FAMILY ZONE CYBER SAFETY LIMITED
APPENDIX 4E
FAMILY ZONE CYBER SAFETY LIMITED
ACN 167 509 177
APPENDIX 4E
GIVEN TO THE ASX UNDER LISTING RULE 4.3A
Reporting Period
Financial year end
Previous corresponding reporting period
Results for Announcement to Market
30 June
2018
$
30 June
2017
$
Revenue from ordinary activities
2,329,780
1,589,202
(18,206,211)
(8,834,735)
30 June 2018
30 June 2017
% increase/
(decrease)
over
corresponding
period
47%
106%
Profit/(Loss) after from ordinary activities tax
attributable to members
Net profit/(loss) for the period attributable to
members
Dividends
(18,194,548)
(8,834,735)
106%
No dividends have been declared or paid during the year ended 30 June 2018. The Directors do
not recommend the payments of a dividend in respect of the year ended 30 June 2018.
The Company does not have any dividend reinvestment plan in operation.
Explanation of Results
The operations of the Group during the financial period have focused on the sales and marketing
of its suite of cyber safety products through its key distribution channels as well as the provision
of ongoing customer support services and continual improvement and upgrade of its services.
Throughout the year, the Group continued its commercialisation strategy through key market
sectors being consumer, education and telecommunications. Family Zone entered the education
sector in mid 2017, a move driven by its strategic vision of integrated school and home IT policy
management. It developed a unique model that supports schools and their cyber safety
challenges, known as the “Partner Schools Program” which has proved to be a strong success to
date with 144 schools signing up to the Partner School Program during the year, with more than
60 live and working with Family Zone to promote cyber safety to their school communities.
In November 2017 the Group completed the acquisition of Linewize a leading provider of cyber
safety in New Zealand as part of its commercialisation strategy and expansion into the education
sector. Consideration for the acquisition comprised NZD200,000 cash deposit and the issue of
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APPENDIX 4E
9,513,708 ordinary shares and 9,500,000 Performance Shares. This acquisition also provided
the Group access to the Linewize technology providing several improved features.
The Group also continued its marketing and business development in Asia signing a number of
strategic partnership agreements with major telecommunication and device manufacturers during
the financial year aimed at increasing market penetration in this region.
Family Zone continued its investment in R&D activities and the globalisation of its business during
the year, resulting in the Group receiving government grant revenues of approximately
$2.65 million resulting in total income of approximately $5.05 million.
The Group’s commercialisation strategy has and will continue to require investment but has
shown clear signs of revenue traction and global potential.
Family Zone also continued to invest in sales, marketing and support staff to support the growth
of the business as well as its on-going development and customer support requirements.
Employee wages was a key expenditure item for the financial year being approximately
$6.79million.
Non- cash share based payments to employees and consultants during the period were
approximately $4.30 million. These equity incentives are designed to ensure employee and
consultants interests were closely aligned with the achievement of the Group’s operational and
financial targets. Another significant non-cash expenditure items was the depreciation and
amortisation charge for the financial year of approximately $3.27 million.
The Group reported a net loss attributable to members for the period of approximately
$18.2 million.
Net Tangible Assets per Security
Net Tangible Liabilities per share
30 June 2018
30 June 2017
Net tangible liabilities (cents per share)
(1.89)
(1.19)
Controlled entities
The following entities were incorporated and/or acquired as wholly owned subsidiaries of the
Company during the year.
Controlled entities
Family Zone Inc.
Family Zone Cyber Safety Pte. Ltd.
Linewize Limited
Linewize Services Limited
Country of Incorporation
USA
Singapore
New Zealand
New Zealand
Date of incorporation /
acquisition
9 September 2016
2 June 2017
29 November 2017
29 November 2017
Since the acquisition in November 2017, Linewize Limited and Linewize Services Limited
(‘Linewize’) contributed a loss after tax of approximately $1.0 million to the Group’s net loss from
ordinary activities.
The other controlled entities did not make any material contribution to the Group’s loss from
ordinary activities during the period.
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APPENDIX 4E
The Group did not have any associates or joint ventures during the period.
Earnings/(loss) per Share
Loss per share
30 June 2018
30 June 2017
Basic and diluted loss per share (cents per share)
(17.35)
(14.70)
Audit
This Appendix 4E is based on the audited financial statements for the year ended 30 June 2018.
The independent audit report included an emphasis of matter highlighting matters that indicate
the existence of a material uncertainty that may cast significant doubt about the Group’s ability to
continue as a going concern.
Matters subsequent to the end of the financial year
On 6 July 2018 the Company announced that UK based advisory firm Tellus Matrix with its
strategic partners had agreed to subscriber to 10,000,000 Shares at $0.50 per Share to raise
$5 million (‘Placement’) and that following completion of the capital raising that Sir Peter
Westmacott, a former British Ambassador to the UK would be appointed to the Board.
The Placement was completed on 29 August 2018 with Tim Levy agreeing to subscribe to
350,000 Shares ($175,000) subject to shareholder approval.
On 17 July 2018 the Company announced it had entered into a partnership with the School
Locker as a Family Zone education reseller. The School Locker is the biggest edu-product
retailer to Australian parents with the Family Zone packages to be promoted to parents as part of
schools Bring Your Own Device programs.
On 29 August 2018 the following restricted securities were released from escrow
•
•
•
•
•
•
22,566,971 Shares;
4,000,000 Options ($0.25, 20 May 2019);
3,348,750 Options ($0.25, 29 Aug 2019);
1,000,000 Employee Options ($0.33, 19 Sept 2019)
10,499,999 Class B Performance Shares; and
10,499,998 Class C Performance Shares.
Attachments
The Company’s audited Annual Financial Report for the year ended 30 June 2018 (‘Annual
Report’) is attached.
Additional Appendix 4E disclosure requirements can be found in the Annual Report which
contains a Review of Operations, the Directors Report and the 30 June 2018 Financial
Statements and accompanying notes including segment information in Note 22 and the
Independent Auditor’s Report on page 65 of the Annual Report.
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ACN 167 509 177
ANNUAL REPORT
for the year ended 30 June 2018
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
CONTENTS
PAGE
CORPORATE INFORMATION .................................................................................................................................... 3
CHAIRMAN'S MESSAGE ............................................................................................................................................ 4
REVIEW OF OPERATIONS ........................................................................................................................................ 5
DIRECTORS REPORT .............................................................................................................................................. 11
DIRECTORS REPORT REMUNERATION REPORT (AUDITED) ............................................................................. 17
AUDITORS INDEPENDENCE DECLARATION ........................................................................................................ 27
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ..................... 28
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................................... 29
CONSOLIDATED STATEMENT OF CHANGES OF EQUITY ................................................................................... 30
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................. 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................. 32
DIRECTORS DECLARATION ................................................................................................................................... 64
INDEPENDENT AUDITOR’S REPORT………………………………………………………………………………………65
ASX ADDITIONAL INFORMATION ........................................................................................................................... 72
CORPORATE GOVERNANCE .................................................................................................................................. 77
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CORPORATE INFORMATION
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
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 11, 12-14 The Esplanade
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)
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CHAIRMAN’S MESSAGE
Dear Fellow Shareholders,
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
I am pleased to present the 2018 Annual Report for Family Zone Cyber Safety Limited (ASX: FZO) (‘the Company’)
and its wholly owned subsidiaries (‘Family Zone’ or ‘the Group’), looking back on a year that has seen us deliver
strong growth, build new partnerships and broaden our offering.
We achieved a 47 per cent increase in operating revenue for FY2018 compared to the previous year, with total
revenue of $5.0 million. During the year, we reached a user milestone, with 50,000 customers now on our books
and many of these added during the past 12 months. These achievements demonstrate the Company’s strategies
for product and go-to-market are delivering on our goals.
Our growth in education was bolstered during the year by our decision to acquire the New Zealand-based edutech
provider Linewize. Linewize had developed a leading cloud-based firewall and school cyber safety tools offering
synergies with our own, as well as significant feature and cost structure improvements for the Company. This
opened up Family Zone to 130,000 existing Linewize users and allowed us to integrate world-leading technology
into our product suite. We are delighted with the progress and performance of this acquisition.
During 2018, we were also busy forming partnerships with some of the world’s largest telecommunications
companies and device manufacturers such as Vodafone and Alcatel in key markets including India, Indonesia, the
Philippines and Malaysia as well as in Australia. Many of these partnerships are being rolled out in the first half of
2019 financial year.
We completed two oversubscribed share placements of $5.2 million and $5.0 million in the first half of the year to
fund our operations, in particular our acquisition of Linewize, and I thank our new and existing shareholders for their
support and continued belief. Subsequent to the year-end, Tellus Matrix underwrote and invested in a $5.0 million
placement with funds to support Family Zone’s service delivery capability, business development activities,
particularly in education and global partnerships, and further strengthen our balance sheet.
I would like to thank my fellow Board members for their efforts and support throughout the year as well as the
management and staff who have all worked tirelessly during what has been a busy and productive 12 months.
2019 promises much excitement for the Company. Our education business in Australia and New Zealand is now
well established and growing and our focus is now turning on launches in USA and with our telco and device
partners. Importantly, the Company has and continues to invest in innovation, the fruits of which are expected to be
delivered in this coming year. We look forward to continuing growth in revenue and improvement in cash flows in
the coming financial year.
I expect significant growth across new and existing markets next year and our team is focussed, aligned and
passionate about delivering shareholder value.
I look forward to sharing that journey with you.
John J Sims
Chairman
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Annual Report 30 June 2018
REVIEW OF OPERATIONS
Family Zone is a technology group focused on cyber safety and has developed unique and innovative solutions and
partnerships to meet a growing demand to keep young people safe online and to manage an increasingly digital
lifestyle.
The Company has developed a world-first universal approach to cyber safety. Under this model, interoperable
technology can be installed on any device and in any network to manage the digital experience of users. Family
Zone built the core platform in 2016 and has since been pursuing an aggressive commercialisation plan to embed
this technology across the spectrum of devices and networks used by children. The Group has been rapidly
building strategic partnerships with relevant providers in the cyber safety ecosystem such as schools,
telecommunication companies, equipment manufacturers and cyber safety experts.
This commercialisation strategy has and will continue to require investment but is showing clear signs of growth,
revenue traction and global potential.
The Company is pursuing and executing on a market opportunity of potentially enormous scale (estimated at
US$60-90bn of unsatisfied global demand).
Family Zone entered the education sector in mid-2017, a move driven by its strategic vision of integrated school
and home IT policy management. It has developed a unique model that supports schools and their cyber safety
challenges, which is termed its “Partner Schools Program”.
In addition to education, Family Zone has partnerships in Australia and internationally as it aims to take its
technology to the world.
2018 Operational Highlights:
• 47% increase in customer revenue to approximately $2.29 million with total revenue of
approximately $5.04 million
• 144 Schools signed up to Family Zone’s Partner School program during the financial year
• Reached the milestone of 50,000 paying subscriber accounts
• Successful acquisition of New Zealand based edu-tech provider Linewize
• Formed partnerships with major telcos and device manufacturers in key Asian markets including
Telkomsel, Maxis Communications, Vodafone India and Micromax
• Collaborated with Netsweeper, a global provider of enterprise internet content-filtering services on
more than 500 million registered devices across 60 countries
• Grew presence in the US market, with plans for a full-scale marketing and sales campaign in 2019.
Partner School Program
The Partner School program involves schools partnering with Family Zone to promote and run cyber safety
programs. These programs mandate, require or promote Family Zone services within the school community.
This Partner School Program represents a significant innovation. Under this commercial model, schools gain
subsidised access to specialty cyber safety and security services, as well as the ability to offer a common cyber
safety platform to the entire school community.
At year-end, Family Zone had 164 Partner Schools, mostly across Australia and New Zealand with more than 60 of
these live and working with the Company to promote cyber safety programs within their community.
Furthermore, Family Zone has now started to gain traction in the important USA market with a small number of
schools selecting to join the partner program.
Expansion into the New Zealand Education Market
Family Zone completed the acquisition of Linewize Limited and Linewize Services Limited (‘Linewize’), leading
providers of cyber security and safety services in New Zealand, in November 2017 following a successful
partnership agreement.
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Founded in 2013, Linewize provides an innovative cloud-managed firewall service, specifically developed for the
needs of the education sector. The Linewize platform and service covers user authentication, content filtering,
network appliances, telecoms services, BYOD support, network access management and an award-winning suite
of classroom tools.
Family Zone acquired Linewize to capitalise on opportunities identified as part of its aggressive commercialisation
strategy and expansion into the education sector.
Consideration for the Linewize acquisition comprised a NZ$200,000 cash deposit, the issue of 9,513,708 ordinary
shares and 9,500,000 Performance Shares which convert into ordinary shares on achievement of various growth
hurdles.
Key drivers for this strategic acquisition extended beyond the expansion into the NZ education market, with
Linewize’s technology providing several new features and significantly improving Family Zone’s cost structure.
The Group’s acquisition strategy in relation to Linewize included:
• Aggressive expansion inside New Zealand, leveraging Linewize’s product and market positioning, and
Family Zone’s consumer offerings and “School Community” engagement model.
• Rapid merging of the School Zone and Linewize platforms for roll out through existing school deployments.
• Roll out Linewize’s data analytics and machine learning services across Family Zone’s entire suite of
service offerings for parents, schools and telco carriers; and
• Leveraging the merged platform globally. The merged platform offers Family Zone order of magnitude
improvements in deployment speed and servicing costs, accelerating potential global expansion.
Since completion of the acquisition in November 2017, Family Zone invested in upgrading Linewize to meet key
functions required in the Australian market including SSL decryption and content caching and integrating it into the
Group’s broader platform. Progress has met the Group’s expectations and confirmed the value and potential of this
deal.
As of 1 April 2018, the merged platform is the product offered to all schools, with the platform now known as
“School Manager”. Deployment times have been fast and customer feedback to date has been extremely positive.
In addition, product costs are lower.
Progress in New Zealand
In acquiring Linewize, Family Zone acquired its existing business, staff and 260 education clients. Since the
acquisition, Family Zone has made good progress on extending this reach in New Zealand signing 15 new schools,
transferring 17 schools from licence fees to become a Partner School and increasing contracted revenue in New
Zealand by 20%.
As a transitional measure, the Group has been trading under the name Linewize by Family Zone in New Zealand.
Stepped-up marketing and sales efforts commenced in April.
International Growth
Family Zone entered multiple strategic partnerships during the financial year aimed at increasing the Group’s
market penetration in Asia. These partnerships included:
Telkomsel – Family Zone executed a full Commercial Value-Added Services Agreement and launched a
commercial service, with Telkomsel, the largest mobile operator in southeast Asia reselling Family Zone’s
consumer services as “Family Protect” in Indonesia.
Maxis Communications – Family Zone partnered with Maxis Communications, Malaysia’s number one telco
provider in the September quarter. The agreement saw Family Zone’s consumer solutions rebranded and sold
through Maxis, initially targeting the 2 million mobile phone services Maxis provides to children, followed by a
launch into Maxis home internet user base.
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Smart Communications – Philippines’ leading mobile provider signed a resale agreement with Family Zone,
allowing the companies to target value-added services to the parents of Smart’s 8 million children’s mobile phone
services.
180C/eSchoolPad – Family Zone signed a software licensing and collaboration agreement with Hong Kong-based
edu-tech developer 180C Limited in April 2018. 180C’s flagship offering is eSchoolPad, a device management
platform leveraging education and enterprise device management capabilities to enable fine-grained control of
student devices. Under the licensing agreement, 180C licences Family Zone to resell eSchoolPad and 180C agree
to develop and support interfaces between eSchoolPad and Family Zone.
Vodafone India – Family Zone signed a binding term sheet with Vodafone India to wholesale Family Zone’s cyber
safety service Mobile Zone across its prepaid and postpaid segments and offer it as a discrete value-added service
as well as a bundled service offering. Vodafone India, 100% owned by the Vodafone Group, is India’s largest
telecommunications company with a 42% customer market share and more than 430 million subscribers.
Micromax – Device manufacturer Micromax agreed to pre-install Family Zone’s Mobile Zone technology on all its
devices at the factory. Micromax is India’s second largest and the world’s 10th largest device manufacturer and
sells more than 30 million devices a year through 125,000 retail outlets in India.
Family Zone’s reseller agreements with major telcos and device manufacturers are outlined in the table below.
Client
Opportunity
Status
Telkomsel
Indonesia
Telkomsel has in excess of 160m subscribers and is
one of the largest mobile carriers in the world.
Estimated to have over 10m child users.
In pilot. Small penetration < 10,000
customers.
PLDT
Philippines
Philippines’ main long distance provider. Primarily a
provider of business services.
Live. Small penetration < 1,000
customers. Primary launch expected in
CY Q3, 2018.
Smart
Philippines
Philippines’ incumbent mobile carrier with over 60m
subscribers, Estimated to have in excess of 8m child
users.
Family Zone development complete.
Launch pending client work and
expected in CY Q3, 2018.
Maxis
Malaysia
Malaysia’s incumbent telco provider with over 12m
subscribes. Estimated to have circa 2m child users.
Family Zone development complete.
Launch pending client work and
expected in CY Q3, 2018.
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Annual Report 30 June 2018
Vodafone
India
Largest telco in India with over 430m subscribers.
Alcatel Mobile Third most sold smart device in Australia.
Scoping phase. Launch expected in
CY Q4, 2018.
Alpha released. Launch expected in
CY Q4, 2018.
Micromax
India
One of the largest manufacturers of Android devices in
India.
Scoping phase. Launch expected in
CY Q4, 2018.
Strategic Partnerships
Collaboration with Netsweeper
In May 2018, Family Zone signed a collaboration agreement with Netsweeper Inc., a leading global provider of
enterprise internet content-filtering services with more than 500 million registered devices on its platforms and
telcos in 60 countries deploying Netsweeper’s services.
Family Zone’s consumer products use Netsweeper for back-end web address categorisation. Under the
collaboration agreement, Netsweeper will be rolled out across all Family Zone offerings, including schools and
telcos around the world. The agreement includes arrangements to interface Netsweeper’s telco deployments into
the Family Zone policy ecosystem - opening up the potential of many telcos and millions of users to seamlessly
enter Family Zone.
Pursuant to this agreement Family Zone will pre-pay for $1,000,000 of future Netsweeper services in consideration
for the issue of 2,087,436 shares in the Company. These shares are to be issued in FY2019.
Collaboration with SchoolTV
Family Zone formed a collaboration with SchoolTV in June 2018.
SchoolTV is a leading Australian parenting resource, spearheaded by
renowned child and adolescent psychologist Dr Michael Carr-Gregg.
Family Zone and SchoolTV both aim to better inform parents about the
continuing rise of online threats, and to offer real solutions. They will leverage this partnership to boost their
penetration in thousands of schools and among parents in Australia and New Zealand. The partnership provides
schools and parents with the most advances and easily accessible platform relating to online safety technology.
Family Zone and SchoolTV have launched a holistic ‘Wellbeing-Hub’ to help schools and their parent community to
deal with the challenges of modern parenting, sold to schools across Australia and New Zealand from July 2018 as
a value-add to Family Zone’s school offerings.
Partnership with TCL Corporation (Alcatel)
In March 2018, Family Zone announced an Application Reseller
Agreement with TLC Mobile International Limited (‘TLC Corporation’),
the owner of the Alcatel brand. Under this agreement TLC Corporation
will embed Family Zone filtering technology and mobile App onto Alcatel smart devices sold in Australia and New
Zealand.
This agreement is scheduled to commence with Alcatel’s new device range set to launch late-2018.
Headquartered in China, TCL Corporation is in the top 10 global manufacturers of smartphones, selling tens of
millions of devices targeted towards prepaid, youth and value-conscious markets. The agreement enables Alcatel
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REVIEW OF OPERATIONS
to offer world-leading parental control features to their customers and offers Family Zone an additional distribution
network and the ability to deliver exceptional customer experience.
Alcatel’s devices are distributed directly to customers through retail outlets and also through partnerships with
Australian telcos. Alcatel and Family Zone will jointly promote the devices to telcos, offering them not only a feature
rich device, but also the opportunity to resell Family Zone services.
This partnership with a global smart device manufacturer is a significant milestone in the Company’s ecosystem
approach to cyber safety and vision for Family Zone technology to be embedded on every device and network that
children use.
Expansion into USA
Having established a presence in the USA, working with schools in West Virginia and more recently, Minnesota,
Family Zone has been preparing for a larger launch in the important USA market, with a sales and marketing push
to follow the full integration of School Manager via the Linewize acquisition.
With the integration complete, Family Zone’s expansion into North America is taking shape, signing four Partner
School campuses, and working on a substantial roll-out of Mobile Zone. It has also attracted an experienced senior
sales executive to join the Family Zone USA team.
Ongoing Product Innovation and Development
During the year, Family Zone continued to develop and update its product suite. The Zone Manager App was
created following the initiation of Family Zone’s collaboration with Telkomsel. It provides ability for parents to
interact with the Family Zone platform with unparalleled parental control. The app was made available to
Indonesian customers through Telkomsel, with its international roll out following.
Other product development and updates included:
• A major upgrade to Mobile Zone agents for PCs and Macs including advanced filtering and malfeasance
mitigation.
• A major upgrade to Mobile Zone agents for Android to support on-device full-packet-inspection.
• Upgrades to search and safe search functions across our network and consumer platforms.
• Major upgrades to our school network filtering platform including adding support of upstream proxy,
configurable SSL inspection and multi-tenant (i.e. groups of schools) support.
• Adding a number of new features for teaching staff to better and more easily manage classroom activity
including student messaging, support for viewing students’ screens on Edge, pushing new tabs to student
browsers.
• A range of end (parent) user experience improvements.
• Alpha release of Family Zone Managed Devices (on eSchoolPad).
IP and Trademarks
Family Zone initiated a significant review of its IP, patent and trademark portfolio with patent attorneys Griffith Hack
during the September quarter to ensure it is defended from IP encroachments and to position it for potential
corporate arrangements. The review identified several new potentially patentable claims for which it is preparing
submissions. In addition, the Company is progressively registering its trademarks including “Family Zone” and
“School Zone” in strategic markets including Australia, the US, UK, Philippines, Indonesia and India.
Capital Raisings
In August 2017, Family Zone completed oversubscribed placement of 13,000,000 shares to sophisticated and
institutional investors at $0.40 per share raising $5,200,000 (before costs). Net proceeds of this capital raising
supported investment in Family Zone’s service delivery capability, business development activities, particularly in
education and global partnerships, and further strengthening the Company’s balance sheet.
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In December 2017, Family Zone raised $5,000,000 in an oversubscribed share placement of 8,333,334 shares to
sophisticated and institutional investors at $0.60 per share. Net proceeds from the placement supported Family
Zone’s aggressive expansion in the attractive New Zealand market and accelerated integration of the Linewize and
Family Zone platforms.
Subsequent to the year end, the Company’s strategic advisor Tellus Matrix agreed to invest in and underwrite a
placement of 10,000,000 shares at $0.50 per share to raise $5,000,000 (before costs). This share placement was
completed on 29 August 2018 and funds raised will be used to support investment in Family Zone’s service delivery
capability, business development activities, particularly in education and global partnerships, and further strengthen
the Company’s balance sheet.
IPO Milestone Achieved
Family Zone founders were issued 28,000,000 Performance Shares in consideration for the cancellation of close to
half of their shares in the Company prior to the Company’s IPO in August 2016. At the time, the founders had
invested more than $1,450,000 and have since increased their cash investment. The Performance Shares were
issued in three classes and convert into ordinary shares (on a one-for-one basis) subject to the achievement of
performance milestones.
During the financial year Family Zone achieved a key milestone associated with 9,333,333 Performance Shares
held by Family Zone founders and 1,166,666 Performance Shares held by key executives. The first performance
milestone was set as a ‘proof point’ for the viability of the Family Zone product. The hurdle was set as achievement
of 15,000 paying subscribers generating at least $100,000 revenue per month over three consecutive months. The
achievement of this performance milestone resulted in 10,500,000 Performance Shares held by the founders and
executives being converted into ordinary shares and 1,483,333 Performance Rights (held by key executives)
vesting.
Subsequent performance milestones are based on demonstrating value in Family Zone’s strategy of leveraging an
ecosystem to drive consumer revenues, with the second and third performance milestones being the achievement
of annual consumer revenues of $10,000,000 and $20,000,000 within 3 and 4 years of IPO respectively.
Research & Development Grant
During the financial Family Zone received a $2,583,700 tax grant as part of the Australian Government Research &
Development incentive scheme. In addition, the Group also received a $72,159 export assistance grant.
As a technology innovator, Family Zone has an active program to develop intellectual property and expects to be
able to be eligible for Research & Development claims in future years.
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Annual Report 30 June 2018
DIRECTORS REPORT
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 2018. 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’s principal activities during the period have
been the sales, marketing and customer support of its suite of cyber safety products and services.
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 2018 of $5,049,374 (2017: $2,290,721) with revenue
from operations being $2,329,780 (2017: $1,589,202).
The net loss attributable to members of the Group for the year ended 30 June 2018 amounted to $18,206,211 (2017:
loss $8,834,735).
REVIEW OF OPERATIONS
The operations of the Group during the financial period have focussed on the sales and marketing of its suite of cyber
safety products through its key distribution channels as well as the provision of ongoing customer support services
and continual improvement and upgrade of its services.
A review of the Group’s operations over the past financial year is outlined on pages 5 to 10 of the Annual Report.
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 2018 the Company announced that UK based advisory firm Tellus Matrix with its strategic partners had
agreed to subscriber to 10,000,000 Shares at $0.50 per Share to raise $5 million (‘Placement’) and that following
completion of the capital raising that Sir Peter Westmacott, a former British Ambassador to the US would be
appointed to the Board.
The Placement was completed on 29 August 2018 with Tim Levy agreeing to subscribe to 350,000 Shares ($175,000)
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Annual Report 30 June 2018
DIRECTORS REPORT
subject to shareholder approval.
On 17 July 2018 the Company announced it had entered into a partnership with the School Locker as a Family Zone
education reseller. The School Locker is the biggest edu-product retailer to Australian parents with the Family Zone
packages to be promoted to parents a part of schools Bring Your Own Device programs.
On 29 August 2018 the following restricted securities were released from escrow
• 22,566,971 Shares
• 4,000,000 Options ($0.25, 20 May 2019);
• 3,348,750 Options ($0.25, 29 Aug 2019);
• 1,000,000 Employee Options ($0.33, 19 Sept 2019)
• 10,499,999 Class B Performance Shares; and
• 10,499,998 Class C Performance Shares.
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.
INFORMATION ON DIRECTORS
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
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DIRECTORS REPORT
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:
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Mr Crispin Swan
B.
(Hons)
Arts
(UK/Germany)
European Business
Programme
Mr Phil Warren
B. Com, CA
● 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
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
● 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
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, Jupiter Energy Limited
Other directorships held in ASX listed companies in the last three years - Nil
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DIRECTORS REPORT
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 2018.
Director
Tim Levy
John Sims
Crispin Swan
Phil Warren
Number of Board meetings eligible
to attend
Number Board meetings
attended
6
6
6
6
6
6
6
6
The number of audit committee meetings held and the number of meetings attended by each of the Directors for the
year ended 30 June 2018.
Director
John Sims
Phil Warren (Chairman)
Number of audit committee
meetings eligible to attend
Number audit committee
meetings attended
2
2
2
2
The number of remuneration committee meetings held and the number of meetings attended by each of the Directors
for the year ended 30 June 2018.
Director
John Sims
Phil Warren (Chairman)
Number of remuneration committee
meetings eligible to attend
Number remuneration
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,
performance shares and performance rights of the Group were:
Director
Shares
Unlisted
Options
Performance Shares
Performance Rights
Class B
Class C
Class D
Class E
Class F
Tim Levy
10,179,729
750,000
3,878,610
3,878,610
John Sims
100,000
1,500,000
-
-
-
-
-
-
-
-
Crispin Swan
4,196,574
750,000
2,205,383
2,205,383
333,340
333,330
333,330
Phil Warren
115,310
2,000,000
-
-
-
-
-
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
In August 2017 the Group paid an insurance premium of $42,970 for Directors and Officers Liability Insurance cover
with an indemnity limit of $10,000,000.
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Annual Report 30 June 2018
DIRECTORS REPORT
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 2018 is provided in this report.
NON-AUDIT SERVICES
Pitcher Partners BA&A Pty Ltd consented to and was appointed as the Group’s auditors on 20 May 2016.
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 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
Pitcher Partner BA&A Pty Ltd – Other assurance engagements
Pitcher Partners (WA) Pty Ltd - Taxation
Total auditors remuneration for non-audit services
UNISSUED SHARES UNDER OPTION
30 June 2018
$
30 June 2017
$
$6,250
$8,500
$14,750
-
13,702
13,702
At the date of this report unissued ordinary shares or interests of the Company under option are:
Tranche Date Option Granted
Expiry Date of
Option
Exercise Price
of Option
Number of shares
under Option
1
2
3
4
5
6
7
8
9
Total
20/05/2016
29/08/2016
19/09/2016 to 31/08/2017
16/12/2016
05/05/2017
04/12/2017
04/12/2017
09/04/2018
09/04/2018
20/05/2019
29/08/2019
19/09/2019
15/12/2019
05/05/2020
04/12/2020
04/12/2020
09/04/2021
09/04/2021
$0.25
$0.25
$0.33
$0.30
$0.30
$0.50
$0.60
$0.75
$0.90
4,000,000
5,888,438
5,232,569
5,335,000
1,750,000
850,000
850,000
516,765
516,765
24,939,537
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DIRECTORS REPORT
SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT OF EXERCISE
As at the date of this report details of ordinary shares issued by the Company are as a result of the exercise of Options
are
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Tranche
Date Option Granted
2
3
4
Total
29/08/2016
19/09/2016 to 31/08/2017
16/12/2016
ROUNDING OF AMOUNTS
Number of
Shares issued
Amount paid
for Shares
4,205,313
$1,051,328
620,422
665,000
$204,739
$199,500
5,490,735
$1,455,567
The Company has applied the relief available to it in ASIC Legislative Instrument 2016/191, and accordingly certain
amounts included in this report and in the financial report have been rounded off to the nearest $1 (where rounding is
applicable), under the option available to the Company under ASIC Corporations.
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
DIRECTORS REPORT
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 2018. 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.
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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 has an executive services agreement with Mr Tim Levy 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 (as varied)
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 Levy is
unable to perform his duties under the agreement for three consecutive months or a period aggregating
to three months in a 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 has an executive services agreement with Mr Crispin Swan 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 (as varied) are as follows:
a)
b)
c)
a base salary of $240,000 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 a 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 be
(ii)
(iii)
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DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
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.
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
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 2018 are set out in the following table.
Directors and
Key Management
Personnel
30 June 2018
Short -term
Post employment
Long term
Share based
payments1
TOTAL
Performance based %
of remuneration
Salary
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Retire-
ment
benefits
$
Termination
benefits
$
Incentive
Plans
$
Long
Service
Leave
Options/
Performance
Rights (PR)
Fixed
based
%
Performance
based %
$
$
$
Mr Tim Levy
206,667
Mr Crispin Swan
234,067
Mr John Sims
Mr Phil Warren
50,000
40,000
Total Directors
530,734
-
-
-
-
-
-
-
-
-
-
19,633
21,533
-
3,800
44,966
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
226,300
100%
293,989
549,589
47%
-
-
50,000
100%
43,800
100%
293,989
869,689
66%
0%
53%
0%
0%
34%
Note 1: Mr Crispin Swan was issued 1,000,000 Performance Rights (comprising 333,340 Class A Performance Rights, 333,330, Class B Performance Rights and 333,330 Class C Performance
Rights) during the period as an equity settled share based payments. The performance conditions attaching to these Performance Rights are outlined on page 25 of the Remuneration Report.
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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 2017 are set out in the following table.
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Directors and
Key Management
Personnel
30 June 2017
Short -term
Post employment
Long term
Share based
payments
TOTAL
Performance based %
of remuneration
Salary
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Retire-
ment
benefits
$
Termination
benefits
$
Incentive
Plans
$
Long
Service
Leave
Options/
Performance
Rights (PR)
Fixed
based
%
Performance
based %
$
$
$
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
100%
- 192,021
100%
-
-
41,667
100%
38,978
100%
- 447,231
100%
0%
0%
0%
0%
0%
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Annual Report 30 June 2018
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 and rights vest on the achievement of operational and financial milestones, providing those
Directors and executives holding performance shares and performance rights an incentive to meet the operational
and financial milestones prior to the expiry date of the performance shares and performance rights.
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
2017
$
2018
$
2,290,721
5,049,374
(8,834,735)
(18,206,211)
0.33
0.00
0.475
0.00
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DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
E.
Key management personnel’s equity holding
a)
Number of Options held by Key Management Personnel
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
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 2018 are as follows:
Directors and
Executives
Held at
1 July 2017
Options
exercised
Options
expired
Other
changes
Held at
30 June 2018
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Total
750,000
750,000
1,500,000
2,000,000
5,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
750,000
1,500,000
2,000,000
5,000,000
Vested and
exercisable
at 30 June 2018
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 2017
Received as
remuneration
Shares issued
for cash
subscription
Other
changes1
Held at
30 June 2018
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Total
1. Shares issued on conversion of Class A Performance Shares following achievement of performance
milestone.
6,301,118
1,991,190
100,000
115,310
8,507,618
3,878,611
2,205,384
-
-
6,083,995
-
-
-
-
-
-
-
-
-
-
10,179,729
4,196,574
100,000
115,310
14,591,613
c)
Number of Employee Options issued during the year under the Employee Share Option Plan.
No options were issued during the year under the Company’s Employee Share Option Plan to any Directors.
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 2018 are as follows:
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REMUNERATION REPORT CONTINUED (AUDITED)
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Held at 1 July 2017
Held at 30 June 2018
Directors and
Executives
Class A
Performance
Shares1
Class B
Performance
Shares
Class C
Performance
Shares
Class A
Performance
Shares1
Class B
Performance
Shares
Class C
Performance
Shares
Mr Tim Levy
3,878,611
3,878,610
3,878,610
Mr Crispin Swan
2,205,384
2,205,383
2,205,383
Mr John Sims
Mr Phil Warren
-
-
-
-
-
-
Total
6,083,995
6,083,993
6,083,993
-
-
-
-
-
3,878,610
3,878,610
2,205,383
2,205,383
-
-
-
-
6,083,993
6,083,993
1. Class A Performance Shares converted into Shares during the financial period following achievement of
performance milestone being 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.
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 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.
As at 30 June 2018 the Class B and C Performance Milestones have not been achieved.
The Performance Shares held by the Directors outlined above were not granted as part of their remuneration but
issued to the Directors in consideration for cancellation of ordinary shares they held in the Company prior to the
Company’s listing of ASX.
e)
Performance Rights Holdings of Key Management Personnel
The number of Performance Rights 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 2018 are as follows:
Directors and
Executives
Performance Rights
held at
1 July 2017
Received as
remuneration
Other changes
Performance Rights
held at
30 June 2018
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Total
-
-
-
-
-
-
1,000,0001
-
-
1,000,000
-
-
-
-
-
-
1,000,000
-
-
1,000,000
1. Comprising 333,340 Class D Performance Rights, 333,330, Class E Performance Rights and 333,330 Class
F Performance Rights.
The Performance Rights are subject to the following performance based vesting milestones
24
For personal use only
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Class of
Performance
Right
Class D
Performance
Rights
Class E
Performance
Rights
Class F
Performance
Rights
Vesting Condition
Milestone
Date
Number of Performance
Rights vesting
Expiry Date
On achievement of 15,000 paying
subscribers of the Company
generating at least $100,000 revenue
per month over 3 consecutive months
On achievement of $10,000,000
revenue by the Company over a 12
month rolling period of which 30% is
subscription income
On achievement of $20,000,000
revenue by the Company over a 12
month rolling period of which 30% is
subscription income
29 August
2018
29 August
2019
29 August
2020
33,334 for each Tier 1
partnering deal that goes
live before the Expiry Date
33,333 for each Tier 1
partnering deal that goes
live before the Expiry Date
33,333 for each Tier 1
partnering deal that goes
live before the Expiry Date
4 Dec 2020
4 Dec 2020
4 Dec 2020
Once the applicable Vesting Condition has been satisfied, the number of Performance Rights specified in the table
above will vest for each Tier 1 partnering deal that goes live between the date of grant and the Expiry Date.
The Performance Rights have been valued based on the share price of the Company at the date of approval of the
issue of the Performance Rights being $0.675 per Share. The total value of the Performance Rights issued to Mr
Swan when granted is $675,000 with the share based payment expense recognised over the vesting period of the
Performance Rights.
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
Mr Phil Warren, a Director of the Company, is also a director of Grange Consulting and an entity related to him is a
shareholder of 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 in August 2016.
Grange Consulting has also been 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.
A summary of the total fees paid to Grange Consulting and Grange Capital Partners for the year ended 30 June 2018
and 30 June 2017 is as follows:
25
For personal use only
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Company secretarial services
Success fee upon listing on ASX
Transaction management on lodgement of prospectus
Total
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
30 June 2018
$
30 June 2017
$
94,500
-
-
90,402
50,000
75,000
94,500
215,402
1. Amounts payable to Grange Consulting and Grange Capital as at 30 June 2018 were $17,586 (incl GST).
b)
Loan Funds provided by Mr Tim Levy
Mr Tim Levy has loaned funds to the Company and made payments on behalf of the Company in the year ended 30
June 2017 which resulted loan funds being payable to Mr Levy. Movements in the loan account during the last two
financial years are outlined Note 25 of the Financial Accounts.
No interest was payable on the funds loaned to the Company by Mr Levy and the amounts loaned to the Company
were fully repaid as at 30 June 2018.
c)
Consulting Fees paid to Mr Crispin Swan
Mr Crispin Swan was paid $10,000 for consulting services provided in July 2016 prior to the Company’s listing on
ASX. These services were 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.
*********** END OF AUDITED REMUNERATION REPORT ***********
Signed in accordance with a resolution of the Directors.
Mr Tim Levy
Managing Director
30 August 2018
26
For personal use only
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 2018, 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 2018
27
Pitcher Partners is an association of Independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | NewcastleFor personal use only
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2018
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Revenue
Cost of sales
Gross profit
Other income
Gain on bargain purchase
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)
Note
2018
$
2017
$
4
4
13
5
5
6
22
7
2,329,780
(1,213,262)
1,116,520
2,719,594
72,142
(4,199,771)
-
(6,562,179)
(34,915)
(1,232,543)
(2,508,800)
(4,306,427)
(3,269,831)
(18,206,211)
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)
-
-
Loss after tax for the period attributable to the members of
Family Zone Cyber Safety Limited
(18,206,211)
(8,834,735)
Other comprehensive income
11,663
-
Total comprehensive (loss) for the period attributable to the
members of Family Zone Cyber Safety Limited
(18,194,548)
(8,834,735)
Basic and diluted loss per share (cents per share) for the year
attributed to the members of Family Zone Cyber Safety Limited
8
(17.35)
(14.70)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction
with the accompanying notes.
28
For personal use only
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
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
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Contingent consideration
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
2018
$
2017
$
9
18
10
11
18
19
12
17
12
13
14
15
16
2,461,222
1,197,011
149,929
3,808,163
9,025,186
321,928
257,682
9,604,796
13,412,958
1,387,577
963,183
169,987
2,520,747
3,325,003
1,007,424
217,421
4,549,848
7,070,595
3,372,409
508,157
3,880,566
3,461,738
191,099
3,652,837
243,883
2,245,505
2,489,388
6,369,954
806,424
-
806,424
4,459,261
7,043,004
2,611,334
30,873,178
6,853,786
(30,683,960)
7,043,004
12,582,677
2,506,406
(12,477,749)
2,611,334
The above Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.
29
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
CONSOLIDATED STATEMENT OF CHANGES OF EQUITY
For the year ended 30 June 2018
Issued
Capital
$
Share-based
Payment
Reserve
$
Accumulated
Losses
$
Foreign
Currency
Translation
Reserve
$
Balance at 1 July 2017
1,433,717
1,605,348
(3,643,014)
Loss for the year
Total other comprehensive income
Total comprehensive loss for the
year
Transaction with owners, directly
recorded in equity:
Issue of Ordinary Shares, net of
transaction costs
Issue of Options, Performance Rights
& Performance Shares
Total transactions with owners
Balance at 30 June 2017
-
-
-
11,148,960
-
-
-
-
-
901,058
(8,834,735)
-
(8,834,735)
-
-
11,148,960
12,582,677
901,058
2,506,406
-
(12,477,749)
-
-
-
-
-
-
-
-
Total
$
(603,949)
(8,834,735)
-
(8,834,735)
11,148,960
901,058
12,050,018
2,611,334
Issued
Capital
$
Share-based
Payment
Reserve
$
Accumulated
Losses
$
Foreign
Currency
Translation
Reserve
$
Total
$
Balance at 1 July 2018
12,582,677
2,506,406
(12,477,749)
-
2,611,334
Loss for the year
Total other comprehensive income
Total comprehensive loss for the
year
Transaction with owners, directly
recorded in equity:
Issue of Ordinary Shares, net of
transaction costs
Issue of Options, Performance Rights
& Performance Shares
Total transactions with owners
Balance at 30 June 2018
-
-
-
18,290,501
-
-
-
-
-
4,335,717
(18,206,211)
-
(18,206,211)
-
11,663
11,663
(18,206,211)
11,663
(18,194,548)
-
-
-
-
18,290,501
4,335,717
18,290,501
30,873,178
4,335,717
6,842,123
-
(30,683,960)
-
11,663
22,626,218
7,043,004
The above Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes
30
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CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
Cash flows from operating activities
Receipt from customers
Government grants received
Payments to suppliers and employees
Interest received
Net cash flows (used in) operating activities
Cash flows from investing activities
Purchase of plant & equipment
Payments for intangible assets
Non-related party loans
Net cash paid for acquisition of business
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of issue costs
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
Effects of foreign exchange rates
Cash and cash equivalents at end year
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Note
20
9
2018
$
2017
$
2,880,833
2,655,859
(16,088,385)
4,949
(10,556,642)
(112,540)
(49,764)
(45,208)
(167,039)
(374,550)
11,993,175
-
11,993,175
1,061,982
1,387,577
11,663
2,461,222
1,344,222
687,778
(7,370,432)
9,522
(5,328,910)
(40,140)
(3,025,000)
-
(3,065,140)
8,439,400
622,000
9,061,000
667,350
720,227
-
1,387,577
The above Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
31
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 2018.
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 $18,206,211 during the year
ended 30 June 2018 (2017: loss of $8,834,735). The Statement of Financial Position shows that the Group had cash
and cash equivalents of $2,461,222 as at 30 June 2018 (2017: $1,387,577).
Subsequent to year end the Group successfully raised $5.0 million through the issue of 10,000,000 shares at $0.50
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 Directors believe that it is reasonable that the Group can raise additional capital, if
required, as a result of the following:
- The Group has raised $5.0m subsequent to year end and at a premium price to that of the market highlighting
the support of sophisticated and professional investors for the Group; and,
- The Directors intend to raise capital as needed
The financial statements do not include any additional 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.
32
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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:
(i) Share Based Payments
The Company measures the cost of equity-settled transactions with suppliers and employees by reference to 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. The fair value of the equity instruments granted is determined using the Black-Scholes model
taking into account the terms and conditions upon which the instruments were granted. The accounting estimates
and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of
assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
(ii) 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 Group. 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.
(iii) Impairment of assets
In determining the recoverable amount of assets, in the absence 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.
(iv) Contingent Consideration
When the fair values of financial assets and financial liabilities recorded in the statement of financial position cannot
be measured based on quoted prices in active markets, their fair value is measured using valuation techniques
including the discounted cash flow (DCF) model. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgement is required in establishing fair values.
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as
part of the business combination. When the contingent consideration meets the definition of a financial liability, it is
subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on a
probability weighted payout approach. The probability weighted value of the contingent consideration was then
33
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
discounted to determine the net present value of the contingent consideration. The key assumptions take into
consideration the probability of meeting each performance target and the discount factor (refer to note 13 for
details).
As part of the accounting for the acquisition of Linewize, contingent consideration with an estimated fair value of
$2,238,275 was recognised at the acquisition date and remeasured to $2,245,505 as at the reporting date. Future
developments may require further revisions to the estimate.
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 Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Subscription/service revenue is recognised over the life of the service contract as the Groups service obligations
under the contract are satisfied. Hardware revenues are recognised when the significant risks and rewards of
ownership of the hardware are transferred to the buyer and the amount of revenue can be measured reliably.
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
34
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
(e)
Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised when the Group 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 Group. 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 Assets
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.
35
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Additionally, as part of its asset acquisitions 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.
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 Group
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 Group expenses all research and development costs as incurred. The amounts incurred in relation to patent
development costs and patent applications are expensed until the Group has received formal notification that a patent
has been granted. The Group believes expensing patent development and application costs provides the most
relevant and reliable information to financial statement users. The Group will only record a development asset when
there is certainty that the Group 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 Group.
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 Group 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.
(m) Cash and Cash Equivalents
36
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 Group 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.
(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 Group, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
37
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 Group 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
Group), whose operating results are regularly reviewed by the Group '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 Group 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 Group has two operating segments being information technology (and more specifically the provision of cyber
safety services) Australia, and information technology (and more specifically the provision of cyber safety services)
New Zealand 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 2017 the Group
operated under one operating segment being information technology (and more specifically the provision of cyber
safety services) Australia.
(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
Group 's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12
months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or
used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group 's normal operating cycle; it is
held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is
no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
(r)
Goods and Services Tax ('GST')
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
38
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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)
Foreign Currency Translation
(i)
Functional and presentation currency
The functional currency of each of the Group's entities is measured using the currency of the primary economic
environment in which that entity operates. The functional currency of the parent is Australian Dollars. The
consolidated financial statements are presented in Australian Dollars.
(ii)
Transactions and Balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date
of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary
items measured at historical cost continue to be carried at the exchange rate at the date of transaction. Non-monetary
items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the transition of monetary items are recognised in the consolidated statement of
profit or loss and other comprehensive income in the period in which they arise, except where deferred in equity as
a qualifying cash flow.
Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent
that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the income
statement.
(iii) Group Companies
The financial results and position of foreign operations whose functional currency is different from the Group's
presentation currency are translated as follows:
- Assets and liabilities are translated at period-end exchange rates prevailing at that reporting date;
- Income and expenses are translated at average exchange rates for the period; and
- Retained earnings are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences on translation of foreign operations are transferred directly to the Group's foreign currency
translation reserve in the balance sheet. These differences transferred to the consolidated statement of profit or loss
and other comprehensive income in the period in which the operation is disposed.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign
operations are expressed in Australian Dollars using exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used.
Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.
(t)
Business Combinations
39
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving
entities or businesses under common control. The business combination will be accounted for from the date that
control is obtained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent
liabilities) assumed is recognised (subject to certain limited exemptions).
When measuring the consideration transferred in the business combination, any asset or liability resulting from a
contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration
classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent
consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any
change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations, other than those associated with the issue of a
financial instrument, are recognised as expenses in profit or loss when incurred. The acquisition of a business may
result in the recognition of goodwill or a gain from a bargain purchase.
(u) 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 Group for the year ended 30 June 2018. The Group’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 Group 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 Group'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 Group. 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 Group will adopt this standard from 1
July 2018.
The Group does not hold any complex financial assets and does not expect the new changes to have any impact on
its recognition of financial assets. Similarly, the Group does not engage in any hedge accounting and as such, the
new hedge accounting rules will have no impact.
The Group has a complex financial liability in the form of contingent consideration payable which will continue to be
measured at fair value through profit or loss under the new standard.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are
expected to change the nature and extent of the group’s disclosures about its financial instruments particularly in the
year of the adoption of the new standard.
AASB 15 Revenue from Contracts with Customers
40
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 Group will recognise revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to
which the Group 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 and is continuing to assess the impact of its adoption. It is expected that there will be no change to the
recognition of service revenue which will continue to be recognised over the life of the contract as the Group’s
performance obligations are satisfied over time rather than on deployment. These performance obligations under the
contract are not likely to be distinct and hence will be grouped together as part of a single contract. This has been
applied to all current contracts and agreements in place and revenue recognised on this basis.
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 Group will adopt this standard from 1 July 2019. There will be minimal impact as current
group.
leases
immaterial
relation
leases
office
held
are
the
by
to
in
(v) Rounding
The Company has applied the relief available to it in ASIC Legislative Instrument 2016/191 and accordingly, certain
amounts included in the Directors’ report and in the financial report have been rounded off to the nearest $1 (where
rounding is applicable), under the option available to the Company under ASIC Corporations.
41
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
(w)
Leases
Leases of property, plant and equipment where substantially all the risks and benefits incidental to the ownership of
the asset, but not the legal ownership, transfer to the Group, are classified as finance leases. Finance leases are
capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased
property, plant and equipment or the present value of the minimum lease payments, including any guaranteed
residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest
expense for the period. Leased assets are depreciated on a straight line basis over their estimated useful lives.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are
recognised in the profit or loss on a straight line basis over the lease term..
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
2018
$
2017
$
2,064,367
265,413
2,329,780
709,035
880,167
1,589,202
19,282
44,453
63,735
2,583,700
72,159
2,655,859
12,399
1,214
13,613
631,813
56,093
687,906
2017
$
412,046
10,000
2,619,728
178,426
298,730
814,979
273,150
4,607,059
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
Total expenditure
2018
$
530,734
-
6,788,633
323,690
612,867
1,631,549
563,036
10,450,509
(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.
42
For personal use only
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 2018
2018
$
2017
$
698,020
148,280
5,805
380,437
1,232,543
676,061
123,296
5,120
314,282
1,118,759
2018
$
2017
$
-
-
-
-
-
-
Profit / (loss) before tax for the year
(18,206,211)
(8,834,735)
Prima facie income tax payable on profit before income tax at:
- 27.50% (Australia)
- 28.00% (New Zealand)
- 27.9% (US)
- 17.00% (Singapore)
(4,458,576)
(318,462)
(237,754)
(645)
(2,650,402)
-
-
-
Adjustments for:
Entertainment
Share based payments
R&D tax incentive classified as income
Non-deductible expenditure
Offset against DTL/DTA not recognised
Tax losses not recognised
Income tax expense attributable to profit
(c) Deferred taxes
Deferred tax asset balance comprises:
Tax losses
Plant & Equipment
Provisions & Accruals
Capital & Business related costs
Offset against deferred tax liability / not recognised
4,639
1,184,267
710,518
1,185,860
1,930,153
-
-
4,094
449,693
(189,544)
474,236
-
1,911,922
-
2018
$
2017
$
2,589,970
-
191,542
303,083
(3,84,596)
1,900,905
291,885
225,815
218,954
(2,637,558)
43
For personal use only
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Deferred tax liability balances comprises:
PPE and 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 – Australia
Operating tax losses – Other jurisdictions
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
(395,108)
-
395,108
-
-
(120)
120
-
2018
$
2017
$
(1,221,059)
(336,614)
1,557,673
-
(2,391,305)
214,720
2,176,585
-
-
-
-
-
2018
$
99,518
2,589,970
833,165
3,522,653
243,188
-
(243,188)
-
2017
$
736,533
1,900,905
-
2,637,437
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.
44
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 8: LOSS PER SHARE
Basic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the year 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:
2018
$
2017
$
Loss used in the calculation of basic and diluted loss per share
(18,206,211)
(8,838,458)
Basic earnings/(loss) per share attributable to equity holders
(cents Per Share)
Weighted average number of ordinary shares outstanding
Weighted average number of ordinary shares outstanding during the
year used in calculation of basic and diluted loss per share
(17.35)
(14.70)
Number
Number
104,927,965
60,117,590
104,927,965
60,117,590
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
2018
$
2017
$
2,461,222
2,461,222
1,387,577
1,387,577
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.
NOTE 10: INVENTORY
Current:
At net realisable value:
Finished goods
Total Inventory
2018
$
2017
$
149,929
149,929
169,987
169,987
45
For personal use only
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 11: INTANGIBLES
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
2017
$
2018
$
13,707,892
(4,955,835)
339,181
(66,052)
9,025,186
Intellectual Property at cost (1)
Less: Accumulated amortisation and impairment
Customer Contracts at cost (2)
Less: Accumulated amortisation and impairment
5,187,142
(1,862,139)
-
-
3,325,003
(1) Intellectual Property includes $8,470,986 acquired as part of the Linewize acquisition (refer to note 13 for further detail). The
remaining amortisation period for this IP is 29 months. The remaining amortisation period on the remainder of the IP is 17
Months
(2) The remaining amortisation period for customer contracts is 29 months.
a) Reconciliation of movements in intangible assets
Intangible Assets
Balance at 1 July 2016
Additions
Impairment expense
Amortisation expense
Balance at 30 June 2017
Additions(1)
Impairment expense
Amortisation expense
Balance at 30 June 2018
$
380,146
4,069,042
(52,248)
(1,071,937)
3,325,003
8,859,931
-
(3,159,748)
9,025,186
(1)
Refer to Note 13: Business combinations for additional detail on intangible assets acquired as part of business combination.
NOTE 12: TRADE AND OTHER PAYABLES
Current:
Trade payables(2)
Revenue in advance
Accruals & other payables
Share monies received in advance (1)
Total Current Trade and Other Payables
Non Current:
Revenue in advance (1)
Total Non Current Trade and Other Payable
2018
$
2017
$
500,277
1,645,500
1,226,632
-
3,372,409
589,321
1,078,281
1,172,136
622,000
3,461,738
243,883
243,883
806,424
806,424
Total Trade and Other Payables
3,616,292
4,268,162
(1) FY 17 balance relates to share monies which were received in the 30 June 2017 financial year for shares issued during
financial year 30 June 2018.
(2) Current trade payables are non-interest bearing and are normally settled on 30-day terms
46
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 13: BUSINESS COMBINATION
On 29 November 2017, Family Zone acquired 100% of the share capital in Linewize Services Limited and Linewize
Limited (Linewize) which own and operate an innovative cloud-managed firewall service, specifically developed for
the needs of the education sector. Its services covers user authentication, content filtering, network appliances,
telecoms services, BYOD support, network access management and an award winning suite of classroom tools.
Linewize is the leading provider of cyber security and safety services in New Zealand with its technology represented
in a network of 260 schools and 130,000 students at the time of the acquisition.
The key drivers and benefits of this acquisition included providing the Group access to a rapidly expanding network
of schools and parents plus access to world leading technology for schools and experienced executives as well as
strategic opportunities for Family Zone to build out features, transform service levels and achieve order of
magnitude reductions in service costs through Linewize’s innovative and world class cloud technology.
a) Details of the consideration paid to Vendors:
Cash deposit paid
Ordinary shares issued
Contingent consideration (Performance Shares issued)
Total purchase consideration
$
179,578
6,326,616
2,238,275
8,744,469
The value of the ordinary shares issued as part of the consideration was assessed at a price of $0.665 per Share
which was based on the quoted price at the date of the business combination.
b) Contingent consideration
The contingent consideration comprised 9,500,000 Performance Shares (Classes D to H Performance Shares)
which convert into Shares subject to the achievement of various revenue and customer targets over a 5 year period
as outlined in the table below:
Class of
Performance
Share
Number of
Consideration
Performance Shares
Performance Milestones
Range of
Contingent
Consideration
D
E
F
G
NZ$1,250,000 of Recurring Revenue; or
1,000,000
310 LW School Deploys; or
$0 - $665,000
5,000 FZO NZ Accounts.
NZ$1,750,000 of Recurring Revenue; or
1,000,000
360 LW School Deploys; or
$0 - $665,000
10,000 FZO NZ Accounts.
NZ$3,750,000 of Recurring Revenue; or
2,000,000
460 LW School Deploys; or
$0 - $1,330,000
20,000 FZO NZ Accounts.
NZ$6,250,000 of Recurring Revenue; or
2,500,000
585 LW School Deploys; or
$0 - $1,662,500
32,500 FZO NZ Accounts.
47
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
H
3,000,000
Total
9,500,000
NZ$9,250,000 of Recurring Revenue and FZO NZ Group
Revenue
$0 - $1,995,000
$0 - $6,317,500
LW School Deploys means the total school deployments of the core technology of Linewize in any country.
The value of the contingent consideration has been assessed based on a probability weighted payout approach.
The probability weighted value of the contingent consideration was then discounted to determine the net present
value of the contingent consideration.
As at 30 June 2018, the contingent consideration has been revalued at $2,245,505 resulting in a revaluation
expense recognised in the statement of profit or loss and other comprehensive income of $7,230.
c) Assets and liabilities acquired
Assets and liabilities held by Linewize at the acquisition date recognised on acquisition at fair value:
Cash
Accounts receivable
Inventory
Property plant and equipment
Accounts payable and accruals
Loans payable
Intangible asset - Contracted customers
Intangible asset - Linewize IP/Platform
Net identifiable assets acquired
Less: Gain on bargain purchase
Total purchase consideration
$
12,539
35,671
10,937
37,803
(45,277)
(45,208)
339,181
8,470,986
8,816,632
(72,163)
8,744,469
The gain on bargain purchase arose when the Group’s share of the fair value of identifiable net assets of Linewize
acquired exceeded the cost of the acquisition paid by the Group. The excess is recognised as income within the
Statement of Profit or Loss and Other Comprehensive Income.
d) Contribution since acquisition
Since the acquisition Linewize has contributed a loss after tax of $1,094,663 which is included within the profit of
the Group. Had the acquiree been controlled for the entire reporting period, the contribution to Group net loss
would have been $1,949,225.
NOTE 14: ISSUED CAPITAL
Issued Ordinary Shares - no par value (fully paid)
Total
2018
Number of
Shares
134,610,852
134,610,852
2017
Number of
Shares
81,795,928
81,795,928
48
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Opening balance – 1 July 2016
Closing balance – 30 June 2017
Shares issued to major shareholder on 20 July 2017
Share issued under sophisticated investor placement on 9 August 2017
Shares issued to Fidelio on 29 November 2017
Shares issued to Linewize Vendors on 29 November 2017
Shares issued under sophisticated investor placement on 4 December 2017
Issued on conversion of options between 31 August 2017 and 30 June 2018
Issued on conversion of rights between 9 April 2018 and 18 June 2018
Less: share issue costs
Closing balance – 30 June 2018
Number of
Shares
Value
$
16,000,029
81,795,928
1,433,717
12,582,677
3,333,334
13,000,000
1,549,443
9,513,708
8,366,668
5,418438
11,633,333
134,610,852
1,000,000
5,200,000
1,045,872
6,326,616
5,020,001
1,444,911
-
(1,746,899)
30,873,178
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.
NOTE 15: RESERVES
Nature and Purpose of Reserve
The share based payment reserve records the value of options, performance rights and performance shares issued
to the Group’s directors, employees, and third parties. The value of the amount disclosed during the year reflects
the value of options and performance shares issued by the Group.
Performance Shares
Performance Rights
Options
Foreign Currency Translation Reserve
Total Reserves
2018
$
1,657,455
1,830,128
3,354,540
11,663
6,853,786
2017
$
1,156,424
-
1,349,982
-
2,506,406
49
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Options outstanding at 30 June 2018
The following options over ordinary shares of the Company existed at reporting date:
Grant Date
Expiry Date
Exercise
Price
Balance at
start of
Year
(number)
Granted
During the
Year
(number)
Exercised
during the
year
(number)
Forfeited
during the
year
(number)
20/05/2016
29/08/2016
20/05/2019
$0.25
4,000,000
29/08/2019
$0.25
10,093,751
-
-
-
(4,205,313)
-
-
Balance at
year end
(number)
Vested and
exercisable at
year end
(number)
4,000,000
4,000,000
5,888,438
5,888,438
19/9/16 - 31/8/17
19/09/2019
$0.33
4,899,773
2,433,272
(548,125)
(1,480,054)
5,304,866
2,576,564
16/12/2016
05/05/2017
04/12/2017
04/12/2017
09/04/2018
09/04/2018
Total
15/12/2019
$0.30
6,000,000
05/05/2020
$0.30
1,750,000
-
-
04/12/2020
$0.50
04/12/2020
$0.60
09/04/2021
$0.75
09/04/2021
$0.90
-
-
-
-
850,000
850,000
516,765
516,765
(665,000)
-
-
-
-
-
-
-
-
-
-
-
5,335,000
3,835,000
1,750,000
1,750,000
850,000
850,000
516,765
516,765
850,000
850,000
516,765
516,765
26,743,524
5,166,802
(5,418,438)
(1,480,054)
25,011,834
20,783,532
Performances shares outstanding at 30 June 2018
The following performance shares of the Company existed at reporting date. On achievement of the performance
milestones attaching to the class of performance shares, the performance shares automatically convert into fully paid
ordinary shares for nil consideration.
Class
Grant Date
Expiry Date
Balance at
start of Year
(number)
Granted
During the
Year*
(number)
A
B
C
D
E
F
G
H
16/6/16 - 16/12/16
29/08/2018
10,500,000
16/6/16 - 16/12/16
29/08/2019
10,499,999
16/6/16 - 16/12/16
29/08/2020
10,499,998
-
-
-
29/11/2017
29/11/2022
29/11/2017
29/11/2022
29/11/2017
29/11/2022
29/11/2017
29/11/2022
29/11/2017
29/11/2022
-
-
-
-
-
1,000,000
1,000,000
2,000,000
2,500,000
3,000,000
Converted
during the year
(number)
(10,500,000)
-
-
-
-
-
-
-
31,499,997
9,500,000
(10,500,000)
Forfeited
during the
year
(number)
-
-
-
-
-
-
-
-
-
Balance at
year end
(number)
-
10,499,999
10,499,998
1,000,000
1,000,000
2,000,000
2,500,000
3,000,000
30,499,997
1. Performance Shares issued during the year were in part consideration for the Linewize acquisition. The Performance Shares
convert into Shares subject to the achievement of various performance targets and have been reported as contingent
consideration for the acquisition. Refer to Note 13: Business combinations for further details.
50
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Reconciliation of movement in performance share reserve:
Opening Balance - 1 July 2017
Share based payment expense for the year in respect to Performance Shares on
issue as at 1 July 2017
Performance Shares issued on 29 November 2017(1)
Performance Shares converted into ordinary shares on achievement of
performance milestone
Number of
Performance
Shares
Value
$
31,499,997 1,349,982
-
307,473
9,500,000
(10,500,000)
-
-
30,499,997 1,657,455
(1) Performance Shares issued during the year were in part consideration for the Linewize acquisition. The Performance Shares
convert into Shares subject to the achievement of various performance targets and have been reported as contingent
consideration for the acquisition. Refer to Note 13: Business combinations for further details.
Performance Rights at 30 June 2018
The following Performance Rights of the Company existed at reporting date:
Grant Date
Expiry Date
Exercise
Price
Balance at
start of Year
(number)
Granted
During the
Year
(number)
Exercised
during the
year
(number)
Forfeited
during
the year
(number)
Balance at
year end
(number)
Vested and
exercisable
at year end
(number)
04/12/2017
04/12/2020
Nil
-
5,450,0001
(1,133,333)2
-
4,316,667
350,0002
1. Comprising 1,483,333 Class A Performance Rights 1,483,331 Class B Performance Rights, 1,483,336 Class C Performance
Rights, 333,340 Class D Performance Rights, 333,330 Class E Performance Rights and 333,330 Class F Performance Rights.
2. 1,113,333 Class A Performance Rights were exercised during the period and 350,000 Class A Performance Rights were
vested and exercisable.
Reconciliation on movement in performance right reserve:
Opening Balance - 1 July 2017
Performance Rights issued on 4 December 2017
Performance Rights exercised during the period following achievement of
performance milestone
Number of
Performance
Rights
-
Value
$
-
5,450,000
1,830,128
(1,133,333)
-
4,316,667
1,830,128
51
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
These Performance Rights have been valued at grant date and each Class are being expensed over the vesting
period.
Performance
Rights
Valuation
Date
Vesting Date
Fair Value at
Grant Date1
Number Issued
04/12/2017
04/12/2017
04/12/2017
04/12/2017
04/12/2017
04/12/2017
29/08/2018
29/08/2019
29/08/2020
29/08/2018
29/08/2019
29/08/2020
$0.675
$0.675
$0.675
$0.675
$0.675
$0.675
1,483,333
1,483,331
1,483,336
333,340
333,330
333,330
Total Expense
for the period
$1,001,250
$327,422
$207,467
$173,791
$73,577
$46,621
5,450,000
$1,830,128
Class A
Class B
Class C
Class D
Class E
Class F
Total
1. The above Performance Rights have been valued using the Black Scholes Model applying the following inputs: share price at
grant date of $0.675 per share; expected volatility of 100%; expected dividends of nil; and a risk free rate of 2.28%.
NOTE 16: ACCUMULATED LOSSES
Accumulated Losses
Opening balance
Net loss for the financial year
Total Accumulated Losses
NOTE 17: PROVISIONS
Current:
Provision for annual leave
Provision for doubtful debts
Total Current Provisions
NOTE 18: TRADE AND OTHER RECEIVABLES
Current:
Trade receivable
Prepayments
GST receivable
Contract receivable
Total Current Trade and Other Receivable
2018
$
(30,683,960)
2017
$
(12,477,749)
(12,477,749)
(18,206,211)
(30,683,960)
(3,643,014)
(8,834,735)
(12,477,749)
2018
$
2017
$
461,028
47,129
508,157
191,099
-
191,099
2018
$
2017
$
264,180
143,373
53,078
736,380
1,197,011
138,351
75,519
94,458
654,855
963,183
52
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Non-Current:
Contract receivable
Bonds and deposits
Total Non-Current Trade and Other Receivable
304,000
17,928
321,928
1,007,424
-
1,007,424
Total Trade and Other Receivable
1,518,939
1,970,607
NOTE 19: PROPERTY PLANT & EQUIPMENT
Property plant & equipment – at cost
Less: Accumulated amortisation and impairment
a) Reconciliation of movements in fixed assets
Property Plant and Equipment
Balance at 1 July 2016
Additions
Depreciation expense
Balance at 30 June 2017
Additions
Depreciation expense
Balance at 30 June 2018
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 other provisions
Cash flows used in operations
2018
$
405,152
(147,470)
257,682
2017
$
232,611
(15,190)
217,421
$
6,852
225,759
(15,190)
217,421
172,541
(132,280)
257,681
2018
$
2017
$
(18,206,211)
(8,834,735)
-
4,306,427
3,269,831
139,192
52,248
1,498,978
1,083,127
(319,386)
742,355
(30,995)
(532,526)
(112,953)
(10,556,642)
3,073,995
46,042
(1,929,179)
-
(5,328,910)
53
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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 – Other assurance engagements
Pitcher Partners (WA) Pty Ltd – Taxation
Total remuneration of Pitcher Partners BA&A Pty Ltd and related firms
2018
$
2017
$
41,000
6,250
8,500
55,750
36,000
-
8,000
44,000
NOTE 22: SHARE BASED PAYMENTS
Share based payments made during the year ended 30 June 2018 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
Shares issued to employees as incentive
Performance Rights issued to employees as incentive and for services
Performance Share issued to employees as incentive and for services
2018
$
-
1,045,874
1,122,952
-
1,830,128
307,473
4,306,427
2017
$
286,035
635,421
422,747
154,775
-
-
1,498,978
(b) Options Granted During the Year
The Group’s current Employee Share Option Plan (ESOP) was approved by the board of directors on 7 July 2016.
The ESOP is designed to provide medium and long term incentives for all employees (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 ESOP, participants have been granted options which only vest if certain performance milestones 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.
54
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
During the year the following Employee Options were granted and vested:
Tranche
Valuation
Date
Expiry Date
Exercise
Price
Issued
during the
year
Vested during
the year
Total Share-Based
Payment Expense
for the year
1
2
3
4
5
Total
19/09/2016
19/09/2019
02/12/2016
19/09/2019
20/02/2017
19/09/2019
31/08/2017
19/09/2019
16/12/2016
15/12/2019
$0.33
$0.33
$0.33
$0.33
$0.30
-
-
-
2,433,272
-
2,433,272
997,866
807,140
317,328
972,601
4,500,000
7,594,934
$141,086
$99,650
$26,816
$428,389
$427,011
$1,122,952
As these Employee Options were considered to represent the value of the services received over the vesting period,
the Group has determined the most appropriate values for these Employee Options using the Black Scholes Model
applying the following inputs.
Underlying share price
Exercise price
Expected volatility
Expiry date (years)
Expected dividends
Risk free rate
Value per option
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
$0.30
$0.33
100%
3.00
Nil
2.28%
$0.182
$0.195
$0.33
100%
3.00
Nil
2.28%
$0.102
$0.18
$0.33
100%
3.00
Nil
2.28%
$0.082
$0.51
$0.33
100%
2.05
Nil
2.28%
$0.325
$0.20
$0.30
100%
3.00
Nil
2.28%
$0.106
The vesting conditions attached to the Tranche 1-4 Employee 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. Vested as at 30 June 2018.
31/12/2017
25% of the Options vest and become exercisable upon the Company having 30,000 paying subscribers
registered by 31 December 2017. Vested as at 30 June 2018.
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.
55
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
The vesting conditions attaching to the Tranche 5 Employee Options are as follows:
Vesting Date
Vesting condition
15/12/2019
15/12/2019
15/12/2019
15/12/2019
25% vest on Family Zone achieving $2.0m Cumulative Revenue in 24 months from engagement or 20,000
Paying Zones. Vested as at 30 June 2018.
25% vest on Family Zone achieving $4.0m Cumulative Revenue in 24 months from engagement or 30,000
Paying Zones. Vested as at 30 June 2018.
25% vest on Family Zone achieving $8.0m Cumulative Revenue in 24 months from engagement or 40,000
Paying Zones. Vested as ay 30 June 2018.
25% vest on Family Zone achieving $10.0m Cumulative Revenue in 24 months from engagement or 50,000
Paying Zones.
c) Performance Rights
During the year, the Group issued 5,450,000 Performance Rights to key executives. The Performance Rights issued
convert into ordinary shares on a one for one basis subject to the achievement of a series of vesting conditions.
These Performance Rights were considered to represent the value of the services received over the vesting period.
The Performance Rights have been valued based on the share price of the Company at the date of approval of the
issue of the Performance Rights with a share based payment expense recognised over the vesting period of the
Performance Rights.
The total share based payment expense for the year in respect to the Performance Rights on issue was $1,830,128.
d) Performance Shares
During the financial period, the Company issued 9,500,000 Performance Shares as part of the consideration for the
Linewize acquisition. These Performance Shares were considered to be contingent consideration for the
acquisition of Linewize. Refer to Note 13 Business Combinations for further details.
The total share based payment expense for the year in respect to the 31,499,997 Performance Shares that had
been issued to employees in lieu of services in the prior period was $307,473.
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.
In the prior year, the Group operated in one segment being cyber security services in Australia. During the financial
year the Group completed the acquisition of Linewize (refer to note 13 for additional information). As a result of the
acquisition, the Group now has two operating segments that are 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 two main operating segments in which the group operates are information technology (and more specifically the
provision of cyber safety services) Australia, and information technology (and more specifically the provision of cyber
safety services) New Zealand. The Group also operates in Asia, and America, however these are in the early stages
of development, and have been allocated to other. Other also includes head office & corporate expenditure.
56
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
30 June 2018
Segment Income
Sales revenue
Other income
Total Income
Segment Expenses
Cost of sales
Operating expenses
Research and Development
Share based payments
Loss before depreciation and
amortisation
Australia
$
New Zealand
$
2,068,772
2,779,284
4,848,055
239,517
12,445
251,962
Other
$
21,492
7
21,499
Total
$
2,329,780
2,791,736
5,121,516
(1,145,401)
(9,898,573)
(2,385,566)
-
(50,150)
(1,206,309)
(116,385)
-
(17,710)
(924,527)
(6,848)
(4,306,427)
(1,213,261)
(12,029,409)
(2,508,800)
(4,306,427)
(8,581,484)
(1,120,882)
(5,5,234,013)
(14,936,380)
Depreciation and amortisation
Loss before Income Tax
(1,540,024)
(10,121,508)
(1,729,806)
(2,850,689)
-
(5,234,013)
(3,269,831)
(18,206,211)
30 June 2018
Segment Assets and Liabilities
Cash
Trade and other receivables
Inventory
Plant and equipment
Intangible assets
Trade and other payables
Provisions
Contingent consideration
Net Assets
Australia
$
New Zealand
$
2,366,182
1,365,988
92,423
218,390
1,930,708
(3,108,858)
(451,800)
(2,245,505)
167,527
53,342
118,181
57,507
39,291
7,094,478
(498,205)
(56,357)
-
6,808,237
Other
$
41,698
34,771
-
-
-
(9,229)
-
-
67,240
Total
$
2,461,222
1,518,939
149,929
257,681
9,025,186
(3,655,209)
(508,157)
(2,245,505)
7,043,004
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.
57
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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
Trade receivables
Total Financial Assets
Financial assets as at 30 June 2018 are neither past due nor impaired.
(ii)
Interest Rate Risk
The Group’s maximum exposure to interest rates at the reporting date was:
2018
$
2017
$
2,461,222
264,180
2,725,403
1,387,577
138,351
1,525,928
2018
Financial Assets - Current
Cash and cash equivalents
2017
Financial Assets - Current
Cash and cash equivalents
Range of
Effective Carrying
Interest
Amount
Rate
(%)
$
Interest Rate Exposure
Variable
Interest
Rate
$
Non
Interest
Bearing
$
Fixed
Interest
Rate
$
Total
$
0 – 1
2,461,222
-
0 – 1
1,387,577
-
-
-
2,461,222
2,461,222
1,387,577
1,387,577
58
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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
Share monies received in advance
Total financial liabilities
(ii)
Contractual Maturity Risk
2018
$
2017
$
799,387
-
799,387
1,155,169
622,000
1,777,169
The following table discloses the contractual maturity analysis at the reporting date:
2018
Financial Instrument
0-6 months
$
6-12 months
$
Over 1 to 5
years
$
More than 5
years
$
Total
$
Financial Assets
Cash
2,461,222
Trade and other receivables
264,180
Total financial assets
2,725,403
Financial Liabilities
Trade and other payables
Total financial liabilities
799,387
799,387
-
-
-
-
-
-
-
-
-
-
2017
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
1,387,577
1,007,424
2,395,001
-
-
-
-
703,782
-
-
-
-
-
-
-
-
-
2,461,222
264,180
2,725,403
799,387
799,387
Total
$
1,387,577
1,970,607
3,358,184
59
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
Financial Liabilities
Trade and other payables
Share monies in advance
1,155,169
622,000
Total financial liabilities
1,777,169
(g) Market Risk
(i)
Currency Risk
-
-
-
-
-
-
-
-
-
1,155,169
622,000
1,777,169
The Group’s primary operations were in Australia during the year ended 30 June 2017.
Following the acquisition of Linewize during the current financial year, primary operations now include those in New
Zealand which gives rise to foreign exchange risk arising from foreign currency transactions with respect to the New
Zealand dollar (NZD). Foreign exchange risk arises from future commercial transactions and recognised assets and
liabilities denominated in a currency (NZD) that is not the functional currency of the Group (AUD).
The Group’s exposure to foreign currency risk with respect to the AUD/NZD exchange rate was as follows:
Net assets (liabilities)
Net profit (Loss)
Foreign Currency sensitivity:
Value of NZD exposure expressed in AUD
2018
(245,905)
(1,135,000)
2017
-
-
Based on the net liability position of the foreign subsidiaries at 30 June 2018, had the Australian dollar
weakened/strengthened by 10% against the New Zealand dollar with all other variables held constant, the Group’s
post-tax loss for the year would have been $113,500 higher/$113,500 lower (2017: Nil), and the effect on equity
would have been $24,591 higher/$24,591 lower (2017: Nil).
The Group currently does not engage in any hedging or derivative transactions to manage foreign currency risk.
(ii)
Interest Rate Risk
The Group’s only exposure to interest rate risk is on balances held as cash as set out in Note 24(d)(ii). The Group is
not exposed to debt interest rate risk as there is nil debt for 2018 (2017: Nil).
(iii) Other Price Risk
By virtue of the nature and classification of the financial instruments held by the Group, 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).
60
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
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.
2018
Financial Assets - Current
Cash and cash equivalents
Trade Receivables
2017
Financial Assets - Current
Cash and cash equivalents
Carrying
Amount
$
2,461,222
328,662
Interest Rate Risk
+1%
-1%
Profit
$
24,612
-
Equity
$
24,612
-
Profit
$
Equity
$
(24,612)
-
(24,612)
-
1,387,577
13,875
13,875
(13,875)
(13,875)
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:
Parent
Family Zone Cyber Safety Limited
Controlled entities
Family Zone Inc.
Family Zone Cyber Safety Pte. Ltd.
Linewize Limited
Linewize Services Limited
Incorporation
Extent of control
2018
2017
Australia
-
-
USA
Singapore
New Zealand
New Zealand
100%
100%
100%
100%
100%
100%
-
-
61
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
(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)
2018
$
2017
$
530,734
-
293,989
824,723
412,046
-
-
412,046
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
(c) Other Transactions with Key Management Personnel
a) Grange Consulting
2018
$
(20,483)
-
20,483
-
2017
$
(44,483)
(120,483)
144,483
(20,483)
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.
A summary of the total fees paid to Grange Consulting and Grange Capital Partners for the year ended 30 June 2018
and 30 June 2017 is as follows:
Company secretarial services
Success fee on listing on the ASX
Transaction management on lodgement of the prospectus
Total
30 June 2018
$
94,500
-
-
94,500
30 June 2017
$
90,402
50,000
75,000
215,402
Amounts payable to Grange Consulting/Grange Capital as at 30 June 2018 were $17,586 (Including GST)
62
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
NOTE 26: EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 6 July 2018 the Company announced that UK based advisory firm Tellus Matrix with its strategic partners had
agreed to subscriber to 10 million Shares at $0.50 per Share to raise $5 million (Placement) and that following
completion of the capital raising that Sir Peter Westmacott, a former British Ambassador to the US would be
appointed to the Board.
The Placement was completed on 29 August 2018 with Tim Levy agreeing to subscribe to 350,000 Shares ($175,000)
subject to shareholder approval.
On 17 July 2018 the Company announced it had entered into a partnership with the School Locker as a Family Zone
education reseller. The School Locker is the biggest edu-product retailer to Australian parents with the Family Zone
packages to be promoted to parents a part of schools Bring Your Own Device programs.
On 29 August 2018 the following restricted securities were released from escrow
•
•
•
•
•
•
22,566,971 Shares
4,000,000 Options ($0.25, 20 May 2019);
3,348,750 Options ($0.25, 29 Aug 2019);
1,000,000 Employee Options ($0.33, 19 Sept 2019)
10,499,999 Class B Performance Shares; and
10,499,998 Class C Performance Shares.
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: COMMITMENTS AND CONTINGENT LIABILITIES
Operating Lease Commitments – Group as Lessee:
Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
30 June 2018
$
66,298
-
-
30 June 2017
$
28,652
28,652
-
The Directors are not aware of any other commitments or any contingent liabilities that may arise from the Group’s
operations as at 30 June 2018.
63
For personal use only Family Zone Cyber Safety Limited
Annual Report 30 June 2018
DIRECTORS DECLARATION
In the Directors’ opinion:
(a)
the accompanying financial statements set out on pages 29 to 63 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 2018 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 2018.
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 2018
64
For personal use only 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 consolidated statement of financial
position as at 30 June 2018, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the
Corporations Act 2001, including:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of
its financial performance for the year then ended; and
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.
Material Uncertainty Related to Going Concern
We draw attention to Note 2(a) to the financial report which indicates that the Group incurred
a net loss of $18,194,548 during the year ended 30 June 2018 (2017: loss of $8,834,735), and
as of that date, the Group had net current liabilities of $72,403 (2017: $1,132,090) and had
cash and cash equivalents of $2,461,222 (2017: $1,387,577). These conditions, along with
other matters as set forth in Note 2(a), indicate the existence of a material uncertainty that
may cast significant doubt about the Group’s ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
65
Pitcher Partners is an association of Independent firms Melbourne | Sydney | Perth | Adelaide | Brisbane | NewcastleFor personal use only
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(b), 3(h), 11 & 13
June 2018,
At 30
the consolidated
statement of financial position of the Group
includes intangible assets of $9,025,186.
The evaluation of the recoverable amount
(‘CGU’)
of each cash generating unit
requires
in
significant
determining the key assumptions and
estimates, including but not limited to:
growth rate assumptions; and
forecast future cash flows
judgement
supporting the expected future cash flows
of the business and the utilisation of the
relevant assets.
Our procedures included, amongst others:
Obtaining an understanding of the relevant
controls associated with the preparation of
the valuation models used to assess the
recoverable value of each CGU.
Assessing management’s determination of
CGUs based on our understanding of the
nature of the Group’s business and the
economic environment.
and
reviewing
Critically
challenging
significant judgements by management in
the key assumptions and
respect of
the
used
estimates
recoverable value of each CGU.
determine
to
and
reviewing
challenging
Critically
management’s assessment of impairment
indicators and assessment of useful life of
each CGU.
Considering the adequacy of the disclosures
included within the financial report.
66
For personal use only
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Revenue Recognition
Refer to Note 3(a) , 3(b) & 4
For the year ended 30 June 2018, the Group
has revenue of $2,329,780 from contracts to
involve a high
provide services which
volume of transactions and are recognised
as the services are delivered.
The determination of revenue recognition
requires management
in
accounting for revenue, discounts and
credit notes.
judgements
Our procedures included, amongst others:
Obtaining an understanding of the relevant
controls associated with the treatment of
revenue,
to
including
discounts, incentives and rebates.
relating
those
Considering the appropriateness of the
Group’s revenue recognition accounting
policies including those relating to discounts,
incentives and
rebates and assessing
compliance with the policies and applicable
accounting standards.
Testing a sample of transactions by sighting
evidence of signed contracts and related
invoices and comparing the revenue amount
recognised to the contracted term.
67
For personal use only
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Share Based Payments
Refer to Note 3(m) & 22
At 30 June 2018, share based payments of
$4,306,427 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. In
calculating the fair value there are a number
of judgements management must make
including but not limited to:
Assessing the probability of achieving
key performance milestones in relation
to vesting conditions; and
Assessing the fair value of the share
price on grant date, estimate of
expected future share price volatility,
expected dividend yield and risk-free
rate of interest.
Our procedures included, amongst others:
Obtaining an understanding of the relevant
controls associated with the preparation of
the valuation model 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.
and
Critically evaluating and challenging the
methodology
of
assumptions
their preparation of
management
valuation model, agreeing inputs to internal
and external sources of information.
in
Assessing the Group’s accounting policy as
set out within Note 3(m) for compliance with
the requirements of AASB 2 Share-based
Payment.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Directors report, which was obtained as at the date of our audit
report, and any additional other information included in the Company’s annual report for the
year ended 30 June 2018, but does not include the financial report and our auditor’s report
thereon. Our opinion on the financial report does not cover the other information and
accordingly we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information above and, in doing so, consider whether the other information is materially
inconsistent with the financial report or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
68
For personal use only
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the
Group to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a
whole is free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
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.
69
For personal use only
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
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
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.
70
For personal use only
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended
30 June 2018. In our opinion, the Remuneration Report of Family Zone Cyber Safety Limited,
for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
PITCHER PARTNERS BA&A PTY LTD
PAUL MULLIGAN
Executive Director
Perth, 30 August 2018
71
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
ASX ADDITIONAL INFORMATION
Additional information required by the Listing Rules not disclosed elsewhere in this Annual Report is set out below.
1.
Number of holders and voting rights of each class of equity securities
The issued capital of the Company as at 20 August 2018 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)
Broker Options ($0.30, 5 May 2020)
Broker Options ($0.50, 4 Dec 2020)
Broker Options ($0.60, 4 Dec 2020)
Broker Options ($0.75, 9 Apr 2021)
Broker Options ($0.90, 9 Apr 2021)
Performance Shares (Class A-H)
Performance Rights (Class A-F)
Number of holders
1,404
5
24
37
2
1
1
1
1
1
14
12
Total on issue
134,949,816
4,000,000
5,888,438
5,232,569
5,335,000
1,750,000
850,000
850,000
516,765
516,765
30,499,997
4,050,000
All issued fully paid ordinary shares (Shares) carry one vote per share. Options, Performance Share and
Performance Rights do 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
10,179,729
6,808,888
7.54%
5.05%
3.
a)
Distribution of equity securities as at 20 August 2018
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
83,398
978,953
1,856,854
20,248,886
111,781,725
134,949,816
119
357
228
533
160
1,397
% Total
Shares
0.06%
0.73%
1.38%
15.00%
82.83%
100.00%
There were 172 holders with less than a marketable parcel of Shares based on the closing share price of $0.375 on
20 August 2018.
72
For personal use only
ASX ADDITIONAL INFORMATION (CONTINUED)
b)
Unlisted Incentive Options ($0.25, 20 May 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
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
e)
Employee Options ($0.30, 15 Dec 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
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
Total
Incentive
Options
% Total
Incentive
Options
Holders
-
-
-
-
5
5
-
-
-
-
-
-
-
-
4,000,000
4,000,000
100.00%
100.00%
Holders Total Options
-
-
7,813
706,250
5,174,375
5,888,438
-
-
1
12
11
24
Total
Employee
Options
-
-
-
1,071,840
4,160,729
5,232,569
Total
Employee
Options
-
-
-
-
5,335,000
5,335,000
Holders
-
-
-
15
22
37
Holders
-
-
-
-
2
2
% Total
Options
-
-
0.13%
11.99%
87.87%
100.00%
% Total
Employee
Options
-
-
-
20.48%
79.52%
100.00%
% Total
Employee
Options
-
-
-
-
100.00%
100.00%
73
For personal use only
Family Zone Cyber Safety Limited
Annual Report 30 June 2018
ASX ADDITIONAL INFORMATION (CONTINUED)
f)
Broker Options ($0.30-$0.90, 5 May 2020 to 9 Apr 2021)
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
-
-
-
-
1
1
Total Broker
Options
-
-
-
-
4,483,530
4,483,530
% Total Broker
Options
-
-
-
-
100.00%
100.00%
4.
Top 20 Shareholder as at 20 August 2018
Position Holder Name
Holding
% IC
1
2
3
4
5
6
7
8
9
10
11
12
12
13
14
15
16
17
18
19
20
TIMOTHY NOMINEES PTY LTD
10,179,729
7.54%
GASMERE PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
CARLO CHIODO/CHIODO TRADING
FRESHIE PTY LTD
6,808,888
5,185,040
4,700,588
4,196,574
5.05%
3.84%
3.48%
3.11%
TRIGGER ASSETS PTY LTD
3,885,986
2.88%
MCCUSKER HOLDINGS PTY LTD
SISU INTERNATIONAL PTY LTD
NOVALANE COM PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
SCOTT ROBERT NOAKES
MICHAEL OLIVER LAWSON
3,670,000
3,456,000
3,422,680
3,349,896
3,182,778
3,040,000
3,040,000
2.72%
2.56%
2.54%
2.48%
2.36%
2.25%
2.25%
BRISPOT NOMINEES PTY LTD
2,901,966
2.15%
FIDELIO
CITICORP NOMINEES PTY LIMITED
HARRY HATCH
GONDWANA INVESTMENT GROUP PTY LTD
NATIONAL NOMINEES LIMITED
TR NOMINEES PTY LTD
FOCUS ASSET MANAGEMENT PTY LTD
Total
Total issued capital - selected security class(es)
2,684,506
2,338,950
2,000,000
1,846,860
1,625,000
1,500,000
1,361,666
1.99%
1.73%
1.48%
1.37%
1.20%
1.11%
1.01%
74,377,107
55.11%
134,949,816 100.00%
74
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
ASX ADDITIONAL INFORMATION (CONTINUED)
5.
Restricted Securities
The following securities as classified as restricted securities and are subject to escrow periods as outlined below
Security
Shares
Incentive Options ($0.25, 20 May 2019)
Employee Options ($0.33, 19 Sept 2019)
Prospectus Options ($0.25, 29 Aug 2019)
Class B Performance Shares
Class C Performance Shares
6.
Unquoted Securities
Escrowed to
29 Nov 2019
Escrowed to
29 Nov 2018
Escrowed to
29 Aug 2018
6,080,000
760,000
22,566,971
4,000,000
1,000,000
3,348,750
10,499,999
10,499,998
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
b)
Broker Options ($0.30-$0.90, 5 May 2020 to 9 Apr 2021)
Holder Name
TR Nominees Pty Ltd
Total Broker Options
c)
Performance Shares
Holder Name
Timothy Nominees Pty Ltd
Total
7.
On-market buy back
Holding
1,500,000
4,000,000
% Total Incentive
Options
37.50%
100.00%
Holding
4,483,530
4,483,530
% Total Broker
Options
100.00%
100.00%
Holding
7,757,220
30,499,997
% Total
Performance
Shares
25.43%
100.00%
There is currently no on-market buyback program for any of the Company’s listed securities and no securities were
purchased on market during the financial period.
75
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
ASX ADDITIONAL INFORMATION (CONTINUED)
8. Use of Funds
In accordance with ASX Listing Rule 4.10.19, Family Zone confirms it has used the cash and assets in a form
readily convertible into cash, that it had at the time of its admission to ASX, for the period from admission to 30 June
2018 in a way that is consistent with its business objectives and strategy.
76
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Family Zone Cyber Safety Limited
Annual Report 30 June 2018
CORPORATE GOVERNANCE
In accordance with ASX Listing Rule 4.10.3 the Company’s corporate governance statement can be found at the
following URL:
https://cdn2.hubspot.net/hubfs/416543/Corporate%20Governance%20Statement%20-
Family%20Zone%2030%20June%202018%20-%20FINAL.pdf?t=1535601911645
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.
77
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