Family Zone Cyber Safety Limited
ACN 167 509 177
ANNUAL REPORT
for the year ended 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
PAGE
CONTENTS
CORPORATE INFORMATION
CHAIRMAN’S MESSAGE
REVIEW OF OPERATIONS
DIRECTORS’ REPORT
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES OF EQUITY
STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR'S REPORT
ASX ADDITIONAL INFORMATION
CORPORATE GOVERNANCE
3
4
6
14
32
33
34
35
36
67
68
74
78
2
CORPORATE INFORMATION
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Directors
Tim Levy
John Sims
Crispin Swan Executive Director - Sales
Phil Warren
Managing Director
Non-executive Chairman
Non-executive Director
Company secretary
Emma Wates
Registered and principal administrative office:
945 Wellington Street
WEST PERTH WA 6005
Telephone: +61 8 9322 7600
Principal place of business
Level 15, 207 Murray Street
WEST PERTH WA 6000
Telephone: 1300 398 326
Share register
Automic Registry Services
Suite 310, 50 Holt Street
SURRY HILLS, NSW 2010
Telephone: +61 8 9324 2099
Solicitors
GTP Legal
68 Aberdeen Street
NORTHBRIDGE WA 6003
Telephone: +61 8 6555 1866
Bankers:
Westpac Banking Corporation
Level 14, 109 St Georges Terrace
Perth WA 6000
Auditors:
Pitcher Partners BA&A Pty Ltd
Level 1, 914 Hay Street
PERTH WA 6000
Telephone: +61 8 9322 2022
Securities Exchange Listing
Family Zone Cyber Safety Limited is listed on the Australian Securities Exchange (ASX Code: FZO)
3
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
CHAIRMAN’S MESSAGE
Dear Fellow Shareholders,
It gives me great pleasure to present the 2017 Annual Report for Family Zone Cyber Safety Limited (‘Company’)
and its wholly owned subsidiaries (‘Family Zone’ or ‘Group’), reflecting on a year that has been transformative and
in which our Company has achieved several key milestones.
Family Zone has delivered strong growth since the Company commenced trading on the Australian Securities
Exchange (‘ASX’) in August 2016, following the completion of a $6.04 million Initial Public Offer.
Today, Family Zone is at the forefront of solving the cyber safety challenges for parents and schools in an
increasingly connected world. Our Group’s cloud-based ecosystem provides a unique set of cyber safety controls
that spread across homes, schools and enterprise networks, regardless of the network or device that may be used.
This holistic approach to solving cyber safety challenges for families sets Family Zone apart. Industry research
reveals that there is a compelling need for what we have to offer:
●
●
●
●
●
Teens spend an average of 4 hours per day online, resulting in 75% of teens being sleep deprived;
90% of teen boys and 60% of teen girls have watched online porn;
70% of teens face cyber bullying;
72,000 Australian teen boys have a problem with gambling; and
45% of pre-teens are using unsafe apps.
Today, cyber safety is a US$2 billion market growing 10% year on year. According to Parks Research, the
addressable size of this market could expand to US$100 billion for companies that can provide simple-to-apply
protection that covers every connected device in the home.
It is in this context – of a large, growing but relatively poorly-served market – that Family Zone has grasped the
opportunity to take its technology to the world.
Since our listing on the ASX, we have made great strides in strengthening our Group, through growth, innovation
and acquisition. Our acquisition of valuable technology and intellectual property, which we have integrated into our
platform to create School Zone, has allowed us to significantly broaden our offering to encompass schools and to
connect with families that are more likely to acquire our Family Zone services. The use of mobile devices among
teens has exploded over the past few years and the duty of care that schools have for their students is threatened
as a result; our School Zone offering gives schools the tools they need to meet their responsibility to the families
they serve.
By year end, we had more than 300 School Zone installations being used in schools across Australia and the US
and signed agreements with 20 Australian schools to mandate Family Zone to their communities under the
Company’s “School Community” model. We expect the education sector to be a strong driver for growth in 2018.
Other highlights of the year included:
• Registered more than 11,000 Family Zone accounts in Australia with 30,000+ users;
• Successfully completed a trial phase with Telkomsel Indonesia;
• Launched a co-branded service with major Philippines carrier PLDT;
• Launched a successful promotion with Australian telco OVO Mobile;
• Signed high profile charity and school cyber safety services supplier, Alannah & Madeline Foundation, as a
cyber expert partner;
• Signed two major Australian IT vendors in education (Learning with Technology and EduNet) to distribute
Family Zone technology commencing in the fourth calendar quarter 2017;
• Signed a reseller agreement with regional Australian telecom provider, Southern Phone; and
4
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
• Completed trials with US company IgniteNet, to provide Family Zone filtering in its suite of consumer and
business access point products (and launched this product post year-end).
We finished the year in a strong position, with operating revenue of $1.59 million and total income of $2.29 million.
As we progressed through the year, Family Zone saw growth in these metrics quarter-over-quarter, providing
positive momentum for 2018.
Post year-end, the Company completed a $5.20 million share placement to support our investment in the scaling of
our service delivery and business development activities, and further strengthen our balance sheet. We are grateful
to our Shareholders for their continued support in these fundraising activities, which will enable us to execute on
our plans and realize the opportunity for greater shareholder returns.
I take this opportunity to thank my fellow Board Members and particularly the management and staff of Family Zone
who have worked tirelessly to realize their vision and grow our shareholder value.
We expect the year ahead to be another productive one, and our entire team is excited and energized for 2018.
Our market opportunity is large, and we believe that with our unique ecosystem approach to cyber safety, we will
continue to forge new horizons in Australia and beyond.
I look forward to sharing our continued success with you.
John Sims
Chairman
5
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
REVIEW OF OPERATIONS
Family Zone is a technology company focused on cyber safety. Meeting a growing demand to keep young people
safe online and manage digital lifestyles, Family Zone has developed a unique and innovative cloud-based
solutions which combines Australian innovation with leading global technology.
Operational achievements for the 2017 financial year
The Company commenced commercial operations in July 2016 which transformed the business from an
engineering and R&D focus to customer support, sales and marketing. The Company also completed an initial
public offering of its shares on the ASX in August 2016 raising $6.04 million to fund its commercialisation and
business development strategy.
During its first year of commercial operations, Family Zone achieved:
• More than 300 School Zone installations, including 133 school in the USA;
• Signed 20 partner schools mandating Family Zone under the “School Community” model;
• 22 cyber expert partnerships signed, including 5 in the USA and 2 in the Philippines;
• More than 11,000 registered zones in operation;
• Partnerships with two Tier 1 telecommunication carriers in SE Asia;
• Partnership signed with Australian Telco Southern Phone;
• $1.59 million customer revenues generated; and
• $2.29 million total revenues.
The Family Zone ecosystem approach to cyber safety
The Family Zone cyber safety ecosystem is a suite of integrated products and services that provide an unrivalled
cyber safety experience. It offers cyber safety services and controls that can be seamlessly implemented across
schools, homes, smart devices, mobile networks and hotspots, regardless of the network or device that may be
used.
The Group’s holistic approach to cyber safety, broad range of product and services and the increasing global focus
on cyber safety has resulted in a significant market opportunity for the Group. Throughout the 2017 financial year
Family Zone has developed, trialled and refined a marketing strategy for the commercialisation of its products and
services, which focuses on three key market sectors, each with a number of distribution channel opportunities that
have been targeted during the 2017 financial year.
6
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
CONSUMER
Marketing and Brand Awareness
The Group formally launched its consumer product offerings in Australia in July 2016, comprising:
• Family Zone Box and networking service providing a safe Wi-Fi network within the home, business or other
network area;
• Family Zone App (iOS and Android) which provides parents with remote device management and enforces
filtering when mobile devices are not connected to the Family Zone Box;
• A community of Cyber Experts creating age-appropriate policies and setting their own pricing.
The Company commenced a national marketing and public relations campaign to increase Family Zone’s social
media presence and build brand momentum in September 2016. Family Zone was featured in a range of national
TV and press news stories, participated in a number of cyber safety events and forums as well as technology
conferences throughout the year in order to build brand awareness.
It also trialled a number of branding, communication and pricing strategies, with the following key findings:
• Cyber safety is an attractive marketing theme, offering better than expected click through rates;
• Family Zone is capable of generating publicity through major media channels;
• Cyber Experts are and continue to be a key component of media access; and
• Schools and school communities are a strong “influencer” in respect to parental control technology choices.
The Group’s consumer sales and marketing efforts have resulted in a steady increase in consumer sign ups during
the year with over 11,000 registered zones in operations at 30 June 2017.
Cyber Experts Partners
A unique feature of the Family Zone business model is its Cyber Expert Partner (CEP) programme.
Cyber Experts is a term the Group has coined for professionals working in the emerging industry of cyber safety.
These professionals are often in schools talking to kids, teachers and parents about the challenges of the digital
age. Family Zone offers the only cyber safety platform that allows these experts to create packages of cyber safety
settings and develop business models to offer these packages and communicate with their customers.
7
The CEP provides a key public relations and sales distribution opportunity for the Family Zone products. CEPs
allow parents to outsource the complexity of parental controls and to access ongoing advice and support from
experts in their kids’ digital world.
Family Zone currently has 14 Australia-based Cyber Experts in the platform, a number of whom are now generating
material incomes from their Family Zone partnership.
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
In the US the Company is currently working with 5 CEPs and recently signed an Indonesian Cyber Expert Bijak
Online and two Filipino experts, to support the growth of the Company’s operations in SE Asia.
The Company will continue to expand its roster of Cyber Experts through partnerships with additional cyber safety
and religiously focused organisations.
Alannah & Madeline Foundation
In April 2017, Family Zone announced a partnership with Australian charity The
Alannah & Madeline Foundation. The partnership provides parents and schools
with the opportunity to subscribe to the Foundation’s cyber safety settings within
Family Zone, leveraging Alannah & Madeline’s expertise in cyber safety training
and advice to the community.
The Foundation will offer age-appropriate custom cyber safety packages to
parents and schools through the Family Zone platform and will promote these packages through its network.
The Alannah & Madeline Foundation is Australia’s leader in cyber safety education, offering services to 2,200
schools and more than 60 per cent of public libraries across Australia.
EDUCATION
School Zone
In December 2016, the Company successfully completed the acquisition of one of Australia’s leading cyber security
and education platforms, Sonar/MyNet, from Tesserent Limited (‘Tesserent’) and engaged Tesserent as its global
reseller and distribution partner.
The Group’s market research had highlighted the importance and influence of schools over the technology used by
parents in the home. This acquisition fast-tracked Family Zone’s sales strategy into school communities, by
identifying families that are prime candidates for its service.
The acquisition rounded out the Group’s product offerings and suite of technologies. When integrated into the
Family Zone ecosystem, the Sonar/MyNet platform became known as School Zone and is designed to solve two of
the biggest technology problems facing schools:
8
• Managing the extension of a school's duty of care to students’ mobile devices; and
• Engaging parents and students in cyber safety.
Following completion of the acquisition, Family Zone focused its consumer sales efforts on leveraging its installed
base of schools using its School Zone service. New product branding was developed to explain Family Zone’s
ecosystem offerings to schools in the context of:
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
• School Zone being the on-campus services;
• Home Zone being home networking solutions; and
• Mobile Zone being on-device technologies.
Family Zone’s work with schools following completion of the
acquisition reaffirmed the transaction rationale, particularly
the Mobile Zone solution and the ability for schools to extend
their ‘duty-of-care’ to all devices that come to school,
whether they are connected to school or cellular mobile
networks.
The educational sales team started engaging with existing
and new potential school partners, developing innovative
commercial models with encouraging take-up by parents in
the community.
To support schools’ uptake of this technology, in April 2017 the Company launched a disruptive commercial model
whereby schools gain subsidised access to School Zone when they mandate Family Zone to the parent
community. This model, known as the “School Community”, has received a very strong response from the
Australian market. Since its introduction, 20 Australian schools have agreed to mandate Family Zone to their
community for the 2018 school year, with promotion starting in 2017. These 20 schools represent close to 15,000
Australian families.
Revenue from Family Zone’s partner offer will range between $60 and $90 per annum upfront per family. The
Company also intends to market Family Zone’s add-on services, including subscriptions for cyber experts,
extended family support and the Family Zone Box (safe Wi-Fi access point) to these families.
The Group had more than 300 schools using School Zone across Australia and US at the end of the financial year.
US Market
The acquisition of Sonar/MyNet in December 2016, which had 47 existing clients in West Virginia, USA,
accelerated the Group’s planned entry into the US education market and also provided an initial distribution focus
for Family Zone’s consumer products.
Certification of the Family Zone box and services for US market were completed in December 2016 and are
currently available for sale direct to US customers.
Given the scale of the US market, Family Zone has remained focused on developing partnership strategies and
has pursued discussions and trials with several telcos, ISPs and system integrators in the USA. Family Zone has
engaged a local distributor to directly promote the Company’s offerings to US schools.
By the end of the financial year the Company had 133 schools using its School Zone service. The Company
proposes to launch its “School Community” commercial model in the USA in early 2018.
9
Educational Technology Vendors
Family Zone formed partnerships with leading educational IT vendors EduNet in May 2017 and Learning with
Technologies in early July 2017. Through these partnerships, Family Zone software will be promoted and
distributed to schools and parents under the schools’ ‘bring your own device’ (BYOD) programs. The Family Zone
software will be either selected by the parent or mandated by the school to be preinstalled on devices sold to
parents by these IT vendors.
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
These partnerships represent a significant opportunity for Family Zone to boost penetration into the education
sector, with these two IT vendors selling 70,000 devices into the education sector each year.
TELECOMMUNICATIONS CARRIERS
Wholesale Telco Partnerships - Global
PLDT - Philippines
Philippines Long Distance Telecommunications (PLDT) launched its co-branded Family
Zone service known as “Fam Zone” as part of its “The Future of Filipino Home” in
November 2016, providing Filipino parents a simple and universal approach to cyber
safety. It also placed an placed an initial order of Family Zone Boxes to distribute to its
customers.
PLDT (PSE: TEL) is the leading telecommunications, digital and multimedia service provider in the Philippines with
approximately 70 million subscribers. Through its principal business groups - fixed line, wireless and others - PLDT
offers a wide range of digital and telecommunications services across the Philippines.
To support the launch of Family Zone in the Philippines and to provide PLDT and its customers with the best
possible local support, Family Zone has established a Manila-based support centre via outsourcing partner Acquire
BPO.
Telkomsel - Indonesia
In February 2016 the Company signed an memorandum of
understanding with Telkomsel Indonesia to trial Family Zone
services within its networks. Telkomsel is one of the premier telcos
in Asia and one of the largest mobile operators in the world. It is
35% owned by SingTel.
Following rigorous trials, Family Zone executed a full Commercial Value-Added Services Agreement with
Telkomsel in July 2017which will see Family Zone enabling on-device and in-network technologies to launch its
innovative parental control suite to Telkomsel subscribers.
The initial phase targeting all smartphone users will deliver the Company’s new native Parent App (Zone Manager),
which offers a simplified end-to-end user experience for Indonesian parents, along with the Child App (Mobile
Zone). Family Zone will roll these services out to Telkomsel’s postpaid and prepaid user base.
Phase two will see Family Zone deploy in-line filtering within the Telkomsel network via an APN (Access Point
Network). Importantly as this service is in-line, Family Zone will also be deployable on legacy feature phones or
portable SIM-enabled Wi-Fi devices, which opens a sizable new market. In combination with the Family Zone App,
this solution offers parents the most comprehensive cyber safety offering available on the market. Clever kids
attempting to hack on-device controls, or remove the SIM and insert it into another device, will remain protected.
10
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Retail Telco Partnerships - Australia
OVO Mobile
In the November 2016 Family Zone launched its first retail partnership with Australian-
based telco provider, OVO Mobile, targeting an estimated 4 million minors with mobile
phone services in Australia. In addition to generating revenue, Family Zone wanted to
demonstrate that “kids’ mobiles” was a legitimate segment and targeting parents desire
for “peace of mind” would result in market penetration.
The promotion and partnership with OVO Mobile showed early success and remains a strong source of new
customer activations.
Southern Phone
In June 2017, Family Zone entered a partnership with Southern Phone, one of the
largest providers of mobile, fixed line and Internet connectivity to businesses and
consumers throughout regional Australia. Key terms of the partnership included:
• Southern Phone recommending Family Zone’s home and mobile offerings to new
and existing customers;
• Southern Phone billing for Family Zone’s services and bundling these services
into its telco service plans; and
• Southern Phone incurring wholesale charges for Family Zone services.
The companies intend to launch their first market offering in Q4 CY 2017.
Resellers - Wireless Equipment Provider
The Group’s innovative cyber safety model includes technology that can be embedded in 3rd party access-points.
This presents additional distribution opportunities without the need to sell the Family Zone Box and provides
resellers and their customers with various points of differentiation in a commoditised industry.
Family Zone has an agreement with IgniteNet to embed Family Zone technology in its wireless access points.
IgniteNet is part of the large Accton group (based in Asia) and offers wireless equipment for sale through some
2,000 ISPs and resellers in USA.
A trial platform was developed with IgniteNet, allowing their customers (ISPs) to
provide Family Zone as a new offer within their internet offerings. Family Zone
successfully completed an Alpha release and testing process which included
integration of the IgniteNet and Family Zone cloud platforms and porting of the
Family Zone embedded filter client to run on multiple IgniteNet wireless access point models.
Family Zone the moved into a Beta release program with IgniteNet in the June 2017 quarter. The Beta trials were
successfully completed and Family Zone confirmed in August 2017 that its technology was available to IgniteNet
distributors and end-user customers globally.
This commercial partnership allows Family Zone and IgniteNet to target:
ISPs with large residential customers seeking to protect their kids at home and away;
•
• Educational institutions needing to comply with local regulations and manage duty of care; and
• Enterprise Wi-Fi and hotspot providers seeking the advanced networking and policy management features.
IgniteNet access point customers constitute about 2,000 ISPs and resellers across the US.
11
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
SME Market - Work Zone
As a response to the market opportunity, Family Zone launched a new offering, Work Zone in December 2016.
Work Zone is a cyber security and workforce optimisation offering to address the security, productivity and cultural
challenges faced by enterprises in managing the digital access of their employees. It was developed in response to
demand from telecommunication providers and small and medium-sized enterprises (‘SME’) seeking an affordable
cyber security platform for their businesses.
Leveraging the Family Zone platform, Work Zone provides business owners affordable options for:
• Firewalling local networks from high risk traffic and accessing malevolent websites (e.g. Infected Hosts,
Malformed URLs, Phishing and Viruses);
• Blocking staff from accessing inappropriate content in the office or on work provided mobile devices;
• Regulating access to distracting content during work hours (e.g. block all Social Media except during lunch
breaks);
• Restricting access to workforce collaboration services (e.g. email) after hours; and
• Alerting IT/Management to Apps downloaded on work provided mobile devices
Work Zone will be primarily distributed through telecommunications partners and generate revenues from hardware
sales and recurring licence fees. Reselling through carriers provides the Company with scale, leverages carriers
existing SMEs sales teams and minimises operational impacts on the Company.
Following its launch the Company received an initial order from its Philippines telecommunication partner for 9,500
access points which will be distributed to PLDT’s SME customers.
Family Zone has also deployed its first enterprise client, a provider of telecoms and media solutions to community
villages in Australia. This partner deployed Family Zone technology to manage community hotspots, finding the
Work Zone services affordable and ideal for governing the appropriateness of accessed content and remote
management of access point infrastructure.
CORPORATE
Sonar/MyNet Acquisition
Family Zone announced in November 2016 it would acquire the integrated Sonar/MyNet cyber security platform
from Tesserent in consideration Family Zone would pay $3,800,000 in cash and shares to Tesserent made up of:
• $0.25 million non-refundable cash deposit;
• $0.75 million in cash on completion
• $0.30 million in shares (1,000,000 shares at assumed price of 30c), issued on completion;
• $0.50 million in cash on 28 February 2017; and
• $2.00 million in cash on 31 May 2017.
The final acquisition payment for the Sonar/MyNet IP and the servicing arrangements for Sonar/MyNet customers
were varied in June 2017, after the parties renegotiated the terms of the transaction.
Under the revised terms, Family Zone paid $1.75 million of the final instalment during the June 2017 quarter
comprising $1.5 million in cash and $0.25 million in Shares (based on 1,000,000 Shares at $0.25), with a further
$0.40 million payable in six equal monthly instalments commencing in July 2017.
The parties also agreed to modify the licensing and support arrangements with a view to providing a more
responsive service for users of Family Zone technology, with Family Zone assuming technical and commercial
12
responsibility for all remaining Tesserent Sonar customers. The new arrangements improved cash flow and has
allowed Family Zone to better serve the increasingly important education market segment.
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Capital Raisings
Family Zone successfully completed a number of number of capital raisings during the year to support and fast
track investment in service delivery and acceleration of business development activities particularly in education,
global partnerships and to strengthen the Group’s balance sheet. The Company received strong support from the
investment community for these raisings with a number of institutions and strategically aligned investors
participating.
In March 2017, the Company completed an oversubscribed placement to sophisticated, institutional and strategic
investors at $0.20 per share to raise $3.29 million (before costs). The Company’s strategic SE Asian partner Fidelio
(backed by former CEO of Virgin Group David Baxby) invested $0.50 million in the this placement, highlighting its
support and commitment to the Company.
A placement of 3,333,334 shares at an issue price of $0.30 per Share pursuant to the Smyth Placement
Agreement was completed in July 2017 with $622,000 funds received in June 2017 and the balance of $378,000
received in the first week of July 2017.
In August 2017 the Company completed a $5.20 million capital raising through the issue of 13,000,000 shares at
$0.40 per Share to sophisticated and professional investors.
Government Grant
The Company received a Research & Development and Export Assistance grant funds of $0.69 million during the
2017 financial year.
13
DIRECTORS’ REPORT
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Your Directors have pleasure in submitting their report together with the financial statements of Family Zone
Cyber Safety Limited (‘Company’) and its wholly owned subsidiaries (the ‘Group’ or ‘Family Zone’) for the financial
year ended 30 June 2017. In order to comply with the provisions of the Corporations Act 2001, the Directors’
report as follows:
DIRECTORS
The Directors in office at any time during the financial year and until the date of this report are as follows:
Mr Tim Levy
Managing Director
Mr John Sims
Non-executive Independent Chairman
Mr Crispin Swan
Executive Director – Sales
Mr Phil Warren
Non-executive Independent Director
The Directors have been in office since the start of the year to the date of this report unless otherwise stated.
PRINCIPAL ACTIVITIES
Family Zone is a technology group focussed on cyber safety. The Group commenced commercial operations in
July 2017 following which its principal activities transformed from an engineering and R&D focus to sales,
marketing and customer support of its suite of cyber safety products and services.
The Family Zone Platform is a cloud based parental control platform owned and operated by the Group. The
Family Zone Platform incorporates networking and application technologies which allow parental controls to be
embedded within home, enterprise, public and telecommunications carrier networks and installed on mobile
devices.
There have been no other significant changes in the nature of these activities during the financial year.
RESULTS
The Group reported total income for the year ended 30 June 2017 of $2,290,721 ($444,122) with revenue from
operations being $1,589,202 (2016: $5,532).
The net loss attributable to members of the Group for the year ended 30 June 2017 amounted to $8,834,735 (2016:
loss $2,815,607).
REVIEW OF OPERATIONS
The Group completed an initial public offering of its shares on ASX in August 2016 raising $6.04 million to fund its
commercialisation and business development strategy. The operations of the Group have since been focussed on
the sales and marketing of its suite of cyber safety products as well as the provision of customer support services.
Throughout the year the Group has developed, trialled and refined a marketing strategy for the commercialisation
of its products and services, which focusses on three key market sectors being consumer, education and
telecommunication carriers. In each of these sectors a number of distribution channel opportunities have been
targeted resulting in the Group reporting revenues from operations of approximately $1.59 million in the year ended
30 June 2017.
14
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
Given its ongoing investment in R&D activities and the globalisation of its business, the Company also received
government grant revenues of approximately $0.69 million during the year resulting in total revenues of
approximately $2.29 million.
In December 2016, the Company successfully completed the acquisition of one of Australia’s leading cyber security
and education platforms, Sonar/MyNet, from Tesserent Limited (‘Tesserent’) and engaged Tesserent as its global
reseller and distribution partner (Refer to Note 28 of the Financial Accounts for further details in respect to the
terms of this acquisition). This acquisition supported Family Zone’s sales strategy into school communities, with
families identified as prime candidates for its service. The Sonar/MyNet technologies were integrated into the
Family Zone ecosystem and the platform became known as School Zone.
The Sonar/MyNet acquisition also fast tracked the Group’s entry into the US education market and provided an
initial distribution focus for Family Zone’s consumer products.
The Group progressed its partnership with Philippines Tier 1 carrier PLDT, with a co-branded Family Zone service
launched in Philippines in November 2016. PLDT also ordered 9,500 Work Zone access points from the Company
in December 2016 to distribute to its SME clients. It also formed a partnership Telkomsel Indonesia one of the
largest mobile operators in the world to trial Family Zone services within its networks. Following successful trials
this progressed to a commercial agreement in July 2017.
With the commencement of commercial operations, the Group invested in the establishment of a strong sales,
marketing and support team during the financial year to support the commercialisation of the business as well as its
on-going development and customer support requirements. Employee and contractor wages were the Company’s
key expenditure item for the financial year being approximately $3.88 million.
To ensure employee interests were closely aligned with the achievement of the Group’s operational and financial
targets, employees were issued options as an equity based incentive component of their remuneration. This non-
cash share based payment expense for the financial period was approximately $1.50 million. Another significant
non-cash expenditure items was the amortisation charge for the financial year of $1.08 million.
The Group’s other key expenditure items included marketing, R&D expenditure and administration.
The Group’s key asset is the intellectual property associated suite of cyber safety offerings. This comprises various
trademarks, patents, licenced patents, copyright in the software which is the Family Zone Platform, as well as other
unregistered intellectual property constituted by confidential information and know-how. It also comprises
registered domain names. Other assets as at 30 June 2017 comprise cash, Family Zone Box inventories and
capitalised development costs and IP acquisition costs associated with the Sonar/MyNet acquisition.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the Group that occurred during the financial year
not otherwise disclosed in this report or the financial statements.
AFTER BALANCE DATE EVENTS
On 6 July 2017, the Group announced it had entered into a distribution agreement with “Leading with
Technologies”, one of Australia’s largest tech vendors into schools. Under the agreement Family Zone will be pre-
installed on devices sold to parents as part of the school Bring Your Own Device programme.
On 14 July 2017, the Group announced it had signed a distribution agreement with the ethical telecommunications
company “The Peoples Operator” which has operations in both the US and UK.
15
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
On 17 July 2017, the Group announced it had executed a commercial value added services agreement with
Telkomesel, Indonesia’s biggest telecommunications company, to commercially launch Family Zone products to its
subscribers.
On 19 July 2017, the announced it had entered into a partnership with New Zealand’s Linewize whereby both
companies will interface their platforms. Linewize is the leading provider of online content filtering systems to New
Zealand’s schools providing Family Zone with access to approximately 130,000 students using Linewize systems
plus the broader NZ market for parental controls.
On 20 July 2017, the Group issued 3,333,334 fully paid ordinary (shares) at $0.30 to raise $1,000,000, pursuant to
the Smyth Placement Agreement.
On 31 July 2017 the Group announced that following successful beta trails that it had entering into a commercial
partnership with IgniteNet making Family Zone technology available to IgniteNet distributors and end user
customers globally.
On 2 August 2017 the Group announced it had raised $5.2 million through the issue of 13,000,000 shares at $0.40
per Share to sophisticated and professional investors. The funds raised are to be used to support investment in
service delivery and acceleration of business development activities particularly in education and global
partnerships and to strengthen the Company’s balance sheet.
On 21 August the Group announced it had signed agreement to sell Family Zone services into Philippines’ leading
mobile provider, Smart Communications.
Apart from the events discussed above, no other matters or circumstances have arisen since the end of the
financial year which significantly affected or may significantly affect the operations of the Company, the results of
those operations or the state of affairs of the Group in subsequent financial years
LIKELY DEVELOPMENTS
Other than as disclosed elsewhere in this report, there are no likely developments in the operations of the Group that
were not finalised at the date of this report.
ENVIRONMENTAL REGULATION
The Company is not subject to any significant environmental Commonwealth or State regulations or laws.
DIVIDENDS
There were no dividends paid or declared or recommended since the start of the financial year.
16
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
DIRECTORS
Mr Tim Levy
B. Com, CA
Experience and expertise
Mr. Levy is a successful telecommunications and technology entrepreneur. He is the
founder of Vodafone’s largest Australian retail partner Mo’s Mobiles and was the former
CEO/COO of listed Optus reseller B Digital Limited. Prior to working in commerce Mr.
Levy was a management consultant at Andersen’s working in technology and change
projects across Australia, South Africa, Zambia, Jordan and Saudi Arabia.
Mr. Levy is a graduate of the University of Western Australia and was a practising
Chartered Accountant prior to his move into commerce.
Other current directorships of ASX listed companies
Nil
Other directorships held in ASX listed companies in the last three years
Nil
Mr John Sims
B. Acc (Glasgow)
Experience and expertise
Mr. Sims is a successful technology and telecommunications executive with over 35
years’ experience. Based in San Francisco his former roles include:
● President, Global Sales, BlackBerry Limited
● Global Head of Telecom & President, SAP Mobile Services, SAP AG
● Board Member, Mobixell Networks
● CEO, 724 Solutions Inc
● Founder and CEO, TANTAU Software Inc
● COO, SCC Communications (now Intrado, part of West Corp) and
● Vice President, Telecommunications, Tandem Computers
Other current directorships of ASX listed companies
Nil
Other directorships held in ASX listed companies in the last three years
Nil
Mr Crispin Swan
B.
Arts
(UK/Germany)
European Business
Programme
(Hons)
Experience and expertise
Mr Swan is an experienced sales executive and general manager working across a
range of global enterprises. His expertise is in international business development,
executive and IT & T sales. Mr. Swan’s former roles have included:
● Vice President Sales Asia Pacific, Mavenir Systems
● Regional Sales Director and General Manager, Airwide Solutions
● Network Infrastructure Solutions IS Manager for Australia & Papua New Guinea,
Schlumberger
● Sales Manager, Sema
● Account Manager, Cisco Systems
● Account Manager, Alcatel-Lucent and
● Sales Executive, Cable & Wireless Communications
Other current directorships of ASX listed companies
Nil
Other directorships held in ASX listed companies in the last three years
Nil
17
DIRECTORS’ REPORT (CONTINUED)
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Mr
B. Com, CA
Phil Warren
Experience and expertise
Mr Warren is a Chartered Accountant and managing director of West Perth based
corporate advisory firm Grange Consulting. Mr. Warren has over 20 years of experience
in finance and corporate roles in Australia and Europe. He has specialised in company
valuations, mergers and acquisitions, capital raisings, debt financing, financial
management, corporate governance and company secretarial services for a number of
public and private companies.
Mr. Warren has established a number of ASX listed companies from initial unlisted shell
seed raisings through to asset acquisitions leading to ASX listings and continues to act
as corporate advisor to some of these companies. Mr. Warren is a non-executive
director of Cassini Resources Limited and Rent.com.au Limited and also sits on a
number of unlisted company boards in his capacity as finance director.
Other current directorships of ASX listed companies
Cassini Resources Limited
Rent.com.au Limited
Other directorships held in ASX listed companies in the last three years
Nil
COMPANY SECRETARY
Ms Emma Wates
B.Com, CA, CSA
Experience and expertise
Ms Wates is a Chartered Accountant and corporate advisor at Grange Consulting
Group with over 15 years’ experience. She specialises in providing valuation advice,
due diligence investigation, corporate governance, compliance and company
secretarial services to both public and private companies. She has advised on the
listing of a number of companies on ASX as well as being involved in various
secondary and seed raisings for public and private companies.
18
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
MEETINGS OF DIRECTORS
The number of Director’s meetings held and the number of meetings attended by each of the Directors for the year
ended 30 June 2017.
Director
Tim Levy
John Sims
Crispin Swan
Phil Warren
Number of Board meetings
eligible to attend
Number Board meetings
attended
4
4
4
4
4
4
4
4
The number of audit committee meetings held and the number of meetings attended by each of the Directors for
the year ended 30 June 2017.
Director
John Sims
Phil Warren (Chairman)
Number of audit committee
meetings eligible to attend
Number audit committee
meetings attended
1
1
1
1
DIRECTORS’ INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the interests of the Directors in fully paid ordinary shares (Shares), unlisted options and
performance shares of the Group were:
Director
Shares
Unlisted
Options
Class A
Performance
Shares
Class B
Performance
Shares
Class C
Performance
Shares
Tim Levy
John Sims
Crispin Swan
Phil Warren
6,301,118
750,000
3,878,611
3,878,610
3,878,610
100,000
1,500,000
-
-
-
1,991,190
750,000
2,205,384
2,205,383
2,205,383
115,310
2,000,000
-
-
-
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
On 12 September 2016 the Group paid an insurance premium of $27,182 for Directors and Officers Liability
Insurance cover with an indemnity limit of $10,000,000.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court under Section 237 of the Corporations Act 2001 to bring proceedings on
behalf of the Group.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 for the year
ended 30 June 2017 is provided in this report
19
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
NON-AUDIT SERVICES
Pitcher Partners BA&A Pty Ltd consented to and was appointed as the Group’s auditors on 20 May 2016 to replace
the Group’s former auditor DM Advisor Services.
The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company are important. Non-audit services were provided by the
Company’s current auditors, Pitcher Partners BA&A Pty Ltd as detailed below. The Group’s former auditors, DM
Advisory Services did not provide any non-audit services to the Company.
The Directors are satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
Amounts paid/ payable to Pitcher Partners BA&A Pty Ltd or related
entities for non-audit services
Preparation of Investigating Accountants Report
Pitcher Partners (WA) Pty Ltd - Taxation
Total auditors remuneration for non-audit services
-
13,702
13,702
15,000
2,000
17,000
30 June 2017
$
30 June 2016
$
20
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for Directors and key management personnel of the
Group for the year ended 30 June 2017. The information contained in this report has been audited as required by
section 308(3C) of the Corporations Act 2001.
The information provided includes remuneration disclosures that are required under Accounting Standard AASB 124
“Related Party Disclosures”. These disclosures have been transferred from the Financial Report.
This remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are
defined as those persons having authority and responsibility for planning, directing and controlling the major
activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group,
and includes the following specified executives in the Group:
A.
Details of Key Management Personnel
Name
Mr Tim Levy
Mr John Sims
Position
Period of Responsibility
Managing Director
Appointed 1 April 2014
Non-Executive Chairman
Appointed 13 May 2016
Mr Crispin Swan
Executive Director - Sales
Appointed 3 September 2015
Mr Phil Warren
Non-Executive Director
Appointed 13 May 2016
B.
Remuneration Policies
Remuneration levels for Directors, secretaries and senior executives of the Group (“the Directors and senior
executives”) will be competitively set to attract and retain appropriately qualified and experienced Directors and
senior executives. The Board may obtain independent advice on the appropriateness of remuneration packages
given trends in comparative companies both locally and internationally and the objectives of the Group’s
remuneration strategy. No such advice was obtained during the current year.
The remuneration structures explained below are designed to attract suitably qualified candidates, reward the
achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The
remuneration structures take into account:
●
●
●
●
the capability and experience of the Directors and senior executives;
the Directors and senior executives ability to control the relevant performance;
the Group’s performance; and
the amount of incentives within each Directors and senior executive’s remuneration.
Remuneration packages include a mix of fixed remuneration and variable remuneration and short and long-term
performance-based incentives.
Fixed remuneration consists of base remuneration, as well as employer contributions to superannuation funds.
Remuneration levels will be, if necessary reviewed annually by the Board through a process that considers the
overall performance of the Group. If required, external consultants provide analysis and advice to ensure the
Directors’ and senior executives’ remuneration is competitive in the market place.
The remuneration policy will be tailored to increase goal congruence between shareholders and Directors and key
management personnel. This will be facilitated through the issue of options and performance shares to key
management personnel to encourage the alignment of personal and shareholder interests. The Group believes this
policy will be effective in increasing shareholder wealth.
21
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Service Agreements
The Group has services agreements with each of its executive Directors and key management personnel. The
Group has also entered into Non-executive Director appointment letters outlining the policies and terms of this
appointment including compensation to the office of Director.
The principal terms of the executive service agreements existing at reporting date are set out below
Mr Tim Levy – Managing Director
The Company and Mr Tim Levy entered into an executive services agreement on 28 June 2016 for his role as
Managing Director of the Group which commenced 29 August 2016 (the date the Company was admitted to the
Official List of ASX) and continues until terminated under the termination provisions outlined below. The principal
terms of this agreement are as follows.
a)
b)
c)
a base salary of $200,000 per annum plus statutory superannuation;
the issue of 750,000 Incentive Options, which have been issued;
the agreement may be terminated
(i)
by either party without cause with 12 months written notice or if the Company elects to with payment in
lieu of notice;
by the Company with one month’s notice, or immediately with payment in lieu of notice if Mr Levy is
unable to perform his duties under the agreement for three consecutive months or a period
aggregating to three months in an 12 month period;
by either party with 12 months written notice if the role of Managing Director becomes redundant. If
the Company terminates the employment of Mr Levy within 12 months of a Change of Control it will be
deemed to be a termination by reason of redundancy. If the Company terminates for reason of
redundancy it shall be obliged to pay Mr Levy for any notice period worked. In addition it will be
required to pay any redundancy amount payable under applicable laws, an amount equal to 12
months base salary (less tax) and any accumulated entitlements;
by the Company, at any time with written notice and without payment (other than entitlements accrued
to the date of termination) as a result of any occurrence which gives the Company a right of summary
dismissal at common law; and
by Mr Levy immediately, by giving notice, if the Company is in breach of a material term of this
agreement.
(ii)
(iii)
(iv)
(v)
Mr Crispin Swan– Executive Director – Sales
The Company and Mr Crispin Swan entered into an executive service agreement for his role as Executive Director -
Sales of the Company which commenced on 29 August 2016 (the date the Company was admitted to the Official
List of ASX) and continues until terminated under the termination provisions outlined below. The principal terms of
the agreement are as follows:
a)
b)
c)
a base salary of $220,000 per annum plus statutory superannuation;
the issue of 750,000 Incentive Options, which have been issued;
the agreement may be terminated
(i)
by either party without cause with 12 months written notice or if the Company elects to with payment in
lieu of notice;
by the Company with one month’s notice, or immediately with payment in lieu of notice if Mr Swan is
unable to perform his duties under the agreement for three consecutive months or a period
aggregating to three months in an 12 month period;
by either party with 12 months written notice if Mr Swan’s role becomes redundant. If the Company
terminates the employment of Mr Swan within 12 months of a Change of Control it will be deemed to
(ii)
(iii)
22
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
be a termination by reason of redundancy. If the Company terminates for reason of redundancy it
shall be obliged to pay Mr Swan for any notice period worked. In addition it will be required to pay any
redundancy amount payable under applicable laws, an amount equal to 12 months base salary and
any accumulated entitlements;
by the Company, at any time with written notice and without payment (other than entitlements accrued
to the date of termination) as a result of any occurrence which gives the Company a right of summary
dismissal at common law; and
by Mr Swan immediately, by giving notice, if the Company is in breach of a material term of this
agreement.
(iv)
(v)
Non-Executive Directors and Chairman
Non-executive Director fees are set based on fees paid to other Non-Executive Directors of comparable companies.
The aggregate remuneration for Non-Executive Directors has been set by the Board at an amount not to exceed
$500,000 per annum. The Board has resolved that the Non-Executive Directors’ fees will be $50,000 per annum for
the Chairman and $40,000 per annum for non-executive Directors (plus statutory superannuation).
The key terms of the Non-Executive Director service agreements are as follows:
Non-Executive Director Appointment – John Sims
The Company has entered into an agreement with Mr John Sims in respect of his appointment as a Non-Executive
Director and Chairman of the Company.
Mr Sims will be paid a fee of $50,000 per annum (exclusive of statutory superannuation) for his services as Non-
Executive Director and Chairman from 29 August 2016 (the date of the Company’s admission to the Official List of
ASX) and will be reimbursed for all reasonable expenses incurred in performing his duties. In addition, the
Company has issued to him 1,500,000 Incentive Options each exercisable at $0.25 on or before 20 May 2019.
The appointment of Mr Sims as Non-Executive Chairman is otherwise on terms that are customary for an
appointment of this nature.
Non-Executive Director Appointment – Phil Warren
The Company has entered into an agreement with Mr Phil Warren in respect of his appointment as a Non-Executive
Director of the Company.
Mr Warren will be paid a fee of $40,000 per annum (exclusive of statutory superannuation) for his services as Non-
Executive Director from 29 August 2016 (the date of the Company’s admission to the Official List of ASX) and will be
reimbursed for all reasonable expenses incurred in performing his duties. In addition, the Company has issued to
him 500,000 Incentive Options each exercisable at $0.25 on or before 20 May 2019.
The Company does not have a Director’s Retirement Scheme in place at present.
23
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
C.
Remuneration of Key Management Personnel
Details of the remuneration of the Directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of the Group for the year ended 30
June 2017 are set out in the following table.
Directors and
Key Management
Personnel
30 June 2017
Short -term
Post employment
TOTAL
Long
term
Share
based
pay-
ments
Total
performance
related
%
Options/
Shares
as % of
total
Salary
fees
$
Cash
bonus
$
Non-
monetary
$
Other
$
Super-
annuation
$
Retirement
benefits
$
Termination
benefits
$
Incentive
Plans
$
Options
/Shares
$
Mr Tim Levy
159,420
Mr Crispin Swan
175,362
Mr John Sims
Mr Phil Warren
41,667
35,597
Total Directors
412,046
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,145
16,659
-
3,381
35,185
-
-
-
-
-
$
- 174,565
- 192,021
-
-
41,667
38,978
- 447,231
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0%
0%
0%
0%
0%
24
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Details of the remuneration of the Directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of the Group for the year ended 30
June 2016 are set out in the following table.
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Short -term
Post employment
Long
term
Directors and
Key Management
Personnel
30 June 2016
Salary
fees
$
Cash
bonus
$
Non-
monetary
$
Mr Tim Levy
-
Mr Crispin Swan
40,000
Mr John Sims
Mr Phil Warren
Mr Ben Trigger*
Mr Paul Robinson*
-
-
-
-
Total Directors
40,000
-
-
-
-
-
-
-
*- Resigned as directors on 13 May 2016.
-
-
-
-
-
-
-
Other
$
--
-
--
--
-
-
--
Super-
annuation
$
Retirement
benefits
$
Termination
benefits
$
Incentive
Plans
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
Total
performance
related
Options
as % of
total
%
Share
based
pay-
ments
Options
$
$
76,875
76,875
376,875 416,875
153,750 153,750
51,250
51,250
-
-
-
-
658,750 698,750
-
-
-
-
-
-
-
100%
90%
100%
100%
-
-
94%
25
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
D.
Relationship between remuneration and company performance
The Directors assess performance of the Group with regard to the achievement of both operational and financial
targets with a current focus on subscriber numbers, sales revenues and share price. Directors and executives are
issued options and, in some cases, performance shares, to encourage the alignment of personal and shareholder
interests.
Options issued to Directors and executives may be subject to market based price hurdles and vesting conditions
and the exercise price of options is set at a level that encourages the Directors to focus on share price
appreciation. The Board believes this policy will be effective in increasing shareholder wealth. Key management
personnel are also entitled to participate in the employee share and option arrangements.
Performance shares vest on the achievement of operational and financial milestones, providing those Directors and
executives holding performance shares an incentive to meet the operational and financial milestones prior to the
expiry date of the performance shares.
On the resignation of Directors and executives any vested options issued as remuneration are retained by the
relevant party.
The Board may exercise discretion in relation to approving incentives such as options. The policy is designed to
reward key management personnel for performance that results in long-term growth in shareholder value.
The following table shows gross income, profits/(losses) and dividends for the last two years for the listed entity, as
well as the share prices at the end of the respective financial years. Analysis of the actual figures shows an
increase in gross income which has been reflected in the increase of the Group’s share price. The Board is of the
opinion that these results can be attributed, in part, to the previously described remuneration policy and is satisfied
with the overall upwards trend in shareholder wealth over the past two years.
Gross Income
Net profit/(loss)
Share price at year-end
Dividends paid
2016
$
2017
$
444,122
2,290,721
(2,815,607)
(8,834,735)
0.20*
0.00
0.33
0.00
*Share price as at admission to the ASX on 29 August 2016 at $0.20 per share
26
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
E.
a)
Key management personnel’s equity holding
Number of Options held by Key Management Personnel
The number of the options of the Group held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities for the year ended 30 June 2017 are as follows:
Directors and
Executives
Held at
1 July 2016
Options
exercised
Options
expired
Other
changes
Held at
30 June 2017
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Total
750,000
750,000
1,500,000
500,000
3,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
-
750,000
750,000
1,500,000
2,000,000
5,000,000
Vested and
exercisable
at 30 June 2017
750,000
750,000
1,500,000
2,000,000
5,000,000
b)
Number of Shares held by Key Management Personnel
The number of ordinary shares of the Group held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities as at the date of this report is as follows :
Directors and
Executives
Held at
1 July 2016
Received as
remuneration
Shares issued
for cash
subscription
Other
changes
Held at
30 June 2017
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Total
5,801,118
1,891,191
-
65,310
7,757,619
-
-
-
-
-
500,000
100,000
100,000
50,000
750,000
-
-
-
-
-
6,301,118
1,991,190
100,000
115,310
8,507,618
c) Number of options issued during the year under the Employee Share Option Plan.
Tranche
Valuation
Date
Expiry Date
Exercise
Price
1
2
3
4
19/09/2016
19/09/2019
02/12/2016
19/09/2019
16/12/2016
15/12/2019
20/02/2017
19/09/2017
$0.33
$0.33
$0.30
$0.33
Granted
during the
period
3,880,958
1,614,280
6,000,000
634,656
27
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
The vesting conditions attached to the Tranche 1,2 & 4 options are as follows
Vesting Date Vesting condition
31/12/2017
25% of the Options will vest and become exercisable upon the Company having 20,000 paying
subscribers registered by 31 December 2017
31/12/2017
25% of the Options vest and become exercisable upon the Company having 30,000 paying
subscribers registered by 31 December 2017
30/06/2019
50% of the Options will vest and become exercisable upon the Company achieving
$10,000,000 of customer revenue in any of the financial years ended 30 June 2017, 30 June
2018 or 30 June 2019.
The vesting conditions attached to the Tranche 3 options are as follows:
Vesting Date Vesting condition
16/12/2018
25% of the Options vest on the Company achieving $2.0m Cumulative Revenue in 24 months
from engagement or 20,000 Paying Zones
16/12/2018
25% of the Options vest on the Company achieving $4.0m Cumulative Revenue in 24 months
from engagement or 30,000 Paying Zones
16/12/2018
25% of the Options vest on the Company achieving $8.0m Cumulative Revenue in 24 months
from engagement or 40,000 Paying Zone
16/12/2018
25% of the Options vest on the Company achieving $10.0m Cumulative Revenue in 24 months
from engagement or 50,000 Paying Zone
d)
Performance Share Holdings of Key Management Personnel
The number of Performance Shares of the Group held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities for the year ended 30 June 2017 are as follows:
Directors and
Executives
Total held at
1 July 2016
Class A
Performance
Shares
Class B
Performance
Shares
Class C
Performance
Shares
Total held at
30 June 2017
Mr Tim Levy
11,635,831
Mr Crispin Swan
6,616,150
3,878,611
2,205,384
3,878,610
2,205,383
3,878,610
11,635,831
2,205,383
6,616,150
Mr John Sims
Mr Phil Warren
-
-
-
-
-
-
-
-
-
-
Total
18,251,981
6,083,995
6,083,993
6,083,993
18,251,981
28
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
During the year ended 30 June 2016 the Group issued a total of 28,000,000 Performance Shares comprising
9,333,334 Class A Performance Shares, 9,333,333 Class B Performance Shares and 9,333,333 Class C
Performance Shares in consideration for a selective buy back of 18,389,653 fully paid ordinary shares in the Group.
The Performance Shares convert to ordinary fully paid shares on a one for one basis following the achievement of
the performance milestones before the expiry date as outlined below:
● Class A Performance Shares convert on achievement of 15,000 paying subscribers of the Group generating
at least $100,000 revenue per month over 3 consecutive months (as confirmed by the Group’s auditor) by 29
August 2018
● Class B Performance Shares convert on achievement of $10,000,000 revenue by the Group over a 12 month
rolling period of which 30% is subscription income (as confirmed by the Group’s auditor) by 29 August 2019
● Class C Performance Shares convert on achievement of $20,000,000 revenue by the Group over a 12
month rolling period of which 30% is subscription income (as confirmed by the Group’s auditor) by 29 August
2020
(together the Performance Milestones)
As at 30 June 2017 none of the Performance Milestones have been achieved.
F.
Key Management Personnel Loans
No loans were provided to made, guaranteed or secured directly or indirectly to any KMP or their related entities
during the financial year.
G. Other Transactions with Key Management Personnel
Transactions with other related parties are made on normal commercial terms and conditions and at market rates.
Outstanding balances are unsecured and are repayable in cash.
a)
Grange Consulting and Grange Capital Partners
Mr Phil Warren, a Director of the Group, is also a director of Grange Consulting and an entity related to him is
shareholder of Grange Consulting. Grange Capital is an entity associated with Grange Consulting.
The Group engaged Grange Consulting to act as Corporate Advisor to its initial public offering on ASX and capital
raising. Pursuant to this engagement Grange Consulting received a $75,000 (plus GST) transaction management
fee and a $50,000 (plus GST) success fee following its listing on ASX.
Grange Consulting was also engaged to provide financial management and company secretarial services to the
Group. Pursuant to this engagement Grange Consulting will receive $7,500 (plus GST) per month for these
services. An administration fee of 5% is also payable on each invoice. This engagement can be terminated by
either party giving 60 days’ notice in writing.
29
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
A summary of the total fees paid to Grange Consulting and Grange Capital Partners for the year ended 30 June
2017 and 30 June 2016 is as follows:
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Company secretarial services
Capital raising fee
Success fee upon listing on ASX
Transaction management on lodgement of prospectus
Total
30 June 2017
$
30 June 2016
$
90,402
-
50,000
75,000
215,402
19,825
6,300
-
-
26,125
(1). Amounts payable to Grange Consulting and Grange Capital as at 30 June 2017 were $17,505 (incl GST).
A further $10,000 was paid to Crispin Swan for consulting fees during the month of July 2016.
*********** END OF AUDITED REMUNERATION REPORT ***********
Signed in accordance with a resolution of the Directors.
Mr Tim Levy
Managing Director
30 August 2017
30
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF FAMILY ZONE CYBER SAFETY LIMITED
In relation to the independent audit for the year ended 30 June 2017, to the best of my
knowledge and belief there have been:
(i)
No contraventions of the auditor independence requirements of the Corporations
Act 2001; and
(ii)
No contraventions of APES 110 Code of Ethics for Professional Accountants.
This declaration is in respect of Family Zone Cyber Safety Limited and the entities it
controlled during the year.
PITCHER PARTNERS BA&A PTY LTD
PAUL MULLIGAN
Executive Director
Perth, 30 August 2017
31
Pitcher Partners is an association of Independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Revenue
Cost of sales
Gross profit
Other income
Administration
Impairment of intangible assets
Employee and director benefits expense
Finance costs
Marketing expenses
Research & development expenses
Share based payment expense
Depreciation & amortisation
Loss before income tax
Income tax benefit/(expense)
Loss after tax for the period attributable to the members of
Family Zone Cyber Safety Limited
Other comprehensive income
Note
2017
$
2016
$
4
4
5
5
6
22
7
1,589,202
(969,317)
619,885
701,519
(1,383,382)
(52,248)
(3,876,030)
(25,604)
(1,118,759)
(1,118,011)
(1,498,978)
(1,083,127)
(8,834,735)
5,532
-
5,532
438,590
(577,061)
(690,041)
(559,725)
(27)
(7,685)
(908,855)
(512,141)
(84,367)
(2,895,780)
-
80,173
(8,834,735)
(2,815,607)
-
-
Total comprehensive (loss) for the period attributable to the
members of Family Zone Cyber Safety Limited
(8,834,735)
(2,815,607)
Basic and diluted loss per share (cents per share) for the year
attributed to the members of Family Zone Cyber Safety Limited
8
(14.70)
(11.71)
The above Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the
accompanying notes.
32
STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Note
2017
$
2016
$
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventory
Total Current Assets
Non-Current Assets
Intangibles
Trade and other receivables
Plant and equipment
Total Non-current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Provisions
Borrowings
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Deferred tax
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY/(DEFICIT)
9
18
10
11
18
19
12
17
13
12
7
14
15
16
1,387,577
963,183
169,987
2,520,747
720,227
41,427
216,029
977,683
3,325,003
1,007,424
217,421
4,549,848
7,070,595
380,146
-
6,852
386,998
1,364,681
3,462,118
191,099
-
3,652,837
525,044
13,586
1,430,000
1,968,630
806,424
-
806,424
4,459,261
-
-
-
1,968,630
2,611,334
(603,949)
12,582,677
2,506,406
(12,477,749)
2,611,334
1,433,717
1,605,348
(3,643,014)
(603,949)
The above Statement of Financial Position is to be read in conjunction with the accompanying notes.
33
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
STATEMENT OF CHANGES OF EQUITY
For the year ended 30 June 2017
Issued
Capital
$
Option
Reserve
Accumulated
Losses
$
Total
Balance at 1 July 2015
1,311,618
Loss for the year
Total other comprehensive income
Total comprehensive loss for the year
-
-
-
$
(827,407)
484,211
(2,815,607)
-
(2,815,607)
(2,815,607)
-
(2,815,607)
-
-
-
-
Transaction with owners, directly recorded
in equity:
Issue of Ordinary Shares, net of
transaction costs
Issue of Options
Share buy-back
Issue of performance rights
Total transactions with owners
Balance at 30 June 2016
1,317,306
-
(1,195,207)
-
122,099
1,433,717
-
410,141
-
1,195,207
1,605,348
1,605,348
-
-
-
-
(3,643,014)
1,317,306
410,141
(1,195,207)
1,195,207)
1,727,447
(603,949)
Option &
Performance
Reserve
Issued
Capital
$
Accumulated
Losses
$
Total
$
Balance at 1 July 2016
1,433,717
1,605,348
(3,643,014)
(603,949)
Loss for the year
Total other comprehensive income
Total comprehensive loss for the year
-
-
-
-
-
-
(8,834,735)
-
(8,834,735)
(8,834,735)
-
(8,834,735)
Transaction with owners, directly recorded
in equity:
Issue of Ordinary Shares, net of
transaction costs
Issue of Options & performance rights
Total transactions with owners
Balance at 30 June 2017
11,148,960
-
11,148,960
12,582,677
-
901,058
901,058
2,506,406
-
-
-
(12,477,749)
11,148,960
901,058
12,050,018
2,611,334
The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes
34
STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
Cash flows from operating activities
Receipt from customers
Government grants received
Payments to suppliers and employees
Interest received
Interest paid
Net cash flows (used in) operating activities
Cash flows from investing activities
Purchase of plant & equipment
Payments for intangible assets
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of issue costs
Repayment of borrowings
Proceeds received for shares not yet issued
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning year
Cash and cash equivalents at end year
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Note
20
9
2017
$
2016
$
1,344,222
687,778
(7,370,432)
9,522
-
(5,328,910)
6,086
437,612
(1,592,709)
978
(27)
(1,148,060)
(40,140)
(3,025,000)
(3,065,140)
(7,241)
(200,164)
(207,405)
8,439,400
-
622,000
9,061,000
667,350
720,227
1,387,577
568,971
1,430,000
-
1,996,971
641,506
78,721
720,227
The above Statement of Cash Flows is to be read in conjunction with the accompanying notes.
35
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 1: REPORTING ENTITY
Family Zone Cyber Safety Limited is the listed public company incorporated and domiciled in Australia and head of
the Group. The financial statements of the Group are as at and for the year ended 30 June 2017.
A description of the nature of the Group’s operations and its principal activities is included in the Directors’ Report
which does not form part of this financial report.
The financial statements were authorised by the Board of Directors on the date of signing the Directors'
Declaration.
NOTE 2: BASIS OF PREPARATION
This General Purpose Financial Report has been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of
the Australian Accounting Standards Board (including Australian
Interpretations) and the Corporations Act 2001.
The Financial Statements and Notes of the Group comply with Australian Accounting Standards, which include
Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that
the Financial Statements and Notes comply with International Financial Reporting Standards.
Family Zone Cyber Safety Limited is a company limited by shares. The financial report is presented in Australian
currency. Family Zone Cyber Safety Limited is a for-profit entity.
(a) Going Concern
These financial statements have been prepared on the going concern basis, which contemplates the continuity of
normal business activities and the realisation of assets and settlement of liabilities in the normal course of
business.
The Statement of Comprehensive Income shows that the Group incurred a net loss of $8,834,735 during the year
ended 30 June 2017 (2016: loss of $2,895,780). The statement of Financial Position shows that the Group had
cash and cash equivalents of $1,387,577 (2016: $720,227).
Subsequent to year end the Group successfully raised $5.2 million through the issue of 13,000,000 shares at $0.40
per Share to sophisticated and professional investors. The funds raised are to be used to support investment in
service delivery and acceleration of business development activities particularly in education and global
partnerships and to strengthen the Group’s financial position.
The ability of the Group to continue as a going concern is dependent on it being able to successfully raise further
debt or capital funding
The financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts, nor to amounts or classification of liabilities that might be necessary should the Group not be able
to continue as a going concern.
36
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(b) Use of Estimates and Judgements
Significant Judgements and Key Assumptions
The preparation of financial statements in conformity with AASBs requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
Information about critical judgements in applying accounting policies that have the most significant effect on the
amounts recognised in the financial statements are included in the following notes:
Share Based Payments
Goods or services received or acquired in a share-based payment transaction are recognised as an increase in
equity if the goods or services were received in an equity-settled share-based payment transaction or as a liability if
the goods and services were acquired in a cash settled share-based payment transaction.
For equity-settled share-based transactions, goods or services received are measured directly at the fair value of
the goods or services received provided this can be estimated reliably. If a reliable estimate cannot be made the
value of the goods or services is determined indirectly by reference to the fair value of the equity instrument
granted using a 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.
Transactions with employees and others providing similar services are measured by reference to the fair value at
grant date of the equity instrument granted using a Black-Scholes option pricing model.
Research and Development Assets
The Group’s accounting policy for capitalised development expenditure is set out in Note 3(h). The application of
this policy necessarily requires management to make certain estimates and assumptions as to the future events
and circumstances of the Company. Any such estimate and assumptions may change as new information becomes
available. If, after having capitalised expenditure under this policy, it is concluded that the expenditures relate to
aspects of the asset no longer utilised, or it is concluded that the expenditures are unlikely to be recovered by
future exploitation or sale, then the relevant capitalised amount will be written off to the profit or loss.
Impairment of assets
In determining the recoverable amount of assets, in the absences of quoted market prices, estimations are made
regarding the present value of future cash flows using asset specific discount rates and the recoverable amount of
the asset is determined. Value in use calculations performed in assessing recoverable amounts incorporate a
number of key estimates.
37
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these financial
statements. 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.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
(a) Revenue Recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Company and the revenue can
be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Interest Revenue
Interest revenue is recognised using the effective interest method. It includes the amortisation of any discount or
premium.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
(b) Government Grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all
attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on
a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.
When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the
related asset.
(c)
Income Tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in Statement of Profit
or Loss and Other Comprehensive Income except to the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill,
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled
entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against
which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
38
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(e)
Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised when the Company becomes party to the contractual
provisions of the financial instrument.
A financial asset is derecognised when the contractual rights to the cash flows from the financial assets expire or
are transferred and no longer controlled by the Company. A financial liability is removed from the Statement of
Financial Position when the obligation specified in the contract is discharged or cancelled or expires. Financial
assets not measured at fair value comprise loans and receivables with fixed or determinable payments that are not
quoted in an active market. These are measured at amortised cost using the effective interest method.
All financial liabilities are measured at amortised cost using the effective interest rate method. The amortised cost
of a financial asset or a financial liability is the amount initially recognised minus principal repayments, plus or
minus cumulative amortisation of any difference between the initial amount and maturity amount and minus any
write-down for impairment or un-collectability.
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated,
the Group recognises the impairment for such financial assets by taking into account the original terms as if the
terms have not been renegotiated so that the loss events that have occurred are duly considered.
(f)
Trade and Other Receivables
Trade accounts and other receivables represent the principal amounts due at reporting date less, where applicable,
any allowances for doubtful accounts.
(g)
Inventories
Finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct
labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the
basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted
average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable
value is the estimated selling price in the ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
(h)
Intangible
Expenditure on the research phase of projects to develop new customised software for IT and billing systems is
recognised as expense as incurred. Costs that are directly attributable to a project’s development phase are
recognised as intangible assets provided they meet the following recognition requirements
●
●
●
●
Development costs can be reliably measured
The project is technically and commercially feasible
The Group intends to and has sufficient resources to complete the project
The Group has the ability to use or sell the software.
Additionally, as part of its asset acquisition the group has committed to the development of projects which are
expected to bring substantial economic benefits over the next 12-36 months. Costs relating to the acquisition and
development of the products have been capitalised.
39
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
All intangible assets are amortised at 33%.
(i)
Plant and Equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation.
The carrying amount of property, plant and equipment is reviewed for impairment when events or changes in
circumstances indicate that carrying value may not be recoverable. If any such indication exists and where the
carrying amount values exceeds the estimated recoverable amount the assets are written down to the recoverable
amounts.
The depreciable amount of all fixed assets is depreciated on a straight line basis over their useful lives to the
Company commencing from the time the asset is held ready for use. The depreciation rates used for each class of
depreciable assets are:
Class of Fixed Asset
Plant and Equipment
(j)
Research & Development Expense
Depreciation Rate
10% - 40%
The Company expenses all research and development costs as incurred. The amounts incurred in relation to
patent development costs and patent applications are expensed until the Company has received formal notification
that a patent has been granted. The Company believes expensing patent development and application costs
provides the most relevant and reliable information to financial statement users. The Company will only record a
development asset when there is certainty that the Company will be able to patent the technology it has created, as
demonstrated by the approval of the patent application and as a result expect future economic benefits to flow to
the Company.
Following initial recognition of development expenditure as a development asset, the asset is carried at cost less
any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when
development is complete and the asset is available for use. It is amortised over the period of expected future
benefit, which will normally be the useful life of the patent. Amortisation is recorded in other expenses and is
currently undertaken at a rate of 33%.
During the period of development, the asset is tested for impairment annually.
(k)
Impairment of Assets
At each reporting date, the Company reviews the carrying value of its tangible and intangible assets to determine
whether there is any indication that those assets should be impaired. If such indication exists, the recoverable
amount of the assets, being the higher of the asset's fair value less costs to sell and value in use, is compared to
the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the
income statement.
(l)
Trade and Other Payables
Trade accounts and other payables and accrued liabilities represent the principal amounts outstanding at reporting
date plus, where applicable, any accrued interest.
40
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(m) Cash and Cash Equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-
term deposits with an original maturity of three months or less. For the purposes of the Statement of Cash Flows,
cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
(n) Employee Benefits
(i) Short-term employee benefit obligations
Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be
settled wholly within twelve months of the reporting date are measured at their nominal amounts based on
remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term
employee benefits in the form of compensated absences such as annual leave is recognised in the provision for
employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Long-term employee benefit obligations
Liabilities arising in respect of long service leave and annual leave which is not expected to be settled wholly within
twelve months of the reporting date are measured at the present value of the estimated future cash outflow to be
made in respect of services provided by employees up to the reporting date.
Employee benefit obligations are presented as current liabilities in the balance sheet if the entity does not have an
unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the
actual settlement is expected to occur
Contributions are made by the Company to employee's superannuation funds. These superannuation contributions
are recognised as an expense in the same period when the employee services are received.
(m) Share-Based Payment Arrangements
Goods or services received or acquired in a share-based payment transaction are recognised as an increase in
equity if the goods or services were received in an equity-settled share-based payment transaction or as a liability if
the goods and services were acquired in a cash settled share-based payment transaction.
For equity-settled share-based transactions, goods or services received are measured directly at the fair value of
the goods or services received provided this can be estimated reliably. If a reliable estimate cannot be made the
value of the goods or services is determined indirectly by reference to the fair value of the equity instrument
granted using a 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.
Transactions with employees and others providing similar services are measured by reference to the fair value at
grant date of the equity instrument granted using a Black-Scholes option pricing model.
(n)
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.
41
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(o) Earnings per Share
(i)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year.
(ii)
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.
(p) Segment Reporting
An operating segment is a component of a company that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses relating to transactions with other components of
the same company), whose operating results are regularly reviewed by the company's chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its performance and for which
discrete financial information is available.
AASB 8 ‘Operating Segments’ requires operating segments to be identified on the basis of internal reports about
components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segment and assess its performance.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However,
an operating segment that does not meet the quantitative criteria is still reported separately where information
about the segment would be useful to users of the financial statements.
The Company has one operating segment being the provision of cyber safety services that is consistent with
internal reporting provided to the chief operating decision maker. The chief operating decision maker has been
identified as the Board of Directors. In the year ended 30 June 2016 the Company operated under two operating
segments being Box Services and Corporate.
(q) 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
Company'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 Company'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
42
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
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.
(r) Goods and Services Tax ('GST')
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.
(s) New Accounting Standards and Interpretations
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory have not been early adopted by the Company for the year ended 30 June 2017. The Company’s
assessment of the impact of these new or amended Accounting Standards and Interpretations are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard
replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments:
Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial
assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective
is to hold assets in order to collect contractual cash flows, which arise on specified dates and solely principal and
interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss
unless the Company makes an irrevocable election on initial recognition to present gains and losses on equity
instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the
standard requires the portion of the change in fair value that relates to the Company'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 Company.
New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has
increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard
introduces additional new disclosures. The Company will adopt this standard from 1 July 2018 but the impact of its
adoption is assessed by the Company to be insignificant.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard
provides a single standard for revenue recognition. The core principle of the standard is that a Company will
43
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the Company expects to be entitled in exchange for those goods or services. The standard
will require: contracts (either written, verbal or implied) to be identified, together with the separate performance
obligations within the contract; determine the transaction price, adjusted for the time value of money excluding
credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-
alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and
recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an
expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the
customer obtains control of the goods. For services, the performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to customers. For performance obligations satisfied over
time, a Company would select an appropriate measure of progress to determine how much revenue should be
recognised as the performance obligation is satisfied.
Contracts with customers will be presented in the Company’s statement of financial position as a contract liability, a
contract asset, or a receivable, depending on the relationship between the Company’s performance and the
customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the
contracts with customers; the significant judgments made in applying the guidance to those contracts; and any
assets recognised from the costs to obtain or fulfil a contract with a customer. The Company will adopt this
standard from 1 July 2018 but the impact of its adoption is assessed by the Company to be insignificant as all sales
are made in advance
(s) New Accounting Standards and Interpretations (Continued)
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard
replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance
leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position,
measured as the present value of the unavoidable future lease payments to be made over the lease term. The
exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal
computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset
is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the
capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct
costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease
expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs)
and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the
lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses
under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be
improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB
16. For classification within the statement of cash flows, the lease payments will be separated into both a principal
(financing activities) and interest (either operating or financing activities) component. For lessor accounting, the
standard does not substantially change how a lessor accounts for leases. The Company will adopt this standard
from 1 July 2019 but the impact of its adoption is yet to be assessed by the Company.
44
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 4: REVENUE AND OTHER INCOME
Operating Revenue
Service revenue
Hardware revenue
Interest and other income
Interest revenue
Other
Government Grant
Research and Development Grant
Export Assistance Grant
NOTE 5: LOSS
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
2016
$
709,035
880,167
1,589,202
840
4,692
5,532
12,399
1,214
13,613
631,813
56,093
687,906
978
569
1,547
367,942
69,099
437,042
Loss before income tax has been determined after charging the following expenses:
Directors’ fees
Director consulting costs (1)
Employee wages
Consulting
Travel & Accommodation
Contractors & Service Providers
Superannuation
Other
Total expenditure
2017
$
2016
$
412,046
10,000
2,619,728
178,426
298,730
814,979
273,150
652,353
5,259,412
40,000
300,000
206,074
-
-
-
13,651
-
559,725
(1) Relates to Mr Crispin Swan for consulting services provided. These services have been provided on an arm’s
length basis with commercial terms no more favourable than those that the Company would have transacted
with other parties for similar services provided.
45
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 6: MARKETING EXPENSES
Sales and Marketing
Advertising
Call centre charges
Domain licenses
Other
NOTE 7: INCOME TAX
(a) The major components of income tax expense / (benefit)
comprise of:
Current tax benefit
Deferred tax benefit
(b) Reconciliation of prima facie tax on continuing operations
to income tax expense / (benefit):
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
676,061
123,296
5,120
314,282
1,118,759
2016
$
-
-
7,685
-
7,685
2017
$
2016
$
-
-
-
-
(80,173)
(80,173)
Profit / (loss) before tax for the year
(8,834,735)
(2,895,780)
Tax benefit @ 30% tax rate (Australia)
Adjustments for:
Entertainment
Share based payments
R&D tax incentive classified as income
Non-deductible R&D expenditure
Tax losses not recognised
Income tax expense attributable to profit
(c) Deferred taxes
Deferred tax asset:
Tax losses
Plant & Equipment
Provisions & Accruals
Capital & Business related costs
Offset against deferred tax liability / not recognised
(2,650,402)
(868,734)
4,094
449,693
(189,544)
474,236
1,911,922
-
83
153,642
(110,383)
-
825,391
-
2017
$
2016
$
1,900,905
291,885
225,815
218,954
(2,637,558)
690,886
-
79,790
32,538
(803,213)
46
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Deferred tax liability:
Intangible assets
Prepayments
Offset against deferred tax assets / not recognised
Net deferred tax asset / (liability)
(d) Deferred tax assets / liabilities included in income tax
expense
Decrease / (increase) in deferred tax assets
(Decrease) / increase in deferred tax liabilities
Adjust for recognition/offset of DTA/DTL
(e) Deferred income tax related to items charged or credited
directly to equity
Decrease / (increase) in deferred tax assets
(Decrease) / increase in deferred tax liabilities
Adjust for derecognition / offset of DTA/DTL
(f)
Deferred tax assets / liabilities not brought to account
Temporary differences
Operating tax losses
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
-
(120)
120
-
2017
$
(2,391,305)
214,720
2,176,585
-
243,188
-
(243,188)
-
(103,813)
-
103,813
-
2016
$
(628,746)
(231,000)
779,573
(80,173)
-
-
-
-
2017
$
2016
$
736,533
1,900,905
2,637,437
8,514
690,886
699,400
The tax benefits of the above deferred tax assets will only be obtained if:
•
•
•
the Company derives future assessable income of a nature and of an amount sufficient to enable the
benefits to be utilised;
the Company continues to comply with the conditions for deductibility imposed by law; and
- no changes in income tax legislation adversely affect the company in utilising the benefits.
47
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 8: LOSS PER SHARE
Basic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the period attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the
period.
The following reflects the income or loss and share data used in the total operations basic and diluted earnings per
share computations:
2017
$
2016
$
Loss used in the calculation of basic and diluted loss per share
(8,838,458)
(2,815,607)
Basic earnings/(loss) per share attributable to equity holders
(cents Per Share)
(14.70)
(11.71)
Weighted average number of ordinary shares outstanding
Adjustments for calculation of basic and diluted earnings per share:
Share consolidation on a 1:1.914 basis
Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted loss per share
Number
60,117,590
Number
38,661,941
-
(14,623,557)
60,117,590
24,038,384
Options outstanding during the year have not been taken into account in the calculation of the weighted average
number of ordinary shares as they are considered anti-dilutive.
There have been no other transactions involving ordinary shares or potential ordinary shares since the reporting
date and before the completion of these financial statements.
NOTE 9: CASH AND CASH EQUIVALENTS
Cash at bank
Total Cash and Cash Equivalents
2017
$
2016
$
1,387,577
1,387,577
720,227
720,227
Cash at bank earns interest at floating rates based on daily bank rates. Refer to note 24 on financial instruments for
details on the Company’s exposure to risk in respect of its cash balance.
48
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 10: INVENTORY
Current:
At net realisable value:
Finished goods
Total Inventory
NOTE 11: INTANGIBLES
Development and capitalised IP acquisition expenses – at cost
Less: Accumulated amortisation and impairment
a) Reconciliation of movements in intangible assets
Intellectual property
Balance at 1 July 2015
Additions
Impairment expense
Amortisation expense
Balance at 30 June 2016
Additions
Impairment expense
Amortisation expense
Balance at 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
2016
$
169,987
169,987
216,029
216,029
2017
$
2016
$
5,187,142
(1,862,139)
3,325,003
1,170,348
(790,202)
380,146
$
884,801
240,921
(661,598)
(83,978)
380,146
4,069,042
(52,248)
(1,071,937)
3,325,003
Details surrounding the amount of contractual commitments for the acquisition of intangible assets are disclosed
within note 28.
49
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 12: TRADE AND OTHER PAYABLES
Current:
Trade payables
Revenue in advance (1)
Accruals & other payables
Share monies received in advance (2)
Total Current Trade and Other Payables
Non Current:
Revenue in advance (1)
Total Non Current Trade and Other Payable
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
2016
$
589,321
1,078,281
1,172,516
622,000
3,462,118
806,424
806,424
225,195
-
299,849
-
525,044
-
-
Total Trade and Other Payables
4,227,350
525,044
(1) Relates to revenues received in advance from Tesserent following the variation to the Reseller and Licence
Agreement between the parties whereby the Company bought out Tesserent Installation Contracts for the Net
Contract Value outlined in the agreements. Refer to Note 25 further details
(2) Relates to share monies which were received in the 30 June 2017 financial year for shares issued during
financial year 30 June 2018.
(3) Current trade payables are non-interest bearing and are normally settled on 30-day terms.
NOTE 13: BORROWINGS
Current:
Convertible notes
Total Borrowings
2017
$
2016
$
-
-
1,430,000
1,430,000
The Group issued 1,430,000 Convertible notes with a face value of $1.00 each during the months of March 2016 –
June 2016 in order to meet its short term working capital needs prior to the Company’s listing on ASX. The notes
were interest free for a period of 6 months and a maturity date of 18 months from their date of issue.
Interest on the Convertible notes accrues 6 months after their issue at a rate of 10% p.a.
The Group completed its initial public offering and was admitted for Official Quotation on the ASX on 29 August
2016. All convertible notes on issue were converted into 13,758,927 shares and 2,593,750 attaching options.
50
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 14: ISSUED CAPITAL
Issued Ordinary Shares - no par value (fully paid)
Total
Opening balance – 1 July 2015
Closing balance – 30 June 2016
Shares issued to Fidelio Partners on 29 July 2016
Conversion of stage 1 convertible note issued 29 August 2016
Conversion of stage 2 convertible note issued 29 August 2016
Shares issued to Alto Capital on 29 August 2016
Shares issued pursuant to public offer on 29 August 2016
Shares issued to Tesserent on 16 December 2016
Shares issued to Tracey Smyth on 16 December 2016
Shares issued to investors on 14 March 2017
Shares issued to Fidelio partners on 11 April 2017
Shares issued to Directors and executives on 4 May 2017
Shares issued to Alto Capital on 4 May 2017
Shares issued to Fidelio Partners on 4 May 2017
Shares issued to Tesserent in consideration of final payment for
intellectual property on 9 June 2017
Less: share issue costs
Closing balance – 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
Number of
Shares
81,795,928
81,795,928
2016
Number of
Shares
16,000,029
16,000,029
Number of
Shares
Value
$
34,913,488
1,311,618
16,000,029
1,433,717
718,750
5,187,500
8,571,427
1,500,000
30,000,000
1,000,000
833,333
12,950,000
2,500,000
1,000,000
225,000
309,889
115,000
600,000
830,000
300,000
6,000,000
200,000
154,167
2,590,000
500,000
276,000
60,750
83,670
1,000,000
250,000
81,795,928
(810,627)
12,582,677
The Company has unlimited authorised capital. There are no restrictions on distribution of dividends or repayment
of capital.
Capital Management
When managing capital, the Board’s objective is to ensure the Group continues as a going concern as well as to
maximise the returns to shareholders and benefits for other stakeholders. The Board also aims to maintain a capital
structure that ensures the lowest cost of capital available to the Group.
The Board is constantly reviewing the capital structure to take advantage of favourable costs of capital or high
returns on assets. As the market is constantly changing, the Board may issue new shares, return capital to
shareholders or sell assets to reduce debt.
The Group was not subject to any externally imposed capital requirements during the year.
51
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 15: RESERVES
Performance Shares
Options
Total Reserves
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
1,156,424
1,349,982
2,506,406
2016
$
1,195,207
410,141
1,605,348
Options outstanding at 30 June 2017
The following options over ordinary shares of the Group existed at reporting date:
Balance at 30 June 2017
Options
Options
Options
Options
Options
Total
Expiry Date
Number of
Options
20/05/2019
29/08/2019
19/09/2019
15/12/2019
05/05/2020
4,000,000
10,093,751
4,899,773
6,000,000
1,750,000
26,743,524
Exercise
Price ($)
0.25
0.25
0.33
0.30
0.30
Performances shares outstanding at 30 June 2017
The following performance shares of the Group existed at reporting date:
Balance at 1 July 2016
Performance shares issued 5 December 2016
Performance shares issued 16 December 2016
Number of
Shares
28,000,000
500,000
2,999,997
Value
$
1,195,207
22,900
131,875
31,499,997
1,349,982
Nature and Purpose of Reserve
The share based payment reserve records the value of options and performance shares issued to the Group’s
directors, employees, and third parties. The value of the amount disclosed during the year 2016 reflects the value
of options and performance shares issued by the Group.
52
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 16: ACCUMULATED LOSSES
Accumulated Losses
Opening balance
Net loss for the financial year
Total Accumulated Losses
NOTE 17: PROVISIONS
Current:
Provision of annual leave
Total Current Provisions
NOTE 18: TRADE AND OTHER RECEIVABLES
Current:
Trade receivable
Prepayments
GST Receivable
Contract receivable
Total Current Trade and Other Receivable
Non-Current:
Contract Receivable
Total Non-Current Trade and Other Receivable
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
(12,477,749)
2016
$
(3,643,014)
(3,643,014)
(8,834,735)
(12,477,749)
(747,234)
(2,895,780)
(3,643,014)
2017
$
2016
$
191,099
191,099
13,586
13,586
2017
$
2016
$
138,351
75,519
94,458
654,855
963,183
1,007,424
1,007,424
41,427
-
-
-
41,427
-
-
Total Trade and Other Receivable
1,970,607
41,427
53
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 19: PROPERTY PLANT & EQUIPMENT
Property plant & equipment – at cost
Less: Accumulated amortisation and impairment
a) Reconciliation of movements in intangible assets
Property Plant and Equipment
Balance at 1 July 2015
Additions
Depreciation expense
Balance at 30 June 2016
Additions
Depreciation expense
Balance at 30 June 2017
NOTE 20: OPERATING CASH FLOW INFORMATION
Reconciliation of cash flow from operations with loss after income tax
Loss for the year
Non-cash items
Impairment
Share based payments
Depreciation and amortisation
Other
Changes in Assets and Liabilities
Increase / (Decrease) in Trade and Other Payables
(Increase)/ Decrease in Inventory
(Increase)/ Decrease in Trade and Other Receivables
Increase)/ (Decrease) in income tax payable
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
2016
$
232,611
(15,190)
217,421
6,852
-
6,852
$
-
6,852
-
6,852
225,759
(15,190)
217,421
2017
$
2016
$
(8,834,735)
(2,815,607)
52,248
1,498,978
1,083,127
(319,386)
3,073,995
46,042
(1,929,179)
-
690,041
817,480
84,367
-
285,076
(125,563)
(3,681)
(80,173)
Cash flows used in operations
(5,328,910)
(1,148,060)
54
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 21: AUDITOR’S REMUNERATION
The auditor of Family Zone Cyber Safety Limited
Amounts received or due and receivable by Pitcher Partners for:
Pitcher Partners BA&A Pty Ltd
- Audit and review services
- Non-audit services – Investigating Accountants Report
Pitcher Partners (WA) Pty Ltd – Taxation
Total remuneration of Pitcher Partners BA&A Pty Ltd and related firms
Other auditors
Amounts received or due and receivable by DM Advisory for:
Audit and review services
Total auditors’ remuneration
NOTE 22: SHARE BASED PAYMENTS
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
2017
$
2016
$
36,000
-
8,000
44,000
16,000
15,000
2,000
33,000
-
44,000
10,550
43,550
Share based payments made during the year ended 30 June 2017 are summarised below.
(a) Recognised Share Based Payment Expense
Broker options issued for capital raising services provided
Shares issued to consultants in lieu of services provided
Options issued to employees as incentive (1)
Shares issued to employees as incentive
2017
$
286,035
635,421
422,747
154,775
1,498,978
2016
$
410,141
349,449
-
90,000
849,590
(1) Options were provided to employees of the Group under the Company’s Employee Share Option Plan in
place at the time. The fair value assigned to these shares has been made with reference to the Group’s
recent capital raising activities at the time of the issue.
55
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(b) Options Granted During the Year
The Group granted the following broker options to Consultants in the year ended 30 June 2017:
Number of
Options
Issued
Issue Date
Vesting
Date
Expiry Date
Exercise
Price
Total Value
Recipient
1,750,000
4 May 2017
4 May 2017
4 May 2020
$0.30
$286,035
Brokers
As the options were considered to represent the value of the services received over the vesting period, the
Company determined the most appropriate value using the Black Scholes Model applying the following inputs:
Number of Options
Underlying share price
Exercise price
Expected volatility
Expiry date (years)
Expected dividends
Risk free rate
Value per option
1,750,000
$0.27
$0.30
100%
3
Nil
2.11%
$0.1634
The establishment of an Employee Share Option Plan was approved by the board of directors on 7 July 2016.
The option scheme is designed to provide long term incentives for senior managers and above (including non-
executive and executive directors) and to attract and retain experienced employees, board members and executive
officers and provide motivation to make the group more successful. Under the plan, participants are granted
options which only vest if certain performance standards are met. Participation in the plan is at the board’s
discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefit.
Any option may only be exercised after the option has vested and other conditions imposed by the board have
been satisfied. Options are granted under the plan for no consideration. Options granted under the plan carry no
dividend or voting rights. When exercisable, shares allotted pursuant to the exercise of options will be allotted
following receipt of relevant documentation and payments will rank equally with all other shares.
56
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
These options have been valued using the Black Scholes Model applying the following inputs:
Issue Date
Number of Options
Underlying share price
Exercise price
Expected volatility
Expiry date (years)
Expected dividends
Risk free rate
Value per option
Tranche 1
Tranche 2
Tranche 3
19/09/2016
3,880,958
$0.30
$0.33
100%
3.00
Nil
2.28%
$0.1825
02/12/2016
1,614,280
$0.195
$0.33
100%
3.00
Nil
2.28%
$0.1018
16/12/2016
6,000,000
$0.20
$0.30
100%
3
Nil
2.28%
$0.11
Tranche 4
20/02/2017
636,656
$0.18
$0.33
100%
2.5
Nil
2.11%
$0.08
The Group issued four tranches of options during the period as noted below:
Tranche Valuation Date
Expiry Date
Exercise
Price
Granted
during the
period
Total Share-Based
Payment Expense for
the period
1
2
3
4
19/09/2016
02/12/2016
16/12/2016
20/02/2017
19/09/2019
19/09/2019
15/12/2019
19/09/2017
$0.33
$0.33
$0.30
$0.33
3,880,958
1,614,280
6,000,000
634,656
$214,535
$23,460
$169,956
$14,796
The vesting conditions attached to the Tranches 1, 2 and 4 options are as follows:
Vesting Date Vesting condition
31/12/2017
25% of the Options will vest and become exercisable upon the Company having 20,000 paying
subscribers registered by 31 December 2017
31/12/2017
25% of the Options vest and become exercisable upon the Company having 30,000 paying
subscribers registered by 31 December 2017
30/06/2019
50% of the Options will vest and become exercisable upon the Company achieving
$10,000,000 of customer revenue in any of the financial years ended 30 June 2017, 30 June
2018 or 30 June 2019.
57
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
The vesting conditions attached to the Tranche 3 options are as follows:
Vesting Date Vesting condition
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
16/12/2018
25% of the Options vest on Family Zone achieving $2.0m Cumulative Revenue in 24 months
from engagement or 20,000 Paying Zones
16/12/2018
25% of the Options vest on Family Zone achieving $4.0m Cumulative Revenue in 24 months
from engagement or 30,000 Paying Zones
16/12/2018
25% of the Options vest on Family Zone achieving $8.0m Cumulative Revenue in 24 months
from engagement or 40,000 Paying Zone
16/12/2018
25% of the Options vest on Family Zone achieving $10.0m Cumulative Revenue in 24 months
from engagement or 50,000 Paying Zone
During the financial period, the Group also issued performance shares. The performance shares issued are subject
to a series of vesting conditions. The performance shares issued during the period are noted below:-
Issue date
5-Dec-16
16-Dec-16
Total
Class A
Performance
Shares
Class B
Performance
Shares
Class C
Performance
Shares
Total Performance
Shares
166,667
999,999
166,667
999,999
166,666
999,999
1,166,666
1,166,666
1,166,665
500,000
2,999,997
3,499,997
The deemed value as at 30 June 2017 of these performance shares totalled $154,775
NOTE 23: SEGMENT INFORMATION
AASB 8 ‘Operating Segments’ requires operating segments to be identified on the basis of internal reports about
components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance.
The Group has one operating segment that is consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Board of Directors.
The Group operates in one main operating and geographic segment being cyber security services in Australia for
the year ended 30 June 2017.
In 2016 the Group operated under two operating segments.
i) Box Services – representing the development of the Cyber Safe Technology (Box Services)
ii) Corporate – representing other corporate undertakings (Corporate).
58
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
2017
There were no segment results or segment assets and liabilities for the year ended 30 June 2017.
2016
The Company therefore operated in two segments being Box Services and Corporate in the year ended 30 June
2016.
Segment income
Sales Revenue
Other income
Total income
Segment expenses
Impairment of intangibles
Operating expenses
Employee expenses
Marketing
Research & Development
Other
Share based payment expenses
Loss before depreciation
Depreciation
Loss before income tax
Segment assets and liabilities
Cash
Trade and other receivables
Inventory
Plant and equipment
Trade and other creditors
Intangibles
Borrowings
Net assets
Box Services
2016
Corporate
2016
Total
2016
-
5,532
-
5,532
-
438,590
438,590
5,532
438,590
444,122
(690,041)
-
-
(7,685)
(908,855)
-
-
(1,601,049)
(84,367)
(1,685,416)
-
(577,061)
(559,725)
-
-
(27)
(512,141)
(1,210,364)
-
(1,210,364)
(690,041)
(577,061)
(599,725)
(7,685)
(908,855)
(27)
(512,141)
(2,811,413)
(84,367)
(2,895,780)
Box Services
2016
Corporate
2016
Total
2016
-
-
216,029
-
-
380,145
6,851
(538,631)
720,227
41,427
720,227
41,427
- 216,029
6,851
(538,631)
380,145
(1,430,000)
(603,952)
-
- (1,430,000)
(1,200,126)
596,174
59
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 24: FINANCIAL INSTRUMENTS
(a)
Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise cash, receivables, and payables.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and
agrees policies for managing each of the risks identified.
The Group manages its exposure to key financial risks, including interest rate, credit and liquidity risks in
accordance with the Company’s risk management policy. The primary objective of the policy is to reduce the
volatility of cash flows and asset values arising from such movements.
The Group uses different methods to measure and manage the different types of risks to which it is exposed.
These include monitoring the levels of exposure to interest rate risk, ageing analysis and monitoring of credit
allowances to manage credit risk and the use of future cash flow forecasts to monitor liquidity risk.
(b) Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, with respect to each class of financial
asset, financial liability and equity instrument are disclosed in Note 3 to the financial statements.
(c) Categorisation of Financial Instruments
Details of each category in accordance with Australian Accounting Standard AASB 139 Financial Instruments:
Recognition and Measurement, are disclosed either on the face of the Statement of Financial Position or in the
notes.
(d) Credit Risk
(i)
Exposure to Credit Risk
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s
maximum exposure to credit risk at the reporting date was:
Financial Assets - Current
Cash and cash equivalents
Total Financial Assets
Financial assets as at 30 June 2017 are neither past due nor impaired.
2017
$
2016
$
1,387,577
1,387,577
720,227
720,227
60
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(ii)
Interest Rate Risk
The Group’s maximum exposure to interest rates at the reporting date was:
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Range of
Effective Carrying
Interest
Amount
Rate
(%)
$
Interest Rate Exposure
Variable
Interest
Rate
$
Non
Interest
Bearing
$
Fixed
Interest
Rate
$
Total
$
0 – 1
1,387,577
-
0 – 1
720,227
-
-
-
1,387,577
1,387,577
720,227
720,227
2017
Financial Assets - Current
Cash and cash equivalents
2016
Financial Assets - Current
Cash and cash equivalents
(e)
Fair value of Financial Instruments
The directors consider the carrying amount of the Group’s financial instruments to be a reasonable approximation
of their fair value, on account of their short maturity cycle.
(f)
Liquidity Risk
(i)
Exposure to Liquidity Risk
The carrying amount of the Group’s financial liabilities represents the maximum liquidity risk. The Group’s
maximum exposure to liquidity risk at the reporting date was:
Financial Liabilities - Current
Trade and other payables
Borrowings
Share monies received in advance
Total financial liabilities
2017
$
2016
$
589,321
-
622,000
1,211,321
581,729
1,430,000
-
2,011,729
61
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(ii)
Contractual Maturity Risk
The following table discloses the contractual maturity analysis at the reporting date:
2017
Financial Instrument
0-6 months
$
6-12 months
$
Over 1 to 5
years
$
More than 5
years
$
Total
$
Financial Assets
Cash
1,387,577
Trade and other receivables
1,007,424
Total financial assets
2,395,001
Financial Liabilities
Trade and other payables
Share monies in advance
589,321
622,000
Total financial liabilities
1,211,321
-
-
-
-
-
-
-
703,782
-
-
-
-
2016
Financial Instrument
0-6 months
$
6-12 months
$
Over 1 to 5
years
$
More than 5
years
$
Financial Assets
Cash
Trade and other receivables
Total financial assets
Financial Liabilities
Trade payables
Other payables
720,227
41,427
761,654
538,631
1,430,000
Total financial liabilities
1,968,631
(g) Market Risk
(i)
Currency Risk
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,387,577
1,970,607
3,358,184
589,321
622,000
1,211,321
Total
$
720,227
41,427
761,654
538,631
1,430,000
1,968,631
The Group’s primary operations were in Australia during the years ended 30 June 2017 and 30 June 2016 and
therefore had limited exposure to foreign exchange risk.
62
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(ii)
Interest Rate Risk
The Group’s only exposure to interest rate risk is Cash as set out in Note 21(e)(ii). The Group is not exposed to
debt interest rate risk as there is nil debt for 2017 (2016: no exposure as borrowings bear interest at a fixed rate).
(iii) Other Price Risk
By virtue of the nature and classification of the financial instruments held by the entity, it is not exposed to
significant other price risk.
(iv) Sensitivity Disclosure Analysis
Taking into account past performance, future expectations and economic forecasts, the Group believes the
following movements are ‘reasonably possible’ over the next 12 months (base rates are sourced from the Reserve
Bank of Australia).
It is considered that 100 basis points is a ‘reasonably possible’ estimate of potential variations in the interest rate.
The following table discloses the impact on net operating result and equity for each category of financial instrument
held by the Company at year end as presented to key management personnel, if changes in the relevant risk occur.
2017
Financial Assets - Current
Cash and cash equivalents
2016
Financial Assets - Current
Cash and cash equivalents
Carrying
Amount
$
Interest Rate Risk
+1%
-1%
Profit
$
Equity
$
Profit
$
Equity
$
1,387,577
13,875
13,875
(13,875)
(13,875)
720,227
7,202
7,202
(7,202)
(7,202)
63
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
NOTE 25: RELATED PARTY TRANSACTIONS
(a)
Parent and Subsidiaries
The parent entity and ultimate parent entity of the Group is Family Zone Cyber Safety Limited, a company listed on
the Australian Securities Exchange. The components of the Group are:
Incorporation
Extent of control
2017
2016
Parent
Family Zone Cyber Safety Limited
Controlled entities
Family Zone Inc.
Family Zone Cyber Safety Pte. Ltd.
Australia
USA
Singapore
-
100%
100%
-
-
-
(b) Key Management Personnel Compensation
Information on remuneration of all Directors and Key Management Personnel is contained in the Remuneration
Report within the Directors’ Report. The aggregated compensation paid to Directors and Key Management
Personnel of the Group is as follows
:
Short-term employee benefits
Post-employment benefits
Share Based Payment
Total
(c)
Loans with Key Management Personnel
(Mr Tim Levy – Managing Director)
2017
$
2016
$
412,046
-
-
412,046
40,000
-
658,750
698,750
A loan balance has arisen between Family Zone Cyber Safety Limited and Mr Tim Levy as a result of funds loaned
to the Company and payments made on behalf of the Company by the Mr Levy. Movements in the loan account
during the year are as follows:
Opening balance payable by the Company
Loans received from director
Cash repayments
Total Payable to the Company
2017
$
(44,483)
(120,483)
144,483
(20,483)
2016
$
-
(67,143)
23,000
(44,483)
64
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
(c) Other Transactions with Key Management Personnel
a) Grange Consulting and Grange Capital Partners
Mr Phil Warren, a Director of the Company, is also a Managing Director of Grange Consulting and an entity related
to him is shareholder of Grange Consulting. Grange Capital is an entity associated with Grange Consulting.
A summary of the total fees paid to Grange Consulting and Grange Capital Partners for the year ended 30 June
2017 and 30 June 2016 is as follows:
Company secretarial services
Capital raising fee
Success fee on listing on the ASX
Transaction management on lodgement of the prospectus
Total
30 June 2017
$
90,402
-
50,000
75,000
30 June 2016
$
19,825
6,300
-
-
215,402
26,125
(1) Amounts payable to Grange Consulting/Grange Capital as at 30 June 2017 were $17,505 (Including GST)
NOTE 26: EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 6 July 2017, the Group announced it had entered into a distribution agreement with “Leading with
Technologies”, one of Australian largest tech vendors into schools. Under the agreement Family Zone will be pre-
installed on devices sold to parents as part of the school Bring Your Own Device programme.
On 14 July 2017, the Group announced it had signed a distribution agreement with the ethical telecommunications
company “The Peoples Operator” which has operations in both the US and UK.
On 17 July 2017, the Group announced it had executed a commercial value added services agreement with
Telkomesel, Indonesia’s biggest telecommunications company, to commercially launch Family Zone products to its
subscribers.
On 19 July 2017, the announced it had entered into a partnership with New Zealand’s Linewize whereby both
companies will interface their platforms. Linewize if the leading provider of online content filtering systems to New
Zealand’s schools providing Family Zone with access to approximately 130,000 students using Linewize systems
plus the broader NZ market for parental controls.
On 20 July 2017, the Group issued 3,333,334 fully paid ordinary (shares) at $0.30 to raise $1,000,000, pursuant to
the Smyth Placement Agreement.
On 31 July 2017 the Group announced that following successful beta trails that it had entering into a commercial
partnership with IgniteNet making Family Zone technology available to IgniteNet distributors and end user
customers globally.
65
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2017
On 2 August 2017 the Group announced it had raised $5.2 million through the issue of 13,000,000 shares at $0.40
per Share to sophisticated and professional investors. The funds raised are to be used to support investment in
service delivery and acceleration of business development activities particularly in education and global
partnerships and to strengthen the Company’s balance sheet.
Apart from the events discussed above, no other matters or circumstances have arisen since the end of the
financial year which significantly affected or may significantly affect the operations of the Group, the results of those
operations or the state of affairs of the Company in subsequent financial years
NOTE 27: CONTINGENT LIABILITIES
The Directors are not aware of any contingent liabilities that may arise from the Group’s operations as at 30 June
2017.
NOTE 28: ASSET ACQUISITION AND RESELLER AND LICENCE AGREEMENT
On 8 November 2016, the Group announced it had entered into an agreement to acquire the intellectual property
rights in the cyber security and education platform Sonar/MyNet owned by Tesserent for $3.5 million in cash and
the issue of 1,000,000 shares (‘Acquisition Agreement)’ payable based on the following cash payment schedule:
● $0.25 million cash deposit;
● $0.75 million on completion;
● $0.5 million by 28 February 2017; and
● $2.0 million by 30 May 2017 (‘Final Payment’).
Tesserent was also engaged as the Group’s reseller and distribution partner and paid Family Zone a monthly
licence fee for the use of the Sonar/MyNet IP on all active installations (‘Reseller and Licence Agreement’).
On 6 June 2017 the parties agreed to vary the terms of the Acquisition Agreement and Reseller and Licence
Agreement as outlined below.
Family Zone paid $1.0 million of the Final Payment instalment under the Acquisition Agreement in April 2017 and
renegotiated the payment terms for the remaining $1.0 million as follows:
● $0.50 million will be paid immediately;
● 1,000,000 Shares issued at an indicative price of $0.25 (issued 9 June 2016); and
● $0.40 million payable in six equal monthly instalments commencing in July 2017.
At the date of this report, the timeline as set above has been followed with no exception.
The parties also agreed to vary the Reseller and Licence Agreement with the Company acquiring all the Installation
Contracts and assuming technical and commercial responsibility for the remaining Tesserent Sonar customers.
The Installation Contracts were acquired for Tesserent based on the Net Contract Value being the value of all
outstanding payments due to Tesserent pursuant to an Installation Contract less the sum of Licence Fees which
would otherwise be due to be paid to Family Zone by Tesserent until the expiry of such Installation Contract.
The Company also announced on 8 November 2016 that it had acquired a client filtering technology application
called the “Company and Application Security Manager” (‘CASM’) in consideration in the issue of 833,333 shares,
which were approved at the General Meeting held in December 2016.
66
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
the accompanying financial statements set out on pages 32 to 66 and the Remuneration Report in the
Directors’ Report are in accordance with the Corporations Act 2001, including:
i.
ii.
(b)
(c)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its performance,
as represented by the results of its operations, changes in equity and cash flows, for the year ended
on that date; and
complying with Australian Accounting Standards, Corporations Regulations 2001 and other mandatory
professional reporting requirements;
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable.
the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.
This declaration is made after receiving the declarations required to be made to the Directors in accordance with
section 295A of the Corporations Act 2001 for the year ended 30 June 2017.
This declaration is made in accordance with a resolution of the Board of Directors.
On behalf of the Directors
Tim Levy
Managing Director
30 August 2017
67
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Family Zone Cyber Safety Limited “the Company” and
its controlled entities “the Group”, which comprises the statement of financial position as at
30 June 2017, the statement of 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:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and
of its financial performance for the year then ended; and
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.
68
Pitcher Partners is an association of Independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | Newcastle INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
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 the key audit
matter
Carrying value of intangible assets
Refer to Note 2, 11 & 28
Intangible assets of $3,325,003 represent
47% of the Group’s total assets.
Our procedures included, amongst others:
these
assets
intangible
The evaluation of the recoverable amount
requires
of
significant judgement in determining the
key assumptions supporting the expected
future cash flows of the business and the
utilisation of the relevant assets.
Obtaining an understanding of the key
controls associated with the preparation of
the valuation models used to assess the
recoverable amount of
the Group’s
intangible assets.
Critically evaluating and challenging the
methodology and key assumptions of
management
their preparation of
impairment models.
in
the appropriateness of
Assessing
the
disclosures included within the financial
report.
69
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Revenue Recognition
Refer to Note 3(a) , 3(b) & 4
The Group has revenue from contracts to
provide services which
involve a high
volume of transactions and are recognised
as the services are delivered.
We believe this is a key audit matter
because of its significance to profit and the
high volume of
transactions
associated with services revenue.
revenue
Our procedures included, amongst others:
Considering the appropriateness of the
Group’s revenue recognition accounting
policies including those relating to discounts,
rebates and assessing
incentives and
compliance with the policies in terms of
applicable accounting standards.
Testing a sample of transactions by sighting
evidence of
invoices and
completed
compared the revenue amount recognised
to the contracted rate with the customer.
Transactions pre and post year end we
tested for cut off.
the Group’s
research and
Assessing
development grants received during the
year, assessing the timing of revenue
recognition as well as testing a sample to
supporting documentation.
Assessing the Group’s accounting policies as
set out within Notes 3(a) & 3(b) for
compliance with
recognition
requirements of Australian Accounting
Standards “AASBs”.
revenue
70
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Share Based Payments
Refer to Note 3(m) & 22
Share based payments of $1,498,978
represent a significant portion of the
Group’s expenditure.
Share based payments must be recorded at
fair value of the service provided, or in the
absence of such, at the fair value of the
underlying equity instrument granted.
Our procedures included, amongst others:
Obtaining an understanding of the key
controls associated with the preparation of
the valuation models used to assess the fair
value of share based payments, including
those relating to volatility of the underlying
security and the appropriateness of the
model used for valuation.
Critically evaluating and challenging the
methodology
of
assumptions
their preparation of
in
management
valuation models.
and
Assessing the Group’s accounting policy as
set out within Note 3(m) for compliance with
the requirements of AASB 2 Share-based
Payment.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
71
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise
professional judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether
due to fraud or error, design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in
the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
72
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were
of most significance in the audit of the financial report of the current period and are therefore
the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
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 2017. In our opinion, the Remuneration Report of Family Zone Cyber Safety
Limited,for the year ended 30 June 2017, 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.
PITCHER PARTNERS BA&A PTY LTD
PAUL MULLIGAN
Executive Director
Perth, 30 August 2017
73
ASX ADDITIONAL INFORMATION
Additional information required by the ASX Listing Rules not disclosed elsewhere in this Annual Report is set out
below.
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
1.
Number of holders and voting rights of each class of equity securities
The issued capital of the Company as at 23 August 2017 includes the following securities:
Equity Class
Fully paid ordinary shares
Unlisted Incentive Options ($0.25,20 May 2019)
Unlisted Options ($0.25, 29 Aug 2019)
Unlisted Employee Options ($0.33, 19 Sept 2019)
Unlisted Employee Options ($0.30, 15 Dec 2019)
Performance Shares
Broker Options ($0.30, 5 May 2020)
Number of holders
821
5
59
25
2
7
1
Total on issue
98,129,262
4,000,000
10,093,750
4,574,393
6,000,000
31,499,997
1,750,000
All issued fully paid ordinary shares (Shares) carry one vote per share. An Unlisted Option or Performance Share
does not entitle the holder to vote on any resolution proposed at a general meeting of Shareholders.
2.
Substantial holders in the Company
Substantial Shareholder
Timothy Nominees Pty Ltd
Gasmere Pty Ltd
Number of Shares held
% of Total Shares
6,301,118
6,808,888
6.42%
6.94%
3.
a)
Distribution of equity securities as at 23 August 2017
Fully paid ordinary shares
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
Holders Total Shares
5,901
389,589
886,577
16,853,497
79,993,698
98,129,262
14
136
102
411
148
811
% Total
Shares
0.01%
0.40%
0.90%
17.17%
81.52%
100.00%
There were 12 holders with less than a marketable parcel of Shares based on the closing share price of $0.50 on
23 August 2017.
74
ASX ADDITIONAL INFORMATION (CONTINUED)
b)
Unlisted Incentive Options ($0.25, 20 May 2019)
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
c)
Unlisted Options ($0.25, 29 Aug 2019)
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
d)
Employee Options ($0.33, 19 Sept 2019)
Holding Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Totals
Total
Incentive
Options
% Total
Incentive
Options
Holders
-
-
-
-
5
5
-
-
-
-
-
-
-
-
4,000,000
4,000,000
100.00%
100.00%
Holders Total Options
-
-
15,626
1,925,000
8,153,125
10,093,751
-
-
2
36
21
59
Total
Employee
Options
-
-
-
643,222
3,931,171
4,574,393
Holders
-
-
-
8
17
25
% Total
Options
-
-
0.15%
19.07%
80.77%
100.00%
% Total
Employee
Options
-
-
-
14.06%
85.94%
100.00%
75
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
ASX ADDITIONAL INFORMATION (CONTINUED)
4.
Top 20 Shareholder as at 23 August 2017
Position Holder Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
GASMERE PTY LTD
TIMOTHY NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
BRISPOT NOMINEES PTY LTD
CHIODO TRADING PTY LTD
SISU INTERNATIONAL PTY LTD
TRIGGER ASSETS PTY LTD
HARRY HATCH
FRESHIE PTY LTD
NOVALANE COM PTY LTD
MCCUSKER HOLDINGS PTY LTD
TR NOMINEES PTY LTD
FIDELIO INVESTMENTS PTE LTD
BNP PARIBAS NOMINEES PTY LTD
UBS NOMINEES PTY LTD
BROWN BRICKS PTY LTD
HAWTHORN GROVE INVESTMENTS PTY LTD
WYMOND INVESTMENTS PTY LTD
20
AUST EXECUTOR TRUSTEES LTD
Totals
Total Shares
Holding
6,808,888
6,301,118
3,241,385
2,810,345
2,530,553
2,398,368
2,302,000
2,211,309
2,000,000
1,991,190
1,898,018
1,700,000
1,500,000
1,500,000
1,488,939
1,270,775
1,266,333
1,166,667
1,100,000
% IC
6.94%
6.42%
3.30%
2.86%
2.58%
2.44%
2.35%
2.25%
2.04%
2.03%
1.93%
1.73%
1.53%
1.53%
1.52%
1.30%
1.29%
1.19%
1.12%
1,000,000
1.02%
46,485,888
47.37%
98,129,262
100.00%
76
ASX ADDITIONAL INFORMATION (CONTINUED)
5.
Restricted Securities
The following securities as classified as restricted securities and are subject to escrow periods as outlined below
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
Security
Shares
Incentive Options ($0.25, 20 May 2019)
Attaching Options ($0.25, 3 years from Quotation)
Prospectus Options ($0.25, 3 years from Quotation)
Escrowed to
1 Feb 2018
Escrowed to
29 Aug2017
225,000
-
Total Options
Class A Performance Shares
Class B Performance Shares
Class C Performance Shares
Total Performance Shares
6.
Unquoted Securities
1,166,666
1,166,666
1,166,665
3,499,997
Escrowed to
28 Aug 2018
13,233,637
4,000,000
-
3,348,750
7,348,750
9,333,334
9,333,333
9,333,333
28,000,000
The names of the security holders holding more than 20% of an unlisted class of security are listed below:
a)
Unlisted Incentive Options ($0.25, 20 May 2019)
Holder Name
John Sims
Total Incentive Options
Holding
1,500,000
4,000,000
% Total Incentive
Options
37.50%
100.00%
b)
Performance Shares
Holder Name
Timothy Nominees Pty Ltd
Freshie Pty Ltd
Total
7.
On-market buy back
Class A
Performance
Shares
Class B
Performance
Shares
Class C
Performance
Shares
Total
Performance
Shares
% of Total
Performance
Shares
3,878,611
3,878,610
3,878,610
11,635,831
41.56%
2,205,384
2,205,383
2,205,383
6,616,150
23.63%
31,499,997
100.00%
There is currently no on-market buyback program for any of the Company’s listed securities.
77
Family Zone Cyber Safety Limited
Annual Report 30 June 2017
CORPORATE GOVERNANCE
The Company’s corporate governance statement can be found at the following URL:
https://cdn2.hubspot.net/hubfs/416543/docs/Corporate%20Governance%20Statement%20-
Family%20Zone%2030%20June%202017.pdf?t=1504071949282
The Board of Directors is responsible for the corporate governance of the Company. The Board guides and
monitors the business and affairs of the Company on behalf of Shareholders by whom they are elected and to
whom they are accountable.
This statement outlines the main corporate governance practises in place throughout the financial year, which
comply with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations
with 2014 Amendments 3rd edition unless otherwise stated.
78