statements 31 Directors' declaration 65 Independent auditor’s report to the members of Crowd Media Holdings limited 66 Shareholder information 70 We see key opportunities in leveraging the technology platforms and reach of our Q&A and Subscription divisions and our proven ability to continue growing the Crowd Media division, as well as the growth prospects that come with the investment and partnership of the Invincible Investment Consortium Crowd Media Holdings Limited - Chairman “ Theo Hnarakis 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 3 3 Corporate Directory Directors Theo Hnarakis - Chairman Domenic Carosa Sophie Karzis Company Secretary Laura Newell Registered Oﬃce Australia Level 4 44 Gwynne Street Cremorne VIC 3121 Europe (Netherlands) 95B Piet Heinkade 1019 GM Amsterdam Share Registry Boardroom Pty Limited Level 12 225 George Street Sydney NSW 2000 Tel: 1300 737 760 (within Australia) +61 (0) 3 9290 9600 (outside Australia) Fax: +61 (2) 9279 0664 Auditor RSM Australia Partners Level 21 55 Collins Street Melbourne VIC 3000 Stock exchange listing Crowd Media Holdings Limited shares are listed on the Australian Securities Exchange (ASX code: CM8) Crowd Media Holdings Limited shares are also dual listed on the Frankfurt Stock Exchange (FWB code: CM3) Website www.crowdmedia.com 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 4 4 Chairman’s Letter “Despite regulatory headwinds and multiple challenges on our journey, my optimism for growth and delivering shareholder value has not dissipated” Dear Shareholders, Crowd Media achieved revenue of $23.9m in a challenging 2019 ﬁnancial year. Our investment in our Crowd Media division continued to gain ground with revenue increasing 232% over 2018, whilst our Q&A and Subscription divisions had mixed results. After conducting a strategic review, we have taken aggressive cost-cutting measures to return the Company to proﬁtable in FY20, while entering into a new phase with the Invincible Investment Consortium who recently took a strategic stake in Crowd Media. The deal leverages the strengths, intellectual property and know-how of each party, noting that Crowd’s strengths include its proprietary technology (currently only utilised in its Q&A and Subscription verticals), social media and digital marketing; IIC’s strengths include innovative product development, brand-building, international business operations, brand positioning and digital media inﬂuencer marketing. Given the new strategic investor joining, I have decided to step aside and make way for incoming Chairman Steven Schapera who comes highly credentialed having exited his previous company to Estee Lauder for AUD $300 million. Annual report I am pleased to present Crowd Media’s 2019 Annual Report. Although this was again a challenging year, I am pleased to say that we have completed our strategic review and are moving into FY20 with a renewed focus and vigour. Revenue, underlying EBITDA and operating cash ﬂow for FY19 were approximately $23.9 million, ($2.6 million) and ($2.4 million), respectively. The Crowd Media division saw signiﬁcant growth, while the Q&A and Subscription divisions suﬀered a drop in revenue. During FY19, the Company implemented cost-saving measures with the objective of moving the Company back to proﬁtability.This included a reduction in 50% of middle and senior management, which included the COO and other management positions. On 29 August 2019 the Company executed a binding Heads of Agreement with an alliance of strategic investors, collectively the Invincible Investment Consortium (IIC), to fund existing Company requirements, as well as develop new business synergies and joint ventures between Crowd Media and businesses that the IIC can introduce and facilitate. Throughout our history, Crowd Media has always been a company that innovates, and we now see signiﬁcant potential to move further into this growing space. We believe we have unique skills and expertise in harnessing the power of social media and digital inﬂuencers to promote global brands, hence why the strategic investment by Invincible Investment Consortium is so important. As part of the investment and collaboration under the agreement, IIC principals Steven Schapera and Robert Quandt will be joining the Crowd Media Board of Directors in September 2019. Crowd Media Agency Division The Crowd Media division provides brands and digital inﬂuencers with an inﬂuencer marketing agency, underpinned by our proprietary technology which we have built over the last 5 years. With millennials quickly becoming the largest population segment in the world, seismic shifts in the media landscape are taking place. Millennials watch little TV and typically surf the web with an adblocker, thus having less exposure to traditional means of advertising. Crowd Media is built upon the idea of using people with a substantial following on social media, or “inﬂuencers” to deliver branded content to their audiences. At Crowd Media, we see inﬂuencers as the future of advertising. Crowd Media continued its strong growth trajectory in FY19, with revenues of $1.6 million (FY18: $0.49m) and a sales pipeline of $1 million. Looking ahead, we will continue to deliver globally competitive social media and digital inﬂuencer campaigns to clients and generating materials revenues with strong year on year growth. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 5 5 Chairman’s Letter Crowd Mobile Division The Q&A and Subscription divisions experienced material headwinds in FY19 caused by regulatory changes and material bad debt provisions. Revenues for the divisions were $15.9 million and $6.4million, respectively, down 41% on combined FY18 revenue of $38.1 million. Headwinds are receding and green shoots are appearing through new social distribution channels and new territories. Consumer demand continues for these services and with the cost saving measures implemented in FY19, these divisions are expecting to be EBITDA positive again in FY20. Fiscal Responsibility We reﬁnanced our JGB debt in FY19 with BillFront Limited at improved terms. The maturity date of the debt is 12 April 2021. In FY19 our operating cash ﬂow was lower due to a number of one-oﬀs, including redundancy payments as part of the strategic review that was performed during the year. Furthermore, the Board and CEO agreed to a salary reduction program for the period from 1 February 2019 to 30 June 2019. As a result of these diligent cost-cutting measures the Company implemented in FY19, we believe this will bring the Company back to consistent positive EBITDA and operating cash ﬂow in FY20. Furthermore, under the agreement executed with the Invincible Investment Consortium (IIC) on 29 August 2019, Crowd Media will issue IIC (and/or their nominees) with convertible notes with a face value of up to $3.7 million in two tranches. Tranche 1 of $1.7 million will be used to pay down the convertible notes issued to Obsidian, cover redundancy costs resulting from the strategic review performed in FY19 and provide additional working capital. Tranche 2 of $2.0 million is subject to the parties agreeing to a business plan which focuses on strategic collaboration objectives. Underlying EBITDA Results Crowd Media reported underlying EBITDA result of ($2.6 million) and ($2.4 million) in operating cashﬂow for FY19 as follows: Net Proﬁt after tax (NPAT) Add: tax expense/(beneﬁt) Add: ﬁnance costs Deduct: interest income Add: depreciation and amortisation Earnings before interest, tax, depreciation and amortisation (‘EBITDA’) Add: impairment expense Add: share-based payments expense (non-cash) Add: restructuring and reﬁnancing costs Add: share issuance costs Eﬀects of exchange rate changes Underlying EBITDA (4,795,984) (1,581,426) 582,894 (1,991) 209,128 (5,587,379) 1,158,485 24,750 1,459,095 131,525 164,915 (2,648,609) Board, Governance and Management The Board is committed to ensuring our business is conducted in accordance with the highest standards of corporate governance. This, together with strong management, creates a positive culture for shareholders, employees and customers. Outlook FY19 was a true challenge for the Company, but we have emerged with a real purpose and drive in FY20. We see key opportunities in leveraging the technology platforms and reach of our Q&A and Subscription divisions and our proven ability to continue growing the Crowd Media division, as well as the growth prospects that come with the investment and partnership of the Invincible Investment Consortium. On a personal note, I joined the Crowd Mobile team as Chairman 5 years ago with a sense of optimism that our company would grow into a leader in our ﬁeld. Despite regulatory headwinds and a multitude of challenges on our journey, my optimism for growth and delivering shareholder value has not dissipated. On behalf of the Board, let me close by thanking you, our shareholders, for your ongoing support. To the Company’s Board of Directors, CEO and Managing Director, Domenic Carosa, and his international team, thank you for your strong and committed eﬀort during the past 12 months and wish you all the best in the future. Theo Hnarakis Crowd Media Holdings Limited - Chairman 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 6 6 Chief Executive Oﬃcer’s Report “As a result of the diligent cost-cutting measures the Company implemented in FY19, we believe this will bring the Company to consistent positive EBITDA and operating cash ﬂow in FY20” Dear Shareholders, We are extremely excited in being able to secure Invincible Investment Consortium (IIC) both in terms of funding and human resource. The Consortium participants are proven performers who will greatly assist Crowd with both our existing operations and, more importantly, new opportunities that we are able to capitalise on following the recent restructure of the Company. Both our social media and digital marketing capabilities, as well as our Artiﬁcial Intelligence and Subscription technology platforms, have been substantially enhanced and reﬁned over the last year and they are now ready to be more eﬀectively deployed with the assistance of IIC. It will be a very exciting few months ahead for Crowd as we work closely with IIC to expand our business capabilities. Under the agreement executed with the Invincible Investment Consortium (IIC) on 29 August 2019, Crowd Media will issue IIC (and/or their nominees) with convertible notes with a face value of up to $3.7 million in two tranches. Tranche 1 of $1.7 million will be used to pay down the convertible notes issued to Obsidian, cover redundancy costs resulting from the strategic review performed in FY19 and provide additional working capital. Tranche 2 of $2.0 million is subject to the parties agreeing to a business plan which focusses on strategic collaboration objectives. Annual review Crowd Media’s FY19 year was a challenging one for the Company, especially within the Q&A and Subscription divisions. Similar to FY19, I expect part of FY20 to be a year of transition and I ask shareholders for their patience as we transform to a platform-centric company focused on marketing, predominately to millennials, through technology. We completed our strategic review and identiﬁed a number of improvements and opportunities. We believe we have some key strengths that we can build on as follows: 1. 2. 3. Pioneers in social media and inﬂuencer marketing (6+ years) Millennial and digital in our company DNA Data-driven culture that leverages Artiﬁcial Intelligence (AI) and Business Intelligence (BI) technology 4. Strong depth and breadth in digital marketing in local markets around the world (30+) However, we are also committed to growth and evolving further into a digital media company and to achieve our goals, a number of fundamental changes needed to be identiﬁed and implemented. As a result of the diligent cost-cutting measures the Company implemented in FY19, we believe this will bring the Company back to consistent positive EBITDA and operating cashﬂow in FY20. Crowd Media Increasing revenue & sales pipeline Crowd Media works with brands and digital inﬂuencers and our strong performance has been achieved by accelerating our ability to capture global growth opportunities in the digital inﬂuencer market space, leveraging the global distribution and expertise we have built up in the past 7 years in social media marketing with the Q&A division. In FY19 Crowd Media revenues were $1.6m, up 232% from $0.49m in FY18, with a current pipeline of $1m+. We anticipate continuing the material growth within Crowd Media across all key metrics in FY20. Crowd Media continues to attract blue chip partners including Nestle, L’Oréal, Apple Music, Bunq, Coty, Happn, Oasis, Moroccan Oil and Mandarine Napoleon. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 7 7 Chief Executive Oﬃcer’s Report Crowd Media’s sales have been secured despite signiﬁcantly longer sales cycles and therefore the continued sales growth illustrates good and promising momentum. The estimated sales cycle is typically around 4-6 months depending on the size of the deal. Key Drivers Social Media & Millennials Crowd Media is positioned to continue capitalising on the global shift towards mobile devices and increasing importance of social media channels. Our target customers Why is Crowd Media investing in this space? At Crowd continue to be 16-35 years old with disposable income and Media, we see social media as the new TV channel and limited ﬁnancial commitments. digital inﬂuencers as the new TV commercial. Millennials are no longer consuming media in traditional ways, so brands need to be agile and design new methods to reach them. This is where digital inﬂuencers – people with clout on social media – come in. Research shows that millennials trust inﬂuencers much more than traditional media, making These millennials are mobile natives and Crowd Media provides valuable mobile services and entertainment aimed at them. We have also identiﬁed the growing trend of digital inﬂuencers and see this as a key opportunity going forward. Our product strategy is matched to these demands and social media an important marketing channel. trends. Moving forward, we see opportunities for inﬂuencers to leverage their popularity to sell both physical and digital products, so we want to empower them to monetise beyond simply advertising. This is part of the reason why we believe the IIC deal is so strategic. Crowd Media Transition and opportunities Crowd Media is continuing to explore additional ways to improve shareholder value. With the signiﬁcantly reduced cost base in FY20, we are expecting positive EBITDA and Backing this all up, we have a global distribution network – positive operating cashﬂow. ﬁfteen years in the making – that is connected to over 220 telcos worldwide. With this vast network in place, we can bill customer’s mobile phones directly. Currently, we are executing over 200 inﬂuencer campaigns a month, and to date, we have worked with over 6,000 inﬂuencers. We see this as a lucrative growth opportunity and are very excited to be in this space. Crowd Mobile Strategic review We are extremely excited in being able to secure IIC both in terms of funding and human resource. The new Chairman and Board member (and other Consortium participants) are proven performers who will greatly assist Crowd with both our existing operations and, more importantly, new opportunities that we are able to capitalise on following the recent restructure of the Company. I would like to thank our board for their support and our staﬀ and executive team for their hard work and application The Q&A and Subscription divisions faced major regulatory in these trying times. headwinds and material bad debt expenses in FY19. Revenue for Q&A in FY19 of $15.9m was down 36% on FY18 and Subscription revenue of $6.4m was down 52% on FY18. I would also like to formally thank our outgoing Chairman, Theo Hnarakis, for his leadership since listing the Company in January 2015; his advice and mentorship have been invaluable. We proactively took steps to protect the operating margins by identifying operational eﬃciencies through the strategic review and aggressive cost-cutting initiatives. Finally, I would like to thank all of our shareholders for your continued support and look forward to sharing our developments with you all in FY20 and beyond. Headwinds are now receding, and green shoots are appearing through new social distribution channels and new territories. Domenic Carosa Chief Executive Oﬃcer 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 8 8 9 1 0 2 t r o p e R l a u n n A 9 9 Directors’ Report The directors present their report, together with the ﬁnancial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Crowd Media Holdings 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 2019. Directors The following persons were directors of Crowd Media Holdings Limited during the whole of the ﬁnancial year and up to the date of this report, unless otherwise stated: Theo Hnarakis - Chairman Domenic Carosa Sophie Karzis Principal activities During the ﬁnancial year the principal continuing activities of the Group consisted of the sale of information, entertainment and content and utility services for mobile phones and tablets. Dividends There were no dividends paid, recommended or declared during the current or previous ﬁnancial year. Review of operations The ﬁnancial results for the year ended 30 June 2019 and for the prior year ended 30 June 2018, (‘pcp’ or ‘prior year’) represents those of the Crowd Media operating entities, the Track operating entities, Crowd Media and Crowd Media Holdings Limited. Crowd Media earned revenue and other income for the year ended 30 June 2019 of $23,918,776 versus $38,557,609 in the prior year. The net loss after tax for the year was $4,795,984 compared with a pcp net loss after tax of $26,041,272 The other comprehensive income for the year attributable to the owners of Crowd Media was $511,227 when accounting for a foreign currency translation loss on foreign operations. Crowd Media’s net asset position at 30 June 2019 was $948,113, a decrease of 80% over the 30 June 2018 balance of $4,655,431. This largely reﬂects the impairment of the Subscription CGU in FY-18 and operational transition and investment in the Media division. During the year ended 30 June 2019, Crowd Media performed a strategic review to streamline operations and implement cost reduction initiatives. These initiatives included redundancies that will save the Company over $1.4m in annualised costs eﬀective 1 July 2019, with total annualised cost savings of $3.5m realised in FY-19. Employee headcount was reduced by 34% from 73 in Q1 FY-19 to an expected 48 in Q1 FY-20. As a result of these initiatives and projected growth in the Media division, the Company is expecting to be earnings before interest, tax, depreciation and amortisation ('EBITDA') positive and operationally cashﬂow positive in FY-20, with a focus on reducing debt. Comparison of years ended 30 June 2019 to 30 June 2018 2019 $ 2018 $ Increase/ (decrease) $ Percentage change % Revenue Other income Cost of sales Selling, general and administration expenses Impairment expense 23,918,776 - (7,167,258) (21,180,412) (1,158,485) 38,552,347 5,262 (9,219,751) (26,599,387) (25,913,717) (14,633,571) (5,262) 2,052,493 5,418,975 24,755,232 Earnings before interest, tax, depreciation and amortisation ('EBITDA') Proﬁt / (Loss) (5,587,379) (23,175,246) 17,587,867 Interest income Depreciation and amortisation Finance costs Income tax beneﬁt 1,991 (209,128) (582,894) 1,581,426 2,655 (3,648,101) (1,528,206) 2,307,626 (664) 3,438,973 945,312 (726,200) (38%) (100%) (22%) (20%) (96%) (76%) (25%) (94%) (62%) (31%) Net Proﬁt / (Loss) After Tax ('NPAT') (4,795,984) (26,041,272) 21,245,288 (82%) 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 10 10 Directors’ Report Notably, the Company’s EBITDA and net loss includes impairment expense of $1,158,485, a non-cash share-based payment charge of $24,750, reﬁnancing and restructuring costs of $1,459,095 and share issuance costs of $131,525. When adjusting only for these eﬀects (consistent with performance measures reported to shareholders during the year), the Underlying EBITDA for the ﬁnancial year is a loss of ($2,648,609) (pcp: $3,579,496), a decrease of 174% versus prior year, as follows: Consolidated 2019 $ 2018 $ Net proﬁt/loss after tax (NPAT) (4,795,984) (26,041,272) Add back: tax expense/(beneﬁt) Add back: ﬁnance costs Deduct: interest income Add back: depreciation and amortisation EBITDA Add back: impairment expense Add back: share-based payments expense Add back: restructuring and reﬁnancing costs Add back: share issuance costs Eﬀects of exchange rate changes (1,581,426) 582,894 (1,991) 209,128 (5,587,379) 1,158,485 24,750 1,459,095 131,525 164,915 (2,307,626) 1,528,206 (2,655) 3,648,101 (23,175,246) 25,913,717 382,380 70,000 - 388,645 Underlying EBITDA (2,648,609) 3,579,496 Revenue 2019 $ 2018 $ Increase/ (decrease) $ Percentage change % Revenue 23,918,776 38,552,347 (14,633,571) (38%) For FY-19, revenue was represented by Q&A of $15,923,286 (pcp: $24,736,054), Subscription of $6,361,291, (pcp: $13,323,863) and Media of $1,634,199 (pcp: $492,430). The Q&A business encountered headwinds and produced softer than expected revenues. The Company continues to develop its Artiﬁcial Intelligence ('AI') and Business Intelligence ('BI') technology to help drive growth. Billed message volumes slightly decreased from 14.0m to 12.5m year on year. The average revenue per paid message for the current year was $1.29 compared to $1.72 for the prior year. This reﬂects the Company’s strategy of growing more strongly in lower unit economic countries, as well as a depreciating Australian dollar versus the Euro, compared to the previous corresponding period. Subscription contributed consolidated revenue of $6,361,291 and the business generally continues to be proﬁtable. Management has tangible plans to expand the product oﬀering in FY20, adding new and better-quality third-party content and diversifying revenue. In addition, management performs a strategic review on an ongoing basis and continues to identify cost savings and operational eﬃciencies for this business. Group revenue is expected to stabilise in FY20 as a result of further growth of the Media business, continuous leverage of existing and new products into existing and new markets in both the Q&A and Subscription businesses and reducing operating expenses. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 11 11 Directors' Report Expenses (i) Cost of sales For FY-19, the Group’s cost of sales was $7,167,258 or 30% of revenue (pcp: $9,219,751 at 24%) and was represented by Q&A at $4,327,093 (pcp: $6,015,865), Subscription at $1,796,815 (pcp: $2,768,174) and Media at $1,043,350 (pcp: $435,712). The margin increase was the result of the decline in Subscription revenue, combined with stable ﬁxed portion of the cost base and increased compliance cost. An improvement in the Q&A business is derived from the use of AI and BI solutions. We expect cost of sales as a percentage of revenue to be relatively ﬂat in FY-20. (ii) Selling, general and administration expense For FY-19, the 20% decrease in Crowd Media’s selling, general, and administrative expenses (which include Marketing) to $21,180,412 is mostly due to decrease in marketing and cost saving initiatives. We expect selling, general and administration expenses to further decrease in line with the additional operational and employee costs savings that will materialise in FY-20. The Group will continue to invest into high growth business areas, such as digital inﬂuencer commerce. The larger movements in expenses for FY-19 versus FY-18, were as follows: 2019 $ 2018 $ Increase/ (decrease) $ Percentage Change % Marketing 6,993,715 11,261,186 (4,267,471) Employee beneﬁts expenses 8,663,575 9,239,409 143,465 24,750 831,494 382,380 (575,834) (688,029) (357,630) 1,158,485 25,913,717 (24,755,232) (38%) (6%) (83%) (94%) (96%) Product development Share-based payment Impairment expense Restructuring and ﬁnance costs 1,459,095 70,000 1,389,095 1984% ● Marketing: The consolidated marketing expense of $6,993,715 or 29% of revenue for FY-19 was down by $4,267,471 or 38% versus FY-18: $11,261,186 (29% of revenue). Q&A was $5,250,706 or 33% of revenue for the year, compared to pcp of $6,015,865, at 24%. The digital inﬂuencer and innovation channels produced stable ROI, which oﬀsets continuous saturation of the Facebook channels. The Subscription expense was $1,587,156 or 25% (pcp: $2,996,103 at 22%). The Media division marketing expense was $155,853 or 10%. Moving forward, we expect a broadly consistent marketing cost to income ratio. ● ● ● ● ● Employee beneﬁts expense: The consolidated expense decreased by $575,834, or 6%, for FY-19, mostly due to a decrease in headcount. Q&A for the period was $6,296,010, almost ﬂat versus the previous corresponding period of $6,333,887. The Subscription expense was $1,220,657 for the period, a decline of 29% versus the FY-18 expense of $1,714,798, due to restructuring in FY-18. In addition, the Crowd Media division incurred an expense of $1,146,908, a decline of 4% versus the previous corresponding period of $1,190,724. At 36% of Group revenue, the employee beneﬁts expense ratio trended upwards in FY-19 compared to pcp. This ratio is expected to decrease in FY-20 as a result of the restructuring that occurred in FY-19. Product development: In FY19, the Company incurred a product development expense of $143,465 (pcp: $831,494), which related to internal product development costs for our digital inﬂuencer CRM and Schumacher emoji app. These costs were expensed and not capitalised. The decline in FY-19 is the result of the Company’s strategic plan and operational transition. Share-based payment: The consolidated expense of $24,750 for FY-19 is a Directors’ and staﬀ incentive expense and is attributed to the Q&A CGU. The reduction of $357,630, or 94%, reﬂects the decline in performance rights in FY-19. Impairment expense: In FY-19, impairment expense is related to allowance for expected credit losses of $1,158,485 (pcp: $533,673). In FY-18, management conducted a strategic review and trigger-based impairment test of the Subscription CGU, resulting in an impairment of $25,380,044, writing the asset down to nil. Restructuring and reﬁnancing costs: In FY-19, the Company incurred costs for debt reﬁnancing and restructuring of $1,459,095. In FY-18, restructuring costs totalled $70,000. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 12 12 Directors' Report (iii) Depreciation and amortisation 2019 $ 2018 $ Change $ Change % Depreciation Amortisation 192,988 16,140 219,474 3,428,627 (26,486) (3,412,487) (12%) (100%) 209,128 3,648,101 (3,438,973) (94%) The FY-19 consolidated depreciation and amortisation expense of $209,128 (pcp: $3,648,101) is split between Q&A as $71,176 (pcp: $125,663), Subscription as $129,612 (pcp: $3,522,438) and Media as $8,340 (pcp: $0). The decrease in the consolidated depreciation and amortisation charges in FY-19 is due to the impairment taken in FY-18, which resulted in writing down the Subscription CGU to nil. (iv) Finance costs The consolidated ﬁnance costs for FY-19 of $582,894 is a decrease of $945,312 or 62% from FY-18. Due to the reduced debt holdings and reﬁnancing that occurred in FY-19, we expect ﬁnance costs to further decline in FY-20. (v) Income tax expense/(beneﬁt) The consolidated tax beneﬁt for FY-19 of ($1,581,426) is represented by a Q&A beneﬁt of ($813,042), a Subscription beneﬁt of ($420,346) and Media beneﬁt of ($348,038). The consolidated tax beneﬁt for FY-18 was ($2,307,626), which was mainly due to the release of a deferred tax liability of ($2,547,137) related to the impairment of the Subscription division in FY-18. Cash ﬂow The Company’s net cash used in operating activities for the year was ($2,443,352), which was a decrease of $5,082,567 versus the prior period (pcp: $2,639,215). The decline reﬂects a decrease of receipts from customers which were $26,868,408 and $41,422,950, respectively. This decline was partially oﬀset by decreased payments to suppliers and employees of $6,665,361. Net trading receipts (excluding interest and tax cash ﬂows) for FY-19 was ($2,632,124), which is a 150% decrease over the prior year of $5,256,697. The net cash ﬂow from investing activities for the period was $120,536, versus ($516,755) in the prior year, mainly reﬂecting proceeds from disposal of intangibles and release of security deposits. The net cash ﬂow from ﬁnancing activities for the period was $133,264 versus ($4,662,157) in the prior year, comprised of repayments of borrowings to JGB of $3,287,542, oﬀset by proceeds from issue of shares of $428,957 and combined payments for borrowings of $2,991,849. Liquidity and Financial Position At Crowd Media’s 30 June 2019 reporting date: Cash and cash equivalents (‘cash’) were $839,462 (30 June 2018: $2,559,776). ● ● Working capital, (deﬁned as current assets less current liabilities) decreased by $1,417,583 to $1,545,624 (30 June 2018: $2,963,207). Reporting date total current and non-current borrowings (‘debt’) were $2,991,849 (30 June 2018: $3,287,542). Net debt (debt less cash), at 30 June 2019 was $2,152,387, an increase of $1,424,621 or 196% from $727,766 at 30 June 2018. Net assets at 30 June 2019 were $948,113 (30 June 2018: $4,655,431). ● ● ● The ﬁnancial statements have been prepared on a going concern basis. Refer to Note 2 of the ﬁnancial statements and the auditor’s review report attached for further information. Signiﬁcant changes in the state of aﬀairs On 25 July 2018, the Company agreed to issue Performance Rights ('PRs') to employees. The three-year PRs are based on share price and earnings per share targets and the maximum number of shares that can be issued on conversion is 6,000,000. On 25 July 2018, the Company cancelled the second issue of PRs. The three-year PRs were issued on 14 July 2017 and were based on share price and earnings per share targets. The maximum number of shares that could be issued on conversion was 6,000,000. On 21 December 2018, following shareholder approval, the Company changed its name from Crowd Mobile Limited to Crowd Media Holdings Limited. The new name more accurately encompasses the current and future operations of the Company. The ASX issuer code remained as CM8. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 13 13 Directors' Report On 12 April 2019, the Company completed its debt reﬁnancing with BillFront Limited, a leading ﬁnance provider to the Media and Technology industries internationally. The debt facility with BillFront was used to redeem the JGB loan in full on materially improved terms. The debt facility is structured as a two year revolving credit facility, senior secured against all of the Company’s assets including receivables. The outstanding balance at 30 June 2019 was EUR€1,339,835 (AUD$2,169,032), with an eﬀective annual interest rate of 11.3% and the maturity date is 12 April 2021. There were no other signiﬁcant changes in the state of aﬀairs of the Group during the ﬁnancial year. Matters subsequent to the end of the ﬁnancial year On 31 July 2019, the Company agreed to issue Performance Rights ('PRs') to employees. The PRs are based on share price targets and the maximum number of shares that can be issued on conversion is 5,500,000 at two years and 5,500,000 at three years. On 31 July 2019, the Company agreed not to proceed with the PRs previously agreed to be issued on 25 July 2018. The three year PRs were based on share price and earnings per share targets and the maximum number of shares that could be issued on conversion was 6,000,000. On 29 August 2019, the Company executed a binding Heads of Agreement ('HOA') with an alliance of strategic investors, collectively the Invincible Investment Consortium ('IIC'), to fund existing Company requirements, as well as develop new business synergies and joint ventures between Crowd Media and businesses that the IIC can introduce and facilitate. These would leverage Crowd Media’s well-established technology and digital marketing platforms. Under the agreement, Crowd Media will issue IIC (and/or their nominees) with convertible notes with a face value of up to $3,700,000 on the following key terms: ● ● Tranche 1: $1,700,000 20 month facility with a ﬁxed conversion price of 1.8 cents, of which $1,600,000 has been received as at 19 September 2019: and Tranche 2: $2,000,000 24-month facility, to be drawn down in 90 days with a ﬁxed conversion price of 2.0 cents, subject to the parties agreeing to a business plan which focusses on strategic collaboration objectives. As part of the investment and collaboration under the agreement, IIC principals Steven Schapera and Robert Quandt will be joining the Crowd Media Board of Directors in September 2019. Crowd Media’s current Chairman, Theo Hnarakis, will be retiring from the Board to pursue other opportunities, and Steven Schapera will replace him as new Chairman. Experience and Expertise of Steven Schapera - Steven is London-based; he co-founded the successful BECCA Cosmetic brand and, as global CEO, commercialised it into a range of cosmetic products that are distributed throughout Europe, Asia and North America. Steven guided BECCA, from its infancy through to being a global player in the international luxury cosmetic space, before exiting the business to Estee Lauder for AUD$300 million. Steven holds a number of Board positions, including non-exec director of ASX listed OBJ Limited, and has investments in the health, beauty, wellness and tech spaces. Experience and Expertise of Robert Quandt - Robert worked for 10 years as a consultant for Booz & Company serving large corporate clients on strategy, operation and organisation. Subsequently, Robert has worked for Linde AG as the strategy lead for their EUR 6bn Americas business. Until recently, he has served as Board Director and COO/CFO of Invincible Brands. Invincible Brands is a Berlin-based Inﬂuencer led brand builder. Working alongside the co-founders, Robert has helped to grow this highly proﬁtable business from EUR 7m revenue in 2016 to around €100m in 2019. As part of the incoming investment by IIC, current CEO Domenic Carosa has agreed to reduce his remuneration package, beginning 1 September 2019 to EUR 240,000 per annum with an agreed 3-month notice period. No other matter or circumstance has arisen since 30 June 2019 that has signiﬁcantly aﬀected, or may signiﬁcantly aﬀect the Group's operations, the results of those operations, or the Group's state of aﬀairs in future ﬁnancial years. Likely developments and expected results of operations The Directors and management of the Group will focus on targeting growth in the combined business operations, whilst paying down debt in cash, wherever possible. Environmental regulation The Group is not subject to any signiﬁcant environmental regulation under Australian Commonwealth or State law. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 14 14 Directors' Report Information on directors Name Theo Hnarakis Title Non-Executive Chairman Experience and expertise Theo Hnarakis brings a wealth of experience working in the media industry and scaling Australian ASX listed technology businesses. He graduated from The University of South Australia with a Bachelor of Accounting and has held senior roles with News Corporation, Boral Group, the PMP Communications Group and was the Managing Director and CEO of Melbourne IT until 2013. He has also held director roles with Neulevel, a JV with US based listed company, Neustar and with Advantate, a JV with Fairfax Media. Other current directorships Chairman of Dropsuite Ltd (ASX: DSE) (since 28 December 2016), Director of Farmgate MSU (non-listed) Former directorships (last 3 years) None Special Responsibilities None Interests in shares 4,177,650 ordinary shares (held indirectly) Interests in options None Interests in rights None Name Domenic Carosa Title Chief Executive Oﬃcer and Executive Director Qualiﬁcations Masters of Entrepreneurship and Innovation (MEI) from Swinburne University Experience and expertise Domenic Carosa is Chief Executive Oﬃcer (‘CEO’) and Executive Director of Crowd Media. With over 20 years’ experience in business and technology, Domenic has built a reputation as a leader in the internet space by building one of Australia’s leading digital music service providers in the late 90’s, and building from scratch Australia’s second largest virtual web hosting/communications company which he sold for A$25 million in 2006-07. Domenic was previously the co-founder and Group CEO of ASX-listed Destra Corporation Ltd which was the largest independent media and entertainment company in Australia with revenues of over A$100 million. Mr Carosa was a director of Destra Limited until April 2009. Domenic is past Chairman of the Internet Industry Association (IIA). Domenic is Non-Executive Chairman of the Future Capital Development Fund and Non-Executive Chairman of Dominet Digital Corporation Pty Ltd, an internet investment group. Other current directorships None Former directorships (last 3 years) None Special Responsibilities None Interests in shares 58,888 ordinary shares (held directly) 24,684,080 ordinary shares (held indirectly) Interests in options None Interests in rights None 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 15 15 Directors' Report Information on directors Name Sophie Karzis Title Non-Executive Director Qualiﬁcations Bachelor of Laws Degree from Monash University Experience and expertise Sophie is a practising lawyer with over 20 years' experience in corporate law. She is company secretary and general counsel to a number of listed and unlisted public companies and private companies and is the principal of Corporate Counsel Pty Ltd, a business which provides corporate and company secretarial services to Australian companies. Other current directorships Director of Change Up Holdings Limited (non-listed), Director of Collingwood Football Club Foundation (non-listed – not-for-proﬁt) Former directorships (last 3 years) None Special Responsibilities Company secretary Interests in shares 504,736 ordinary shares (held indirectly) Interests in options None Interests in rights None 'Other current directorships' quoted above are current directorships for listed entities 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 Ms Sophie Karzis was the Company Secretary for the ﬁnancial year and is a Non-Executive Director. Refer to 'Information on directors' section above for experience and expertise. Subsequent to 30 June 2019, Sophie resigned as Company Secretary and was replaced with Laura Newell, however, Sophie remains on the Board in her existing position as Non-Executive Director. Laura Newell of Boardroom Pty Limited has worked in multiple Company Secretary roles prior to joining the Group and brings a signiﬁcant degree of experience to Crowd Media Holdings Limited. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2019, and the number of meetings attended by each director were: Theo Hnarakis Domenic Carosa Sophie Karzis ‘Held’ represents the number of meetings held during the time the director held oﬃce. Full Board Attended Held 14 14 13 14 14 14 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 16 16 Directors' Report Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, 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 information Additional disclosures relating to key management personnel Principles used to determine the nature and amount of remuneration The objective of the Group'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. 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 Group 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 revenue and economic proﬁt as a core component of plan design focusing on sustained growth in shareholder wealth, and particularly 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 Board may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors' fees and payments are appropriate and in line with the market. Non-executive directors may receive share options or other incentives. Fees are reviewed annually and include superannuation contributions, where required. The non-executive directors do not receive any other beneﬁts. ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 9 December 2015, where the shareholders approved an aggregate remuneration of $500,000. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both ﬁxed and variable components. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 17 17 Directors' Report The executive remuneration and reward framework has four components: ● ● ● ● base pay and non-monetary beneﬁts short-term performance incentives share-based payments 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 Group and comparable market remunerations. The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of those executives in charge of meeting those targets. STI payments are paid as cash bonuses and are discretionary. The long-term incentives (‘LTI’) may include equity based payments in the form of shares, performance rights or options. On 17 December 2014, shareholders approved a Performance Rights Plan ('PR Plan'). Under the PR Plan, selected employees and Directors may be granted performance rights which will entitle them to receive ordinary shares in the Company, subject to the Company meeting performance objectives. On 25 July 2018, the Company agreed to issue Performance Rights to employees. The three-year PRs are based on share price and earnings per share targets and the maximum number of shares that can be issued on conversion is 6,000,000. Performance rights may be issued to all employees and Directors of the Company and any Subsidiary. The number of performance rights (if any) to be oﬀered from time to time to each person shall be determined by the Board in its discretion. The performance rights in respect of an employee will vest no earlier than on meeting the relevant Performance Condition(s). Unissued performance rights will be issued pro-rata at the time the relevant Performance Condition is met. The employee must still be employed by the Company at the time of vesting, unless otherwise agreed by the Board in limited circumstances. Any performance rights that have been earned but remain unvested will vest in the event of a takeover or similar event occurring. Should the holder of performance rights resign, all rights not yet vested will be forfeited. The Company established an employee option plan in 2015 called the Crowd Mobile Limited Executive Option Plan (‘Option Plan’), which replaces the former Q Limited Incentive Option Scheme. The Group may, at the discretion of the Board, grant options over ordinary shares in the Company to certain key management personnel (and Directors) of the Group. The options are issued for nil consideration and are granted in accordance with performance guidelines established by the Board. As a legacy tool, the Company has so far maintained, though not activated, The Q Limited Share Plan (‘Q Plan’) which was established in 2011 ﬁscal year as part of the then remuneration strategy and the Q Plan currently holds a minor shareholding in the Company. All LTI incentives are designed and used speciﬁcally to align management and shareholder’s interests and to assist the Company in the attraction, motivation and retention of appropriately skilled staﬀ. In particular, the plans are designed to provide relevant executives with an incentive for future performance and typically include vesting conditions under the plans. Group performance and link to remuneration Remuneration for key management personnel is not directly linked to performance of the Group. Use of remuneration consultants During the ﬁnancial year ended 30 June 2019, the Company did not engage remuneration consultants to review its existing remuneration policies or provide recommendations on how to improve incentive programs. Voting and comments made at the Company's 2018 Annual General Meeting ('AGM') At the 28 November 2018 AGM, 80.97% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2018. The Company did not receive any speciﬁc feedback at the AGM regarding its remuneration practices. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 18 18 Directors' Report Details of remuneration The key management personnel of the Group consisted of the directors of Crowd Media Holdings Limited and the following persons: ● ● ● ● Antoaneta Ignatovska - Chief Financial Oﬃcer (resigned 1 June 2019, eﬀective 31 July 2019); Michel de Jong - Chief Operating Oﬃcer (made redundant, eﬀective 30 September 2019); Gregor Cooney - General Manager - Q&A (resigned, eﬀective 31 December 2018); and Melanie Mouldenhauer – Chief Financial Oﬃcer (appointed 1 June 2019). Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. Short-term beneﬁts Post- employment beneﬁts Long-term beneﬁts Share- based payments Cash salary and fees Cash bonus Non- monetary Termination payments Super- annuation Leave beneﬁts Equity settled $ $ $ $ $ $ $ 2019 Non-Executive Directors T Hnarakis S Karzis Executive Directors D Carosa* Other Key Management Personnel 144,318 119,449 581,232 A Ignatovska 288,826 M de Jong 339,626 15,787 G Cooney** 127,671 M Mouldenhauer*** 16,269 - - - - - - - - 2,587 1,149 6,733 1,432 - - - - - - - - 13,710 - 5,700 - - - - - - - - - - - Total $ 158,028 119,449 589,519 289,975 362,146 129,103 16,269 - - - - - - - 1,617,391 15,787 11,901 - 19,410 - - 1,664,489 * D Carosa remuneration includes mobility premium for secondment to The Netherlands of $209,350 (eﬀective date 1 July 2016) ** Remuneration is for the period from 1 July to date of resignation or termination as a director or key management personnel *** Remuneration is for the period from appointment as a director or key management personnel 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 19 19 Directors' Report 2018 Non-Executive Directors T Hnarakis S Karzis Executive Directors D Carosa* Other Key Management Personnel Short-term beneﬁts Post- employment beneﬁts Long-term beneﬁts Share- based payments Cash salary and fees Cash bonus (a) Non- monetary Termination payments Super- annuation Leave beneﬁts Equity settled (b) $ $ $ $ $ $ $ Total $ 150,000 109,307 - - - - 584,816 29,326 3,050 - - - - 14,250 - 5,700 - - - - - - - - 53,269 217,519 23,557 132,864 145,577 768,469 - 69,398 23,329 588,685 - 78,468 13,858 309,930 A Ignatovska ** 53,490 15,720 188 C Shaw *** 344,739 34,633 - 153,765 32,219 M de Jong ** 76,806 - 1,662 G Cooney 243,598 45,925 6,549 - - - - 1,562,756 125,604 11,449 153,765 52,169 - 259,590 2,165,333 * D Carosa remuneration includes mobility premium for secondment to The Netherlands of $210,790 (eﬀective date 1 July 2016) ** Remuneration is for the period from appointment as director or key management personnel *** Remuneration is for the period from 1 July to date of resignation or termination as director or key management personnel (a) Cash bonus relates to prior period targets. (b) The Company cancelled all Director options in FY-18, hence there was nil ﬁnancial beneﬁt to the Directors. 9 1 0 2 t r o p e R l a u n n A 20 20 Directors' Report The proportion of remuneration linked to performance and the ﬁxed proportion are as follows Fixed remuneration At risk - STI At risk - LTI 2019 2018 2019 2018 2019 2018 Name Non-Executive Directors T Hnarakis S Karzis 100% 100% 76% 82% Executive Directors D Carosa 100% 77% Other Key Management Personnel A Ignatovska C Shaw M de Jong G Cooney M Mouldenhauer 100% - 96% 100% 100% 77% 90% 98% 79% - - - - - - 4% - - - - 4% 23% 6% 2% 17% - - - - - - - - - 24% 18% 19% - 4% - 4% - Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name Domenic Carosa Title Executive Director and Chief Executive Oﬃcer Agreement commenced 13 January 2015 Term of agreement Ongoing Details Base annual package*, performance based, ‘at-risk’ STI and discretionary share based LTI remuneration, subject to annual performance review. 12 month termination notice by either party. 6 month non-solicitation clause after termination. The Company may terminate the agreement with cause in certain circumstances such as gross misconduct. * Base annual package - Netherlands annual package €350,000 per annum (reduced to €315,000 per annum for the period from 1 February 2019 to 30 June 2019 and to €240,000 eﬀective 1 September 2019) plus statutory social security, plus Australian Director Fees of $60,000 per annum plus statutory superannuation Name Antoaneta Ignatovska Title Chief Financial Oﬃcer (resigned 1 June 2019, eﬀective 31 July 2019) Agreement commenced 27 April 2018 Term of agreement Ongoing Details Base annual package, performance based, ‘at-risk’ STI and discretionary share based LTI remuneration, subject to annual performance review. 4 months termination by employer, 2 months by executive. The Company may terminate the agreement with cause in certain circumstances such as gross misconduct. * Base annual package - €180,000 plus statutory social security 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 21 21 Directors' Report Name Michel de Jong Title Chief Operating Oﬃcer (made redundant, eﬀective 30 September 2019) Agreement commenced 27 April 2018 Term of agreement Ongoing Details Base annual package, performance based, ‘at-risk’ STI and discretionary share based LTI remuneration, subject to annual performance review. 4 months termination by employer, 2 months by executive. The Company may terminate the agreement with cause in certain circumstances such as gross misconduct. * Base annual package - €214,256 plus statutory social security Name Gregor Cooney Title General Manager – Q&A (resigned, eﬀective 31 December 2018) Agreement commenced 1 February 2016 Term of agreement Ongoing Details Base annual package, performance based, ‘at-risk’ STI and discretionary share based LTI remuneration, subject to annual performance review. 4 months termination by employer, 2 months by executive. The Company may terminate the agreement with cause in certain circumstances such as gross misconduct. * Base annual package - €158,000 plus statutory social security Name Melanie Mouldenhauer Title Chief Financial Oﬃcer Agreement commenced 1 June 2019 Term of agreement Ongoing Details Base annual package, performance based, ‘at-risk’ STI and discretionary share based LTI remuneration, subject to annual performance review. 2 months termination by employer, 1 month by executive. The Company may terminate the agreement with cause in certain circumstances such as gross misconduct. * Base annual package - €115,800 plus statutory social security 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 2019. Options There were no options over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2019. There were no other options over ordinary shares granted to or vested in directors and other key management personnel as part of compensation during the year ended 30 June 2019. Performance rights There were no performance rights over ordinary shares issued to directors and other key management personnel as part of compensation that were outstanding as at 30 June 2019. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 22 22 Directors' Report Additional information The earnings of the Group for the four years to 30 June 2019 are summarised below: 2019 $ 2018 $ 2017 $ 2016 $ Sales revenue EBITDA 23,918.776 38,552,347 43,887,388 36,994,826 (5,587,380) (23,157,246) 9,407,765 6,315,439 Total comprehensive income for the year attributable to the owners of Crowd Media Holdings Limited (4,284,757) (25,640,051) (251,234) 379,882 The factors that are considered to aﬀect total shareholders return ('TSR') are summarised below: Share price at ﬁnancial year end ($) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2019 2018 2017 2016 0.01 (2.10) 0.04 (11.71) 0.14 (0.05) (2.10) (11.71) (0.05) 0.16 0.56 0.47 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 Group, including their personally related parties, is set out below: Balance at the start of the year Received as part of remuneration Additions Disposals / other Balance at the end of the year Ordinary shares T Hnarakis D Carosa S Karzis G Cooney 2,782,914 22,004,529 110,000 333,334 25,230,777 - - - - - 1,394,736 2,738,439 394,736 - 4,527,911 - - - - - 4,177,650 24,742,968 504,736 333,334 29,758,688 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 23 23 Directors' Report Option holding The number of options over ordinary shares in the Company held during the ﬁnancial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Granted Exercised Expired / forfeited / other Balance at the end of the year Options over ordinary shares T Hnarakis D Carosa S Karzis All options lapsed during the year. 211,012 781,250 10,000 1,002,262 - - - - - - - - (211,012) (781,250) (10,000) (1,002,262) - - - - Performance rights holding The number of performance rights over ordinary shares in the Company held during the ﬁnancial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Granted Vested Expired / forfeited / other Balance at the end of the year Performance rights over ordinary shares D Carosa G Cooney 1,250,000 666,666 1,916,666 - - - - - - (1,250,000) (666,666) (1,916,666) - - - All performance rights lapsed during the year. This concludes the remuneration report, which has been audited. Shares under option Unissued ordinary shares of Crowd Media Holdings Limited under option at the date of this report are as follows: Grant Date 2 April 2019 Expiry Date Exercise price Number under option 2 April 2022 $0.050 2,000,000 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. Shares under performance rights Unissued ordinary shares of Crowd Media Holdings Limited under performance rights at the date of this report are as follows: Grant Date 31 July 2019 Expiry Date 31 July 2022 Number under rights 11,000,000 No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate in any share issue of the Company or of any other body corporate. 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 24 24 Directors' Report Shares issued on the exercise of options There were no ordinary shares of Crowd Media Holdings Limited issued on the exercise of options during the year ended 30 June 2019 and up to the date of this report. Shares issued on the exercise of performance rights There were no ordinary shares of Crowd Media Holdings Limited issued on the exercise of performance rights during the year ended 30 June 2019 and up to the date of this report. 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 There were no non-audit services provided during the ﬁnancial year by the auditor. Oﬃcers of the Company who are former partners of RSM Australia Partners There are no oﬃcers of the Company who are former partners of RSM Australia Partners. 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 RSM Australia Partners 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 Theo Hnarakis Crowd Media Holdings Limited - Chairman 19 September 2019 Melbourne 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 25 25 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Crowd Mobile Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 19 September 2019 Melbourne, Victoria 26 Statement of proﬁt or loss and other comprehensive income For the year ended 30 June 2019 Consolidated 2019 $ 2018 $ 23,918,776 - 23,918,776 (7,167,258) 38,552,347 5,262 38,557,609 (9,219,751) 16,751,518 29,337,858 106,902 1,991 (6,993,715) (2,774,060) (2,280,087) (209,128) (8,663,575) (407,662) (143,465) (24,750) (1,158,485) - (582,894) - 2,655 (11,261,186) (2,538,566) (1,462,798) (3,648,101) (9,239,409) (883,554) (831,494) (382,380) (533,673) (25,380,044) (1,528,206) (6,377,410) (23,348,898) 1,581,426 2,307,626 (4,795,984) (26,041,272) Notes 5 6 6 13 6 7 23 Revenue Revenue from continuing operations Other income Cost of sales Gross proﬁt Net fair value gain on ﬁnancial assets Interest revenue calculated using the eﬀective interest method Expenses Marketing Administration and other expenses Consultants Depreciation and amortisation expense Employee beneﬁts expense Travel and accommodation Product development Share-based payment Allowance for expected credit losses Impairment of intangibles Finance costs Loss before income tax beneﬁt Income tax beneﬁt Loss after income tax beneﬁt for the year attributable to the owners of Crowd Media Holdings Limited Other comprehensive income Items that may be reclassiﬁed subsequently to proﬁt or loss Foreign currency translation 511,227 401,221 Other comprehensive income for the year, net of tax 511,227 401,221 Total comprehensive income for the year attributable to the owners of Crowd Media Holdings Limited (4,284,757) (25,640,051) Basic earnings per share Diluted earnings per share 34 34 Cents (2.10) (2.10) Cents (11.71) (11.71) The above statement of proﬁt or loss and other comprehensive income should be read in conjunction with the accompanying notes 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 27 27 Statement of ﬁnancial position As at 30 June 2019 Consolidated Notes 2019 $ 2018 $ Assets Current assets Cash and cash equivalents Trade and other receivables Accrued income Income tax receivable Other Total current assets Non-current assets Property, plant and equipment Intangibles Deferred tax Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Deferred revenue Borrowings Employee beneﬁts Provisions Total current liabilities Non-current liabilities Borrowings Derivative ﬁnancial instruments Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 839,462 2,170,127 2,752,300 334,075 316,424 2,559,776 2,392,305 5,427,467 343,949 495,149 6,412,388 11,218,646 352,892 613,994 1,579,919 2,546,805 498,368 713,888 479,968 1,692,224 8,959,193 12,910,870 4,093,412 176,345 - 46,098 550,909 4,866,764 2,991,849 152,467 3,144,316 4,780,392 105,101 3,287,542 82,404 - 8,255,439 - - - 8,011,080 8,255,439 948,113 4,655,431 28,720,072 5,062,673 (32,834,632) 28,167,383 4,739,547 (28,251,499) 948,113 4,655,431 The above statement of ﬁnancial position should be read in conjunction with the accompanying notes 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 28 28 Statement of changes in equity For the year ended 30 June 2019 Foreign currency reserve $ Share- based payments reserve $ Convertible note optionality reserve $ Issued Capital $ Accumulated losses $ Total equity $ Consolidated Balance at 1 July 2017 28,165,539 (663,174) 4,406,269 212,851 (2,210,227) 29,911,258 Loss after income tax beneﬁt 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: - - - - 401,221 401.221 Contributions of equity, net of transaction costs (note 21) 100,000 Share-based payment (note 35) - Share buy-back (note 21) (98,156) - - - - - - - 382,380 - - - - - - - (26,041,272) (26,041,272) - 401,221 (26,041,272) (25,640,051) - - - 100,000 382,380 (98,156) Balance at 30 June 2018 28,167,383 (261,953) 4,788,649 212,851 (28,251,499) 4,655,431 Foreign currency reserve $ Share- based payments reserve $ Convertible note optionality reserve $ Issued Capital $ Accumulated losses $ Total equity $ Consolidated Balance at 1 July 2018 28,167,383 (261,953) 4,788,649 212,851 (28,251,499) 4,655,431 Loss after income tax beneﬁt 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: - - - - 511,227 511,227 Contributions of equity, net of transaction costs (note 21) 552,689 Share-based payment (note 35) Transfers - - - - - - - - - 24,750 - - - - - (4,795,984) (4,795,984) - 511,227 (4,795,984) (4,284,757) - - 552,689 24,750 - (212,851) 212,851 - Balance at 30 June 2019 28,720,072 249,274 4,813,399 - (32,834,632) 948,113 The above statement of changes in equity should be read in conjunction with the accompanying notes 9 9 1 1 0 0 2 2 t t r r o o p p e e R R l l a a u u n n n n A A 29 29 Statement of cash ﬂows For the year ended 30 June 2019 Cash ﬂows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Other revenue Interest and other ﬁnance costs paid Income taxes refunded Income taxes paid Net cash from/(used in) operating activities Cash ﬂows from investing activities Payments for property, plant and equipment Payments for intangibles Proceeds from disposal of property, plant and equipment Proceeds from disposal of intangibles Proceeds from release of security deposits Net cash from/(used in) investing activities Cash ﬂows from ﬁnancing activities Proceeds from issue of shares Payments for share buy-backs Proceeds from borrowings - Obsidian Proceeds from borrowings - NTH Mobile Limited Proceeds from borrowings - BillFront Repayment of borrowings - JGB Repayment of borrowings - other Consolidated Notes 2019 $ 2018 $ 26,868,408 (29,500,532) 20,948 106,902 (430,427) 491,349 - 41,422,590 (36,165,893) 2,655 - (1,528,206) - (1,091,931) (2,443,352) 2,639,215 (14,352) (51,826) 6,505 137,904 42,305 120,536 428,957 - 404,420 418,397 2,169,032 (3,287,542) - (342,163) (175,823) - - 1,231 (516,755) 100,000 (98,156) - - - (4,636,305) (27,696) 33 12 13 21 21 Net cash from/(used in) ﬁnancing activities 133,264 (4,662,157) Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the ﬁnancial year Eﬀects of exchange rate changes on cash and cash equivalents (2,189,552) 2,559,776 (2,539,697) 5,200,089 469,238 (100,616) Cash and cash equivalents at the end of the ﬁnancial year 8 839,462 2,559,776 The above statement of cash ﬂows should be read in conjunction with the accompanying notes 9 1 0 2 t r o p e R l a u n n A 30 30 Notes to the ﬁnancial statements 30 June 2019 Note 1. General information The ﬁnancial statements cover Crowd Media Holdings Limited as a consolidated entity consisting of Crowd Media Holdings Limited (referred to as 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year (referred to as the 'Group'). The ﬁnancial statements are presented in Australian dollars, which is Crowd Media Holdings Limited's functional and presentation currency. Crowd Media Holdings Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered oﬃce and principal place of business is: Level 4 44 Gwynne Street Cremorne VIC 3121 A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the ﬁnancial statements. The ﬁnancial statements were authorised for issue, in accordance with a resolution of directors, on 19 September 2019. The directors have the power to amend and reissue 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 or amended Accounting Standards and Interpretations adopted The Group 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. The adoption of these Accounting Standards and Interpretations did not have any signiﬁcant impact on the ﬁnancial performance or position of the Group. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Group: AASB 9 Financial Instruments The Group has adopted AASB 9 from 1 July 2018. The standard introduced 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 that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash ﬂows which arise on speciﬁed dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other ﬁnancial assets are 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 or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a ﬁnancial asset may be irrevocably designated as measured at fair value through proﬁt or loss to reduce the eﬀect of, or eliminate, an accounting mismatch. For ﬁnancial liabilities designated at fair value through proﬁt or loss, 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 use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment is measured using 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. For receivables, a simpliﬁed approach to measuring expected credit losses using a lifetime expected loss allowance is available. AASB 15 Revenue from Contracts with Customers The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised goods or services to customers at an amount that reﬂects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a measurement approach that is based on an allocation of the transaction price. This is described further in the accounting policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with customers are 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. Customer acquisition costs and costs to fulﬁl a contract can, subject to certain criteria, be capitalised as an asset and amortised over the contract period. Impact of adoption AASB 9 and AASB 15 were adopted using the modiﬁed retrospective approach and as such comparatives have not been restated. There was no impact of the adoption on opening retained earnings as at 1 July 2018. AASB 15 uses the term 'contract assets' and 'contract liabilities'. To maintain consistency in presentation with prior periods, the Group has retained the use of 'accrued revenue' and 'deferred revenue', respectively. 9 1 0 2 t r o p e R l a u n n A 31 31 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Going concern The ﬁnancial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. As disclosed in the ﬁnancial statements the Group incurred a loss of $4,795,984 (30 June 2018: loss of $26,041,272) and had negative operating cash ﬂows of $2,443,352 (30 June 2018: positive cashﬂows $2,639,215). The Directors believe that it is reasonably foreseeable that the Group will continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the ﬁnancial report after consideration of the following factors: ● The Group expects to achieve proﬁtability by completing its cost saving measures and utilising growth opportunities from its media business in the next year; and The Group’s proven record of being able to raise funds to support its business plan, which includes receiving an additional $1,600,000 of funding through a convertible loan note facility (refer to note 36). ● 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. 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 Group'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. Parent entity information In accordance with the Corporations Act 2001, these ﬁnancial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 31. Principles of consolidation The consolidated ﬁnancial statements incorporate the assets and liabilities of all subsidiaries of Crowd Media Holdings Limited as at 30 June 2019 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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 Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group 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 Group. 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 Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation diﬀerences recognised in equity. The Group 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. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The ﬁnancial statements are presented in Australian dollars, which is Crowd Media Holdings Limited's functional and presentation currency. 9 1 0 2 t r o p e R l a u n n A 32 32 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at ﬁnancial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in proﬁt or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange diﬀerences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in proﬁt or loss when the foreign operation or net investment is disposed of. Revenue recognition The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reﬂects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identiﬁes the contract with a customer; identiﬁes the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisﬁed in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reﬂects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a signiﬁcant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a ﬁxed price or an hourly rate. Grant income Grant income is recognised when it is received or when the right to receive payment is established. 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. 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. 9 1 0 2 t r o p e R l a u n n A 33 33 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable proﬁts will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable proﬁts available to recover the asset. Deferred tax assets and liabilities are oﬀset only where there is a legally enforceable right to oﬀset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or diﬀerent taxable entities which intend to settle simultaneously. Current and non-current classiﬁcation Assets and liabilities are presented in the statement of ﬁnancial position based on current and non-current classiﬁcation. An asset is classiﬁed as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classiﬁed as non-current. A liability is classiﬁed as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classiﬁed as non-current. Deferred tax assets and liabilities are always classiﬁed as non-current. 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. 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 allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simpliﬁed approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Contract assets Contract assets are recognised when the Group has transferred goods or services to the customer but where the Group is yet to establish an unconditional right to consideration. Contract assets are treated as ﬁnancial assets for impairment purposes. The ﬁnancial statements include the recognition of accrued revenue which is used to refer to a class of contract assets. Derivative ﬁnancial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Derivatives are classiﬁed as current or non-current depending on the expected period of realisation. Investments and other ﬁnancial assets Investments and other ﬁnancial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for ﬁnancial assets at fair value through proﬁt or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classiﬁcation. Classiﬁcation is determined based on both the business model within which such assets are held and the contractual cash ﬂow characteristics of the ﬁnancial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash ﬂows have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a ﬁnancial asset, it's carrying value is written oﬀ. Impairment of ﬁnancial assets The Group recognises a loss allowance for expected credit losses on ﬁnancial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the ﬁnancial instrument's credit risk has increased signiﬁcantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or eﬀort to obtain. 9 1 0 2 t r o p e R l a u n n A 34 34 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Where there has not been a signiﬁcant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a ﬁnancial asset has become credit impaired or where it is determined that credit risk has increased signiﬁcantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original eﬀective interest rate. For ﬁnancial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in proﬁt or loss. Property, 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 property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 1.5 - 5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic beneﬁt to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to proﬁt or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained proﬁts. Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulﬁlment of the arrangement is dependent on the use of a speciﬁc asset or assets and the arrangement conveys a right to use the asset. A distinction is made between ﬁnance leases, which eﬀectively transfer from the lessor to the lessee substantially all the risks and beneﬁts incidental to the ownership of leased assets, and operating leases, under which the lessor eﬀectively retains substantially all such risks and beneﬁts. Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the ﬁnance costs, so as to achieve a constant rate of interest on the remaining balance of the liability. Leased assets acquired under a ﬁnance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life & the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Operating lease payments, net of any incentives received from the lessor, are charged to proﬁt or loss on a straight-line basis over the term of the lease. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indeﬁnite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in proﬁt or loss arising from the derecognition of intangible assets are measured as the diﬀerence between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of ﬁnite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to proﬁt or loss and are not subsequently reversed. Intellectual property Signiﬁcant costs associated with intellectual property are deferred and amortised on a straight-line basis over the period of their expected beneﬁt, being their ﬁnite life of 5 years. Distribution network Signiﬁcant investments in relation to distribution networks and messaging systems are capitalised as an asset and amortised on a straight-line basis over the period of their expected beneﬁt, being their ﬁnite useful life of 4.7 years. 9 1 0 2 t r o p e R l a u n n A 35 35 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Software Signiﬁcant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected beneﬁt, being their ﬁnite life of 5 - 6 years. Databases Costs in relation to databases are capitalised as an asset and amortised on a straight-line basis over the period of their expected beneﬁt, being their ﬁnite life of 5 - 6 years. Impairment of non-ﬁnancial assets Goodwill and other intangible assets that have an indeﬁnite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-ﬁnancial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash ﬂows relating to the asset using a pre-tax discount rate speciﬁc to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash ﬂows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the Group 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. Contract liabilities Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reﬂect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer. These ﬁnancial statements include the recognition of deferred revenue which is a term used to refer to a class of contract liabilities. 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 exhibit characteristics of a liability is recognised as a liability in the statement of ﬁnancial position, net of transaction costs. On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability using 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 remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to proﬁt or loss. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other ﬁnance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate speciﬁc to the liability. The increase in the provision resulting from the passage of time is recognised as a ﬁnance cost. Employee beneﬁts Short-term employee beneﬁts Liabilities for wages and salaries and other employee beneﬁts expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 9 1 0 2 t r o p e R l a u n n A 36 36 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Other long-term employee beneﬁts Employee beneﬁts 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. 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 high-quality 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. Share-based payments Equity-settled and cash-settled share-based compensation beneﬁts are provided to employees. Equity-settled transactions are awards of shares, performance rights or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to proﬁt or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in proﬁt or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to proﬁt or loss until settlement of the liability is calculated as follows: ● ● during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in proﬁt or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisﬁed. If equity-settled awards are modiﬁed, as a minimum an expense is recognised as if the modiﬁcation has not been made. An additional expense is recognised, over the remaining vesting period, for any modiﬁcation that increases the total fair value of the share-based compensation beneﬁt as at the date of modiﬁcation. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisﬁed during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, they are treated as they had vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modiﬁcation. 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. 9 1 0 2 t r o p e R l a u n n A 37 37 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) Assets and liabilities measured at fair value are classiﬁed into three levels, using a fair value hierarchy that reﬂects the signiﬁcance of the inputs used in making the measurements. Classiﬁcations are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is signiﬁcant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be signiﬁcant. External valuers are selected based on market knowledge and reputation. Where there is a signiﬁcant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a veriﬁcation of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 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. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the proﬁt attributable to the owners of Crowd Media Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the ﬁnancial year, adjusted for bonus elements in ordinary shares issued during the ﬁnancial year. Diluted earnings per share Diluted earnings per share adjusts the ﬁgures used in the determination of basic earnings per share to take into account the after income tax eﬀect of interest and other ﬁnancing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of ﬁnancial position. Cash ﬂows are presented on a gross basis. The GST components of cash ﬂows arising from investing or ﬁnancing activities which are recoverable from, or payable to the tax authority, are presented as operating cash ﬂows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. 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 Group for the annual reporting period ended 30 June 2019. The Group's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. 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 and lease liability are recognised at the commencement of the lease. The right-of-use asset is recognised at an amount that is equivalent to the initial measurement of the lease liability, adjusted by the amount of any prepaid or accrued lease payments previously recognised in the statement of ﬁnancial position in relation the lease and an estimate of any future restoration, removal or dismantling costs. The lease liability is recognised at the present value of future lease payments comprising ﬁxed lease payments less incentives, variable lease payments, residual guarantees payable, payment of purchase options where exercise is reasonably certain, and any anticipated termination penalties. The lease payments are discounted at the entity’s incremental borrowing rate. 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. Under the new standard, the previous straight-line operating lease expense recognition will be replaced with a depreciation charge of the right-of-use asset (classiﬁed as operating costs) together with an interest expense on the recognised lease liability (classiﬁed as 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 improve as the operating expense is replaced by interest and depreciation expenses in proﬁt or loss under AASB 16. 9 1 0 2 t r o p e R l a u n n A 38 38 Notes to the ﬁnancial statements 30 June 2019 Note 2. Signiﬁcant accounting policies (continued) For classiﬁcation within the statement of cash ﬂows, under AASB 16, the lease payments will be separated and reclassiﬁed as payment of principal (ﬁnancing activities) and interest (either operating or ﬁnancing activities). For lessor accounting, the standard does not substantially change how a lessor accounts for leases. Given the limited number of operating leases the Group has on hand with its properties, there will be no material impact on the statement of ﬁnancial position. A right of use asset and lease liability will be recognised, estimated to be approximately $0.65m. There will be no material impact on a net basis. New Conceptual Framework for Financial Reporting A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual reporting periods beginning on or after 1 January 2020. This release impacts for-proﬁt private sector entities that have public accountability that are required by legislation to comply with Australian Accounting Standards and other for-proﬁt entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be released which will impact for-proﬁt private sector entities. The application of new deﬁnition and recognition criteria as well as new guidance on measurement will result in amendments to several accounting standards. The issue of AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, also applicable from 1 January 2020, includes such amendments. Where the Group has relied on the conceptual framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards, the Group may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and is yet to assess its impact. 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. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact proﬁt or loss and equity. Refer to note 35 for details of inputs utilised in calculating the fair value of the equity instrument. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and ﬁnite life intangible assets. The useful lives could change signiﬁcantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written oﬀ or written down. Goodwill and other indeﬁnite life intangible assets The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indeﬁnite life intangible assets have suﬀered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated pre-tax discount rates based on the current cost of capital and growth rates of the estimated future cash ﬂows. Impairment of non-ﬁnancial assets other than goodwill and other indeﬁnite life intangible assets The Group assesses impairment of non-ﬁnancial assets other than goodwill and other indeﬁnite life intangible assets at each reporting date by evaluating conditions speciﬁc to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. 9 1 0 2 t r o p e R l a u n n A 39 39 Notes to the ﬁnancial statements 30 June 2019 Note 3. Critical accounting judgements, estimates and assumptions (continued) Income tax The Group is subject to income taxes in the jurisdictions in which it operates. Signiﬁcant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the ﬁnal tax outcome of these matters is diﬀerent from the carrying amounts, such diﬀerences will impact the current & deferred tax provisions in the period in which such determination is made. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary diﬀerences only if the Group 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 The Group is organised into three operating segments: Mobile Content - Q & A (‘Q&A’), Mobile Content - Subscription (‘Subscription’) and Crowd Media ('Crowd Media'). The Company operates mobile content businesses globally but predominantly in Europe and Australasia. These operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identiﬁed as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The Q&A operating segment recognises all corporate costs including public company costs, acquisition costs, share based payments expense and restructure costs. For operating segment performance, the CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the ﬁnancial statements. The information reported to the CODM is on at least a monthly basis. Types of products and services The principal products and services of each of these operating segments are as follows: Mobile Content Q&A Crowd Mobile proprietary Q&A micro job platform technology that facilitates Q&A entertainment products via various Direct Carrier Billing, SMS and App product oﬀerings. Mobile Content Subscription Crowd Mobile subscription based, broad content oﬀering of products such as mobile security, games and video portals via an m-payments network. Crowd Media Crowd Media works with brands and digital inﬂuencers to provide social media marketing, digital inﬂuencer advertising and commerce platform and 3rd party aﬃliate revenues. Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. 9 1 0 2 t r o p e R l a u n n A 40 40 Notes to the ﬁnancial statements 30 June 2019 Note 4. Operating segments (continued) Operating segment information Consolidated - 2019 Revenue Q&A* $ Subscription Crowd Media $ $ Total $ Sales to external customers 15,923,286 6,361,291 1,634,199 23,918,776 Interest income Total revenue 1,991 - - 1,991 15,925,277 6,361,291 1,634,199 23,920,767 EBITDA Depreciation and amortisation Allowance for expected credit losses Interest income Finance costs (3,299,165) (71,176) (978,258) 1,991 427,500 (129,612) (147,338) - 1,799,374 (2,376,698) Other non-cash expenses 106,903 - (1,664,132) (4,535,797) (8,340) (32,889) - (5,570) - (209,128) (1,158,485) 1,991 (582,894) 106,903 Loss before income tax beneﬁt (2,440,331) (2,226,148) (1,710,931) (6,377,410) Income tax beneﬁt Loss after income tax beneﬁt 1,581,426 (4,795,984) Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities 5,320,341 3,385,513 253,339 8,959,193 8,959,193 5,605,533 1,994,227 411,320 8,011,080 8,011,080 * Q&A segment includes Group Corporate costs 9 1 0 2 t r o p e R l a u n n A 41 41 Notes to the ﬁnancial statements 30 June 2019 Note 4. Operating segments (continued) Consolidated - 2018 Revenue Q&A* $ Subscription Crowd Media $ $ Total $ Sales to external customers 24,736,054 13,323,863 492,430 38,552,347 Other revenue Interest income Total revenue EBITDA Depreciation and amortisation Impairment of assets Finance costs Other non-cash expenses 5,262 2,655 - - - - 5,262 2,655 25,743,971 13,323,863 492,430 38,560,264 3,021,051 (2,558,683) 2,661,138 (125,663) (3,522,438) - (25,913,717) (1,528,206) (382,380) - - 3,123,506 (3,648,101) (25,913,717) (1,528,206) (382,380) - - - - Proﬁt/(Loss) before income tax beneﬁt 624,889 (26,415,104) (2,558,683) (28,348,898) Income tax beneﬁt Loss after income tax beneﬁt Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities * Q&A segment includes Group Corporate costs Geographical information 6,902,832 6,008,038 (9,070,676) 17,326,115 2,307,626 (26,041,272) 12,910,870 12,910,870 8,255,439 8,255,439 - - Australasia Europe Latin America Other Revenue Geographical non-current assets 2019 $ 2018 $ 2019 $ 2018 $ 776,353 4,574,281 20,692,287 31,458,934 1,773,305 676,831 1,936,733 582,399 597,714 369,173 - - 681,007 531,250 - - 23,918,776 38,552,347 966,887 1,212,257 The geographical non-current assets above are exclusive of, where applicable, ﬁnancial instruments, deferred tax assets, post-employment beneﬁts assets and rights under insurance contracts 9 1 0 2 t r o p e R l a u n n A 42 42 Notes to the ﬁnancial statements 30 June 2019 Note 5. Revenue Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Consolidated - 2019 Major product lines Information Entertainment and content Marketing agency Geographical regions Australasia Europe Latin America Other Q&A* $ Subscription Crowd Media $ $ Total $ 15,923,286 - - - 6,361,291 - - - 1,634,199 15,923,286 6,361,291 1,634,199 15,923,286 6,361,291 1,634,199 23,918,776 534,639 14,131,857 1,251,064 5,726 241,714 5,372,447 522,241 224,889 - 1,187,983 - 446,216 776,353 20,692,287 1,773,305 676,831 15,923,286 6,361,291 1,634,199 23,918,776 Timing of revenue recognition Goods transferred at a point in time Services transferred over time 15,923,286 - 6,361,291 - - 1,634,199 22,284,577 1,634,199 15,923,286 6,361,291 1,634,199 23,918,776 Disaggregation of revenue disclosure are required by AASB 15. As AASB 15 was adopted using the modiﬁed retrospective approach, comparatives have not been provided. Note 6. Expenses Loss before income tax includes the following speciﬁc expenses: Consolidated 2019 $ 2018 $ Depreciation Property, plant and equipment (note 12) Amortisation Intangibles (note 13) Total depreciation and amortisation Impairment Impairment of intangibles (note 13) Allowance for expected credit losses Total impairment Finance costs Interests and ﬁnance charges paid Rental expense relating to operating leases Minimum lease payments Superannuation expense Deﬁned contribution superannuation expense Share-based payments expense Share-based payments expense 192,988 16,140 209,128 - 1,158,485 1,158,485 582,894 407,815 62,263 24,750 219,474 3,428,627 3,648,101 25,380,044 533,673 25,913,717 1,528,206 492,642 110,957 382,380 9 1 0 2 t r o p e R l a u n n A 43 43 Notes to the ﬁnancial statements 30 June 2019 Note 7. Income tax beneﬁt Income tax beneﬁt Current tax Deferred tax - origination and reversal of temporary diﬀerences Consolidated 2019 $ 2018 $ (25,761) (1,555,665) (38,775) (2,268,851) Aggregate income tax beneﬁt (1,581,426) (2,307,626) Deferred tax included in income tax beneﬁt comprises Decrease/(increase) in deferred tax assets (note 14) Decrease in deferred tax liabilities (1,555,665) - 278,286 (2,547,137) Deferred tax - origination and reversal of temporary diﬀerences (1,555,665) (2,268,851) Numerical reconciliation of income tax beneﬁt and tax at the statutory rate Loss before income tax beneﬁt (6,377,410) (28,348,898) Tax at the statutory tax rate of 30% (1,913,223) (8,504,669) Tax eﬀect amounts which are not deductible/(taxable) in calculating taxable income Entertainment expenses Track impairment Share-based payments Employee entitlement accruals Interest expense (JGB Optionality) Other items (net) Diﬀerences in overseas tax rates 3,331 - 7,425 9,258 9,824 14,621 (1,868,764) 287,338 18,320 7,614,013 114,714 3,620 29,472 (83,530) (808,060) (1,499,566) Income tax beneﬁt (1,581,426) (2,307,626) Amounts charged directly to equity Deferred tax assets (note 14) Note 8. Current assets - cash and cash equivalents Consolidated 2019 $ 2018 $ 455,714 - Consolidated 2019 $ 2018 $ Cash at Bank 839,462 2,559,776 9 1 0 2 t r o p e R l a u n n A 44 44 Notes to the ﬁnancial statements 30 June 2019 Note 9. Current assets - trade and other receivables Trade receivables Less: Allowance for expected credit losses (2018: Provision for impairment of receivables) Aggregate income tax beneﬁt Other receivables Interest receivable Consolidated 2019 $ 2018 $ 3,903,833 (1,792,223) 2,111,610 811 57,706 2,947,400 (633,742) 2,313,658 1,984 76,663 2,170,127 2,392,305 Allowance for expected credit losses The Group has recognised a loss of $1,158,485 in proﬁt or loss in respect of the expected credit losses for the year ended 30 June 2019. The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated - 2019 Not overdue 0 to 3 months overdue 3 to 6 months overdue 6 to 9 months overdue Over 9 months overdue Expected credit loss rate Carrying amount Allowance for expected credit losses 2019 % 2019 $ 2019 $ 5% 13% 69% 91% 100% 1,606,562 565,988 73,428 727,263 930,592 3,903,833 75,578 73,578 50,665 661,810 930,592 1,792,223 Past due but not impaired The following table details the Group’s trade and other receivables exposed to credit risk with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled, with the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are speciﬁc circumstances indicating that the debt may not be fully repaid to the Group. The balances of receivables that remain within initial trade terms (as detailed in the table) are considered to be of high credit quality. Consolidated 2018 Within initial trade terms <30 days overdue 30-60 days overdue >60 days overdue Past due and impaired $ $ $ $ $ Total $ Trade receivables Accrued income Other receivables Interest receivables 1,597,948 5,427,467 1,984 76,663 293,686 - - - 114,371 - - - 307,653 - - - 633,742 - - - 2,947,400 5,427,467 1,984 76,663 7,104,062 293,686 114,371 307,653 633,742 8,453,514 9 1 0 2 t r o p e R l a u n n A 45 45 Notes to the ﬁnancial statements 30 June 2019 Note 10. Current assets - accrued income Accrued income 2,752,300 5,427,467 AASB 15 uses the term ‘contract assets’ and ‘contract liabilities’ to maintain consistency in presentation with prior periods, the Group has retained the use of ‘accrued income’ and ‘deferred revenue’, respectively. Consolidated 2019 $ 2018 $ Note 11. Current assets - other Prepayments Security deposits Other deposits Note 12. Non-current assets - property, plant and equipment Plant and equipment - at cost Less: accumulated depreciation Consolidated 2019 $ 2018 $ 241,327 8,098 66,999 316,424 419,336 50,403 25,410 495,149 Consolidated 2019 $ 2018 $ 983,954 (631,062) 352,892 1,408,846 (910,478) 498,368 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 Exchange diﬀerences Depreciation expense Balance at 30 June 2018 Additions Disposals Exchange diﬀerences Depreciation expense Balance at 30 June 2019 Plant and equipment $ 400,397 342,163 (24,718) (219,474) 498,368 14,352 (6,505) 39,665 (192,988) 352,892 9 1 0 2 t r o p e R l a u n n A 46 46 Notes to the ﬁnancial statements 30 June 2019 Note 13. Non-current assets - intangibles Goodwill after impairment 317,214 317,214 Consolidated 2019 $ 2018 $ Intellectual property Less: Accumulated amortisation Distribution network - at cost Less: Accumulated amortisation Less: Impairment Software - at cost Less: Accumulated amortisation Less: Impairment Databases - at cost Less: Accumulated amortisation Website and other intangibles - at cost Less: Accumulated amortisation 2,714,980 (2,616,054) 2,714,828 (2,614,786) 98,926 100,042 13,600,006 (8,191,809) (5,408,197) 13,206,293 (7,948,401) (5,251,603) - 6,289 3,085,181 (969,293) (2,114,833) 3,014,833 (955,515) (2,053,598) 1,055 5,720 621,900 (456,899) 165,001 36,892 (5,094) 31,798 621,900 (456,899) 165,001 120,864 (1,242) 119,622 613,994 713,888 9 1 0 2 t r o p e R l a u n n A 47 47 Notes to the ﬁnancial statements 30 June 2019 Note 13. Non-current assets - intangibles (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous ﬁnancial year are set out below: Consolidated Goodwill Intellectual property Distribution network Software Databases Website and other intangibles $ $ $ $ $ $ Balance: 1/07/2017 Additions Disposals Exchange diﬀerences Impairment of assets Amortisation expense Balance: 30/06/2018 Additions Disposals Exchange diﬀerences Amortisation expense 17,538,217 - - 853,840 (18,074,843) - 317,214 - - - - 46,759 55,380 - (2,097) - - 100,042 - - 99 (1,215) 8,405,717 - - 259,452 (5,251,603) (3,407,277) 1,958,467 - (25,245) 120,901 (2,053,598) 5,195 6,289 - - 154 (6,443) 5,720 - - - (4,665) 190,304 - - - - (25,303) 165,001 - - - - - 120,864 - - - (1,242) 119,622 51,826 (137,904) 2,071 (3,817) Total $ 28,139,464 176,244 (25,245) 1,232,096 (25,380,044) (3,428,627) 713,888 51,826 (137,904) 2,324 (16,140) Balance: 30/06/2019 317,214 98,926 - 1,055 165,001 31,798 613,994 Goodwill acquired through business combinations is allocated to cash generating units, as follows: Cash generating unit Q&A Bongo IP Ltd Global AQA IP Pty Ltd Buddy IP Pty Ltd Consolidated 2019 $ 2018 $ 230,774 64,393 22,047 317,214 230,774 64,393 22,047 317,214 9 1 0 2 t r o p e R l a u n n A 48 48 Notes to the ﬁnancial statements 30 June 2019 Note 14. Non-current assets - deferred tax Deferred tax asset comprises temporary diﬀerences attributable to: Amounts recognised in proﬁt or loss: Tax losses Employee beneﬁts Transaction fees (blackhole expenditure) Provisions Other Amounts recognised in equity: Foreign exchange revaluation Deferred tax asset Movements: Opening balance Credited/(charged) to proﬁt or loss (note 7) Charged to equity (note 7) Closing balance Note 15. Current liabilities - trade and other payables Trade payables Accrued expenses and other payables Refer to note 25 for further information on ﬁnancial instruments. Note 16. Current liabilities - deferred revenue Consolidated 2019 $ 2018 $ 1,326,003 8,979 341,521 352,015 7,115 2,035,633 (455,714) 1,579,919 479,968 1,555,665 (455,714) 1,579,919 - 11,791 455,637 - 12,540 479,968 - 479,968 758,254 (278,286) - 479,968 Consolidated 2019 $ 2018 $ 1,921,970 2,171,442 4,093,412 2,568,426 2,211,966 4,780,392 Consolidated 2019 $ 2018 $ Deferred revenue 176,345 105,101 AASB 15 uses the term ‘contract assets’ and ‘contract liabilities’. To maintain consistency in presentation with prior periods, the Group has retained the use of ‘accrued income’ and ‘deferred revenue’, respectively. 9 1 0 2 t r o p e R l a u n n A 49 49 Notes to the ﬁnancial statements 30 June 2019 Note 17. Current liabilities - borrowings Consolidated 2019 $ 2018 $ Convertible notes payable - JGB - 3,287,542 9 1 0 2 t r o p e R l a u n n A ● ● ● The JGB convertible note balance was paid in full upon reﬁnancing with BillFront on 12 April 2019 Refer to note 19 for further information on assets pledged as security. Refer to note 25 for further information on ﬁnancial instruments Note 18. Current liabilities - employee beneﬁts Consolidated Employee beneﬁts Note 19. Non-current liabilities - borrowings Consolidated Loans payable - NTH Mobile Limited Loans payable - BillFront Convertible notes payable - Obsidian 2019 $ 2019 $ 2018 $ 46,098 82,404 2018 $ - - - - 418,397 2,169,032 404,420 2,991,849 Refer to note 25 for further information on ﬁnancial instruments Loans payable – NTH Mobile Limited The NTH Mobile Limited balance date debt is EUR€261,500. The principal balance and interest, payable at a ﬁxed annual rate of 3.99%, is due upon maturity at 25 September 2020. Loans payable – BillFront The BillFront note balance date debt is EUR€1,339,835. The note is a two-year revolving credit facility with a maximum aggregate outstanding amount of EUR€1,750,000. It is senior secured against all of the Company's assets, including receivables. The eﬀective annual interest rate is 11.3% and the maturity date is 12 April 2021. Convertible notes payable – Obsidian On 6 June 2019, the Company entered into a Convertible Securities Agreement with Obsidian Global Partners, LLC ('Obsidian'), pursuant to which Obsidian may invest up to AUD$1,500,000 in cash across two tranches in return for convertible notes in the Company. The ﬁrst tranche was executed on 12 June 2019, pursuant to which the Company raised AUD$750,000 (less associated fees and costs) and issued 5,259 convertible notes with a face value of USD$120 each. On 28 June 2019, Obsidian converted 500 notes to shares. As the transaction did not meet the ﬁxed-for-ﬁxed test, the conversion option is recorded as a derivative liability and measured at fair value (refer note 20). The second tranche, in which Obsidian may invest a further AUD$750,000 in the Company, is intended to occur no earlier than 90 days after the date of the ﬁrst tranche (12 June 2019) and is subject to the Company satisfying certain conditions, including obtaining approval of its shareholders. Total secured liabilities The total secured liabilities (current and non-current) are as follows: Consolidated Loans payable - NTH Mobile Limited Loans payable - BillFront Convertible notes payable - JGB Convertible notes payable - Obsidian 2019 $ 2018 $ 418,397 2,169,032 - 404,420 2,991,849 - - 3,287,542 - 3,287,542 50 50 Notes to the ﬁnancial statements 30 June 2019 Note 20. Non-current liabilities - derivative ﬁnancial instruments Consolidated 2019 $ 2018 $ Convertible notes derivative liability 152,467 - ● ● Refer to note 25 for further information on ﬁnancial instruments. Refer to note 26 for further information on fair value measurement. Note 21. Equity - issued capital Consolidated 2019 Shares 2018 Shares 2019 $ 2018 $ Ordinary shares - fully paid 241,265,666 222,074,251 28,720,072 28,167,383 Movements in ordinary share capital Details Date Shares Issue price $ Balance Issue of shares on exercise of performance rights Issue of shares Share buy-back 1 Jul 2017 15 Sep 2017 5 Dec 2017 7 Jun 2018 219,683,699 2,912,844 769,230 (1,291,522) Balance Issue of shares Issue of shares in satisfaction of commitment fees for new issue of convertible notes Issue of shares on conversion of convertible notes 30 Jun 2018 12 Dec 2018 12 Jun 2019 28 Jun 2019 222,074,251 11,288,179 1,681,614 6,221,622 28,165,539 - 100,000 (98,156) 28,167,383 428,957 37,500 86,232 $0.130 $0.076 $0.038 $0.014 Balance 30 Jun 2019 241,265,666 28,720,072 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. Share buy-back On 20 Apr 2018, the Company announced a buy-back of ordinary shares for holders of less than marketable parcels of shares in the Company. A total of 1,291,522 were sold at a price of 7.6 cent per share, being the Volume Weighted Average Price for the 5 days on which shares were traded between 11 Apr 2018 and 19 Apr 2018. The proceeds were distributed to the shareholders who participated in the Buy-Back before 20 June 2018. These shares were cancelled once transferred to the Company. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders &beneﬁts for other stakeholders & 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 Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment. The Group will pursue additional investments however in the short term the focus is to integrate and grow its existing businesses in order to maximise synergies. The Group is subject to certain ﬁnancing arrangement covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the ﬁnancing arrangements during the ﬁnancial year. The capital risk management policy remains unchanged from the 2018 Annual Report. 9 1 0 2 t r o p e R l a u n n A 51 51 Notes to the ﬁnancial statements 30 June 2019 Note 22. Equity - reserves Consolidated Foreign currency reserve Share-based payments reserve Convertible note optionality reserve 2019 $ 2018 $ 249,274 4,813,399 - 5,062,673 (261,953) 4,788,649 212,851 4,739,547 Foreign currency reserve The reserve is used to recognise exchange diﬀerences arising from the translation of the ﬁnancial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity beneﬁts provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Convertible note optionality reserve The reserve is used to recognise the value of the optionality component of the convertible note over the life of the facility. Note 23. Equity - accumulated losses Consolidated Accumulated losses at the beginning of the ﬁnancial year Loss after income tax beneﬁt for the year Transfer from convertible note optionality reserve 2019 $ 2018 $ (28,251,499) (4,795,984) 212,851 (2,210,227) (26,041,272) - Accumulated losses at the end of the ﬁnancial year (32,834,632) (28,251,499) Note 24. Equity - dividends There were no dividends paid, recommended or declared during the current or previous ﬁnancial year. Note 25. Financial instruments Financial risk management objectives The Group's activities expose it to a variety of ﬁnancial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of ﬁnancial markets and seeks to minimise potential adverse eﬀects on the ﬁnancial performance of the Group. Due to our smaller size and less complex business and including the natural revenue and expense cash ﬂow hedges in the Australian and European operations, whilst we maintain an active dialogue with foreign exchange providers, as yet the Group, to date, has not required the use of derivative ﬁnancial instruments such as forward foreign exchange contracts to hedge risk. This may change in the future as our operations and related treasury needs develop. The Group uses diﬀerent methods to measure diﬀerent types of risk to which it is exposed. These methods may include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, as well as ageing analysis for credit risk. Risk management is carried out between the CEO and key management personnel under policies approved by the Board of Directors ('the Board'). These policies include identiﬁcation and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. The CEO and CFO identify, evaluate and hedge ﬁnancial risks within the Group's operating units (where appropriate) and report to the Board on a monthly basis. Market risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate ﬂuctuations. Foreign exchange risk arises from future commercial transactions and recognised ﬁnancial assets and ﬁnancial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash ﬂow forecasting. 9 1 0 2 t r o p e R l a u n n A 52 52 Notes to the ﬁnancial statements 30 June 2019 Note 25. Financial instruments (continued) The average exchange rates and reporting date exchange rates applied were as follows: Consolidated Australian dollars United Kingdom Sterling European Union Euros United States Dollars Hungarian Forint Average exchange rates Reporting date exchange rates 2019 2018 2019 2018 0.5525 0.6268 0.7151 201.6197 0.5760 0.6500 0.7760 202.6040 0.5522 0.6172 0.7015 199.0528 0.5610 0.6330 0.7400 280.5860 The carrying amount of the Group’s foreign currency denominated ﬁnancial assets and ﬁnancial liabilities at the reporting date were as follows: Consolidated Australian dollars Euros Pound Sterling United States Dollar Mexican Peso Turkish Lira South African Rand Hungarian Forint Other Sensitivity analysis Assets 2019 $ 928,775 3,221,842 452,159 977,641 337,803 393,953 364,892 96,285 722,246 2018 $ 2,414,189 5,346,757 833,453 1,091,473 411,624 238,209 553 294,517 303,868 Liabilities 2019 $ 1,367,561 5,259,549 97,501 353,877 74,984 33,010 4,777 - 563,287 2018 $ 578,070 5,639,503 130,039 631,248 - - - - 4,684 7,495,596 10,934,643 7,754,546 6,983,544 Consolidated - 2019 % change Eﬀect on proﬁt Eﬀect on equity % change Eﬀect on proﬁt Eﬀect on equity AUD strengthened AUD weakened Eﬀect on proﬁt United Kingdom Sterling European Union Euros Other currencies 5% 5% 5% 114,831 (62,617) 221,565 114,831 (62,617) 221,565 (5%) (5%) (5%) (114,831) 62,617 (221,565) (114,831) 62,617 (221,565) 273,779 273,779 (273,779) (273,779) Consolidated - 2018 % change Eﬀect on proﬁt Eﬀect on equity % change Eﬀect on proﬁt Eﬀect on equity AUD strengthened AUD weakened Eﬀect on proﬁt United Kingdom Sterling European Union Euros Other currencies 5% 5% 5% 95,027 (1,175,952) 17,521 95,027 (1,175,952) 17,521 (5%) (5%) (5%) (95,027) 1,175,952 (17,521) (95,027) 1,175,952 (17,521) (1,063,404) (1,063,404) 1,063,404 1,063,404 9 1 0 2 t r o p e R l a u n n A 53 53 Notes to the ﬁnancial statements 30 June 2019 Note 25. Financial instruments (continued) The analysis above has been carried out on the following basis: ● ● Management’s estimate of what is reasonably possible for changes in exchange rates (i.e. 5%) for the ﬁnancial year. Hedged transactions were not taken into consideration. It is reasonable to expect that ﬂuctuations on the value of hedged items are almost fully oﬀset by hedging instruments. Price risk The Group is not exposed to any signiﬁcant price risk. Interest rate risk The Group's main interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to interest rate risk. Borrowings issued at ﬁxed rates expose the Group to fair value interest rate risk. The policy is to maintain borrowings at ﬁxed rates and to monitor fair value interest rate risk in Australia and Europe to ensure borrowings remain competitively priced. If deemed necessary, the Group may seek to utilise interest rate swaps or re-ﬁnancing to achieve this when necessary. As at the reporting date, the Group had the following borrowings: Consolidated Loans payable - BillFront Loans payable - NTH Convertible notes payable - Obsidian Convertible notes payable - JGB Net exposure to cash ﬂow interest rate risk 2019 2018 Weighted average interest rate % Balance $ Weighted average interest rate % 11.25% 3.99% - - 2,169,032 418,397 404,420 - 2,991,849 - - - 15.00% Balance $ - - - 3,287,542 3,287,542 Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁnancial loss to the Group. To date, the signiﬁcant portion of credit risk relates to the telecommunications aggregator companies from which the Group receives its cash ﬂows after 7 to 180 days post month end. The Group tries to ensure that it transacts with the largest aggregator companies available in the various countries in which it conducts business and makes regular industry reference checks and sets credit limits to mitigate credit risk. If a risk concentration is deemed too great in a particular country then the Group seeks to utilise multiple aggregators. The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using ﬁxed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written oﬀ when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. The Group has no signiﬁcant credit risk at 30 June 2019 or 30 June 2018. Liquidity risk Vigilant liquidity risk management requires the Group 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 Group 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 Group'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. 9 1 0 2 t r o p e R l a u n n A 54 54 Notes to the ﬁnancial statements 30 June 2019 Note 25. Financial instruments (continued) Consolidated 2019 Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Non-derivatives Non-interest bearing Trade payables Accrued expenses and other payables Interest-bearing - variable Loans payable - BillFront Interest-bearing - ﬁxed rate Convertible notes payable Loans payable - NTH Mobile Limited % - - $ 1,921,970 2,171,442 $ - - 11.30% 160,780 2,289,617 - 3.99% - - 404,420 443,095 Total non-derivatives 4,254,192 3,137,132 Derivatives Convertible note derivative liability Total derivatives - - - - 152,467 152,467 $ - - - - - - - - $ - - - - - - - - Consolidated 2018 Weighted average interest rate 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Non-derivatives Non-interest bearing Trade payables Accrued expenses and other payables Interest-bearing - ﬁxed rate Convertible notes payable % - - $ 2,568,426 2,317,067 15.00% 3,287,542 Total non-derivatives 8,173,035 $ - - - - $ - - - - $ - - - - Remaining contractual maturities $ 1,921,970 2,171,442 2,450,397 404,420 443,095 7,391,324 152,467 152,467 Remaining contractual maturities $ 2,568,426 2,317,067 3,287,542 8,173,035 The cash ﬂows in the maturity analysis above are not expected to occur signiﬁcantly earlier that contractually disclosed above. 9 1 0 2 t r o p e R l a u n n A 55 55 Notes to the ﬁnancial statements 30 June 2019 Note 26. Fair value measurement Fair value hierarchy The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is signiﬁcant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability Consolidated 2019 Liabilities Loans payable Convertible notes payable Convertible notes derivative liability Total Liabilities Consolidated 2018 Liabilities Convertible notes payable Total Liabilities Level 1 $ Level 2 $ Level 3 $ Level 4 $ - - - - - - - - 2,587,429 404,420 152,467 2,587,429 404,420 152,467 3,144,316 3,144,316 Level 1 $ Level 2 $ Level 3 $ Level 4 $ - - - - 3,287,542 3,287,542 3,287,542 3,287,542 There were no transfers between levels during the ﬁnancial year. The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature. The fair value of ﬁnancial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar ﬁnancial liabilities. The discount rate used is 23%. Valuation techniques for fair value measurements categorised within level 2 and level 3 Unquoted investments have been valued using a discounted cash ﬂow model. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous ﬁnancial year are set out below: Consolidated Balance at 1 July 2017 Disposals Balance at 30 June 2018 Additions Reﬁnanced Loans payable NTH Mobile Limited Loans payable BillFront $ - - - $ - - - Convertible notes JGB $ 7,923,847 (4,636,305) 3,287,542 Convertible notes Obsidian $ - - - 418,397 2,169,032 - 404,420 Total $ 7,923,847 (4,636,305) 3,287,542 2,991,849 - - (3,287,542) - (3,287,542) Balance at 30 June 2019 418,397 2,169,032 - 404,420 2,991,849 9 1 0 2 t r o p e R l a u n n A 56 56 Notes to the ﬁnancial statements 30 June 2019 Note 27. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the Group is set out below: Consolidated Short-term employee beneﬁts Post-employment beneﬁts Termination beneﬁts Share-based payments 2019 $ 2018 $ 1,645,079 19,410 - - 1,664,489 1,699,809 52,169 153,765 259,590 2,165,333 Detailed remuneration disclosures can be found in the remuneration report and equity interests in the directors’ report. Note 28. Remuneration of auditors During the ﬁnancial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor of the Company, and its network ﬁrms: Consolidated Audit services - RSM Australia Partners Audit or review of the ﬁnancial statements Audit services - RSM Netherlands Audit or review of the ﬁnancial statements Note 29. Commitments Consolidated Lease commitments - operating Committed at the reporting date but not recognised as liabilities, payable Within one year One to ﬁve years 2019 $ 2018 $ 149,600 107,000 - 82,720 2019 $ 2018 $ 416,977 332,166 749,143 334,720 494,751 829,471 Operating lease commitments includes contracted amounts for various oﬃces and plant and equipment under non-cancellable operating leases. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The Group had no ﬁnance lease commitments at 30 June 2019 or 30 June 2018. 9 1 0 2 t r o p e R l a u n n A 57 57 Notes to the ﬁnancial statements 30 June 2019 Note 30. Related party transactions Parent entity Crowd Media Holdings Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 32. Key management personnel Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the directors' report. Transactions with related parties The following transactions occurred with related parties: Consolidated Payment for services Boardroom Pty Limited (Director S. Karzis is the General Manager of Corporate Counsel Pty Ltd, a subsidiary of Boardroom) provided professional registry and corporate secretarial services to Crowd Media Holdings Limited Mish Guru Limited (Director D. Carosa is a 0.25% shareholder) provided marketing services to Crowd Media Holdings Limited subsidiaries Wholesale Investor Pty Ltd (Director D. Carosa is a 7.77% shareholder) provided investor promotions services to Crowd Media Holdings Limited Other expense transactions Compensation paid to Sophie Karzis, Company Secretary and legal counsel, via monies paid to her company Corporate Counsel Pty Ltd Other (payment)/receipt transactions Dominet Digital Corporation Pty Ltd (a Carosa vendor) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost, which was partially oﬀset by payments made to Dominet for virtual PA services and mobile phone reimbursement, at cost. Global Internet Ventures Pty Ltd (Director D. Carosa is a 25% shareholder) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost. Kindy Now Pty Ltd (Director D. Carosa is a 7.78% shareholder) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost. 2019 $ 2018 $ 115,571 82,630 35,335 61,986 4,750 9,750 60,949 94,597 20,490` (5,931) 84,721 30,807 - - Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated Current receivables Global Internet Ventures Pty Ltd (Director D. Carosa is a 25% shareholder) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost. Kindy Now Pty Ltd (Director D. Carosa is a 7.78% shareholder) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost. Current payables Payable to Sophie Karzis, Company Secretary and legal counsel, for director fees via her company Corporate Counsel Pty Ltd Payable to Boardroom Pty Limited for professional registry and corporate secretarial services to Crowd Media Holdings Limited Mish Guru Limited (Director D. Carosa is a 0.25% shareholder) provided marketing services to Crowd Media Holdings Limited subsidiaries Dominet Digital Corporation Pty Ltd (a Carosa vendor) paid Crowd Media Holdings Ltd for oﬃce space rented, at cost, which was partially oﬀset by payments made to Dominet for virtual PA services and mobile phone reimbursement, at cost. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. 2019 $ 2018 $ 24,984 4,550 - - 31,474 4,950 19,610 23,386 5,759 1,956 - - 9 1 0 2 t r o p e R l a u n n A 58 58 Notes to the ﬁnancial statements 30 June 2019 Note 31. Parent entity information Set out below is the supplementary information about the parent entity. Statement of proﬁt or loss and other comprehensive income Parent Proﬁt/(loss) after income tax Total comprehensive income Statement of ﬁnancial position Parent Total current assets Total assets Total current liabilities Total liabilities Equity Issue capital Foreign currency reserve Share-based payments reserve Convertible note optionality reserve Accumulated losses 2019 $ 10,066 10,066 2018 $ (25,546,768) (25,546,768) 2019 $ 2018 $ 13,832,362 19,925,348 29,814,047 25,358,156 21,026,036 20,946,901 23,751,955 20,946,901 87,956,338 1,063,333 5,069,128 - (88,026,707) 87,403,650 - 5,044,378 212,851 (88,249,624) Total equity 6,062,092 4,411,255 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 2019 and 30 June 2018. Contingent liabilities The parent entity has no contingent liabilities at 30 June 2019 or 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 2019 and 30 June 2018. Signiﬁcant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: ● ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. 9 1 0 2 t r o p e R l a u n n A 59 59 Notes to the ﬁnancial statements 30 June 2019 Note 32. Interests in subsidiaries The consolidated ﬁnancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Principal place of business / Country of incorporation Ownership interest 2019 % 2018 % Name Bongo Operations Pty Ltd Bongo IP Pty Ltd Global AQA Pty Ltd * Global AQA IP Pty Ltd Buddy Operations Pty Ltd Buddy IP Pty Ltd Crowd Mobile IP Pty Ltd Australia Australia Australia Australia Australia Australia Australia Crowd Media Holdings Pty Ltd (formerly Crowd Mobile Australia Pty Ltd) Australia Bongo Europe Pty Ltd Digital Global Marketing Pty Ltd Crowd Mobile EU Kft Crowd Media (Global) UK Ltd (formerly Crowd Butler UK Ltd) Crowd Mobile Co-Operatif U.A. * Crowd Mobile QA Services B.V. Track Holdings B.V. Track Online B.V. Track Concepts B.V. Be Tracked Media B.V. Vivazz Mobile B.V. Track Mobile B.V. Immediato B.V. Mobilizo B.V. Yulara B.V. Crowd Mobile QA Operations B.V. Crowd Mobile IP B.V. Crowd Media B.V. Q Share Plan Pty Limited Inala QA B.V. Australia Australia Europe United Kingdom The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands The Netherlands Australia The Netherlands * Global AQA Pty Ltd owns 1% of Crowd Mobile Co-Operatif U.A 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 9 1 0 2 t r o p e R l a u n n A 60 60 Notes to the ﬁnancial statements 30 June 2019 Note 33. Cash ﬂow information Reconciliation of loss after income tax to net cash from/(used in) operating activities Consolidated Loss after income tax beneﬁt for the year Adjustments for: Depreciation and amortisation Impairment of intangibles Net loss on disposal of intangibles Share-based payments Non-cash interest on loans Transfers - non-cash Convertible note share issues - non-cash Change in operating assets and liabilities: Decrease in trade and other receivables Decrease in accrued income Decrease/(increase) in income tax refund due Decrease/(increase) in deferred tax assets Decrease/(increase) in prepayments Increase in other operating assets Increase/(decrease) in trade and other payables Increase in deferred revenue Increase in derivative liabilities Decrease in provision for income tax Decrease in deferred tax liabilities Decrease in employee beneﬁts Increase in other provisions Net cash from/(used in) operating activities 2019 $ 2018 $ (4,795,984) (26,041,272) 209, 128 - - 24,750 - - 123,732 222,178 2,675,167 9,874 (1,099,951) 178,009 (41,589) (686,980) 71,244 152,467 - - (36,306) 550,909 (2,443,352) 3,648,101 25,380,044 25,245 382,380 (564,625) (141,337) - 3,386,858 - (343,949) 278,286 (62,007) (25,410) 63,500 - - (786,757) (2,547,137) (12,705) - 2,639,215 Changes in liabilities arising from ﬁnancing activities Consolidated Loans payable NTH Mobile Limited Loans payable BillFront Convertible notes JGB Convertible notes Obsidian Balance at 1 July 2017 Net cash used in ﬁnancing activities Balance at 30 June 2018 Net cash from/(used in) ﬁnancing activities $ - - - $ - - - $ 7,923,847 (4,636,305) 3,287,542 $ - - - 418,397 2,169,032 (3,287,542) 404,420 Balance at 30 June 2019 418,397 2,169,032 - 404,420 Note 34. Earnings per share Consolidated Loan Other $ Total $ 27,696 (27,696) 7,951,543 (4,664,001) - - - 3,287,542 (295,693) 2,991,849 2019 $ 2018 $ Loss after income tax attributable to the owners of Crowd Media Holdings Limited (4,795,984) (26,041,272) Weighted average number of ordinary shares used in calculating basic earnings per share 228,411,790 222,336,199 Weighted average number of ordinary shares used in calculating diluted earnings per share 228,411,790 222,336,199 Number Basic earnings per share Diluted earnings per share Cents (2.10) (2.10) (11.71) (11.71) Options and performance rights have been excluded from the above calculation in the current and previous year as their inclusion would be anti-dilutive. 9 1 0 2 t r o p e R l a u n n A 61 61 Notes to the ﬁnancial statements 30 June 2019 Note 35. Share-based payments As part of the debt reﬁnancing plan in the current year, options were issued to entities associated with JGB (Cayman) Newton Ltd ('JGB'). The options are unlisted with an exercise price of $0.05 cents and a 3-year term. Set out below are summaries of options granted: 2019 Grant date Expiry date Exercise price 02/04/2019 02/04/2022 $0.050 Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year - - 2,000,000 2,000,000 - - - - 2,000,000 2,000,000 Other options Set out below are summaries of additional options issued to the vendors of Track Holdings B.V. (‘Track’) as partial consideration for the sale of Track to the Company, and to suppliers for capital raising and investor relations services rendered during the reporting period, outside of the ESOP: 2019 Grant date Expiry date Exercise price 29/08/2016 01/11/2021 30/06/2017 09/06/2020 $0.300 $0.250 All options lapsed during the year. 2018 Grant date Expiry date Exercise price 29/08/2016 01/11/2021 30/06/2017 09/06/2020 $0.300 $0.250 Balance at the start of the year 5,000,000 1,000,000 6,000,000 Balance at the start of the year 5,000,000 1,000,000 6,000,000 Granted Exercised - - - Granted Exercised - - - - - - - - - Expired/ forfeited/ other Balance at the end of the year (5,000,000) (1,000,000) (6,000,000) - - - Expired/ forfeited/ other Balance at the end of the year - - - 5,000,000 1,000,000 6,000,000 Performance rights On 17 December 2014, shareholders approved a Performance Rights Plan ('PR Plan'). Under the PR Plan, selected employees and Directors may be granted performance rights which will entitle them to receive ordinary shares in the Company, subject to the Company meeting performance objectives. 9 1 0 2 t r o p e R l a u n n A 62 62 Notes to the ﬁnancial statements 30 June 2019 Note 35. Share-based payments (continued) Set out below are summaries of performance rights granted under the plan: 2019 Grant date Expiry date Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 16/01/2015 11/05/2015 10/07/2015 24/07/2015 02/12/2015 13/04/2016 15/08/2016 15/09/2017 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 2,500,000 1,500,000 325,000 500,000 16,667 479,161 500,000 2,912,844 8,733,672 - - - - - - - - - - - - - - - - - - (2,500,000) (1,500,000) (325,000) (500,000) (16,667) (479,161) (500,000) (2,912,844) (8,733,672) - - - - - - - - - 2018 Grant date Expiry date Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 16/01/2015 11/05/2015 10/07/2015 24/07/2015 02/12/2015 13/04/2016 05/08/2016 14/07/2017 15/09/2017 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 30/11/2018 2,500,000 1,500,000 325,000 500,000 16,667 479,161 500,000 - - - - - - - - - 6,000,000 3,250,000 - - - - - - - - (337,156) - - - - - - - (6,000,000) - 2,500,000 1,500,000 325,000 500,000 16,667 479,161 500,000 - 2,912,844 5,820,828 9,250,000 (337,156) (6,000,000) 8,733,672 Valuation model inputs For the options granted during the current ﬁnancial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date 02/04/2019 02/04/2022 $0.012 $0.050 81.30% - 1.00% $0.0015 9 1 0 2 t r o p e R l a u n n A 63 63 Notes to the ﬁnancial statements 30 June 2019 Note 36. Events after the reporting period On 31 July 2019, the Company agreed to issue Performance Rights ('PRs') to employees. The PRs are based on share price targets and the maximum number of shares that can be issued on conversion is 5,500,000 at two years and 5,500,000 at three years. On 31 July 2019, the Company agreed not to proceed with the PRs previously agreed to be issued on 25 July 2018. The three year PRs were based on share price and earnings per share targets and the maximum number of shares that could be issued on conversion was 6,000,000. On 29 August 2019, the Company executed a binding Heads of Agreement ('HOA') with an alliance of strategic investors, collectively the Invincible Investment Consortium ('IIC'), to fund existing Company requirements, as well as develop new business synergies and joint ventures between Crowd Media and businesses that the IIC can introduce and facilitate. These would leverage Crowd Media’s well-established technology and digital marketing platforms. Under the agreement, Crowd Media will issue IIC (and/or their nominees) with convertible notes with a face value of up to $3,700,000 on the following key terms: ● ● Tranche 1: $1,700,000 20 month facility with a ﬁxed conversion price of 1.8 cents, of which $1,600,000 has been received as at 19 September 2019: and Tranche 2: $2,000,000 24-month facility, to be drawn down in 90 days with a ﬁxed conversion price of 2.0 cents, subject to the parties agreeing to a business plan which focuses on strategic collaboration objectives. As part of the investment and collaboration under the agreement, IIC principals Steven Schapera and Robert Quandt will be joining the Crowd Media Board of Directors in September 2019. Crowd Media’s current Chairman, Theo Hnarakis, will be retiring from the Board to pursue other opportunities, and Steven Schapera will replace him as new Chairman. Experience and Expertise of Steven Schapera- Steven is London-based; he co-founded the successful BECCA Cosmetic brand and, as global CEO, commercialised it into a range of cosmetic products that are distributed throughout Europe, Asia and North America. Steven guided BECCA, from its infancy through to being a global player in the international luxury cosmetic space, before exiting the business to Estee Lauder for AUD$300 million. Steven holds a number of Board positions, including non-exec director of ASX listed OBJ Limited, and has investments in the health, beauty, wellness and tech spaces. Experience and Expertise of Robert Quandt- Robert worked for 10 years as a consultant for Booz & Company serving large corporate clients on strategy, operation and organisation. Subsequently, Robert has worked for Linde AG as the strategy lead for their EUR 6bn Americas business. Until recently, he has served as Board Director and COO/CFO of Invincible Brands. Invincible Brands is a Berlin-based Inﬂuencer led brand builder. Working alongside the co-founders, Robert has helped to grow this highly proﬁtable business from EUR 7m revenue in 2016 to around €100m in 2019. As part of the incoming investment by IIC, current CEO Domenic Carosa has agreed to reduce his remuneration package, beginning 1 September 2019 to EUR 240,000 per annum with an agreed 3-month notice period. No other matter or circumstance has arisen since 30 June 2019 that has signiﬁcantly aﬀected, or may signiﬁcantly aﬀect the Group's operations, the results of those operations, or the Group's state of aﬀairs in future ﬁnancial years. 9 1 0 2 t r o p e R l a u n n A 64 64 Directors’ declaration 30 June 2019 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 Group's ﬁnancial position as at 30 June 2019 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 Theo Hnarakis Chairman 19 September 2019 Melbourne 9 1 0 2 t r o p e R l a u n n A 65 65 INDEPENDENT AUDITOR’S REPORT To the Members of Crowd Media Holdings Limited Opinion We have audited the financial report of Crowd Media Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the statement of financial position as at 30 June 2019, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 66 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 Recognition of Revenue and Accrued Revenue Refer to Note 5 in the financial statements The Group’s revenue relates the sale of information and entertainment content services for mobile phones and tablets, and marketing agency services. to Total revenue for the year ended 30 June 2019 was $23.9m and accrued revenue of $2.7m, which is material to the financial statements. We have considered the recognition of revenue due to its size and magnitude in the financial statements. The nature and timing of recognition of accrued revenue at year-end involves management judgement and is complex. We have considered the recognition of revenue and the associated accrued revenue as a key audit matter because of the reasons above. Going Concern Refer to Note 2 in the financial statements We identified going concern as a Key Audit Matter due to Group’s has negative operating cash flows of $2.4m and loss before income tax of $6.4m for the year ending 30 June 2019. Our key audit procedures in relation to the recognition of revenue included: • Obtaining a detailed understanding of the processes and internal controls associated with the capture and recording of revenue; • Assessing whether revenue recognition policies were in compliance with AASB 15 Revenue from Contracts with Customers; the Group’s • On a sample basis, vouching to supporting contracts and third-party report of sales data to revenue recognised; • Comparing accrued revenue to subsequent third- party reports and funds receipted; and • Checking the accuracy of valuation of foreign currency transactions recorded. In assessing the appropriateness of the going concern assumption used in preparing the financial statements, our procedures included: Management have performed an assessment of its ability to continue as a going concern. This included the preparation of the cashflow forecast for twelve months which required significant judgement and assumptions. • Reviewing the current financial position of the Group and assessing a number of key ratios; • Sighting bank statements from August and September 2019 showing the receipt of $1.6 million of the $1.7 million from Tranche 1 of the convertible note facility; to year-end, Subsequent the Group obtained additional funding in the form of a convertible note facility to cover operating costs over the next 12 months. This amount was incorporated into the forecast prepared. • Reviewing management’s the twelve months from the date of signing of the financial statements, including assessing and challenging the assumptions used. forecasts for 67 Key Audit Matters (Continued.) AASB 9 - Expected Credit Losses Refer to Note 9 in the financial statements The Group adopted AASB 9 Financial Instruments on 1 July 2018. This standard supersedes the requirements of AASB 139 Financial Instruments - Recognition and Measurement. financial statements Management has determined that there will not be a material impact of the new standard on the Group’s the calculation of the allowance for impairment of accounts receivables using an expected credit loss (“ECL”) model. We considered this a key audit matter due to the judgements and estimates involved in the application of the expected credit loss model. relates to As at 30 June 2019, the carrying value of accounts receivables amounted to $3.9 million (2018: $2.9 million), and the allowance for impairment of accounts receivables amounted to $1.8m million (2018: $0.6 million). to determine the allowance The Group's management has applied a simplified ECL model for impairment of trade receivables. The ECL model involves the use of various assumptions, macro- economic factors and study of historical trends relating to the Group's history of a collection of trade receivables. Our audit procedures included the following: • Assessing the valuation methodology used; • Verifying whether the ECL model developed by management is consistent with the requirements of AASB 9; • Testing the accuracy and completeness of underlying data used in the model and the arithmetical accuracy of the computation of ECL; and • Testing key assumptions and judgments, such as those used to calculate the likelihood of default and loss on default by comparing to historical data, as well as the appropriateness of forward- looking factors (macroeconomic factors) used to determine ECL’s. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2019 but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 68 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/ar1.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Crowd Media Holdings Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS J S CROALL Partner Dated: 19 September 2019 Melbourne, VIC 69 Shareholder information 30 June 2019 In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders not elsewhere disclosed in this Annual Report. The information provided is current as at 9 August 2019 ('Reporting Date'). Corporate Governance Statement The Company’s Directors and management are committed to conducting the Group’s business in an ethical manner and in accordance with the highest standards of corporate governance. The Company has adopted and substantially complies with the ASX Corporate Governance Principles and Recommendations (Third Edition) ('Recommendations') to the extent appropriate to the size and nature of the Group’s operations. The Company has prepared a statement which sets out the corporate governance practices that were in operation throughout the ﬁnancial year for the Company, identiﬁes any Recommendations that have not been followed, and provides reasons for not following such Recommendations ('Corporate Governance Statement'). In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available for review on Crowd Media’s website, https://investor.crowdmobile.com/corporate_governance.html#investor (Website), and will be lodged together with an Appendix 4G with ASX at the same time that this Annual Report is lodged with ASX. The Appendix 4G will particularise each Recommendation that needs to be reported against by Crowd Mobile and will provide shareholders with information as to where relevant governance disclosures can be found. The Company’s corporate governance policies and charters are all available on Crowd Media Holdings Limited’s Website. Substantial shareholders Number held No. Percentage of total shares on issue % Domenic Carosa DSAH Holdings Pty Ltd, Daniel Wallis 24,742,968 18,484,045 9.93% 7.42% Distribution of equity securities As at the Reporting Date, the number of holders in each class of equity securities: Fully paid ordinary shares Options exercisable at $0.05 each on or before 2 April 2022 Convertible Notes Distribution of ordinary shareholders Holding ranges 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 holders No. 1,552 3 1 Holders No. Total units No. Total Shares % 73 71 236 843 329 4,102 248,546 2,122,378 34,646,052 212,226,332 0.002% 0.100% 0.851% 13.900% 85.147% 1,552 249,247,410 100.000% 9 1 0 2 t r o p e R l a u n n A 70 70 Shareholder information 30 June 2019 Distribution of option holders Holding ranges 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Distribution of convertible notes Holding ranges 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holders of $0.05 options expiring 2 Apr 2022 - - - - 3 3 Holders of convertible notes No. - 1 - - - 1 Less than marketable parcels of ordinary shares (‘UMP Shares’) The number of holders of less than a marketable parcel of ordinary shares based on the closing market price at the Reporting Date is as follows: Total Shares No. UMP Shares No. UMP Holders No. Issued shares held by UMP holders % 249,247,410 9,252,394 756 3.71% Quoted securities Twenty largest quoted equity security holders The Company only has one class of quoted securities, being ordinary shares. The names of the 20 largest holders of ordinary shares, and the number of ordinary shares and percentage of capital held by each holder is as follows: Ordinary shares No. Total shares issued % DSAH Holdings Pty Ltd Dominet digital Corporation Pty Ltd (The Carosa Family A/C) Dominet digital investments Pty Ltd (Dominet digital investmt A/C) Mr Rene Rath Mr Hendrikus Antonius Johannes Kusters Mutual Trust Pty Ltd Australco super investments Pty Ltd (Hnarakis Family S/F A/C) Perpetual Capital Investments Pty Ltd Citicorp Nominees Pty Limited AddingUp Pty Limited (AddingUp S/F A/C) MFA Capital Pty Ltd (T&J Adams super fund A/C) Michael Matthew Farrelly Obsidian Global Partners LLC Ms Lewei Jiang & Ms Xi Zhang Yeend Superannuation Pty Ltd (Yeend super fund A/C) J P Morgan nominees Australia Pty Limited Mr Rodney Barry Ruttiman & Mrs Jane Lorrie Ruttiman Mrs Elizabeth Adell Holmes Stolow Pty Ltd (The Leung investment A/C) Mr Risto Alberg Total remaining holders balance 18,484,045 11,792,523 9,923,378 8,792,570 8,792,570 5,807,598 4,177,650 4,000,000 3,271,145 3,000,000 2,700,000 2,700,000 2,636,313 2,185,000 2,106,274 2,017,540 2,010,948 2,000,000 2,000,000 1,950,813 100,348,367 148,899,043 7.416% 4.731% 3.981% 3.528% 3.528% 2.330% 1.676% 1.605% 1.312% 1.204% 1.083% 1.083% 1.058% 0.877% 0.845% 0.809% 0.807% 0.802% 0.802% 0.783% 40.260% 59.740% 9 1 0 2 t r o p e R l a u n n A 71 71 Shareholder information 30 June 2019 Unquoted equity securities The number of each class of unquoted equity securities on issue, and the number of their holders, are as follows: Class of equity securities Number of unquoted equity securities Number Of Holders Options exercisable at $0.05 each expiring on 2 April 2022 Convertible notes 2,000,000 4,109 3 1 Except as listed below, no persons hold 20% or more of the equity securities in any unquoted class that were not issued or acquired under an employee incentive scheme. ● ● ● 746,162 options exercisable at $0.05 each, expiring 2 April 2022 are held by JGB Capital Oﬀshore Ltd. 1,136,541 options exercisable at $0.05 each, expiring 2 April 2022 are held by JGB Partners LP. 4,109 convertible notes are held by Obsidian Global Partners, LLC. Voting rights The only class of equity securities on issue in the Company which carry voting rights is ordinary shares. At a general meeting of the Company, every holder of ordinary shares is entitled to vote in person or by proxy or attorney; and on a show of hands every person present who is a member has one vote, and on a poll every person present in person or by proxy or attorney has one vote for each ordinary share he holds. Voluntary escrow There are no securities on issue in the Company that are subject to voluntary escrow. Stock Exchange Listings The Company’s ordinary shares are quoted on the Australian Securities Exchange ('ASX') (ASX issuer code: CM8) and on the Frankfurt Stock Exchange (European stock code: CM3). Buybacks No securities were purchased on-market during the reporting period under or for the purposes of an employee incentive scheme or to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an employee incentive scheme. The Company is not currently conducting an on-market buy-back. Item 7 issues of securities There are no issues of securities approved for the purposes of item 7 of section 611 of the Corporations Act which have not yet been completed. Company secretary The Company’s secretary is Laura Newell. Registered oﬃce The address and telephone number of the Company’s registered oﬃce are: Level 4 44 Gwynne Street CREMORNE VIC 3121 Telephone: +61 3 9020 1468 Share registry The address and telephone number of the Company’s share registry, Boardroom Pty Limited, are: Street Address: Level 12 225 George Street SYDNEY NSW 2000 Telephone: +61 2 9290 9600 9 1 0 2 t r o p e R l a u n n A 72 72 i . m o c a d e m d w o r c w w w .

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