FAMILY ZONE CYBER SAFETY LIMITED
ACN 167 509 177
ANNUAL REPORT
for the year ended 30 June 2020
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
CONTENTS
PAGE
CORPORATE INFORMATION .................................................................................................................................... 3
CHAIRMAN'S MESSAGE ............................................................................................................................................ 4
REVIEW OF OPERATIONS ........................................................................................................................................ 5
DIRECTORS‟ REPORT ............................................................................................................................................... 9
DIRECTORS‟ REPORT REMUNERATION REPORT (AUDITED) ............................................................................ 18
AUDITOR‟S INDEPENDENCE DECLARATION ........................................................................................................ 33
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ..................... 34
CONSOLIDATED STATEMENT OF FINANCIAL POSITION .................................................................................... 35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY .................................................................................... 36
CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................. 37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .............................................................................. 38
DIRECTORS‟ DECLARATION .................................................................................................................................. 83
INDEPENDENT AUDITOR‟S REPORT………………………………………………………………………………………84
ASX ADDITIONAL INFORMATION ........................................................................................................................... 92
CORPORATE GOVERNANCE .................................................................................................................................. 97
2
CORPORATE INFORMATION
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Directors
Tim Levy
Peter Pawlowitsch
Crispin Swan
Phil Warren
Matthew Stepka
Company secretary
Emma Wates
Managing Director
Non-Executive Chairman (appointed 24 September 2019)
Executive Director - Sales
Non-Executive Director
Non-Executive Director (appointed 1 May 2020)
Registered and principal administrative office:
945 Wellington Street
WEST PERTH WA 6005
Telephone: +61 8 9322 7600
Principal place of business
Level 17 Citibank House
37 St George Terrace
PERTH WA 6000
Telephone: 1300 398 326
Share register
Automic Registry Services
Level 5
126 Phillip Street
Sydney NSW 2000
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)
3
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
CHAIRMAN’S MESSAGE
Dear Fellow Shareholders,
I have really enjoyed my first year as Chairman of Family Zone Cyber Safety Limited (“Family Zone” or the
“Company”, ASX: FZO) and its controlled entities (the “Group”) and helping the team deliver on our mission of
supporting and protecting every child's digital journey and in the past 12 months we have taken significant steps
forward in this aim.
The Family Zone platform offers a world first, singular approach to enable schools, parents and cyber safety
experts to collaborate to keep children safe anywhere, at any time, on any device and any network. We are building
a business that incorporates school administration, teachers, all kinds of devices and the community surrounding
children, empowering parents with tools and content that support learning.
While the COVID-19 pandemic has affected businesses everywhere during this period, it has highlighted the value
of our products and the need of our tools to assist children with their digital experiences, which have only increased
with homeschooling becoming a tool being used to combat the spread of COVID-19.
We entered the year with 927 schools and 482,000 students on the platform. At year end, the Company‟s
educational base had grown to 2,456 schools (+165 percent) and 1.31 million students (+172 percent). Building on
this, the strong sales trend has continued into FY21, with the Company achieving a 33 percent increase in the
number of contracted students within just the first eight weeks of FY21.
Our growth has been bolstered by our aggressive push into the US market during the past 12 months. The US
market offers a large-scale growth opportunity with 135,000 schools and 57 million students. At the start of FY20,
the US made up about 48 percent of our school clients, and at year end, it made up more than 75 percent of our
numbers. However, this is only the tip of the iceberg as we have penetrated only about 2 percent of the US school
districts, demonstrating how much further we can grow our business by focusing on this market.
Family Zone‟s prioritisation of its education channel in FY20 was the bedrock of the Company‟s success. The
annual value of contracts signed grew swiftly through the year and the Company achieved 500 percent YoY growth
on this metric in the June quarter alone. The Company expects to supplement this growth by launching consumer
offerings into the US within the next six months.
I would like to thank our Shareholders, both new and existing, for their support of our capital raisings during the
year and for continuing to support Family Zone as it pursues its strategy for growth. I also thank our Board, who
have supported me since coming into the role of Chairman in September 2019, and our Management team,
including Managing Director Tim Levy, for their stellar efforts. Our staff have operated through a challenging period
recently and I commend them for their dedication.
Family Zone has a clear goal of what it wants to achieve, and I believe we are on the right track to that success. I
look forward to keeping you all updated of our progress in the year ahead.
Peter Pawlowitsch
Chairman
4
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
REVIEW OF OPERATIONS
Operational results
Key operational highlights and achievements in the 12-month period ending 30 June 2020 included:
Successful expansion in USA education drove a 165% YoY growth in schools and 173% growth in
Students using Family Zone‟s service.
Established the Company as a significant player in US education, deploying into approximately 2% of USA
school districts and over 30 states in America.
Significantly expanded our product offerings including launching market leading Classwize, SafeInspect,
SafeGuard and SafeDNet.
Continued to innovate in consumer offerings, including a successful launch of freemium, Family Zone
Insights.
Raised a total of $11.17 million (net of issue costs) in two placements to support continued investment in
the platform and business growth into FY21.
Recurring revenue growth
relatively
Growth in the annual recurring revenue is a key
strategic focus of the Group. Given the Group‟s
operating costs are
fixed, strong
revenue growth will have a significant impact on
the Company‟s operating result. The majority of
the Group‟s revenues are generated from its
education business with schools contracted
generally for between 1 and 3 years. Contracted
revenues are also generated from the Group‟s
consumer and wholesale customers.
The Group ended the financial year with annual
recurring revenues (Non-IFRS measure) of circa
$8.04 million representing a 105% increase from
the prior year.
Annual recurring revenue
represents the estimated next 12 month gross
revenue of the Group based on the number of
contracted customers year end and the average
revenue generated per customer.
US growth
The 2019/2020 financial year represented the second year of the Company‟s entry into US education. The
Company‟s previous investments in product and business development saw strong traction with more than 830,000
US students added to the Family Zone platform. This represented a near trippling of the Company‟s student user-
base.
By the June 2020 quarter, which cyclically represents the largest US sales period, the US was the biggest
contributor to the Company‟s top line growth. Family Zone ended FY20 with 2,010 US schools on the platform
representing more than 75% of customers in its Education division. Family Zone has achieved market penetration
of more than 2% of all US school districts in an incredibly short period of time, which demonstrates the opportunity
for future growth.
5
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
REVIEW OF OPERATIONS
Record growth in schools and student licences
Family Zone continued to add student licences at a
record pace throughout the year, with each quarter
surpassing the previous one and Family Zone
finishing the year with a new record of 214,000 new
student licences in the June quarter, 1.3 million
students on the platform and more than 900,000
licenced students. It ended the year with 2,456
schools on the platform and 1,815 contracted
schools.
The June quarter record was broken in the first
month of FY21, with July 2020 seeing Family Zone
add 219,000 contracted student licenses to the
platform as budgets were set in the US school
system, which boosted sales activity. This
is
expected
the company with strong
to provide
momentum to build upon in FY21.
Continued innovation in consumer
Whilst focused on expansion in education during the
year, the Company continued to grow it‟s direct
consumer business and innovate. Most importantly,
the Company launched its freemium consumer
offering, Family Zone Insights. Its launch was a
significant milestone, providing Family Zone with
direct access to large audiences and the ability to
obtain insights into children‟s online activities for the
purpose of promoting cyber safety and Family
Zone‟s premium parental control offering.
Insights is a „freemium‟ product which provides parents with:
Detailed reports and drill downs into their children‟s internet usage;
The ability to locate their children‟s devices;
The ability to trace their children‟s location history;
Alerts for risky activity such as the use of inappropriate apps;
Analysis of their children‟s internet activity;
Timely and relevant advice from cyber safety experts; and
Seamless upgrade opportunities to seamlessly subscribe to premium parental controls allowing parents to
block inappropriate content, manage screen-time, limit social media, Apps and more.
The purpose of Insights is to drive scale and by design enforces no restrictions onto the child. Insights was made
available to Family Zone‟s school clients and wholesale partners, offering them valuable (brand building) tools for
their community/customers and offering Family Zone upgrade sales opportunities.
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Family Zone Cyber Safety Limited
Annual Report 30 June 2020
REVIEW OF OPERATIONS
Insights was soft launched in Australia and in November 2019, the Company launched Telkomsel Safe, a re-
branded Family Zone Insights offering.
By the end of 1H20, 7,200 accounts had been activated across Family Zone‟s channels with the bulk via
Telkomsel. Initial engagement indicators were exceptional, with greater than 60% activation of downloaded Apps
and negligible churn.
In February 2020, Telkomsel started providing some initial marketing of the product and this resulted in a
considerable increase in downloads.
Wholesale channels
During the March quarter, as COVID-19 started to impact the business, the Company initiated a strategic review of
its Asian telco channel, in light of:
The economic impact of COVID-19 on these jurisdictions;
The costs to service this channel;
Existing wholesale revenue; and
Other opportunities to deploy capital.
As a result, the Company decided to suspend wholesale sales for 2020 and reconsider the wholesale channel in
CY21 while it capitalises on opportunities in the Education sector, particularly in the US, as it believed the
Education and School Communities segments to be a more productive and appropriate focus for short-term
investment.
Financial results
The Group achieved revenue of $5.09 million for the year ended 30 June 2020, a 21.6% increase on the previous
corresponding period. Revenue from sales in the US increased by about 70% to $1.35 million over the previous
year.
The Group reported a net loss of $17.6 million, which was a 22.3% increase on the FY19 result. During the year,
the Group continued to invest in the development of new products as well as undertaking several major product
enhancements. This included the launch of its teacher tool Classwize in February 2020, which proved to be a
valuable tool for schools particularly following the move to remote learning in the wake of the COVID-19 pandemic.
The Company also invested in expanding the scale of its platform to support the increasing number of users and
scale of opportunities presented in the US education market.
Family Zone‟s continued investment in R&D activities resulted in the Group receiving government R&D grant
income of approximately $2.39 million, resulting in operating revenue and other income for the year of
approximately $8.47 million.
Employee benefits and director remuneration was a key expenditure item for the financial year, being
approximately $10.05 million. During the year, the Group invested in the establishment of an experienced sales and
delivery team to drive growth in the US education market. It now has 20 employees in its US team.
Non-cash share-based payments to employees and consultants during the period were approximately $2.91
million.
Other significant non-cash expenditure was the depreciation and amortisation charge for the financial year of
approximately $4.16 million.
7
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
REVIEW OF OPERATIONS
Corporate
Capital Raising
In October 2019, the Company completed a placement of 33.9 million new shares at $0.14 per share to raise $4.75
million (before costs). The Company was supported in the placement by several existing institutional investors and
welcomed a range of new institutional and sophisticated investors from Australia and Asia.
Blue Ocean Equities Pty Ltd acted as Lead Manager to the Placement.
As announced in April 2020 and completed in May 2020, the Company completed a second capital raising for $10
million (before costs) through a Placement of 84,333,335 new shares to a range of institutional and private
investors based in Australia and the US.
The Placement price was set at $0.12, representing a 7.7% discount to the closing price on 23 April 2020 of $0.13
and a 16.6% discount to the 15-day VWAP of $0.14 prior to the Placement. The Placement shares were issued in
two tranches, with the second tranche being subject to shareholder approval which was granted on 30 June 2020
and shares issued in July 2020.
Bell Potter Securities Limited acted as Lead Manager to the Placement.
Net proceeds from the capital raisings have and are being used primarily to accelerate growth and build on the
rapid progress being made in USA education.
Board Changes
In September, experienced ASX executive Peter Pawlowitsch became Family Zone‟s Non-Executive Chairman.
He is non-executive chairman of Novatti Group Ltd (ASX: NOV) and a non-executive director of Dubber
Corporation Ltd (ASX: DUB), VRX Silica Ltd (ASX: VRX) and Knosys Ltd (ASX: KNO).
John Sims, who previously held the Chairman role, and non-executive Director Sir Peter Westmacott resigned
during the period.
In the June quarter, the Company appointed former Google executive Matthew Stepka as a Non-Executive
Director. Mr Stepka is Managing Partner of Machina Ventures, an investment firm focused on early stage, artificial
intelligence and data science enabled companies. He is also a Lecturer at UC Berkeley, Haas School of Business
and is an inaugural Disruptor Foundation Fellow and is a member of the California State Bar.
Cash balance
The Company‟s cash balance as at 30 June 2020 was $5.8 million, with an additional $3.7 million received on 7
July 2020 following the completion of the second tranche of its Placement.
With these funds and growing recurring revenues the Company is well funded and positioned to invest in growth.
8
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 2020. In order to comply with the provisions of the Corporations Act 2001, the Directors‟ Report as
follows:
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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 Peter Pawlowitsch
Non-Executive Independent Chairman
Appointed 24 September 2019
Mr John Sims
Non-Executive Independent Chairman
Resigned 24 September 2019
Mr Crispin Swan
Executive Director – Sales
Mr Phil Warren
Non-Executive Independent Director
Mr Matthew Stepka
Non-Executive Independent Director
Appointed 1 May 2020
Sir Peter Westmacott
Non-Executive Independent Director
Resigned 24 September 2019
The Directors have been in office since the start of the year to the date of this report unless otherwise stated.
COMPANY SECRETARY
The following person held the position of Company Secretary at the end of the financial year:
Emma Wates
Emma is a Corporate Advisor and acted as Company Secretary for a number of ASX listed companies. Emma is a
Chartered Accountant and a Senior Associate of FINSIA.
PRINCIPAL ACTIVITIES
Family Zone is a technology group focussed on cyber safety. Meeting a growing demand to keep kids safe online
and manage digital lifestyles, Family Zone has developed a unique ecosystem-based approach to cyber safety.
The Family Zone ecosystem is a platform from which cyber safety settings, advice, and support can be delivered
across any network and any device – offering a universal approach to cyber safety at home, at school and
anywhere in between. The innovation of the Family Zone ecosystem is that it not only supports the needs of
schools and parents but also that it also permits telecommunication service providers and device manufacturers to
embed world‟s-best practice cyber safety into their offerings.
The principal activities of the Group during the period have been continued sales and distribution, 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 revenue, other income and revaluation gains for the year ended 30 June 2020 of
$8,465,865 (2019: $9,199,917) with revenue from operations being $5,090,173 (2019: $4,184,323).
The net loss attributable to members of the Group for the year ended 30 June 2020 amounted to $17,617,120
(2019: loss $14,401,137).
9
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT
REVIEW OF OPERATIONS
The operations of the Group during the financial year 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 8 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.
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 Group 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.
EVENTS AFTER BALANCE DATE
On 1 July 2020, the Company acquired 100% of the issued fully paid capital of a privately owned technology
company operating within the cyber security sphere, for cash consideration of $100. At the date of this report, the
initial business combination accounting is incomplete and as such no disclosures have been made in relation to the
acquisition accounting for this transaction. Further disclosure will be provided in due course as management
continue to work through this process.
On 1 July 2020, a new lease agreement was entered into by the Company for premises in Australia. The lease is
for a term of 2 years, commencing from 1 July 2020.
On 7 July 2020, the Company completed the issue of the second tranche of 30,833,333 Placement Shares at $0.12
per Share raising $3.7 million (before costs) including an investment of $500,000 by the Company‟s Chairman,
Peter Pawlowitsch. The Company also issued 2,000,000 Broker Options ($0.18, 7 July 2023), 5,500,000
Performance Rights to Matthew Stepka and 1,000,000 Director Options ($0.21, 7 July 2023) to Phil Warren. These
options were approved at the Shareholder meeting on 30 June 2020, and therefore accounted for at 30 June 2020.
On 13 July 2020 the Company announced the issue of the 4,000,000 Advisor Options, comprising 2,000,000
Tranche 1 Advisor Options ($0.18, 13 July 2023) and 2,000,000 Tranche 2 Advisor Options ($0.24, 13 July 2023)
and 4,500,000 Performance Rights under the Company‟s Performance Rights Plan. These options were approved
at the Shareholder meeting on 30 June 2020, and therefore accounted for at 30 June 2020.
On 15 July 2020 the Company announced it had passed through a significant operational milestone with over 1
million contracted student licenses with a total of approximately 1.4 million students and 2,600 schools on the
Family Zone Platform.
On 26 August 2020, the Company announced that in the 8 weeks following the end of the financial year the
Company had signed contracts in US education covering greater than 300,000 student licenses with 312,500
10
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT
student licences added across the business in this period representing a 33% increase in the size of Family Zone‟s
contracted education base.
On 28 August 2020, the Company announced the issue of 500,000 Broker Options ($0.18, 13 July 2023).
Since the end of the financial year a total of 4,798,789 Shares have been issued following the exercise of
4,798,789 Options with a total of $998,923 funds received from the exercise of these Options. In addition 459,842
Performance Rights have been exercises for nil consideration.
Apart from the events discussed above, no other matters or circumstances have arisen since the end of the period
which significantly affected or may significantly affect the operations of the Group, the results of those operations or
the state of affairs of the Group in subsequent financial years.
INFORMATION ON DIRECTORS
DIRECTORS
Mr Tim Levy
B. Com, CA
Mr Peter
Pawlowitsch
B. Comm, CPA
MBA, FGIA
(Appointed 24
September 2019)
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
Experience and expertise
Mr Pawlowitsch is an experienced ASX company director. Mr Pawlowitsch specialises in
technology businesses and the transition from startup to sustainability.
Mr Pawlowitsch is also a Fellow of the Governance Institute of Australia and holds a
Master of Business Administration from Curtin University. These qualifications have
underpinned more than 15 years‟ experience in the accounting profession and more
recently in business management and the evaluation of businesses and projects.
Other current directorships of ASX listed companies
Dubber Corporation Limited (September 2011 – present)
VRX Silica Limited (February 2010 – present)
Knosys Limited (March 2015 – present)
Novatti Group Limited (June 2015 – present)
Other directorships held in ASX listed companies in the last three years
Rewardle Holdings Limited (May 2017 – January 2019)
Mr John Sims
B. Acc (Glasgow)
(Resigned 24
September 2019)
Experience and expertise
Mr. Sims is a successful technology and telecommunications executive with over 35
years‟ experience. Based in San Francisco his former roles include:
● President, Global Sales, BlackBerry Limited
● Global Head of Telecom & President, SAP Mobile Services, SAP AG
11
DIRECTORS’ REPORT
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Mr Crispin Swan
B.
(Hons)
Arts
(UK/Germany)
European Business
Programme
Mr Phil Warren
B. Com, CA
● 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
● 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
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 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 and governance director.
Other current directorships of ASX listed companies
raisings, debt
financing,
Cassini Resources Limited (March 2011- present)
Rent.com.au Limited (September 2014 – present)
Jupiter Energy Limited (April 2018 – present)
Other directorships held in ASX listed companies in the last three years – Nil
Sir Peter
Westmacott
(Resigned 24
September 2019)
Experience and expertise
Sir Peter is a distinguished senior British diplomat, who has been British Ambassador to
Turkey, France and the United States of America. Sir Peter has been honoured with
numerous awards and appointments in the UK and France. He was appointed
Companion of the Order of St Michael and St George in 2000, promoted to Knight
12
DIRECTORS’ REPORT
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Commander (KCMG) in 2003 and Knight Grand Cross (GCMG) in 2016. He was also
made a Lieutenant of the Victorian Order by HM The Queen in 1993.
Other current directorships of ASX listed companies
None
Other directorships held in ASX listed company in the last three years
None
Mr Matthew
Stepka
(Appointed 1 May
2020)
Experience and expertise
Mr Stepka is Managing Partner of Machina Ventures, an investment firm focused on early
stage, artificial intelligence and data science enabled companies. He is also a Lecturer at
UC Berkeley, Haas School of Business. Previously, Mr. Stepka was Vice President,
Business Operations and Strategy at Google, where he led and incubated strategic
initiatives
renewable energy,
strengthening freedom of expression and democracy, innovating in robotics, establishing
novel pricing strategies and extending Google‟s footprint in emerging markets, especially
Africa.
internet access, deploying
including expanding
Prior to joining Google, Mr. Stepka held positions including Vice President at
drugstore.com, Chief Operating Officer at WorldRes (a leading online hotel reservation
network) and Management Consultant with McKinsey & Company.
Mr. Stepka holds a Juris Doctorate from UCLA School of Law, and is a member of the
California State Bar. In addition, he holds Bachelor of Science degrees in Computer
Engineering and Management from Case Western Reserve University.
Other current directorships of ASX listed companies
None
Other directorships held in ASX listed company in the last three years
None
MEETINGS OF DIRECTORS
The number of Directors‟ meetings held, and the number of meetings attended by each of the Directors, for the
year ended 30 June 2020:
Director
Mr Tim Levy
Mr Peter Pawlowitsch
Mr John Sims
Mr Crispin Swan
Mr Phil Warren
Mr Matthew Stepka
Sir Peter Westmacott
Number of Board meetings eligible
to attend
4
3
1
4
4
1
1
Number of Board meetings
attended
4
3
1
4
4
1
1
13
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT
The number of audit committee meetings held, and the number of meetings attended by each of the Directors, for
the year ended 30 June 2020.
Director
John Sims
Phil Warren (Chairman)
Mr Peter Pawlowitsch (Chairman)
Number of audit committee
meetings eligible to attend
Number of audit committee
meetings attended
1
2
1
1
2
1
During the year ended 30 June 2020 the Remuneration Committee worked with management to develop the
Group‟s remuneration strategy which formed the basis of the Staff Incentive Plan introduced during the year in
which the Executive Directors participated. The Remuneration Committee reviewed and approved the revised
remuneration packages of the Executive Directors by circular resolution during the year.
The Board as a whole considered the appointment of new Directors during the financial year having regard to the
Company‟s stage of operations and the desired skills and experience required by the Company as well as the
proposed candidates‟ diversity of background.
DIRECTORS’ INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the interests of the Directors in fully paid ordinary shares (Shares), unlisted options,
and performance rights of the Group were:
Director
Tim Levy
John Sims
Crispin Swan
Phil Warren
Sir Peter Westmacott
Peter Pawlowitsch
Matthew Stepka
Shares
10,939,730
322,222
4,196,575
293,088
283,052
8,298,085
-
Unlisted Options Performance Rights1
181,351
-
197,838
1,000,000
75,000
3,000,000
4,599,207
-
2,910,959
-
-
-
5,500,000
1. Refer to the table below for breakdown of various Performance Rights held by Directors
14
DIRECTORS’ REPORT
As at the date of this report, the interests of the Directors the various classes of performance rights of the Group
were:
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Director
Tim Levy
John Sims
Class D
PRs
Class G
PRs
Remuneration
PRs
Employee
PRs
Executive
PRs
SP PRs
Total
Performance Rights (“PR”)
-
-
977,778
1,071,429
300,000
1,250,000
1,000,000
4,599,207
-
-
-
-
Crispin Swan
333,340
213,333
814,286
300,000
1,250,000
Phil Warren
Sir Peter
Westmacott
Peter
Pawlowitsch
Matthew Stepka
-
-
-
-
-
-
-
-
-
-
-
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,910,959
-
-
-
5,000,000
5,500,0000
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
The Company indemnifies the directors and officers of the Company for costs incurred, in their capacity as a
director or officer, for which they may be held personally liable, except where there is a lack of good faith. During
the financial year, the Company paid a market rate premium in respect of a contract to insure the directors and
executives of the Company against a liability to the extent permitted by the Corporations Act 2001. For
confidentiality purposes the insurer has recommended not to disclose of the nature of the liability and the amount of
the premium.
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 2020 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 Group are important. Non-audit services were provided by the Group‟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.
15
DIRECTORS’ REPORT
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
30 June 2020
$
30 June 2019
$
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 auditor’s remuneration for non-audit services
-
11,700
11,700
3,000
10,600
13,600
UNISSUED SHARES UNDER OPTION
At the date of this report unissued ordinary shares, or interests of the Company under option, are:
Options
Broker Options
Broker Options
Broker Options
Broker Options
Advisor Options
Employee Options
Selling/Advisor Options
Director Options
Employee Options
Director Options
Broker Options
Advisor Options
Advisor Options
Advisor Options
Performance Shares
Performance Rights
Total
Granted
Exercise Price
Expiry Date
Number
04/12/2017
04/12/2017
09/04/2018
09/04/2018
11/03/2019
18/03/2019
08/11/2019
08/11/2019
29/05/2020
30/06/2020
30/06/2020
30/06/2020
30/06/2020
28/08/2020
29/11/2017
25/02/2019 to
13/07/2020
$0.50
$0.60
$0.75
$0.90
$0.25
$0.18
$0.21
$0.21
$0.21
$0.21
$0.18
$0.18
$0.24
$0.18
Nil
Nil
04/12/2020
04/12/2020
09/04/2021
09/04/2021
11/03/2022
18/03/2022
08/11/2022
08/11/2022
29/05/2023
07/07/2023
07/07/2023
13/07/2023
13/07/2023
13/07/2023
29/11/2022
25/02/2022 to
13/07/2023
850,000
850,000
516,765
516,765
250,000
1,629,892
2,595,000
3,000,000
500,000
1,000,000
2,000,000
500,000
1,200,000
500,000
3,000,000
26,068,235
44,976,657
16
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT
SHARES ISSUED DURING OR SINCE THE END OF THE YEAR AS A RESULT OF EXERCISE OF OPTIONS
During the year, and as at the date of this report, details of ordinary shares issued by the Company are as a result of
the exercise of Options and Performance Rights are:
Options
Date Option Granted
Exercise Price
Number of Shares
issued
Amount paid for
Shares
Broker Options
Employee Options
Selling/Advisor
Advisor Options
Advisor Options
Performance Rights
Total
21/05/2019
09/04/2018
08/11/2019
30/06/2020
30/06/2020
25/02/2019 and
02/03/2020
$0.235
$0.18
$0.21
$0.24
$0.18
Nil
898,692
342,997
1,257,100
800,000
1,500,000
459,842
$211,193
$61,739
$263,991
$192,000
$270,000
-
5,258,631
$998,923
ROUNDING OF AMOUNTS
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.
17
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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 2020. 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 – Resigned 24 September
2019
Mr Peter Pawlowitsch
Non-Executive Chairman
Appointed 24 September 2019
Mr Crispin Swan
Executive Director - Sales
Appointed 3 September 2015
Mr Phil Warren
Non-Executive Director
Sir Peter Westmacott
Non-Executive Director
Mr Matthew Stepka
Non-Executive Director
Appointed 13 May 2016
Appointed 8 October 2018 – Resigned 24 September
2019
Appointed 1 May 2020
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 executives 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, employer contributions to superannuation funds as well as
securities issued under the Staff Incentive Plan as part of the Group‟s cashflow conservation strategy. These
securities are considered fixed remuneration when they are not at risk as a result of performance.
Remuneration levels will be, if necessary, reviewed annually by the Board through a process that considers the
18
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
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.
No external remuneration consultants were engaged during the year.
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.
During the year, the Group implemented a Staff Incentive Plan with the following core objectives:
●
●
●
●
Conserving cash by converting cash based remuneration to security based remuneration;
Attract and retain staff;
Align executives incentives to the Company‟s annual recurring revenue targets; and
Align remuneration with shareholders through employees having an equity interest in the Company.
The Staff Incentive Plan introduced comprised:
Remuneration in Securities
The Executive Directors and a number of senior staff agreed to convert part of their cash based remuneration into
security based remuneration. Shares and Remuneration Performance Rights were issued in lieu of salaries with the
objective of conserving cash and aligning the employee remuneration with shareholders through employees having
an equity interest in the Company.
Employee Incentive Scheme
The Company also introduced an Employee Incentive Scheme across all staff, including Executive Directors,
with the objective of attracting and retaining staff within the business through the issue of Employee
Performance Rights. The Employee Performance Rights were issued under the Company‟s Performance
Rights Plan in three equal tranches which vest subject to continued employment over a 3 year period.
Executive Incentive Scheme
The Company also introduced an Executive Incentive Scheme for senior executives, including Executive
Directors, focusing on growing annual recurring revenue (ARR). The continued growth of the Company‟s ARR
has been identified as a key strategic objective of the Company and it is targeting to achieve $16 million
ARR by 30 June 2021.
The Executive Performance Rights issued under the Company‟s Performance Rights Plan include vesting
conditions which focus on the achievement of $16 million of ARR by 30 June 2021 (Target ARR). No
Executive Performance Rights will vest if the Company does not achieve at least 90% of this target and all the
Executive Performance Rights will vest if the Company‟s ARR is $20 million by 30 June 2020 exceeding its Target
ARR by 25%.
Executive 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.
19
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
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)
a base salary of $300,000 per annum (2019: $220,000) plus statutory superannuation, effective 15 January
2020.
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)
During the year, Mr Levy agreed to forgo 50% of his cash salary for 12 months and opted to receive 1,071,429
Remuneration Performance Rights for the service provided. He was also issued 300,000 Employee Performance
Rights, 1,250,000 Executive Performance Rights and 1,000,000 SP Performance as part of the Company‟s Staff
Incentive Plan. Refer to Section E for details on these performance rights including the vesting conditions.
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) a base salary of $300,000 per annum (2019: $240,000) plus statutory superannuation, effective 15 January
2020.
the agreement may be terminated;
b)
(i)
(ii)
(iii)
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 a termination by reason of redundancy. If the Company terminates for reason of redundancy it
20
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
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)
During the year, Mr Swan agreed to forgo 38% of his base salary for 12 months and opted to instead receive
814,286 remuneration Performance Rights for the service provided. He was also issued 300,000 Employee
Performance Rights and 1,250,000 Executive Performance Rights as part of the Company‟s Staff Incentive Plan.
Refer to Section E for details on these performance rights including the vesting conditions;
Non-Executive Directors and Chairman Fees
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.
Non-Executive Chairman, Mr Peter Palowitsch receives a base cash fee of $80,000 per annum (plus statutory
superannuation) payable from his appointment date. If the market capitalisation of the Company reaches $150
million for 20 consecutive days Mr Pawlowitsch‟s remuneration will increase to $100,000 per annum (plus statutory
superannuation). Non-Executive Directors Mr Phil Warren and Mr Matthew Stepka are entitled to base cash fee of
$40,000 pa and $60,000 pa respectively.
During the financial year Mr Pawlowtisch and Mr Stepka agreed to receive equity based remuneration in lieu of their
base cash fees for a 12 month period.
The Company does not have a Director‟s Retirement Scheme in place at present.
21
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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 (KMP) (as defined in AASB 124 Related Party Disclosures) of the Group for the year
ended 30 June 2020 are set out in the following table.
Directors and KMP
Short -term
Post employment
Long term
Share-based
payments
TOTAL
Performance based %
of remuneration
30 June 2020
Salary
fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Retire-
ment
benefits
$
Termination
benefits
$
Incentive
Plans
$
Long
Service
Leave
$
Shares/
Options/
Performance
Rights (PR)
$
Fixed
based
%
Performance
based %
$
Mr Tim Levy1
62,500
-
Mr Crispin Swan2
189,500
-
-
-
18,129
-
-
20,662
-
-
-
-
-
195,101
275,730
86%
-
85,671
295,833
91%
Mr John Sims3
4,166
-
-
-
-
-
-
-
-
4,166 100%
Mr Peter Pawlowitsch3
21,449
-
-
2,037
-
-
-
-
208,523
232,009
45%
Mr Phil Warren
16,666
-
-
3,800
-
-
-
-
57,705
78,171
26%
Sir Peter Westmacott4
-
-
-
-
-
-
-
-
-
-
Matthew Stepka5
-
-
Total Directors
294,281
-
-
-
-
-
-
44,628
-
-
-
-
-
361,863 361,863
-
908,863
1,247,772
52%
0%
3%
14%
9%
0%
55%
74%
0%
97%
48%
22
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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 2019 are set out in the following table.
Directors and
KMP
Performance based %
of remuneration
Share-based
payments
Post employment
Short -term
Long term
TOTAL
30 June 2019
Salary
fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Retire-
ment
benefits
$
Termination
benefits
$
Incentive
Plans
$
Long
Service
Leave
$
Shares/
Options/
Performance
Rights $
$
Fixed
based
%
Performance
based %
Mr Tim Levy
128,333
Mr Crispin Swan
220,000
Mr John Sims
Mr Phil Warren
Sir
Westmacott
Peter
25,000
23,333
6,667
Total Directors
403,333
-
-
-
-
-
-
-
5,600
-
-
-
20,900
22,800
-
3,800
-
5,600
47,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
151,243
300,476
86%
200,283
448,683
90%
50,000
75,000
100%
40,000
67,133
100%
40,000
46,667
100%
481,526
937,959
91%
14%
10%
0%
0%
0%
9%
1. Mr Levy’s base cash salary increased from $220,000 to $300,000 pa on 15 January 2020. In the CY2019 Mr Levy received 100% of his base cash salary as equity based remuneration. In the CY2020 Mr Levy
has agreed to receive 50% of his base cash salary as equity based remuneration. In addition Mr Levy’s performance incentives were issued as equity based incentives in May 2020. Assuming all the vesting
conditions attaching to Mr Levy’s equity based incentives are achieved a higher remuneration expense will be recognised in the 2021 financial year due to a higher equity based remuneration expense being
recognised during the period.
2. Mr Swan’s base cash salary increased from $240,000 to $300,000 pa on 15 January 2020. In the CY2019 Mr Swan received 20% of his base cash salary as equity based remuneration. In the CY2020 Mr
Swan has agreed to receive 38% of his base cash salary as equity based remuneration. In addition Mr Swan’s performance incentives were issued as equity based incentives in May 2020. Assuming all the
vesting conditions attaching to Mr Swan’s equity based incentives are achieved a higher remuneration expense recognised in the 2021 financial year due to a higher equity based remuneration expense being
recognised during the period.
3. Mr John Sims resigned from his position as Non-Executive Chairman 24 September 2019 and Mr Peter Pawlowitsch was appointed Non-Executive Chairman on the same date.
4 Sir Peter Westmacott resigned from his position as Non-Executive Director 24 September 2019.
5 Mr Stepka was appointed as Non-Executive Director 1 May 2020.
23
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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, recurring (contracted) sales revenues and share price.
Directors and employees are issued options and/or performance rights, to encourage the alignment of personal and
shareholder interests.
Options issued to Directors and employees may be subject to market-based price hurdles and other vesting
conditions that encourage the achievement of strategic targets and/or ongoing commitment to the Company. 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 rights vest on the achievement of market based price hurdlers and/or operational milestones,
providing those Directors and executives holding performance rights an incentive to meet the operational and
financial milestones prior to the expiry date of the performance rights.
On the resignation of Directors and employees any vested options and performance rights issued as remuneration
are generally retained by the relevant party.
The Board may exercise discretion in relation to approving incentives such as options and performance rights. The
policy is designed to reward key management personnel for performance that results in long-term growth in
shareholder value, to also encourage employee commitment to the Company and to align staff and shareholders
interests.
The following table shows Group‟s operating revenue, profits/(losses) and dividends for the last five financial years,
as well as the Company‟s share prices at the end of the respective financial years. The Group has continued to
grow its operating revenue over the last financial year. As outlined in the operating and financial review growth in
revenue in particular contracted recurring revenues from the Company‟s education business is a key focus of the
Group. The Board has been issued equity based incentives during the financial year as a reward for the
operational performance of the Group but also as an incentive with performance based vesting conditions linked to
the Group‟s key strategic objectives being recurring revenue growth and share price appreciation, therefore
aligning the interests of Directors with shareholders.
Operating revenue
5,090,173
4,184,323
2,329,780
1,589,202
2020
$
2019
$
2018
$
2017
$
2016
$
5,532
Net profit/(loss)
(17,617,120)
(14,401,137)
(18,206,211)
(8,834,735)
(2,815,607)
Share price at year-end
Dividends paid
0.195
0.00
0.150
0.00
0.475
0.00
0.33
0.00
0.20
0.00
24
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
E.
a)
Key management personnel’s equity holding
Number of Options held by Key Management Personnel
The number of the options of the Company held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities for the year ended 30 June 2020 are as follows:
Directors and
Executives
Held at
1 July 2019
Options
exercised
Options
expired
Other
changes
Held at
30 June 2020
Vested and
exercisable
at 30 June 2020
Mr Tim Levy
181,351
-
-
-
181,351
-
-
-
-
197,838
-
Mr Crispin Swan
Mr John Sims
Mr Peter
Pawlowitsch1
Mr Phil Warren2
Sir Peter Westmacott
Mr Matthew Stepka
Total
1. 3,000,000 options ($0.21, 8 Nov 2022) were issued to Peter Pawlowitsch on 8 Nov 2019 of which
1,500,000
75,000
-
1,954,189
-
75,000
-
3,454,189
-
-
1,500,000
197,838
-
(1,500,000)
3,000,000
3,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
120,900
131,892
-
1,000,000
-
75,000
-
1,327,792
1,000,000 were vested as at 30 June 2020.
2. 1,500,000 options ($0.25, 29 Aug 2019) held by Phil Warren expired unexercised on 29 August 2019.
Subsequent to year end on 7 July 2020 Phil Warren was issued 1,000,000 options ($0.21, 7 July 2023).
These were approved at shareholder meeting on 30 June 2020.
During the period 3,000,000 options ($0.21, 3 years) were granted to Non-Executive Chairman, Peter Pawlowitsch
pursuant to the terms of his appointment for services to be provided. Shareholder approval was obtained 4
November 2019 and the options were issued 8 November 2019. These options are subject to various vesting
conditions as outlined below:
Tranche
Vesting Condition
Number
Value Per
Option
($)
Total
Value
($)
Total Share-Based
Payment Expense
for the year ($)
1
2
3
4
5
None
1,000,000
0.0923
92,260
The 30 day VWAP of the Company’s
Shares being greater than $0.25
The 30 day VWAP of the Company’s
Shares being greater than $0.35
The 30 day VWAP of the Company’s
Shares being greater than $0.45
The 30 day VWAP of the Company’s
Shares being greater than $0.60
500,000
0.0917
45,855
500,000
0.0882
44,090
500,000
0.0830
41,480
500,000
0.0754
37,700
92,260
9,832
9,454
8,894
8,083
Total
3,000,000
261,385
128,523
25
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
The fair value of these options have been determined using a Monte Carlo simulation model and the inputs are
outlined below:
Underlying share price
Exercise price
Target price
Exercise Multiple
Expiry date (years)
Expected Volatility
Risk free rate
Value per option
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
$0.18
$0.21
N/A
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.0923
$0.0917
$0.0882
$0.0830
$0.0754
During the year 1,000,000 options ($0.21, 3 years) were granted to non-executive Director Phil Warren. Shareholder
approval was obtained 30 June 2020, options were issued 7 July 2020. These options are subject to various vesting
conditions, the details of which have been outlined below:
Tranche
Vesting Condition
Number
None
500,000
The 30 day VWAP of the Company’s
Shares being greater than $0.25
500,000
0.1090
54,500
Value Per
Option
($)
0.1154
Total
Value ($)
57,705
Total Share-Based
Payment Expense
for the year ($)
57,705
-
1,000,000
112,205
57,705
1
2
Total
Tranche 1 Options have been valued using a Monte Carlo simulation and Tranche 2 Options have been valued
using the Black Scholes option pricing model valuation methodology. The key inputs have been outlined below.
Grant date
Underlying share price
Exercise price
Expiry date (years)
Expected Volatility
Risk free rate
Value per option
Tranche 1
Tranche 2
30/06/2020
$0.195
$0.210
3
98%
0.26%
$0.1154
30/06/2020
$0.195
$0.210
3
93%
0.26%
$0.1090
b)
Number of Shares held by Key Management Personnel
The number of ordinary shares of the Company held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities for the year ended 30 June 2020 is as follows:
26
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Directors and
Executives
Held at
1 July 2019
Received as
remuneration
Shares issued
for cash
subscription
Other
changes
Held at
30 June 2020
Mr Tim Levy1
Mr Crispin Swan1
Mr John Sims
Mr Peter
Pawlowitsch2
Mr Phil Warren
Sir Peter
Westmacott
Mr Matthew Stepka
10,939,729
4,196,574
322,222
-
-
-
-
-
559,991
3,571,428
293,088
283,052
-
-
-
-
-
-
-
1
1
-
-
-
-
-
10,939,730
4,196,575
322,222
4,131,419
293,088
283,052
-
Total
1. Class C Performance Shares that lapsed during the year converted into 1 fully paid ordinary share for each holder.
2. 559,991 shares were issued to Peter Pawlowitsch in lieu of cash remuneration, of $80,000. Peter Pawlowitsch
16,034,665
3,571,428
559,991
2
20,166,086
participated in the Oct/Nov 2019 shares placement being issued 3,571,428 shares at $0.14 each ($500,000 investment).
He also participated in the May/June 2020 placement with 4,166,666 shares being issued at $0.12 each ($500,000
investment) on 7 July 2020.
c)
Number of Employee Options issued during the year under the Employee Share Option Plan
During the year, 3,000,000 options were issued to Mr Peter Pawlowitsch under ESOP with exercise price of $0.21
and expiry date of 8 November 2022. Refer to Section E, part a, above for details on valuation and inputs.
d)
Performance Share Holdings of Key Management Personnel
The number of Performance Shares of the Company held, directly, indirectly or beneficially, by each Director and
key management personnel, including their personally-related entities for the year ended 30 June 2020 are as
follows:
Held at 1 July 2019
Held at 30 June 2020
Class C
Performance
Shares
Class B
Performance
Shares1
Class C
Performance
Shares2
Directors and
Executives
Mr Tim Levy
Mr Crispin Swan
Mr John Sims
Mr Phil Warren
Sir Peter Westmacott
Class B
Performance
Shares
3,878,610
2,205,383
-
-
-
3,878,610
2,205,383
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
6,083,993
6,083,993
1. Class B Performance Shares lapsed during the year following vesting conditions not being achieved.
2. Class C Performance Shares were cancelled on 2 June 2020.
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:
27
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
● 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.
The Class B Performance Shares lapsed during the year following vesting conditions not being achieved and the
Class C Performance Shares were cancelled on 2 June 2020.
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 on ASX.
e)
Performance Rights Holdings of Key Management Personnel
The number of Performance Rights of the Company held, directly, indirectly or beneficially, by each Director and key
management personnel, including their personally-related entities for the year ended 30 June 2020 are as follows:
Directors and Executives Performance Rights
held at
1 July 2019
Received as
remuneration
Other changes Performance Rights
held at
30 June 2020
4,599,207
3,244,289
-
-
-
-
-
Mr Tim Levy1
Mr Crispin Swan2
Mr John Sims
Mr Peter Pawlowitsch
Mr Phil Warren
Sir Peter Westmacott
Mr Matthew Stepka3
Total
977,778
1,213,333
3,621,429
2,364,286
-
(333,330)
-
-
-
-
-
2,191,111
-
-
-
-
-
-
-
-
-
-
5,985,715
(333,330)
7,843,496
1. Tim Levy was issued 1,071,429 Remuneration Performance Rights, 300,000 Employee Performance Rights, 1,250,000
Executive Performance Rights and 1,000,000 SP Performance Rights (comprising 100,000 Class A TL SP Performance
Rights, 200,000 Class B TL SP Performance Rights, 300,000 Class C TL SP Performance Rights and 400,000 Class D
TL SP Performance Rights) on 5 May 2020.
2. Crispin Swan was issued 814,286 Remuneration Performance Rights, 300,000 Employee Performance Rights and
1,250,000 Executive Performance Rights on 5 May 2020. 333,330 Class Performance Rights issued previously to
Crispin lapsed during the year following vesting conditions not being achieved.
3. 500,000 Remuneration Performance Rights and 5,000,000 MS SP Performance Rights (comprising 1,000,000 Class A
MS SP Performance Rights, 1,000,000 Class B MS SP Performance Rights, 1,000,000 Class C MS SP Performance
Rights, 1,000,000 Class D MS SP Performance Rights and 1,000,000 Class E MS SP Performance Rights) were issued
to Matthew Stepka on 7 July 2020. The issue of these securities was approved at the shareholder meeting on 30 June
2020.
28
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
The Performance Rights are subject to the following performance based vesting milestones:
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Performance Rights
Vesting Condition
Remuneration
Performance Rights
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Milestone
Date
6 months
from issue
date
Number of Performance Rights
Vesting
100% Remuneration Performance
Rights held
Executive Performance
Rights
The achievement of ARR1 of $14.4m by
the Milestone Date
30 June 2021
If the ARR is $20m or more, 100% of
the Executive Performance Rights
held;
OR
If the ARR is less than $20m, the
number of Executive Performance
Rights vesting is determined based
on this formula:
[ARR at the Milestone Date1/ $16m]
x [(Number Executive Performance
Rights held) x (100/125)]
100% of the Class A Employee
Performance Rights held
100% of the Class B Employee
Performance Rights held
100% of the Class C Employee
Performance held
1 year from
issue date.
2 year from
issue date.
3 year from
issue date.
3 years from
issue date
100% of the Class A TL SP
Performance Rights held
3 years from
issue date
100% of the Class B TL SP
Performance Rights held
3 years from
issue date
100% of the Class C TL SP
Performance Rights held
3 years from
issue date
100% Class D Performance TL SP
Rights held
1 year from
issue date.
100% Class A Performance MS SP
Rights held
1 year from
issue date.
100% Class B Performance MS SP
Rights held
29
Class A Employee
Performance Rights
Class B Employee
Performance Rights
Class C Employee
Performance Rights
Class A TL SP
Performance Rights
Class B TL SP
Performance Rights
Class C TL SP
Performance Rights
Class D TL SP
Performance Rights
Class A MS SP
Performance Rights
Class B MS SP
Performance Rights
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Continued employment with the
Company in existing role from issue
date until the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.25 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.35 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.45 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.60 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater $0.12 prior to the
Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.18 prior
to the Milestone Date
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Performance Rights
Vesting Condition
Class C MS SP
Performance Rights
Class D MS SP
Performance Rights
Class E MS SP
Performance Rights
The 30 day VWAP of the Company’s
Shares being greater than $0.24 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.36 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater $0.60 prior to the
Milestone Date
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Milestone
Date
Number of Performance Rights
Vesting
1 year from
issue date.
100% Class C Performance MS SP
Rights held
2 year from
issue date.
100% Class D Performance MS SP
Rights held
2 year from
issue date.
100% Class E Performance MS SP
Rights held
1: ARR means the annual recurring revenue of the Company at a particular date which equals 12 X the consolidated revenue reported by
the Company in the next calendar month, on an accruals basis, inclusive of contracted and uncontracted service revenue and exclusive of
one off revenue such as installation fees, hardware and any R&D or other grant income.
During the year, the Company issued a number of Performance Rights to executives and Directors as an incentive
and as remuneration for services.
Performance Rights
TL SP Performance Rights (i)
MS SP Performance Rights (i)
Remuneration Performance Rights - Tim Levy, Crispin Swan (ii)
Remuneration Performance Rights - Matthew Stepka (ii)
Employee Performance Rights – Directors (iii)
Executive Performance Rights – Directors (iv)
Number
Expense for Period
1,000,000
5,000,000
1,885,715
500,000
600,000
$ 12,082
$ 352,000
$ 83,217
$ 9,863
$ 7,574
2,500,000
$ 43,898
$ 508,634
(i) During the year the Company had agreed to issue 1,000,000 TL SP Performance Rights to Tim Levy and
5,000,000 MS SP Performance Rights to Matthew Stepka. The issue of the SP Performance Rights was
subject to shareholder approval which was obtained 1 May 2020 and 30 June 2020 for Messers Levy and
Stepka respectively.
The TL SP Performance Rights have been valued using a Monte Carlo simulation methodology to account for
the market based vesting conditions. The total value of the TL SP Performance Rights issued to Mr Levy
when granted was $89,000 with this share based payment expense recognized over the expected vesting
period of the TL SP Performance Rights.
The MS SP Performance Rights have been valued using a Monte Carlo simulation methodology to account for
the market based vesting conditions. The total value of the MS SP Performance Rights issued to Mr Stepka
when granted $545,000 with this share based payment expense recognized over the expected vesting period
of the MS SP Performance Rights.
The inputs utilised and fair value determined for TL SP Performance Rights and MS SP Performance Rights
within the Monte Carlo simulation performed are as outlined below:
30
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
TL SP Performance Rights
Class A
Class B
Class C
Class D
Total
Unvested
Unvested
Unvested
Unvested
Vesting Date
1-May-23
1-May-23
1-May-23
1-May-23
Number of PR issued
100,000
200,000
300,000
400,000
1,000,000
VWAP Hurdle
Volatility
Risk Free Rate
Total Value of PR
Total Expense for Period
MS SP Performance
Rights
$0.25
99.35%
0.32%
$11,000
$2,602
$0.35
99.35%
0.32%
$20,000
$4,730
$0.45
99.35%
0.32%
$27,300
$2,036
$0.60
99.35%
0.32%
$31,600
$2,714
$89,900
$12,082
Class A
Class B
Class C
Class D
Class E
Total
Unvested
Unvested
Unvested
Unvested
Unvested
Vesting Date
30/06/2021 30/06/2021 30/06/2021 30/06/2022 30/06/2022
Number of PR issued
1,000,000
1,000,000
1,000,000
1,000,000
1,000,000
5,000,000
VWAP Hurdle
Volatility
Risk Free Rate
$0.12
92.66%
0.26%
$0.18
92.66%
0.26%
$0.24
92.66%
0.26%
$0.36
92.66%
0.26%
$0.60
92.66%
0.26%
Total Value of PR
$194,000
$158,000
$101,000
$64,000
$28,000
$545,000
Total Expense for Period
$194,000
$158,000
-
-
-
$352,000
Management have assessed the probability of achieving the vesting condition, as at reporting date. If it was
assessed that the hurdle was likely to be met prior to the expiry date the share based payment expense has
been adjusted to reflect a shorter vesting period.
Management's assessment was based on the fact that the Company's share price was $0.195, as at 30 June
2020 and therefore any Tranches with a VWAP hurdle of less than $0.195 have been met and fully expensed.
For those tranches that management have assessed, as at reporting date, as more likely to be met earlier
than the stated vesting date, they have been expensed over a shortened vesting period.
(ii) The Remuneration Performance Rights granted to Messrs Levy, Swan and Stepka have been valued based
on the fair value of the services provided (remuneration foregone) being $324,000, with this share based
payment expense recognised over the vesting period of the Remuneration Performance Rights. An expense of
$83,217 for Messrs Levy and Swan and $9,863 for Mr Stepka, respectively, has been recognised in the
current period.
(iii) The Employee Performance Rights have been valued at $0.13 based on the share price as at the grant date.
The Employee Performance Rights convert into ordinary shares on a one for one basis subject to achievement
of the vesting conditions. The total value of the Employee Performance Rights issued to Messers Levy and
Swan when granted was $78,000 with this share based payment expense recognized over the vesting period
of the Employee Performance Rights. An expense of $7,574 has been recognised in the current period.
31
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT CONTINUED (AUDITED)
(iv) The Executive Performance Rights have been valued at $0.13 based on the share price as at the grant date.
The Executive Performance Rights convert into ordinary shares on a one for one basis subject to achievement
of the vesting conditions. The total value of the Executive Performance Rights issued to Messers Levy and
Swan when granted was $325,000 with this share based payment expense recognized over the vesting period
of the Executive Performance Rights. When assessing the value of the Executive Performance Rights it has
been assumed that the vesting condition will be achieved. In the event the vesting condition is not achieved
this share based payment expense will be reversed. An expense of $43,898 has been recognised in the
current period.
c)
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.
d)
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.
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.
Grange Consulting is engaged to provide financial management and company secretarial services to the Group.
Pursuant to this engagement during the year ended 30 June 2020 Grange Consulting was entitled to receive $7,500
(plus GST) per month for these services. This fee was increased to $10,000 per month (plus GST) from 1 July
2020. 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 fees paid to Grange Consulting for the year ended 30 June 2020 and 30 June 2019 is as follows:
Company secretarial and financial management services
Total
30 June 2020
30 June 2019
$94,839
$94,839
$94,500
$94,500
No amounts were payable to Grange Consulting or Grange Capital Partners as at 30 June 2020 (2019: $25,987 incl.
GST).
*********** END OF AUDITED REMUNERATION REPORT ***********
Signed in accordance with a resolution of the Directors.
Mr Tim Levy
Managing Director
30 September 2020
32
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 2020, to the best of my
knowledge and belief there have been:
(i)
(ii)
No contraventions of the auditor independence requirements of the Corporations Act
2001; and
No contraventions of APES 110 Code of Ethics for Professional Accountants
(including Independence Standards).
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 September 2020
33
Pitcher Partners BA&A Pty LtdAn independent Western Australian Company ABN 76 601 361 095.Level 11, 12-14 The Esplanade, Perth WA 6000Registered Audit Company Number 467435.Liability limited by a scheme under Professional Standards Legislation.Adelaide Brisbane Melbourne Newcastle Perth SydneyPitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2020
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Revenue
Cost of sales
Gross profit
Other income
Advertising costs
Administration costs
IT costs
Share based payments
Employee and director costs
Depreciation and amortisation
Contingent consideration revaluation gain/(loss)
Other costs
Operating loss
Finance costs
Loss before income tax
Income tax benefit/(expense)
Note
4
4
5(a)
20
5(c)
11, 12, 13
2020
$
2019
$
5,090,173
(2,248,493)
2,841,680
4,184,323
(2,033,080)
2,151,243
3,375,692
(671,184)
(1,083,398)
(3,659,943)
(2,915,880)
(10,048,900)
(4,164,248)
(87,582)
(988,953)
(17,402,716)
3,847,124
(1,005,088)
(1,866,391)
(1,112,338)
(1,933,070)
(9,927,363)
(4,498,680)
1,168,470
(1,124,773)
(14,300,866)
(214,404)
(100,271)
(17,617,120)
-
(14,401,137)
-
Loss after tax for the period attributable to the
members of Family Zone Cyber Safety Limited
(17,617,120)
(14,401,137)
Other comprehensive income
Items that will be reclassified subsequently to
profit or loss when specific conditions are met:
Exchange
operations, net of tax
differences
translating
foreign
on
Total comprehensive
the period
attributable to the members of Family Zone Cyber
Safety Limited
(loss)
for
(9,595)
(14,973)
(17,626,715)
(14,416,110)
Basic and diluted loss per share (cents per share) for
the year attributed to the members of Family Zone
Cyber Safety Limited
7
(7.48)
(9.07)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction
with the accompanying notes.
34
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Note
2020
$
2019
$
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayments
Inventory
Total Current Assets
Non-Current Assets
Intangibles
Trade and other receivables
Plant and equipment
Right to use assets
Total Non-current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Contract liabilities
Provisions
Contingent consideration
Borrowings
Lease liability
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Contract liabilities
Contingent consideration
Provisions
Lease Liability
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
8
9
10
11
9
12
13
14
4
15
16
13
14
4
15
13
17
18
19
5,807,193
4,739,118
188,611
249,993
10,984,915
1,251,177
53,156
1,540,565
365,740
3,210,638
14,195,553
3,121,307
2,314,320
655,028
-
1,272,510
225,642
7,588,807
-
1,917,795
22,117
103,563
156,625
2,200,100
9,788,907
5,116,523
3,228,710
805,604
157,152
9,307,989
4,826,403
80,112
682,757
-
5,589,272
14,897,261
2,220,559
1,903,181
491,728
629,440
1,469,535
-
6,714,443
12,675
188,079
47,595
-
-
248,349
6,962,792
4,406,646
7,934,469
56,673,575
10,435,288
(62,702,217)
4,406,646
45,567,979
7,451,587
(45,085,097)
7,934,469
The above Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.
35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Issued
Capital
Share-based
Payment
Reserve
Accumulated
Losses
$
$
$
Foreign
Currency
Translation
Reserve
$
Total
$
Balance at 1 July 2018
30,873,178
6,842,123
(30,683,960)
11,663
7,043,004
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
-
-
-
14,694,801
-
14,694,801
-
-
-
-
612,774
612,774
(14,401,137)
-
(14,401,137)
-
(14,973)
(14,973)
(14,401,137)
(14,973)
(14,416,110)
-
-
-
-
-
-
14,694,801
612,774
15,307,575
Balance at 30 June 2019
45,567,979
7,454,897
(45,085,097)
(3,310)
7,934,469
Issued
Capital
Share-based
Payment
Reserve
Accumulated
Losses
$
$
$
Foreign
Currency
Translation
Reserve
$
Total
$
Balance at 1 July 2019
45,567,979
7,454,897
(45,085,097)
(3,310)
7,934,469
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
Reversal of performance rights
Reversal of employee options
Total transactions with owners
-
-
-
-
(17,617,120)
-
(17,617,120)
-
(9,595)
(9,595)
-
-
(17,617,120)
(9,595)
(17,626,715)
11,105,596
-
-
3,054,036
-
-
11,105,596
(20,833)
(39,907)
2,993,296
-
-
-
-
-
-
-
-
-
-
11,105,596
3,054,036
(20,833)
(39,907)
14,098,892
Balance at 30 June 2020
56,673,575
10,448,193
(62,702,217)
(12,905)
4,406,646
The above Consolidated Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
36
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Government grants received
Payments to suppliers and employees
Interest received
Interest paid
Net cash flows (used in) operating activities
Cash flows from investing activities
Purchase of plant & equipment
Payments for intangible assets
Net cash flows (used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Payment of principle portion of lease liabilities
Proceeds from borrowings
Repayments of borrowings
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 2020
Note
2020
$
2019
$
5,888,149
1,943,696
(16,090,303)
3,742
(22,258)
(8,276,974)
4,181,121
1,882,977
(16,257,044)
16,164
(32,673)
(10,209,455)
(1,261,159)
-
(1,261,159)
(614,487)
(52,094)
(666,581)
11,170,072
(729,560)
(185,671)
1,522,017
(1,523,106)
10,253,752
715,619
5,116,523
(24,949)
5,807,193
12,624,677
(489,004)
-
1,401,937
-
13,537,610
2,661,574
2,461,222
(6,273)
5,116,523
21
8
The above Consolidated Statement of Cash Flows is to be read in conjunction with the accompanying notes.
37
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
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 2020.
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) (AASB) 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) Adoption of new and revised accounting standards
The Group have adopted the new accounting standards during the year ended 30 June 2020 as outlined below.
AASB 16 Leases
The Group has applied all new and revised Australian Accounting Standards that apply to annual reporting periods
beginning on or after 1 January 2019, including AASB 16 Leases. AASB 16 replaces AASB 117 Leases and
introduces a single lessee accounting model that requires a lessee to recognise right-of-use assets and lease
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
Right-of-use assets are initially measured at cost and lease liabilities are initially measured on a present value
basis. Subsequent to initial recognition, right-of-use assets are accounted for on a similar basis to non-financial
assets, whereby the right-of-use asset is accounted for on a cost basis.
Lease liabilities are accounted for on a similar basis to other financial liabilities, whereby interest expense is
recognised in respect of the lease liability and the carrying amount of the lease liability is reduced to reflect the
principal portion of lease payments made.
In accordance with the transition requirements of AASB 16, the Group has elected to apply AASB 16
retrospectively to those contracts that were previously identified as leases under the predecessor standard, with the
cumulative effect, if any, of initially applying the new standard recognised as an adjustment to opening retained
earnings at the date of initial application (i.e. at 1 July 2019). Accordingly, comparative information has not been
restated.
The Group has also elected to apply the following practical expedients to the measurement of right-of-use assets
and lease liabilities in relation to those leases previously classified as operating leases under the predecessor
standard:
to recognise each right-of-use asset at the date of initial application at an amount equal to the lease
38
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease
recognised in the statement of financial position immediately before the date of initial application;
to not recognise a right-of-use asset and a lease liability for leases for which the underlying asset is of
low value;
to not recognise a right-of-use asset and a lease liability for leases for which the lease term ends within
12 months of the date of initial application; and
to use hindsight, such as in determining the lease term if the contract contains options to extend or
terminate the lease.
The application of AASB 16 resulted in the recognition of right-of-use assets with a carrying amount of $365,740
(referred to in these financial statements as “leased assets”) and corresponding lease liabilities with an aggregate
carrying amount of $382,267 at 30 June 2020. The weighted average incremental borrowing rate applied in the
calculation of the initial carrying amount of lease liabilities was 7.92%. The total cash outflows for the year were
$185,671, and the interest expense recognised during the year was $31,881.
The lease liabilities as at 1 July 2019 reconcile to the operating lease commitments as of 30 June 2019, as follows
Operating lease commitments at 30 June 2019
Less relating to short term leases
Operating lease commitments subject to discounting at 1 July 2019
Discounting at weighted average incremental borrowing rate
Balance of lease liabilities at 1 July 2019
(b) Standards Issued but not yet effective
$
319,222
(2,902)
316,320
(37,119)
279,201
The AASB has issued a number of new and amended Accounting Standards and Interpretations that have
mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has
decided not to early adopt any of the new and amended pronouncements. The Group‟s assessment of the new and
amended pronouncements that are relevant to the group but applicable in future reporting periods is set out below:
AASB 2018-6: Amendments to Australian Accounting Standards – Definition of a Business (applicable for
annual reporting periods beginning on or after 1 January 2020).
AASB 2018-6 amends AASB 3: Business Combinations to clarify the definition of a business, assisting entities to
determine whether a transaction should be accounted for as a business combination or as an asset acquisition.
The amendments:
(a)
clarify that to be considered a business, an acquired set of activities and assets must include, at a
minimum, an input and a substantive process that together significantly contribute to the ability to create
outputs;
remove the assessment of whether market participants are capable of replacing any missing inputs or
processes and continuing to produce outputs;
add guidance and illustrative examples to help entities assess whether a substantive process has been
acquired;
narrow the definitions of a business and of outputs by focusing on goods and services provided to
customers and by removing the reference to an ability to reduce costs; and
add an optional concentration test that permits a simplified assessment of whether an acquired set of
activities and assets is not a business.
(b)
(c)
(d)
This Standard is not expected to significantly impact the Group‟s financial statements.
39
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
AASB 2018-7: Amendments to Australian Accounting Standards – Definition of Material (applicable for
annual reporting periods beginning on or after 1 January 2020).
AASB 2018-7 principally amends AASB 101: Presentation of Financial Statements and AASB 108: Accounting
Policies, Changes in Accounting Estimates and Errors. The amendments refine the definition of material in AASB
101. The amendments clarify the definition of material and its application by improving the wording and aligning the
definition across AASB Standards and other publications. The amendment also includes some supporting
requirements in AASB 101 in the definition to give it more prominence and clarifies the explanation accompanying
the definition of material.
This Standard is not expected to significantly impact the Group‟s financial statements.
AASB 2020-1: Amendments to Australian Accounting Standards – Classification of Liabilities as Current or
Non-current (applicable for annual reporting periods beginning on or after 1 January 2022).
AASB 2020-1 amends AASB 101 Presentation of Financial Statements to clarify requirements for the presentation
of liabilities in the statement of financial position as current or non-current.
This Standard is not expected to significantly impact the Group‟s financial statements.
AASB 2020-3: Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and
Other Amendments (applicable for annual reporting periods beginning on or after 1 January 2022).
AASB 2020-3 amends AASB 1 First-time Adoption of Australian Accounting Standards, AASB 3 Business
Combinations, AASB 9 Financial Instruments, AASB 116 Property, Plant and Equipment, AASB 137 Provisions,
Contingent Liabilities and Contingent Assets and AASB 141 Agriculture as a consequence of the recent issuance
by IASB of the following IFRS: Annual Improvements to IFRS Standards 2018-2020, Reference to the Conceptual
Framework, Property, Plant and Equipment: Proceeds before Intended Use and Onerous Contracts – Cost of
Fulfilling a Contract.
This Standard is not expected to significantly impact the Group‟s financial statements.
(c) 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:
40
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(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 an appropriate option
pricing 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. Please refer to Note 20 for further details.
(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
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
discounted to determine the net present value of the contingent consideration.
(d) 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 Consolidated Statement of Profit or Loss and Other Comprehensive Income shows that the Group incurred a
net loss of $17,617,120 during the year ended 30 June 2020 (2019: $14,401,137), and net cash outflows from
operating activities of $8,276,973 (2019: $10,209,455). The net loss includes significant non-cash items, such as
depreciation and amortisation, share-based payment expenses and contingent consideration revaluation
amounting to $7,167,710 (2019: 5,263,280).
The Directors believe that there are reasonable grounds that the Group will continue as a going concern, after
consideration of the following factors:
41
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Subsequent to 30 June 2020, the Company received $3.7 million from the second tranche of its $10
million placement to sophisticated investors and approximately $1.0 million from the exercise of
options.
Subsequent to 30 June 2020, the Group has recorded sales of $1.8 million for the two months ended
31 August 2020 which represented an increase of 71% from the prior comparative period. As at 31
August 2020 had debtors of $2.2 million, which are expected to be collected.
As at 25 September 2020, the Group had $8.1 million Cash and cash equivalents on hand.
The Group Budget includes significant forecast cash inflows coming from education sales with the key
growth in education sales forecast from the US education market. R&D receipts also represent a key
cash inflow in the Group Budget with more than $3.0 million budgeted to be received over the 12
month period to 30 September 2021. This includes a balance of approximately $0.9 million to be
received in respect to the Company‟s $2.1 million 30 June 2020 R&D claim and advance funding to be
received in respect to the Company‟s budgeted 30 June 2021 R&D claim.
As at 29 September 2020 Education sales had exceeded budgeted expectations with approximately
$3.8 million to be billed for the September 2020 quarter, 53% ahead of budget and the number of
students added to the platform in the September quarter to date is approximately 370,000 compared to
the forecast 180,000.
The Group continues to see a strong sales pipeline with the value of the sales pipeline as a 24
September being approximately $3.5 million, with 75% of these being US education deals.
The Group also has deals in Proof of Concept (POC) trials representing $0.9 million in revenues. POC
trials have a historical conversion into contracted deals averaging approximately 85%.
There is a potential upside in budgeted consumer revenues from the US business with only a relatively
conservative uptake assumption included in the budget when compared with the consumer uptake in
Australia and New Zealand.
The Group has been investing in the migration its data and hosting services to a new provider with the
key objectives being cost reductions, simplified reporting services and new accretive product offerings.
Once this migration has been completed in December 2020 the Company expects a reduction in data
and serving costs given the systems are no longer running in parallel and the relatively lower cost of
the new service provider.
The Group continues to closely monitor and manage its overhead expenditure and has the ability to
curtail expenditure which is discretionary in nature in the event that actual sales are not meeting budget
expectations.
In the event that the matters above do not eventuate, then the Group may be unable to continue as a going
concern, and may be required to realise its assets and discharge its liabilities other than in the ordinary course of
business, and at amounts that differ from those stated in the financial statements and that the financial report does
not include any adjustments relating to the recoverability and classification of recorded asset amounts, or liabilities
that might be necessary should the Group not continue as a going concern.
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 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) 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.
42
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the
related asset.
(b)
Income Tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in Consolidated
Statement of Profit or Loss and Other Comprehensive Income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill,
the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled
entities to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the
tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against
which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
(c) 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.
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair value through profit and loss.
The classification of financial instruments at initial recognition depends on the financial asset‟s contractual cashflow
characteristics and the Group‟s business model for managing them. With the exception of the Group‟s trade
receivables that do not contain a significant financing component, the Group initially measures the financial asset at
its fair value plus, in the case of a financial asset not at fair value through profit and loss, transaction costs. Trade
receivables that do not contain a significant financing component are measured at the transaction price determined
in accordance with the Group‟s accounting policy for revenue recognition. 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. 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 recognised initially at fair value and, in the case of loans and borrowings and payables,
net of directly attributable transaction costs. The Group‟s financial liabilities include trade and other payables,
contingent consideration and lease liabilities. 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. A financial liability is
removed from the Consolidated Statement of Financial Position when the obligation specified in the contract is
discharged or cancelled or expires.
43
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(d)
Trade and Other Receivables
Trade accounts and other receivables represent the principal amounts due at reporting date less, where applicable,
any allowances for expected credit losses.
The Group applies a simplified approach in calculating expected credit losses. Therefore, the Group does not track
changes in credit risk, but instead recognises a loss allowance based on lifetime expected credit losses at each
reporting date. In determining the provision required, the Group utilises its historical credit loss experience,
adjusted only where appropriate for forward-looking factors specific to the debtors and economic environment.
(e)
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.
(f)
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.
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 on a straight-line basis over 3 years.
(g) Plant and Equipment
Items of plant and equipment are stated at cost less accumulated depreciation.
The carrying amount of 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
Depreciation Rate
10% - 40%
44
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(h) Research & Development Expense
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
in accordance with the policy set out in Note 2(c).
During the period of development, the asset is tested for impairment annually.
(i)
Impairment of Non-Financial 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
profit or loss.
(j) 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.
(k) Cash and Cash Equivalents
Cash and cash equivalents in the Consolidated 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 Consolidated
Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
(l) 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.
45
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(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, including performance shares, performance rights and options, 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 an appropriate 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) Revenue
The principal activities of the Group are the sale and distribution, marketing and customer support of its suite of
cyber safety products and services.
Sales of Hardware
Revenue from the sale of equipment is recognised at the point in time when control of the asset is transferred to the
customer, generally on delivery of the equipment. The Group considers whether there are other promises in the
contract that are separate performance obligations to which a portion of the transaction price needs to be allocated
(e.g., warranties, customer loyalty points). In determining the transaction price for the sale of equipment, the Group
considers the effects of variable consideration, the existence of significant financing components, non-cash
consideration, and consideration payable to the customer (if any).
Subscription revenues
Subscription/service revenue is recognised over time over the life of the service contract as the Groups service
obligations under the contract are satisfied.
Contract balances
Contract Assets:
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the
Group transfers goods or services to a customer before the customer pays consideration or before payment is due,
a contract asset is recognised for the earned consideration that is conditional.
Trade receivables
A receivable represents the Group's right to an amount of consideration that is unconditional (i.e., only the passage
of time is required before payment of the consideration is due). Refer to accounting policies of financial assets
under Financial Assets and Financial Liabilities above.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received
consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the
46
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Group transfers goods or services to the customer, a contract liability is recognised when the payment is made, or
the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs
under the contract.
Capitalised Contract Cost
Incremental costs of obtaining a contract and certain costs to fulfil a contract are recognised as an asset if the
following criteria are met:
-
-
-
the costs relate directly to a customer contract;
the costs generate or enhance resources of the entity that will be used in satisfying performance obligations
attaching to the customer contracts; and
the costs are recoverable from the customer.
Any capitalised contract costs assets are amortised on a systematic basis that is consistent with the Group's transfer
of the related goods or services to the customer.
(p) 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 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.
(q) 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 three operating segments being information technology (and more specifically the provision of
cyber safety services) in Australia, United States of America and New Zealand which 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.
47
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(r) Current and non-current classification
Assets and liabilities are presented in the Consolidated 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.
(s) Goods and Services Tax ('GST')
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is
not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset
or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the
Consolidated 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.
(t) 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.
48
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(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.
(u) Business Combinations
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.
(v) Basis of Consolidation
The Financial Statements are those of the Group, comprising the financial statements of the Company, and of
all entities which the Company controls. The Group controls an entity when it is exposed, or has rights, to
variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. The financial statements of subsidiaries are prepared for the same reporting period as the
parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar
accounting policies, which may exist.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup
transactions are eliminated in preparing the consolidated financial statements. Subsidiaries are eliminated
from the date on which control is established and are de-recognised from the date that control ceases.
(w) Rounding
The Company has applied the relief available to it in ASIC Legislative Instrument 2016/191 and accordingly, certain
49
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
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.
NOTE 4: REVENUE AND OTHER INCOME
Operating Revenue
Service revenue(1)
Hardware revenue(2)
Other Income
Interest revenue
Other government grants/subsidies received
Research and development grant
2020
$
4,775,644
314,529
5,090,173
3,742
981,806
2,390,144
3,375,692
2019
$
3,584,539
599,784
4,184,323
9,132
7,032
3,830,960
3,847,124
(1)
(2)
Service revenue is subscription revenue and is recognised over the life of the service contract as the service obligations under the
contract are satisfied.
Hardware revenue is recognised at the point in time when control of the asset is transferred to the customer.
Contract liabilities
Contract liabilities recognised relate to amounts invoiced in advance of the transfer of services to customers for its
subscription service offerings. Revenue is recognised for these amounts over time, over the life of the service
contract, as the Group‟s service performance obligations are satisfied.
a) Reconciliation of movements in contract liabilities
Contract Liabilities
Balance at 1 July 2018
Additions
Recognised within service revenue
Balance at 30 June 2019
Additions
Recognised within service revenue
Balance at 30 June 2020
$
1,889,383
1,860,052
(1,645,500)
2,103,935
4,031,361
(1,903,181)
4,232,115
As at 30 June 2020 $2,314,320 (2019: $1,903,181) has been recognised as current contract liabilities representing
services to be provided within the next 12 months. A further $1,917,795 (2019: $188,079) represents contracts
signed for services to be delivered in the next 2-3 years.
NOTE 5: EXPENSE ITEMS
5(a) Advertising expense
Sales and marketing
Advertising
Call centre charges
Domain Licenses
Marketing and marketing staff costs
Total advertising expense
2020
$
2019
$
377,831
-
3,111
290,242
671,184
515,953
36,037
1,083
452,015
1,005,088
50
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
5(b) Research and Development expense
A breakdown of research and development costs incurred during the year by nature is set out below. These
costs are classified across various expense accounts by function within the Consolidated Statement of
Comprehensive Loss for the year ended 30 June 2020.
Administration expense
Contractor costs
Employee benefits expense
Total research and development expense
1,822,029
111,753
3,477,242
5,411,024
678,342
253,922
3,545,859
4,478,123
5(c) Employee and director benefits costs
Directors‟ fees
Employee wages and superannuation
Total employee and director benefits costs
NOTE 6: 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):
467,362
9,581,538
10,048,900
346,589
9,580,774
9,927,363
2020
$
2019
$
-
-
-
-
-
-
Profit / (loss) before tax for the year
(17,617,120)
(14,401,137)
Prima facie income tax payable on profit before income tax at:
- 27.50% (Australia)
- 28.00% (New Zealand)
- 21.00% (US)
- 17.00% (Singapore)
- 30.00% (India)
Adjustments for:
Entertainment
Cash Flow Boost Income
Share-based payments
R&D tax incentive classified as income
Non-deductible expenditure
Offset against DTL/DTA not recognised
Income tax expense attributable to profit
(3,527,884)
(314,807)
(688,506)
1,116
402
5,175
(13,750)
688,921
(657,289)
2,348,289
2,158,332
-
(2,210,745)
(476,975)
(328,425)
(20,731)
-
4,700
-
431,115
(1,375,932)
1,235,089
2,741,904
-
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(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
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
Adjust for derecognition / offset of DTA/DTL
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
8,307,495
117,481
291,332
397,606
(9,113,915)
3,995,130
-
192,295
318,206
(4,505,631)
(37,893)
(1,002)
38,895
-
(63,340)
-
63,340
-
2020
$
2019
$
(1,337,335)
(24,445)
1,361,780
-
(1,723,820)
(318,086)
2,041,906
-
200,629
(200,629)
-
-
-
-
2020
$
2019
$
(f)
Deferred tax assets / liabilities not brought to account
Temporary differences
Operating tax losses – Australia
Operating tax losses – Other jurisdictions
447,161
5,218,515
4,222,526
9,888,202
Total tax losses of $27,140,094 (2019: $22,994,068) have not been brought to account for the year ended 30
June 2020.
767,526
6,252,726
2,054,769
9,075,021
The tax benefits of the above deferred tax assets, including tax losses, 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.
52
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
NOTE 7: 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
year.
The following reflects the income or loss and share data used in the total operations basic and diluted earnings per
share computations:
Loss used in the calculation of basic and diluted loss per share
2020
$
(17,617,120)
2019
$
(14,401,137)
Basic and diluted (loss) per share attributable to equity holders
(cents Per Share)
(7.48)
(9.07)
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
Number
Number
235,571,555
158,819,942
235,571,555
158,819,942
Options and other potentially dilutive ordinary shares 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.
NOTE 8: CASH AND CASH EQUIVALENTS
Cash at bank
Total Cash and Cash Equivalents
2020
$
2019
$
5,807,193
5,807,193
5,116,523
5,116,523
Cash at bank earns interest at floating rates based on daily bank rates. Refer to note 22 on financial instruments for
details on the Company‟s exposure to risk in respect of its cash balance.
NOTE 9: TRADE AND OTHER RECEIVABLES
Current:
Trade receivable
Less provision for expected credit losses1
Other current receivables:
GST receivable
Capitalised contract costs
R&D Grant receivable (secured)
2020
$
2019
$
2,336,421
(95,663)
2,240,758
11,378
23,702
2,403,579
988,646
(64,042)
924,604
42,868
313,254
1,947,983
53
16
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Other receivables
Total Current Trade and Other Receivables
59,701
4,739,118
-
3,228,710
Non-Current:
Capitalised contract costs
Bonds and deposits
Total Non-Current Trade and Other Receivables
-
53,156
53,156
23,702
56,410
80,112
Total Trade and Other Receivables
1
The provision for expected credit loss is based on an assessment of the historical credit losses and the amount recognised is a result of
additional debtors during the year.
3,308,822
4,792,274
NOTE 10: INVENTORY
Current:
At cost:
Finished goods
Total Inventory
2020
$
2019
$
249,993
249,993
157,152
157,152
a) Amounts recognised in profit or loss
Inventories recognised as an expense during the year ended 30 June 2020 amounted to $351,410 (2019:
$615,974). These were included in cost of sales.
NOTE 11: INTANGIBLES
Intellectual Property at cost
Less: Accumulated amortisation and impairment
Customer lists at cost
Less: Accumulated amortisation and impairment
a) Reconciliation of movements in intangible assets
Intangible Assets
Balance at 1 July 2018
Additions
Impairment expense
Amortisation expense
Balance at 30 June 2019
Additions
Impairment expense
Amortisation expense
Balance at 30 June 2020
2020
$
13,759,986
(12,555,816)
339,181
(292,172)
1,251,177
2019
$
13,759,986
(9,093,652)
339,181
(179,112)
4,826,403
$
9,025,186
52,094
-
(4,250,877)
4,826,403
-
-
(3,575,226)
1,251,177
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
NOTE 12: PLANT & EQUIPMENT
Plant & equipment – at cost
Less: Accumulated depreciation
a) Reconciliation of movements in fixed assets
Plant and Equipment
Balance at 1 July 2018
Additions
Reclassification of inventory
Depreciation expense
Balance at 30 June 2019
Additions
Depreciation expense
Balance at 30 June 2020
NOTE 13: RIGHT TO USE ASSET AND LEASE LIABILITIES
Lease Assets
Land and Building – right of use assets
Less: Accumulated Amortisation
Lease Liabilities
Current
Lease Liability
Total Current Lease Liability
Non-Current
Lease Liability
Total Non-Current Lease Liability
Total Lease Liabilities
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
2,327,301
(786,736)
1,540,565
1,072,904
(390,147)
682,757
$
257,681
616,096
58,392
(249,412)
682,757
1,261,159
(403,351)
1,540,565
2019
$
2019
$
-
-
-
-
-
-
-
-
55
2020
$
551,411
(185,671)
365,740
2020
$
225,642
225,642
156,625
156,625
382,267
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
NOTE 14: TRADE AND OTHER PAYABLES
Current:
Trade payables(1)
Accruals & other payables
Share monies received in advance(2)
Total Current Trade and Other Payables
Non-Current:
Other payables
Total Non-Current Trade and Other Payable
Total Trade and Other Payables
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
1,243,818
1,377,489
500,000
3,121,307
-
-
3,121,307
1,143,101
1,077,458
-
2,220,559
12,675
12,675
2,233,234
(1) Current trade payables are non-interest bearing and are normally settled on 30-day terms
(2) FY20 balance relates to share monies which were received in the 30 June 2020 financial year for shares issued during
financial year 30 June 2021.
NOTE 15: PROVISIONS
Current:
Provision for annual leave
Provision for long service leave
Total current provisions
Non-Current:
Provision for long service leave
Total non-current provisions
Total Provisions
NOTE 16: BORROWINGS
Current:
R&D Loan Facility
Interest Payable
Total Current Borrowings
2020
$
596,587
58,441
655,028
103,563
103,563
758,591
2019
$
491,728
-
491,728
-
-
491,728
2020
$
2019
$
1,141,322
131,188
1,272,510
1,404,244
65,291
1,469,535
During the year, the Company received advance funding on its expected FY2020 R&D rebate from Radium Capital.
Refer to below for key terms of this funding.
Key Facility Terms:
Counterparty: Innovation Structured Finance Co LLC facilitated by Radium Capital
Amount: 80% of the expected R&D tax offset resulting from each period‟s eligible R&D expenditures, with
principal and interest repaid from the actual tax offsets at the end of the financial year
Final Maturity Date: 31 October 2020
56
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
o Family Zone has the option to repay earlier without penalties
Interest Rate: 14% per annum
Security: Secured against the R&D refund receivable from the ATO
Conditions: R&D expenditure has to be reviewed by R&D Tax Consultants
Purpose of Loan as per agreement: Wholly or predominantly for working capital or research and development
expenditure.
a) Reconciliation of movements in R&D Loan Facility, at amortised cost
R&D Loan Facility
Balance at 1 July 2018
Drawdowns
Interest and other finance costs
Repayments
Balance at 30 June 2019
Drawdowns
Interest and other finance costs
Repayments
Balance at 30 June 2020
NOTE 17: ISSUED CAPITAL
Issued Ordinary Shares - no par value (fully paid)
Total
Opening balance – 1 July 2018
Shares issued on exercise of Performance Rights on 4 Jul 2018
Shares issued on exercise of options during the period on 20 Jul 2018
Shares issued to sophisticated investor on 29 Aug 2018
Shares issued to Tellus Matrix LLP for advisory services on 29 Aug 2018
Shares issued to Netsweeper for services on 19 Oct 2018
Shares issued to Fidelio on 28 Nov 2018
Shares issued to Tim Levy on 28 Nov 2018 (following shareholder approval)
Shares issued to sophisticated investor on 11 Jan 2019
Shares issued to sophisticated investor on 18 Jan 2019
Shares issued to consultant on 26 Feb 2019
Shares issued to the Linewize Vendors on conversion of performance
shares on 18 Mar 2019
Shares issued to executives on the exercise of Class A performance rights
on 18 Mar 2019
Shares issued in respect to Brand Ambassadorial Agreement on 8 Apr 2019
$
-
1,404,244
65,291
-
1,469,535
1,194,893
77,617
(1,469,535)
1,272,510
2020
Number of
Shares
295,543,169
295,543,169
2019
Number of
Shares
200,627,835
200,627,835
Number of
Shares
Value
$
134,610,852
30,873,178
266,667
72,297
9,650,000
101,825
2,087,436
2,788,997
350,000
11,095,556
133,333
216,000
-
10,658
4,825,000
45,981
1,000,000
725,139
175,000
2,496,500
30,000
48,600
2,000,000
400,000
83,333
-
500,000
100,000
57
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Shares issued to Fidelio on 18 Apr 2019
Shares issued to Non-executive Directors in lieu of cash salaries for the
2019 calendar year on 18 Apr 2019
Shares issued to sophisticated investors on 29 Apr 2019
Shares issued to Tim Levy on exercise of options on 15 May 2019
Less: share issue costs
Closing balance – 30 June 2019
309,889
61,979
577,778
130,000
35,483,872
300,000
-
200,627,835
5,500,000
75,000
(929,056)
45,567,979
Shares issued to the Linewize vendors on conversion of performance shares on
4 September 20191
4,500,000
742,500
Placement to sophisticated investors - Tranche 1 on 3 October 2019
Placement to sophisticated investors - Tranche 2 on 8 November 2019
Shares issued on conversion of Class B Performance Shares 15 Nov 2019
Shares issued to advisor on 15 November 2019
Shares issued to employees in lieu of cash salary on 2 March 2020
Shares issued to Director in lieu of cash salary on 4 May 2020
Placement to sophisticated investors - Tranche 1 on 6 May 2020
Shares issued to consultants for services provided on 27 May 2020
Less: share issue costs
Closing balance – 30 June 2020
4,903,426
29,025,146
7
70,255
1,856,507
559,991
53,500,002
500,000
-
295,543,169
686,480
4,063,520
-
15,807
233,920
80,000
6,420,072
100,000
(1,236,704)
56,673,575
1 Upon achievement of the relevant milestones, 4,500,000 shares were issued to the vendors of Linewize at an issue price of $0.16 per share
based on the fair value, being the share price on grant date. Refer to Note 2(c) (iv) for further information.
Subsequent to year end, upon receiving shareholder approval, a further 30,833,333 fully paid ordinary shares were
issued for gross proceeds of $3.7m before issue costs as part of Tranche 2 of the placement to sophisticated
investors. Refer to Note 28 of this report for further information.
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 18: RESERVES
Nature and Purpose of Share-Based Payment 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.
58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Performance Shares
Performance Rights
Options
Total Share-Based Payment Reserve
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
1,660,671
3,640,704
5,146,818
10,448,193
2019
$
1,587,603
2,120,938
3,746,356
7,454,897
Nature and Purpose of Foreign Currency Translation Reserve
The foreign currency translation reserve records exchange differences arising on translation of a foreign controlled
subsidiaries.
Foreign Currency Translation Reserve
Total Foreign Currency Translation Reserve
Options outstanding at 30 June 2020
2020
$
(12,905)
(12,905)
2019
$
(3,310)
(3,310)
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)
29/08/2016
19/09/2016 -
31/08/2017
16/12/2016
5/05/2017
4/12/2017
4/12/2017
9/04/2018
9/04/2018
29/08/2018
11/03/2019
18/03/2019
21/05/2019
8/11/2019
15/11/2019
8/11/2019
29/05/2020
30/06/2020
30/06/2020
30/06/2020
30/06/2020
Total
29/08/2019
$0.25
5,888,438
19/09/2019
$0.33
4,321,340
15/12/2019
$0.30
5,335,000
5/05/2020
4/12/2020
4/12/2020
9/04/2021
9/04/2021
$0.30
$0.50
$0.60
$0.75
$0.90
1,750,000
850,000
850,000
516,765
516,765
29/08/2020
$0.60
500,000
11/03/2022
$0.25
250,000
18/03/2022
$0.18
2,147,647
21/05/2022
$0.24
898,692
-
-
-
-
-
-
-
-
-
-
-
-
8/11/2022
$0.21
15/11/2022
$0.21
8/11/2022
$0.21
29/05/2023
$0.21
7/07/2023
7/07/2023
$0.21
$0.18
13/07/2023
$0.18
13/07/2023
$0.24
-
-
-
-
-
-
-
-
2,852,100
1,000,000
3,000,000
500,000
1,000,000
2,000,000
2,000,000
2,000,000
23,824,647 14,352,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Forfeited
during the
year
(number)
(5,888,438)
(4,321,340)
(5,335,000)
(1,750,000)
-
-
-
-
-
-
Balance at
year end
(number)
Vested and
exercisable at
year end
(number)
-
-
-
-
850,000
850,000
516,765
516,765
500,000
250,000
-
-
-
-
850,000
850,000
516,765
516,765
500,000
250,000
(174,758)
1,972,889
1,316,976
-
-
-
-
-
-
-
-
-
898,692
898,692
2,852,100
2,852,100
1,000,000
1,000,000
3,000,000
1,000,000
500,000
1,000,000
500,000
500,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
2,000,000
(17,469,536) 20,707,211
17,551,298
59
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Reconciliation of movement in option reserve:
Opening Balance - 1 July 2018
Options issued for corporate advisory and capital raising services
Share based payment expense in respect to employee options on issue as at
1 July 2018 and granted during the period
Exercised during the period
Forfeited during the period
Closing Balance – 30 June 2019
Options issued for capital raising services and strategic advisory services
Share based payment expense in respect to employee options on issue as at 1
July 2019
Share based payment expense in respect to Director options granted during the
year
Share based payment expense in respect to Company Secretary options
granted during the year
Exercised during the year
Forfeited during the year
Closing Balance – 30 June 2020
Number of
Options
25,011,834
Value
$
3,354,540
1,648,692
158,715
2,209,859
233,101
(372,297)
(4,673,441)
-
-
23,824,647
3,746,356
9,852,100 1,062,579
-
104,123
4,000,000
186,227
500,000
47,532
-
(17,469,536)
-
-
20,707,211 5,146,817
On 8 November 2019, 2,852,100 options ($0.21, 8 Nov 2022) were issued for capital raising services provided to
the Company. These options vested immediately (Selling Options).
On 15 November 2019, 1,000,000 options ($0.21, 8 Nov 2022) were issued to a corporate advisor in relation to
services provided. These options vested immediately (Advisor Options).
On 8 November 2019, 3,000,000 Director Options ($0.21, 8 Nov 2022) were issued to non-executive Chairman
Peter Pawlowitsch for services to be provided. There are various vesting conditions associated with the Director
Options. Please refer to Note 20: Share based payments for further details as to the basis of valuation of Director
Options and their assessed fair value.
On 29 May 2020, 500,000 options ($0.21, 29 May 2023) were issued to the company secretary. These options
vested immediately (CoSec Options).
On 30 June 2020, 1,000,000 Director Options ($0.21, 8 Nov 2022) were approved for issue to non-executive
director Phil Warren in two Tranches. Please refer to Note 20: Share based payments for further details as to the
basis of valuation of options and their assessed fair value.
On 30 June 2020, 2,000,000 options were approved for issue at the Shareholder meeting for capital raising
services provided to the Company. These options have a 3 year term and exercise price of $0.18 per option vesting
immediately (Broker Options).
On 30 June 2020, 4,000,000 options were approved for issue at the Shareholder meeting for services provided to
the Company. These options were issued in two Tranches of 2,000,000 options in each Tranche. Tranche 1 has a
3 year term and exercise price of $0.18 per option vesting immediately and Tranche 2 has a 3 year term and
exercise price of $0.24 per option vesting immediately (Advisor II Options).
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
These options were valued using the Black-Scholes option pricing model applying the following inputs.
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Date
08/11/2019
15/11/2019
29/05/2020
30/06/20201
Selling
Options
Advisor
Options
CoSec
Options
Broker
Options
2,852,100
1,000,000
500,000
2,000,000
30/06/20201
Advisor II
Options
(Tranche 1)
2,000,000
30/06/20201
Advisor II
Options
(Tranche 2)
2,000,000
Number of Options
Underlying share
price
Exercise price
Expected volatility
Expiry date (years)
Expected dividends
Risk free rate
Value per option
$0.175
$0.210
90%
3.00
Nil
0.830%
$0.093
$0.175
$0.210
90%
2.98
Nil
0.830%
$0.093
$0.165
$0.210
102%
3.00
Nil
0.26%
$0.095
$0.195
$0.195
$0.195
$0.18
98%
3.00
Nil
0.26%
$0.121
$0.18
98%
3.00
Nil
0.26%
$0.121
$0.24
98%
3.00
Nil
0.26%
$0.110
1. These options have been valued under accounting standards based on the grant date being the date that shareholder approval was
obtained, 30 June 2020. The Broker options and Advisor options were issued subsequent to year end on 7 July 2020 and 13 July 2020,
respectively.
Performances shares outstanding at 30 June 2020
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)
Converted
during the year
(number)
Forfeited
during the
year
(number)
Balance at
year end
(number)
B
C
D
E
F
G
H
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
2,000,000
29/11/2017
29/11/2022
2,500,000
29/11/2017
29/11/2022
3,000,000
28,499,997
-
-
-
-
-
-
-
-
-
-
-
-
(2,000,000)
(2,500,000)
-
(10,499,999)
(10,499,998)
-
-
-
-
-
-
-
-
-
-
-
3,000,000
(4,500,000)
(20,999,997)
3,000,000
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
61
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
month rolling period of which 30% is subscription income (as confirmed by the Group‟s auditor) by 29 August
2020.
● Class D-H Performance Shares were issued 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, consistent with the disclosure in the 30
June 2019 Annual Report.
The Class B Performance Shares lapsed during the year following vesting conditions not being achieved and the
Class C Performance Shares were cancelled on 2 June 2020.
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.
Reconciliation of movement in performance share reserve:
Opening Balance - 1 July 2018
Share based payment expense for the year in respect to Performance Shares on
issue as at 1 July 2018
Reversal of share based payment expense as vesting conditions were not met
Performance Shares converted into ordinary shares on achievement of
performance milestone
Closing Balance – 30 June 2019
Share-based payment expense for the year in respect to Performance Shares
on issue as at 1 July 2019
Performance Shares converted into ordinary shares on achievement of
performance milestone(2)
Performance Shares lapsed during the period(1)
Number of
Performance
Shares
Value
$
30,499,997 1,657,455
-
-
148,287
(218,139)
(2,000,000)
-
28,499,997 1,587,603
-
73,069
(4,500,000)
(20,999,997)
-
-
Closing Balance – 30 June 2020
(1) The Class B Performance Shares converted into ordinary shares on a one for one basis on the achievement of a vesting
condition. The vesting condition for the conversion of the Class B Performance Shares on a one for one basis was
assessed as unlikely to be met as at 30 June 2019. The share-based payment expensed to date in respect to these
Class B Performance Shares was therefore reversed in the prior period. Following, consolidation, conversion and
cancellation of the 10,499,999 Class B Performance shares, 7 ordinary shares were issued on 8 November 2019, as
disclosed in Note 17.
3,000,000 1,660,672
(2) Class F and Class G Performance Shares were issued as part of the acquisition of Linewize Services Limited in the 30
June 2017. Class F and Class G Performance Shares converted to fully paid ordinary shares during the reporting period
upon achievement of their relevant performance target, consistent with the Linewize disclosures in the 30 June 2019
Annual Report.
62
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Performance Rights at 30 June 2020
The following Performance Rights of the Company existed at reporting date:
Grant Date
Expiry Date
Exercise
Price
Balance at
start of
Year
(number)1
Granted
During the
Year
(number)2
Exercised
during
the Year
(number)
Forfeited
during the
Year
(number)3
Balance at
Year end
(number)
Vested and
exercisable
at Year end
(number)
4/12/2017
4/12/2020
17/04/2019
17/04/2022
9/09/2019
30/06/2020
2/03/2020
2/03/2024
2/03/2020
2/09/2020
2/03/2020
2/03/2023
1/05/2020
2/03/2024
1/05/2020
1/05/2024
1/05/2020
4/05/2023
1/05/2020
7/07/2023
4/05/2020
4/11/2020
30/06/2020
7/07/2023
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
3,550,001
1,805,196
-
-
-
-
-
-
-
-
-
-
-
-
1,250,000a
3,125,000b
2,049,428c
4,046,541d
2,500,000e
1,000,000f
600,000g
500,000h
1,885,715i
5,000,000j
Total
5,355,197
21,956,684
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,774,994)
1,775,007
333,340
-
1,805,196
1,805,196
(550,000)
700,000
700,000
-
-
3,125,000
2,049,428
(110,000)
3,936,541
2,500,000
1,000,000
600,000
500,000
1,885,715
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000,000
2,000,000
(2,434,994)
24,876,887
4,838,536
(1) Comprising 1,274,998 Class B Performance Rights, 1,275,003 Class C Performance Rights, 333,340 Class D Performance Rights,
333,330 Class E Performance Right, 333,330 Class F Performance Rights and 1,805,196 Class G Performance Rights.
(2) The following Performance Rights were granted during the year under the Company’s Performance Rights Plan:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
1,250,000 Class H Performance Rights were granted to senior executives as security based remuneration.
3,125,000 Executive Performance Rights were issued to senior executives as security based remuneration.
2,049,428 Remuneration Performance Rights were issued to executives in lieu of their cash salary.
4,046,541 Employee Performance Rights were issued to employees as security based remuneration.
2,500,000 Executive Performance Rights were issued to Tim Levy (1,250,000) and Crispin Swan (1,250,000) as security based
remuneration.
1,000,000 TL SP Performance Rights were issued to Tim Levy as security based remuneration.
600,000 Employee Performance Rights were issued to Tim Levy (300,000) and Crispin Swan (300,000) as security based
remuneration.
500,000 Remuneration Performance Rights were issued to Director Matthew Stepka in lieu of his cash salary.
1,885,715 Remuneration Performance Rights were issued to Directors Tim Levy (1,071,429) and Crispin Swan (814,286) in lieu
of cash salary.
5,000,000 MS SP Performance Rights were issued to Matthew Stepka as security based remuneration.
(3) Comprising 1,274,998 Class B Performance Rights, 166,666 Class C Performance Rights, 333,330 Class E Performance Rights, 550,000
Class H Performance Rights and 110,000 Employee Performance Rights.
63
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Reconciliation on movement in performance right reserve:
Opening Balance - 1 July 2018
Performance Rights issued on 18 March 2019 and on 17 April 2019
Reversal of share based payment expense as vesting conditions were not met
Performance Rights exercised during the period following achievement of
performance milestone
Performance Rights lapsed and cancelled during the period
Closing Balance - 30 June 2019
Performance Rights granted during the year
Performance Rights expense recognised for the current period
Reversal of share based payment expense as vesting conditions are not met
Performance Rights exercised during the period following achievement of
performance milestone
Performance Rights lapsed and cancelled during the period
Number of
Performance
Rights
4,316,667
2,055,196
-
(350,000)
(666,666)
5,355,197
21,956,684
-
-
-
(2,434,994)
Value
$
1,830,128
1,434,154
(1,143,343)
-
-
2,120,938
994,592
546,007
(20,833)
-
-
Closing Balance - 30 June 2020
24,876,887
3,640,704
These Performance Rights have been valued at grant date and each Class are being expensed over the vesting
period.
Valuation
Date
Vesting
Date
(Expected)
Fair Value
at Grant
Date
Balance as at
30 June 2020
(Number)
Performance Rights
Class C Performance Rights
Class D Performance Rights
Class F Performance Rights
Class G Performance Rights
Class H1 Performance Rights
Class H1 Performance Rights
Executive Performance Rights
4/12/2017
29/08/2020
4/12/2017
29/08/2018
4/12/2017
29/08/2020
17/04/2019
17/04/2020
19/09/2019
30/06/2020
19/09/2019
30/06/2020
02/03/2020
30/06/2021
$0.68
$0.68
$0.68
$0.23
$0.20
$0.20
$0.11
$0.13
$0.11
$0.10
$0.09
$0.08
1,108,337
333,340
333,330
1,805,196
250,000
450,000
3,125,000
2,500,000
100,000
200,000
300,000
400,000
Executive Performance Rights - Directors
01/05/2020
30/06/2021
TL SP Performance Rights
Class A TL SP Performance Rights
Class B TL SP Performance Rights
Class C TL SP Performance Rights
Class D TL SP Performance Rights
MS SP Performance Rights
1/05/2020
1/05/2023
1/05/2020
1/05/2023
1/05/2020
1/05/2023
1/05/2020
1/05/2023
Class A MS SP Performance Rights
30/06/2020
30/06/2020
$0.19
1,000,000
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Valuation
Date
Vesting
Date
(Expected)
Fair Value
at Grant
Date
Balance as at
30 June 2020
(Number)
Performance Rights
Class B MS SP Performance Rights
Class C MS SP Performance Rights
Class D MS SP Performance Rights
Class E MS SP Performance Rights
Employee Performance Rights
Employee Performance Rights - Directors
30/06/2020
30/06/2020
30/06/2020
31/12/2020
30/06/2020
31/12/2020
30/06/2020
30/06/2022
2/03/2020
1/05/2020
Note 1
Note 1
Remuneration Performance Rights
2/03/2020
2/09/2020
Remuneration Performance Rights – TL and CS
4/05/2020
4/11/2020
Remuneration Performance Rights – MS
30/06/2020
30/06/2021
Total
$0.16
$0.10
$0.06
$0.03
$0.11
$0.13
$0.11
$0.13
$0.12
1,000,000
1,000,000
1,000,000
1,000,000
3,936,541
600,000
2,049,428
1,885,715
500,000
24,876,887
(1) One third of the Employee Performance Rights vest one year from issue date (Class A), one third of the Employee Performance Rights
vest two years from issue date (Class B) and one third of the Employee Performance Rights vest three years from issue date (Class C).
The Performance Rights 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:
Performance Rights
Vesting Condition
Class C Performance
Rights
Class D Performance
Rights
Class F Performance
Rights
Class G Performance
Rights
Class H1 Performance
Rights
Class H2 Performance
Rights
Achievement of $20,000,000 revenue
by the Group over a 12 month rolling
period of which 30% is subscription
income
Achievement of 15,000 paying
subscribers of the Company generating
at least $100,000 revenue per month
over 3 consecutive months
Achievement of $20,000,000 revenue
by the Company over a 12 month
rolling period of which 30% is
subscription income
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Achievement by Family Zone Inc of
signed contracts in the year ending 30
June 2020 (FY2020) with a total Annual
Contract Value of at least US$1.7M
Milestone
Date
Number of Performance Rights
Vesting
100% Class C Performance Rights held
29 August
2020
29 August
2018
33,334 Class D Performance Rights
vest for each Tier 1 partnering deal
that goes live before 4 December 2020
29 August
2020
33,334 Class F Performance Rights vest
for each Tier 1 partnering deal that
goes live before 4 December 2020
100% Class G Performance Rights held
1 Jan 2020
30 June 2020
100% Class H1 Performance Rights
held
30 June 2020
100% Class H2 Performance Rights
held
65
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Performance Rights
Vesting Condition
Milestone
Date
Number of Performance Rights
Vesting
million.
Remuneration
Performance Rights
Continued employment with the
Company in existing role from issue
date until the Milestone Date
6 months
from issue
date
100% Remuneration Performance
Rights held
Executive Performance
Rights
The achievement of ARR1 of $14.4m by
the Milestone Date
30 June 2021
If the ARR is $20m or more, 100% of
the Executive Performance Rights
held;
OR
If the ARR is less than $20m, the
number of Executive Performance
Rights vesting is determined based on
this formula:
[ARR at the Milestone Date/ $16m] x
[(Number Executive Performance
Rights held) x (100/125)]
100% of the Class A Employee
Performance Rights held
100% of the Class B Employee
Performance Rights held
100% of the Class C Employee
Performance held
1 year from
issue date.
2 year from
issue date.
3 year from
issue date.
3 years from
issue date
100% of the Class A TL SP Performance
Rights held
3 years from
issue date
100% of the Class B TL SP Performance
Rights held
3 years from
issue date
100% of the Class C TL SP Performance
Rights held
3 years from
issue date
100% Class D Performance TL SP Rights
held
1 year from
issue date.
100% Class A Performance MS SP
Rights held
1 year from
issue date.
100% Class B Performance MS SP
Rights held
66
Class A Employee
Performance Rights
Class B Employee
Performance Rights
Class C Employee
Performance Rights
Class A TL SP
Performance Rights
Class B TL SP
Performance Rights
Class C TL SP
Performance Rights
Class D TL SP
Performance Rights
Class A MS SP
Performance Rights
Class B MS SP
Performance Rights
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Continued employment with the
Company in existing role from issue
date until the Milestone Date
Continued employment with the
Company in existing role from issue
date until the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.25 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.35 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.45 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.60 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater $0.12 prior to the
Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.18 prior
to the Milestone Date
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Performance Rights
Vesting Condition
Class C MS SP
Performance Rights
Class D MS SP
Performance Rights
Class E MS SP
Performance Rights
The 30 day VWAP of the Company’s
Shares being greater than $0.24 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater than $0.36 prior
to the Milestone Date
The 30 day VWAP of the Company’s
Shares being greater $0.60 prior to the
Milestone Date
NOTE 19: ACCUMULATED LOSSES
Milestone
Date
Number of Performance Rights
Vesting
1 year from
issue date.
100% Class C Performance MS SP
Rights held
2 year from
issue date.
100% Class D Performance MS SP
Rights held
2 year from
issue date.
100% Class E Performance MS SP
Rights held
Accumulated Losses
Opening balance
Net loss for the financial year
Total Accumulated Losses
2020
$
(62,702,217)
2019
$
(45,567,979)
(45,085,097)
(17,617,120)
(62,702,217)
(30,683,960)
(14,401,137)
(45,085,097)
NOTE 20: SHARE-BASED PAYMENTS
Share-based payments made during the year ended 30 June 2020 are summarised below:
(a) Recognised Share-Based Payment Expense
Broker and advisor options issued in lieu of services provided1
Shares issued to consultants in lieu of services provided2
Shares issued to employees as incentive2
Shares issued to directors in lieu of salary2
Options issued to employees as incentive3
Options issued to directors and co secretary as incentive in prior period4
Performance Rights issued to employees for services5
Performance Rights issued to directors and executives for services6
Performance Shares issued to employees as incentive and for services7
Reversal of SBP expenses as vesting conditions were not met
Less amounts recognised within equity as a cost of capital raised1
2020
$
1,062,579
115,807
233,920
80,000
144,030
233,759
765,806
774,793
73,069
(60,740)
(507,143)
2,915,880
2019
$
170,224
1,347,076
130,000
-
221,592
-
272,097
-
(69,852)
-
(138,067)
1,933,070
67
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
1. Broker & Advisor options
During the year 5,000,000 options were granted to corporate advisors in relation to services provided and
expensed in the Statement of Profit or Loss. The fair value of the service could not be reliably measured and
therefore, a Black Scholes model was used to determine the value of the options. The inputs have been detailed
below for each issue:
Input
Number of Options
Underlying share price
Exercise price
Expected volatility
Expiry date (years)
Expected dividends
Risk free rate
Value per option
Total fair value of the options
Selling Options
Advisor Options
- Tranche 1
Advisor Options
- Tranche 2
1,000,000
$0.175
$0.210
90%
2.98
Nil
0.83%
$0.092
$92,447
2,000,000
$0.195
$0.180
98%
3.00
Nil
0.26%
$0.121
$242,667
2,000,000
$0.195
$0.240
98%
3.00
Nil
0.26%
$0.110
$220,322
Total
5,000,000
$555,436
A further 4,852,000 options were issued to corporate advisors in relation to capital raisings and have been
recognised within equity to the value of $507,143. Refer to Note 18 for details of these share based payments.
2. Shares issued to employees, directors and consultants in lieu of services provided
During the year the Group issued
i.
ii.
iii.
570,255 shares to Consultants as consideration for services provided, to the value of $115,807.
1,856,507 shares to employees as remuneration for services, to the value of $233,920.
559,991 shares to Director Peter Pawlowitsch in lieu of his cash salary of $80,000.
3. Options issued to Employees
Tranche
Valuation Date
Expiry Date
Exercise
Price
Issued
during the
period
6
Total
18/03/2019
18/03/2022
$0.18
Vested
during
the
period
Total Share-Based
Payment Expense
for the period ($)
-
-
-
-
144,030
144,030
The valuation for the Employee Options disclosed above have been previously disclosed in prior period financial
reports.
4. Options issued to Directors and Company Secretary as Incentive
(a) During the period 3,000,000 options ($0.21, 3 years) were granted to Non-Executive Chairman, Peter
Pawlowitsch pursuant to the terms of his appointment for services to be provided. Shareholder approval was
obtained 4 November 2019 and the options were issued 8 November 2019. These options are subject to
various vesting conditions as outlined below
68
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Tranche
Vesting Condition
Number
Value Per
Option
($)
Total
Value
($)
Total Share-Based
Payment Expense
for the year ($)
1
2
3
4
5
None
1,000,000
0.0923
92,260
The 30 day VWAP of the Company’s
Shares being greater than $0.25
The 30 day VWAP of the Company’s
Shares being greater than $0.35
The 30 day VWAP of the Company’s
Shares being greater than $0.45
The 30 day VWAP of the Company’s
Shares being greater than $0.60
500,000
0.0917
45,855
500,000
0.0882
44,090
500,000
0.0830
41,480
500,000
0.0754
37,700
92,260
9,832
9,454
8,894
8,083
Total
3,000,000
261,385
128,523
The fair value of these options have been determined using a Monte Carlo simulation model and the inputs are
outlined below:
Underlying share price
Exercise price
Target price
Exercise Multiple
Expiry date (years)
Expected Volatility
Risk free rate
Value per option
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
$0.18
$0.21
N/A
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.18
$0.21
$0.25
2.5
3
90%
0.83%
$0.0923
$0.0917
$0.0882
$0.0830
$0.0754
(b) During the year 1,000,000 options ($0.21, 3 years) were granted to non-executive Director Phil Warren.
Shareholder approval was obtained 30 June 2020, options were issued 7 July 2020. These options are subject
to various vesting conditions, the details of which have been outlined below.
Tranche
Vesting Condition
Number
None
500,000
The 30 day VWAP of the Company’s
Shares being greater than $0.25
500,000
0.1090
54,500
Value Per
Option
($)
0.1154
Total
Value ($)
57,705
Total Share-Based
Payment Expense
for the year ($)
57,705
-
1,000,000
112,205
57,705
1
2
Total
Tranche 1 have been valued using a Monte Carlo simulation and Tranche 2 have been valued using the Black
Scholes option pricing model valuation methodology. The key inputs have been outlined below.
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Grant date
Underlying share price
Exercise price
Expiry date (years)
Expected Volatility
Risk free rate
Value per option
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Tranche 1
Tranche 2
30/06/2020
$0.195
$0.210
3
98%
0.26%
$0.1154
30/06/2020
$0.195
$0.210
3
93%
0.26%
$0.1090
(c) During the year 500,000 options ($0.21, 3 years) were granted to the Company Secretary. The fair value of
these options have been determined using a Black-Scholes model and the inputs are outlined below:
Grant date
Underlying share price
Exercise price
Expiry date (years)
Expected Volatility
Risk free rate
Value per option
Total fair value
Input
29/05/2020
$0.165
$0.210
3
102%
0.26%
$0.095
47,531
5. Performance Rights issued to employees
During the year 1,250,000 Class H Performance Rights have been issued to senior executives under the
Company's Performance Rights Plan of which 700,000 vested and 550,000 lapsed following failure to meet vesting
conditions. The Performance Rights issued convert into ordinary shares on a one for one basis subject to the
achievement of a series of vesting conditions.
The existing performance rights on issue have continued to be expensed and recognised for the year ended 30
June 2020.
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 $765,806.
6. Performance Rights issued to Directors and Executives
During the year, the Company issued a number of Performance Rights to executives and Directors as an incentive
and as remuneration for services.
70
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Performance Rights
TL SP Performance Rights
MS SP Performance Rights
Executive Performance Rights - Executives
Executive Performance Rights - Directors
Remuneration Performance Rights - Executives
Remuneration Performance Rights - Tim Levy, Crispin Swan
Number
Expense for Period
1,000,000
5,000,000
3,125,000
2,500,000
2,049,428
1,885,715
$ 12,082
$ 352,000
$ 85,052
$ 43,898
$ 188,681
$ 83,217
Remuneration Performance Rights - Matthew Stepka
500,000
$ 9,863
$ 774,793
During the year the Company had agreed to issue 1,000,000 TL SP Performance Rights to Tim Levy and
5,000,000 MS SP Performance Rights to Matthew Stepka. The issue of the SP Performance Rights was subject to
shareholder approval which was obtained 1 May 2020 and 30 June 2020 for Messers Levy and Stepka
respectively.
The SP Performance Rights have been issued in a number of tranches with market based performance hurdles
associated with each tranche. A Monte-Carlo model was used to value the SP Performance Rights and the details
of each issue has been outlined below:
TL SP Performance Rights
Class A
Class B
Class C
Class D
Total
Unvested
Unvested
Unvested
Unvested
Vesting Date
1-May-23
1-May-23
1-May-23
1-May-23
Number of PR issued
100,000
200,000
300,000
400,000
1,000,000
VWAP Hurdle
Volatility
Risk Free Rate
Total Value of PR
Total Expense for Period
MS SP Performance
Rights
Vesting Date
Number of PR issued
VWAP Hurdle
Volatility
Risk Free Rate
Total Value of PR
Total Expense for Period
$0.25
99.35%
0.32%
$11,000
$2,602
$0.35
99.35%
0.32%
$20,000
$4,730
$0.45
99.35%
0.32%
$27,300
$2,036
$0.60
99.35%
0.32%
$31,600
$2,714
$89,900
$12,082
Class A
Class B
Class C
Class D
Class E
Total
Unvested
Unvested
Unvested
Unvested
Unvested
30/06/2021 30/06/2021 30/06/2021 30/06/2022 30/06/2022
1,000,000
1,000,000
1,000,000
$0.60
$0.24
$0.12
92.66%
92.66%
92.66%
0.26%
0.26%
0.26%
$28,000
$101,000
$194,000
-
-
$194,000
1,000,000
$0.36
92.66%
0.26%
$64,000
-
1,000,000
$0.18
92.66%
0.26%
$158,000
$158,000
5,000,000
$545,000
$352,000
71
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Management have assessed the probability of achieving the vesting condition, as at reporting date. If it was
assessed that the hurdle was likely to be met prior to the expiry date the share based payment expense has been
adjusted to reflect a shorter vesting period.
Management's assessment was based on the fact that the Company's share price was $0.195, as at 30 June 2020
and therefore any Tranches with a VWAP hurdle of less than $0.195 have been met and fully expensed. For those
tranches that management have assessed, as at reporting date, as more likely to be met earlier than the stated
vesting date, they have been expensed over a shortened vesting period.
The 3,125,000 Executive Performance Rights - Executives have been valued at $0.11, based on the share price as
at the issue date. These Performance Rights convert into ordinary shares on a one for one basis subject to
achievement of the vesting conditions. The total value of these Performance Rights when granted was $343,750
with this share based payment expense recognized over the vesting period. When assessing the value of the
Executive Performance Rights it has been assumed that the vesting condition will be achieved. In the event the
vesting condition is not achieved this share based payment expense will be reversed. An expense of $85,052 has
been recognised in the current period.
The 2,500,000 Executive Performance Rights - Directors have been valued at $0.13 based on the share price as at
the grant date. These Performance Rights convert into ordinary shares on a one for one basis subject to
achievement of the vesting conditions. The total value of the Executive Performance Rights issued to Messers Levy
and Swan when granted was $325,000 with this share based payment expense recognised over the vesting period.
When assessing the value of the Executive Performance Rights it has been assumed that the vesting condition will
be achieved. In the event the vesting condition is not achieved this share based payment expense will be reversed.
An expense of $43,898 has been recognised in the current period.
The 2,049,428 Remuneration Performance Rights – Executives have been valued based on the fair value of the
services provided (remuneration foregone) being $286,920, with this share based payment expense recognized
over the vesting period of the Remuneration Performance Rights. An expense of $188,681 has been recognised in
the current period.
The Remuneration Performance Rights granted to Messrs Levy and Swan (1,885,715) and Stepka (500,000) have
been valued based on the fair value of the services provided (remuneration foregone) being $324,000, with this
share based payment expense recognized over the vesting period of the Remuneration Performance Rights. An
expense of $83,217 for Messrs Levy and Swan and $9,863 for Mr Stepka, respectively, has been recognised in
the current period.
7. Performance Shares issued to employees
The total share based payment expense for the year in respect to the 1,166,665 Performance Shares that had
been issued to employees in lieu of services was $73,069. The shares were cancelled prior to year end and as
such the total amount included an expense of $41,532 relating to the cancellation of these performance shares.
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
NOTE 21: OPERATING CASH FLOW INFORMATION
Reconciliation of cash flow from operations with loss after income tax
Loss for the year
Non-cash items
Share-based payments
Advertising and other expenses settled in equity
Depreciation and amortisation
Revaluation of contingent consideration
Interest expense
Loan forgiveness1
Changes in Assets and Liabilities
Increase / (Decrease) in Trade and Other Payables
Increase / (Decrease) in Deferred Revenue
(Increase)/ Decrease in Inventory
(Increase)/ Decrease in Trade and Other Receivables
Increase)/ (Decrease) in Provisions
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
(17,617,120)
(14,401,137)
2,915,880
2,021,783
-
4,164,248
87,582
31,881
(327,124)
73,511
4,498,680
(1,168,470)
-
-
938,605
2,270,051
(92,841)
(855,080)
206,944
(8,276,974)
762,424
-
(65,614)
(1,914,204)
(16,429)
(10,209,455)
Cash flows used in operations
1
During the year the Group received funding from the US Small Business Administration agency to provide assistance through COVID-19. This
loan had conditions attached, which if met, the loan would be forgiven. At 30 June 2020, all attaching conditions had been met and therefore the
loan was forgiven and recognised as other income in the Statement of Profit or Loss and Other Comprehensive Income.
Non-cash financing and investing activities
During the year the Group issued equity securities as payment for services to the value of $507,143 (2019: $138,067). These
issue costs are not reflected in the Statement of Cashflows.
NOTE 22: FINANCIAL INSTRUMENTS
(a)
Financial Risk Management Objectives and Policies
The Group‟s principal financial instruments comprise cash, receivables, payables and lease liabilities.
Primary responsibility for identification and control of financial risks rests with the Board. The Board reviews and
agrees policies for managing each of the risks identified.
The Group manages its exposure to key financial risks, including interest rate, credit and liquidity risks in
accordance with the Company‟s risk management policy. The primary objective of the policy is to reduce the
volatility of cash flows and asset values arising from such movements.
The Group uses different methods to measure and manage the different types of risks to which it is exposed.
These include monitoring the levels of exposure to interest rate risk, ageing analysis and monitoring of credit
allowances to manage credit risk and the use of future cash flow forecasts to monitor liquidity risk.
(b) Significant Accounting Policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, with respect to each class of financial
asset, financial liability and equity instrument are disclosed in Note 3 to the financial statements.
73
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
(c) Categorisation of Financial Instruments
Details of each category in accordance with Australian Accounting Standard AASB 9 Financial Instruments, are
disclosed either on the face of the Consolidated Statement of Financial Position or in the notes.
(d) Credit Risk
(i)
Exposure to Credit Risk
Credit risk is managed on a group basis. Credit risk arises predominantly from credit exposures to customers,
including outstanding receivables and committed transactions. The key elements to manage credit risk are; for
banks and financial institutions, only independently rated parties with a minimum rating of “A” are accepted and for
customers to review aged trade debtors on a regular basis. There are no significant concentrations of credit risk
through exposure to individual customers.
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
2020
$
2019
$
5,807,193
4,739,118
10,546,311
5,116,523
3,228,710
8,345,233
Financial assets as at 30 June 2020 are neither past due nor impaired. The Group applies the AASB 9 simplified
approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables and contract assets. Refer to Note 3(c), (d) for the Group‟s accounting policy.
(ii)
Interest Rate Risk
The Group‟s maximum exposure to interest rates at the reporting date was:
2020
Financial Assets - Current
Cash and cash equivalents
Financial Liabilities -
Current
Borrowings
2019
Financial Assets - Current
Range of
Effective Carrying
Interest
Amount
Rate
(%)
$
Interest Rate Exposure
Variable
Interest
Rate
$
Non
Interest
Bearing
$
Fixed
Interest
Rate
$
Total
$
0 – 1
5,807,193
5,807,193
-
- 5,807,193
14
1,272,510
- - 1,272,510 1,272,510
74
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Cash and cash equivalents
0-4
5,116,523
4,923,111
193,412
-
5,116,523
Financial Liabilities -
Current
Borrowings
14
1,469,535
-
-
1,469,535
1,469,535
(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.
Contingent consideration is fair valued using valuation techniques including a discounted cash flow (DCF) model, a
level 3 input for fair value measurement under AASB 13 Fair Value Measurement. 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.
The key assumptions take into consideration the probability of meeting each performance target and the discount
factor. The fair value of contingent consideration is also determined with reference to the Group‟s share price at
each reporting period end, a Level 1 input. Contingent consideration as therefore valued at the fair value of the
number of shares expected to be issued as a result of the achievement of contingent consideration performance
milestones. Unobservable inputs used in the DCF model include:
- Forecasted recurring revenue, number of schools deployed and number of active user accounts within New
Zealand; and
- The likelihood of any (one) of the above inputs for the payment of contingent consideration being achieved
During the year, a revaluation loss of $87,582 (2019: gain $1,168,470) was recognised in the Consolidated
Statement of Profit or Loss as a result of re-measurement of contingent consideration payable. 4,500,000 fully paid
ordinary shares, valued at $742,500 (2019: 2,000,000 shares valued at $400,000) were issued as a result of
contingent consideration milestones being achieved. Refer to Note 17 for further information.
(f)
Liquidity Risk
(i)
Exposure to Liquidity Risk
The carrying amount of the Group‟s financial liabilities represents the maximum liquidity risk. The Group‟s
maximum exposure to liquidity risk at the reporting date was:
Financial Liabilities - Current
Trade and other payables
Borrowings
Lease liabilities
Total financial liabilities
(ii)
Contractual Maturity Risk
The following table discloses the contractual maturity analysis at the reporting date:
2020
$
2019
$
1,973,621
1,272,510
225,642
3,471,773
1,143,101
1,469,535
-
2,612,636
75
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
2020
Financial Instrument
0-6 months
6-12 months
$
$
Over 1 to 5
years
$
More than 5
years
$
Total
$
Financial Assets
Cash
Trade and other receivables
Total financial assets
5,807,193
4,739,118
10,546,311
Financial Liabilities
Trade and other payables
1,973,621
-
-
-
-
-
53,156
53,156
-
-
-
5,807,193
4,792,274
10,599,467
-
-
1,973,621
1,272,510
-
-
-
1,272,510
Borrowings
Lease liabilities
Total financial liabilities
112,821
3,358,952
112,821
112,821
156,625
156,625
2019
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
5,116,523
3,228,710
8,345,233
Financial Liabilities
Trade and other payables
2,220,559
Borrowings
1,469,535
Total financial liabilities
2,612,636
(g) Market Risk
(i)
Foreign exchange risk
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
382,267
3,628,398
Total
$
5,116,523
3,228,710
8,345,233
1,143,101
1,469,535
2,612,636
The group‟s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars
was as follow:
Net assets (liabilities)
Net profit (Loss)
Value of NZD exposure expressed in
AUD
Value of USD exposure
expressed in AUD
2020
(151,492)
(672,896)
2019
2020
2019
(239,029)
(467,570)
221,165
(1,703,487)
(2,237,084)
(1,563,928)
76
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Foreign Currency sensitivity:
Based on the net liability position of the foreign subsidiaries at 30 June 2020, 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 $67,290 higher/$67,290 lower (2019: $170,349 higher/$$170,349
lower), and the effect on equity would have been $15,149 higher/$15,149 lower (2019: $23,902 higher/$23,902
lower).
In addition, had the Australian dollar weakened/strengthened by 10% against the US dollar with all other variables
held constant, the Group‟s post-tax loss for the year would have been $223,708 higher/$223,708 lower (2019:
$156,393 higher/$156,393 lower), and the effect on equity would have been $46,757 higher/$46,757 lower (2019:
$22,117 higher/$22,117 lower).
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 and R&D Loan Facility as set out in
Note 22(d)(ii).
(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).
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.
2020
Financial Assets - Current
Cash and cash equivalents
Trade Receivables
Financial Liabilities - Current
Trade and other payable
Borrowings
Carrying
Amount
$
5,807,193
4,739,118
Interest Rate Risk
+1%
-1%
Profit
$
58,072
-
Equity
$
58,072
-
Profit
$
Equity
$
(58,072)
-
(58,072)
-
1,973,621
1,272,510
-
(12,725)
-
(12,725)
-
12,725
-
12,725
77
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
2019
Financial Assets - Current
Cash and cash equivalents
Trade Receivables
Financial Liabilities - Current
Trade and other payable
Borrowings
4,923,111
3,228,710
49,231
-
49,231
-
(49,231)
-
(49,231)
-
1,143,101
1,469,535
-
(14,695)
-
(14,695)
-
14,695
-
14,695
NOTE 23: SEGMENT INFORMATION
AASB 8 ‘Operating Segments’ requires operating segments to be identified on the basis of internal reports about
components of the Company that are regularly reviewed by the chief operating decision maker in order to allocate
resources to the segment and to assess its performance.
The chief operating decision maker has been identified as the Board of Directors.
The Group has three main operating segments being, information technology (and more specifically the provision
of cyber safety services) in Australia, New Zealand and United States of America. The Group also operates in Asia,
however this is in the early stages of development, and has been allocated to other. Other also includes head office
& corporate expenditure. This is consistent with the internal reporting provided to the chief operating decision
maker.
30 June 2020
Segment Income
Sales revenue
Other income
Less: Intercompany revenue
Segment Income
Segment Expenses
Cost of sales
Operating expenses
Research and development
Share based payments
Loss before depreciation
and amortisation
Depreciation
amortisation
Loss before income tax
and
Australia
USA
New Zealand
Other
Total
4,163,988
3,173,133
(1,633,914)
5,703,207
1,347,139
309,064
18,083
1,674,286
984,428
4,916
-
989,344
70,871
28,157
-
99,028
6,566,426
3,515,270
(1,615,831)
8,465,865
(1,023,742)
(9,287,421)
(3,482,679)
- - - (2,915,880)
(2,248,493)
86,529 (13,094,422)
- (3,659,942)
(2,915,880)
(874,424)
(2,723,486)
(125,954)
(330,922)
(1,170,044)
(51,309)
(19,405)
(8,090,635)
(2,049,578)
(562,931)
(2,749,728)
(13,452,872)
(930,055)
(187,505)
(3,046,688)
- (4,164,248)
(9,020,690)
(2,237,084)
(3,609,619)
(2,749,728)
(17,617,120)
30 June 2020
Australia
USA
Segment Assets
8,839,090
3,598,089
New
Zealand
1,618,708
Other
Total
139,664
14,195,553
Segment Liabilities
(5,215,037)
(4,005,739)
(549,167)
(18,964)
(9,788,907)
78
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
30 June 2019
Australia
USA
New
Zealand
Other
Total
Segment Income
Sales Revenue
Other Income
Less: Intercompany revenue
Segment Income
Segment Expenses
Cost of sales
Operating Expenses
Research and Development
3,209,353
3,840,053
-
7,049,406
790,384
7,015
-
797,399
193,846
49
-
193,895
(9,262)
8
-
(9,254)
4,184,323
3,847,124
-
8,031,447
(1,675,055)
(8,958,882)
(1,061,434)
(163,721)
(2,281,655)
(871)
(131,582)
(1,527,960)
(50,033)
(62,722)
(86,921)
-
(2,033,080)
(12,855,417)
(1,112,338)
Share based payments
-
-
- (1,933,070)
(1,933,070)
Loss before depreciation
and amortisation
Depreciation
amortisation
Loss before Income Tax
and
(4,645,964)
(1,648,847)
(1,515,680)
(2,091,966)
(9,902,458)
(1,459,069)
(2,991,362)
(48,249)
-
(4,498,680)
(6,105,034)
(4,640,209)
(1,563,928)
(2,091,966)
(14,401,138)
30 June 2019
Australia
USA
New
Zealand
Other
Total
Segment Assets
Segment Liabilities
9,435,125
4,485,045
953,993
23,099
14,897,262
(5,655,350)
(566,319)
(556,624)
(184,500)
(6,962,793)
NOTE 24: 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
Incorporation
Extent of control
2019
2020
Australia
-
-
Controlled entities
Family Zone Inc.
Family Zone Cyber Safety Pte. Ltd.
Family Zone NZ Cyber Safety Ltd (formerly Linewize Service Ltd)
USA
Singapore
New Zealand
100%
100%
100%
100%
100%
100%
(b) Key Management Personnel Compensation
Information on remuneration of all Directors and Key Management Personnel is contained in the Remuneration
Report within the Directors‟ Report. The aggregated compensation paid to Directors and Key Management
Personnel of the Group is as follows:
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Short-term employee benefits
Post-employment benefits
Share-based payment
Total
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
294,281
44,628
908,863
1,247,772
408,933
47,500
481,526
937,959
(c) Other Transactions with Key Management Personnel
a) Grange Consulting
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
2020 and 30 June 2019 is as follows:
Company secretarial and financial management services
Total
2020
$
94,839
94,839
2019
$
94,500
94,500
No amounts were payable to Grange Consulting or Grange Capital Partners as at 30 June 2020 (2019: $25,987 incl.
GST).
NOTE 25: 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
NOTE 26: COMMITMENTS AND CONTINGENT LIABILITIES
Operating Lease Commitments – Group as Lessee:
2020
$
2019
$
56,096
-
11,700
67,796
47,000
3,000
10,600
60,600
The Group has no operating lease commitments, other than right of use leases which have now been accounted
for in accordance with AASB 16. Refer to Note 13: Right of Use Assets and Lease Liabilities and Note 2(a) for
further information of the impact of the implementation of AASB 16.
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 2020.
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
NOTE 27: PARENT ENTITY DISCLOSURE
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current liabilities
Non-current liabilities
Total Liabilities
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
2020
$
2019
$
8,430,092
1,228,902
9,658,994
4,599,801
652,547
5,252,348
8,454,204
5,135,615
13,589,819
5,583,205
72,145
5,655,350
Net Assets/(Deficiency)
4,406,646
7,934,469
Equity
Issued Capital
Reserves
Accumulated losses
Total Equity
Profit/(Loss) for the year
Total comprehensive income
56,673,575
10,448,193
(62,715,122)
4,406,646
45,567,979
7,454,897
(45,088,407)
7,934,469
(10,302,656)
(10,312,251)
(8,039,075)
(8,054,048)
The parent did not have any guarantees, contingent liabilities or commitments as at 30 June 2020 (2019: nil).
NOTE 28: EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 1 July 2020, the Company acquired 100% of the issued fully paid capital of another privately owned technology
company that operated within the cyber security sphere for cash consideration of $100. At the date of this report,
the initial business combination accounting is incomplete and as such no disclosures have been made in relation to
the acquisition accounting for this transaction. Further disclosure will be provided in due course as management
continue to work through this process.
On 1 July 2020, a new lease agreement was entered into by the Company for premises in Australia. The lease is
for a term of 2 years, commencing from 1 July 2020.
On 7 July 2020, the Company completed the issue of the second tranche of 30,833,333 Placement Shares at $0.12
per Share raising $3.7 million (before costs) including an investment of $500,000 by the Company‟s Chairman,
Peter Pawlowitsch. The Company also issued 2,000,000 Broker Options ($0.18, 7 July 2023), 5,500,000
Performance Rights to Matthew Stepka and 1,000,000 Director Options ($0.21, 7 July 2023) to Phil Warren. These
options were approved at the Shareholder meeting on 30 June 2020, and therefore accounted for at 30 June 2020.
On 13 July 2020 the Company announced the issue of the 4,000,000 Advisor Options, comprising 2,000,000
Tranche 1 Advisor Options ($0.18, 13 July 2023) and 2,000,000 Tranche 2 Advisor Options ($0.24, 13 July 2023)
and 4,500,000 Performance Rights under the Company‟s Performance Rights Plan. These options were approved
at the Shareholder meeting on 30 June 2020, and therefore accounted for at 30 June 2020.
On 15 July 2020 the Company announced it had passed through significant operational milestone with over 1
million contracted student licenses with a total of approximately 1.4 million students and 2,600 schools on the
81
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2020
Family Zone Platform.
On 26 August 2020, the Company announced that in the 8 weeks following the end of the financial year the
Company had signed contracts in US education covering greater than 300,000 student licenses with 312,500
student licences added across the business in this period representing a 33% increase in the size of Family Zone‟s
contracted education base.
On 28 August 2020, the Company announced the issue of 500,000 Broker Options ($0.18, 13 July 2020).
Since the end of the financial year a total of 4,798,789 Shares have been issued following the exercise of
4,798,789 Options with a total of $998,923 funds received from the exercise of these Options. In addition 459,842
Performance Rights have been exercises for nil consideration.
Apart from the events discussed above, no other matters or circumstances have arisen since the end of the period
which significantly affected or may significantly affect the operations of the Group, the results of those operations or
the state of affairs of the Group in subsequent financial years.
82
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
DIRECTORS’ DECLARATION
In the Directors‟ opinion:
(a)
the accompanying financial statements set out on pages 34 to 82 and the Remuneration Report in the
Directors‟ Report are in accordance with the Corporations Act 2001, including:
i.
ii.
giving a true and fair view of the Group‟s financial position as at 30 June 2020 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;
(b)
(c)
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 2020.
This declaration is made in accordance with a resolution of the Board of Directors.
On behalf of the Directors
Tim Levy
Managing Director
30 September 2020
83
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 2020, 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 2020 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 (including Independence Standards), “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.
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.
84
Pitcher Partners BA&A Pty LtdAn independent Western Australian Company ABN 76 601 361 095.Level 11, 12-14 The Esplanade, Perth WA 6000Registered Audit Company Number 467435.Liability limited by a scheme under Professional Standards Legislation.Adelaide Brisbane Melbourne Newcastle Perth SydneyPitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Key Audit Matter
How our audit addressed the key audit
matter
Going Concern
Refer to Note 2(d) of the financial report
The Group currently had cash and cash
equivalents of $5,807,193 as at 30 June
2020. Subsequent to year end the Group
completed the issue of the second tranche of
30,833,333 Placement Shares at $0.12 to
raise $3.7 million (before costs).
Our procedures included, amongst others:
evaluating
and
Understanding
and
relevant
management’s
processes around the preparation of cash
flow forecasts reviewed by the Directors.
controls
For the year ended 30 June 2020, the
Company has
incurred a deficit of
$17,617,120 and has net cash outflow from
operating and
investing activities of
$9,538,133.
Checking and satisfying ourselves that the
cash flow forecasts prepared by Directors
were consistent with the Group’s strategy
and current position.
The Directors have continued to adopt the
going concern basis of preparation
in
preparing the Group’s financial statements,
and having prepared detailed cash flow
forecasts which support the assertion that
the Group will have sufficient resources to
continue for a period of at least 12 months
from the date of these financial statements
were approved.
The Director’s assessment of the Group’s
going concern ability was an area of audit
focus and particular attention was paid to the
key assumptions and judgements taken by
the Directors that most significantly impacted
these cash flow forecasts, including the
assumptions used in forecasting projected
service and hardware sales revenue and
cash outflows associated with its operations.
Challenging management
regarding:
assumptions
•
•
the likelihood that forecasted growth
and retention rates across operating
sections in Australia, New Zealand
and Australia will be achieved;
Assumptions around costs and cost
the
saving
Group’s unit cost for delivery and
manage it’s overheads
initiatives
improve
to
Assessing the Company’s disclosures within
the financial report and the appropriateness,
including consistency with the assumptions
and judgements made by management.
85
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Key Audit Matter
How our audit addressed the key audit
matter
Valuation of intangible assets
Refer to Note 11 of the financial report
At 30 June 2020, the consolidated statement
of financial position of the Group includes
intangible assets of $1,251,177.
This amount represents 9% of total assets.
the
report
Due to the significance to the Group’s
financial
of
and
in
judgment
management’s
determining a Cash Generating Units
(“CGU”) and assessing whether there are
impairment indicators present, we consider
this to be a key audit matter.
level
involved
Our procedures included, amongst others:
Assessing management’s determination of
the appropriate CGU based on our
understanding of the nature of the Group’s
business and the economic environment in
which it operates. Also reviewing the internal
reporting of
to assess how
earnings streams and groups of assets are
monitored and reported
the Group
evaluating
and
Understanding
management’s
and
relevant
processes regarding valuation of the CGU to
determine any potential impairment including
the procedures around the preparation and
review of the associated cash flow forecasts
controls
the
appropriateness
of
Assessing
management’s judgment and conclusion that
there were no impairment indicators present
as at 30 June 2020. In doing so considering
internal and external impairment factors and
assessing
the
amortisation period of
the capitalised
expenditure pursuant to the requirements of
Australian Accounting Standards.
the appropriateness of
Assessing, agreeing and checking the data
within the cash flow forecasts associated with
the CGU.
Considering the adequacy of the disclosures
included within the financial report.
86
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Revenue Recognition
Refer to Note 3(o) & 4 of the Financial Report
For the year ended 30 June 2020, the Group
has revenue of $5,090,173 from the sale of
hardware and/or for contracts to provide
subscription services.
for
judgements
The determination of revenue recognition
requires management
in
relevant
accounting
performance obligations, discounts and
credit notes in accordance with the Group’s
identified performance obligations as part of
the transaction.
revenue,
Our procedures included, amongst others:
Obtaining an understanding of the relevant
controls associated with the treatment of
revenue, including, but not limited to, those
identification of performance
relating
obligations, discounts,
incentives and
rebates.
to
revenue
the appropriateness of
the
Considering
recognition accounting
Group’s
policies including those relating to identifying
performance obligations, determining the
transaction price and allocating
the
transaction price
the performance
to
obligations in contract.
Testing a sample of transactions by sighting
evidence of signed contracts,
related
invoices and comparing the revenue amount
recognised to the timing of when the Group
satisfies performance obligations associated
with the transaction.
Considering the adequacy of the disclosures
included within the financial report.
87
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Share Based Payments
Refer to Note 3(m), 18 and 20 of the
Financial Report
At 30 June 2020, share based payments of
$2,915,880 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 management judgements including but
not limited to:
the
key
probability
of
Assessing
achieving
performance
milestones in relation to vesting
conditions; and
•
•
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.
Critically evaluating and challenging the
methodology
of
management in their preparation of valuation
model, agreeing
internal and
inputs
external sources of information.
assumptions
and
to
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.
the appropriateness of share
Assessing
based payments expensed during the year
pursuant to the requirements of Australian
Accounting Standards.
Assessing the Group’s accounting policy as
set out within Note 3(m) for compliance with
the requirements of AASB 2 Share-based
Payments.
88
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
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 2020, 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.
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.
89
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
FAMILY ZONE CYBER SAFETY LIMITED
Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including
the disclosures, and whether the financial report represents the underlying transactions
and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial
report. We are responsible for the direction, supervision and performance of the Group
audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where
applicable, actions taken to elminiate threats or 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.
90
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 2020. In our opinion, the Remuneration Report of Family Zone Cyber Safety Limited,
for the year ended 30 June 2020, 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 September 2020
91
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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 17 September 2020 includes the following securities:
Equity Class
Fully paid ordinary shares
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)
Advisor Options (($0.25, 11 Mar 2022)
Employee Options ($0.18, 18 Mar 2022)
Options ($0.21, 8 Nov 2022)
Employee Options ($0.21, 29 April 2023)
Director Options ($0.21, 7 July 2023)
Broker/Advisor Options ($0.18-$0.24, 7-13 July 2023)
Performance Shares -Class H
Performance Rights
Number of holders
2,929
1
1
1
1
1
36
9
1
1
6
7
68
Total on issue
330,335,133
850,000
850,000
516,765
516,765
250,000
1,629,892
5,595,000
500,000
1,000,000
5,500,000
3,000,000
29,068,235
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
Regal Funds Management Pty Ltd
McCusker Holdings Pty Ltd
Number of Shares held
33,334,862
17,190,000
% of Total Shares
10.11%
5.20%
3.
a)
Distribution of equity securities as at 17 September 2020
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
141
887
470
1,086
342
2,929
Total Shares
92,369
2,498,600
3,858,508
42,030,248
281,855,408
330,335,133
% Total Shares
0.03%
0.76%
1.17%
12.72%
85.32%
100.00%
There were 167 holders with less than a marketable parcel of Shares based on the share price of $0.465 on 17
September 2020.
92
ASX ADDITIONAL INFORMATION (CONTINUED)
b)
Employee Options ($0.18, 18 Mar 2022)
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)
Options ($0.21, 8 Nov 2022)
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)
Broker/Advisor Options ($0.18-$0.24, 7-13 Jul 2023)
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)
Performance 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
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Holders
-
4
7
20
5
36
Total Employee
Options
-
9,752
52,653
663,478
904,009
1,629,892
% Total
Employee
Options
-
0.60%
3.23%
40.71%
55.46%
100.00%
Total
Selling/Advisor
Options
-
-
17,500
71,000
5,506,500
5,595,000
Holders
-
-
2
2
5
9
% Total
Selling/Advisor
Options
-
-
0.3%
1.27%
98.42%
100.00%
Holders
-
-
-
-
6
6
Total Broker
Options
-
-
-
-
5,500,000
5,500,000
% Total Broker
Options
-
-
-
-
100.00%
100.00%
Holders
-
-
-
2
5
7
Total Broker
Options
-
-
-
118,673
2,881,327
3,000,000
% Total Broker
Options
-
-
-
3.96%
96.04%
100.00%
93
ASX ADDITIONAL INFORMATION (CONTINUED)
f)
Performance Rights
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 2020
Total
Performance
Rights
-
-
-
1,616,494
27,451,741
29,068,235
Holders
-
-
-
47
21
68
% Total
Performance
Rights
-
-
-
5.56%
94.44%
100.00%
4.
Top 20 Shareholder as at 17 September 2020
Position Holder Name
Holding
% IC
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CS THIRD NOMINEES PTY LIMITED
MCCUSKER HOLDINGS PTY LTD
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
TIMOTHY NOMINEES PTY LTD
TWYNAM INVESTMENTS PTY LTD
SISU INTERNATIONAL PTY LTD
HARMANIS HOLDINGS PTY LTD
MOSCH PTY LTD
1001 PTY LTD
CITICORP NOMINEES PTY LIMITED
GASMERE PTY LTD
BNP PARIBAS NOMINEES PTY LTD
MR THOMAS MADSEN
BROWN BRICKS PTY LTD
FRESHIE PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SCOTT ROBERT NOAKES
TRIGGER ASSETS PTY LTD
WYLLIE GROUP PTY LTD
NOVALANE COM PTY LTD
Total
Total issued capital - selected security class(es)
21,745,092
17,190,000
11,231,615
10,479,730
9,950,000
8,688,705
8,319,655
7,738,094
7,612,500
6,644,023
6,228,888
5,994,462
5,064,707
4,673,558
4,196,575
3,837,804
3,626,181
3,383,184
3,333,333
3,036,644
152,974,750
330,335,133
6.58%
5.20%
3.40%
3.17%
3.01%
2.63%
2.52%
2.34%
2.30%
2.01%
1.89%
1.81%
1.53%
1.41%
1.27%
1.16%
1.10%
1.02%
1.01%
0.92%
46.31%
100.00%
94
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
ASX ADDITIONAL INFORMATION (CONTINUED)
5.
Restricted Securities
There are no restricted securities on issue as at 17 September 2020.
6.
Unquoted Securities
The names of the security holders holding more than 20% of an unlisted class of security are listed below:
a)
Broker Options ($0.50-$0.90, 4 Dec 2020 to 9 Apr 2021)
Holder Name
TR Nominees Pty Ltd
Total Options
b)
Advisor Options ($0.25, 11 Mar 2022)
Holder Name
Idea X Partners Pte Ltd
Total Options
c)
Options ($0.21, 8 Nov 2022)
Holder Name
Vault (WA) Pty Ltd
Total Options
d)
Employee Options ($0.21, 29 Apr 2023)
Holder Name
Beachswing Pty Ltd
Total Options
e)
Director Options ($0.21, 7 Jul 2023)
Holder Name
Philuchna Pty Ltd
Total Options
f)
Broker/Advisor Options ($0.18-$0.24, 7-13 July 2023)
Holder Name
Bell Potter Nominees Ltd
Total Options
Holding
% Total Options
2,733,530
2,733,530
100.00%
100.00%
Holding
% Total Options
250,000
250,000
100.00%
100.00%
Holding
% Total Options
3,000,000
5,595,000
53.62%
100.00%
Holding
% Total Options
500,000
500,000
100.00%
100.00%
Holding
% Total Options
1,000,000
1,000,000
100.00%
100.00%
Holding
% Total Options
1,550,000
5,500,000
28.18%
100.00%
95
ASX ADDITIONAL INFORMATION (CONTINUED)
g)
Performance Shares
Holder Name
Michael Oliver Lawson
Scott Robert Noakes
Total
7.
On-market buy back
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
Holding
960,000
960,000
3,000,000
% Total
Performance
Shares
32.00%
32.00%
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.
96
Family Zone Cyber Safety Limited
Annual Report 30 June 2020
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://f.hubspotusercontent40.net/hubfs/416543/Corporate%20Governance%20Statement%20-
Family%20Zone%2030%20June%202020.pdf
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.
97