SeaChange Technology Holdings Pty Ltd (Shark Shield)

Transcription

1 SeaChange Technology Holdings Pty Ltd (Shark Shield) Annual Report June 30, 2016 ABN: Building 7, 1 Winton Road, Joondalup, Western Australia 6020

2 Contents Directors Report... 3 Auditor s Independence Declaration... 5 Annual `Financial Report 30 June Consolidated Income Statement... 7 Consolidated Statement of Retained Earnings... 8 Consolidated Balance Sheet... 9 Consolidated Statement of Cash Flows Directors Declaration Independent Audit Report... 23

3 3 Directors Report Your directors present their report on the consolidated entity consisting of SeaChange Technology Holdings Pty Ltd and the entities it controlled at the end of, or during, the year ended 30 June Throughout the report, the consolidated entity is referred to as the group. Directors The names of the directors in office at any time during or since the end of the year are: Lindsay N Lyon Amanda L Wilson Alan J Broome AM James Wakim Jane McKellar (resigned 1 July 2016) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Principal activities During the year the principal continuing activities of the group consisted of the design, sale and marketing of the Shark Shield personal shark deterrent device. There were no significant changes in these activities during the year. Dividends SeaChange Technology Holdings Pty Ltd There were no dividends paid or declared during the year. Review of operations Group sales increased by 11% from $1,141,355 to $1,261,817. The FY16 growth came from the company s traditional dive products. Despite best efforts, delays in the release of the FREEDOM+Surf product meant that there were $nil sales recorded against the projections for this new product, however the company was holding sales orders of $382,368 at the close of FY16 The growth in sales resulted in a $7,554 increase in gross profit with the gross profit margin slipping back to the 2014 ratio of 33% ( %) due to non-recurring cost of sales yearend adjustments. The lower gross margin is primarily attributed to increased air freight costs; the company is now using sea freight and expects a gross margin improvement in FY17 based on this change. Other income from government grants was $116,786 lower in 2016 as grant eligibility phases down. The R&D Tax Incentive relating to the 2016 R&D expenditure on the FREEDOM+Surf product will be recorded in the 2017 accounts once it is received. The Company is expecting a R&D Tax Incentive cash rebate in FY17 of approximately $240,000. Operating expenses during FY16 were well managed and remained flat with a 1% increase overall. Growth in US sales of the dive product has continued in 2016 however not to the level that can financially justify the cost of a stand-alone US division at present. From 1 July 2016 the US dive sales are being managed under an agency arrangement which will lower the overall operating expenses in FY17 by approximately $250,000.

4 4 The delay in the FREEDOM+Surf product and the cost of the US operations resulted in the group reporting a loss for the year of $681,134 ( $586,756 loss). Based on the FREEDOM+ Surf now shipping in September 2016, the Company is forecasting a $500,000 profit in FY17. Significant changes in the state of affairs Additional share capital of $1,394,980 was contributed by new and existing shareholders during the year. The net cash received was used principally for $430,149 in R&D on the FREEDOM+Surf product, reducing accounts payable, loan repayments and funding the 2016 loss. Events since the end of the financial year The company has undertaken further share capital raisings subsequent to 30 June At the date of this report, $258,750 in share capital has been contributed by new and existing shareholders A trade finance facility of approximately $1 million has been arranged with the Commonwealth Bank of Australia. Due to increasing demands on Jane McKellar as a professional board director, with directorships on ASX listed Automotive Holdings Group (AHG), McPherson's Consumer Products (MCP) and GWA Group (GWA) as well as the Terry White Group, Jane has chosen to move off the Shark Shield board and into an advisory role; she continues to be a shareholder. The board wishes to acknowledge Jane s contribution to the success of the business and her generous ongoing support of the management team in this new role. No other matter or circumstance has arisen since 30 June 2016 that has significantly affected the group s operations, results or state of affairs, or may do so in future years. Likely developments and expected results of operations Likely developments in the operations of the group that were not finalised at the date of this report included: Manufacturing of the FREEDOM+Surf product is underway with delivery of the initial 2,000 order expected to be received at the end of October Advance sales of the FREEDOM+Surf product have continued and shipping to customers should occur in October Based on the expected shipping date of the FREEDOM+Surf, the company is projecting 2017 sales of $2.7 million and a net profit of $500,000. Shares under option There were no unissued shares under option at the date of this report. This report is made in accordance with a resolution of directors. Lindsay Lyon Alan Broome AM Sydney Managing Director Chairman 20 March 2018

5 5 Auditor s Independence Declaration

6 6 Annual `Financial Report 30 June 2016 Financial statements Schedule Consolidated income statement 1 Consolidated statement of retained earnings 2 Consolidated balance sheet 3 Consolidated statement of cash flows 4 Notes to the consolidated financial statements 5 Directors declaration 6 Independent Audit Report 7 These financial statements are consolidated financial statements for the group consisting of SeaChange Technology Holdings Pty Ltd and its subsidiaries: Shark Shield Pty Ltd Australia 100% owned Shark Shield LLC USA 100% owned The financial statements are presented in the Australian currency. SeaChange Technology Holdings Pty Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office is: SeaChange Technology Holdings Pty Ltd Unit 7, 1 Winton Road, Joondalup WA 6020 A description of the nature of the consolidated entity s operations and its principal activities is included in the Directors Report which does not form part of these financial statements. The financial statements were authorised for issue by the directors on 23 March The directors have the power to amend and reissue the financial statements. All press releases, reports and other information are available on the company s website:

7 7 Consolidated Income Statement For the year ended 30 June 2016 Schedule 1 Revenue from continuing operations Note $ $ Sale of goods 2 1,261,817 1,141,355 Cost of goods sold (841,382) (728,474) Gross profit 420, ,881 Other income 2 77, ,120 Less, Operating expenses Staff and consultants 3(a) (661,630) (629,315) Marketing and selling costs (214,223) (281,163) Premises (40,174) (32,038) Administration (200,380) (143,078) Gain / (loss) on disposal of property, plant & equipment 3(b) - (18,067) Foreign currency gains / (losses) (22,326) (22,031) Earnings before interest, tax, depreciation, amortisation (640,964) (518,691) Depreciation and amortisation 3(c) (1,795) (1,085) Earnings before interest and tax (642,759) (519,776) Interest and finance costs 3(d) (38,375) (66,980) Profit / (Loss) before income tax (681,134) (586,756) Income tax expense Profit / (Loss) for the year (681,134) (586,756) These financial statements must be read in conjunction with accompanying notes.

8 8 Consolidated Statement of Retained Earnings For the year ended 30 June 2016 Schedule 2 Note $ $ Profit / (Loss) for the year after income tax (681,134) (586,756) Retained Earnings / (Accumulated Losses) at the beginning of the financial year (8,590,422) (7,795,792) Total available for appropriation (9,271,556) (8,382,548) Other appropriations Transfer the historical balancing adjustment relating to the FY2013 conversion from Saasu to Xero to accumulated losses - (207,874) Retained Earnings (Accumulated Losses) at the end of the financial year (9,271,556) (8,590,422) These financial statements must be read in conjunction with accompanying notes

9 9 Consolidated Balance Sheet For the year ended 30 June 2016 Schedule 3 ASSETS Note $ $ Current assets Cash and cash equivalents 5 40,589 13,658 Trade and other receivables 6 35,129 76,718 Inventories 7 182, ,739 Other current assets 8 223, ,589 Total current assets 481, ,704 Non-current assets Property, plant and equipment 9 32,531 3,764 Intangible assets , ,063 Total non-current assets 654, ,827 TOTAL ASSETS 1,136, ,531 LIABILITIES Current liabilities Trade and other payables , ,301 Borrowings , ,732 Provisions 13 8,998 3,966 Other current liabilities 14 62,712 - Total current liabilities 802,982 1,055,999 TOTAL LIABILITIES 802,982 1,055,999 NET ASSETS 333,378 (380,468) EQUITY Contributed equity 15 9,604,934 8,209,954 Accumulated losses (9,271,556) (8,590,422) TOTAL EQUITY 333,378 (380,468) These financial statements must be read in conjunction with accompanying notes.

10 10 Consolidated Statement of Cash Flows For the year ended 30 June 2016 Schedule 4 Note $ $ Cash flows from operating activities Receipts from customers (inclusive of GST) 1,450,644 1,176,960 Payments to suppliers and employees (inclusive of GST) (2,142,147) (1,720,435) Other revenue 78, ,870 Interest paid (38,577) (67,466) Net cash inflow / (outflow) from operating activities 18 (651,746) (404,071) Cash flows from investing activities Payments for property plant and equipment (30,562) (3,316) Payment for development costs (430,149) - Interest received Net cash inflow / (outflow) from investing activities (460,509) (2,830) Cash flows from financing activities Proceeds from issues of shares 1,342, ,000 Proceeds / (repayment) of borrowings related parties (124,135) 209,409 Proceeds / (repayment) of borrowings third parties (71,487) (277,311) Net cash inflow / (outflow) from financing activities 1,146, ,098 Net increase / (decrease) in cash 34,603 (36,803) Cash at the beginning of the financial year (65,359) (28,556) Cash and cash equivalents at end of year 5 (30,756) (65,359) These financial statements must be read in conjunction with accompanying notes.

11 11 Notes to the Financial Statements For the year ended 30 June 2016 Schedule 5 NOTE 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The directors have prepared the financial statements on the basis that the company is a nonreporting entity because there are no users dependent on general purpose financial statements. The financial statements are therefore special purpose financial statements that have been prepared in order to meet the needs of the members and must not be used for any other purpose. The company is classified as a small proprietary company under the Corporations Act The financial statements have been prepared in accordance with the significant accounting policies disclosed below which the directors have determined are appropriate to meet the needs of the members. Such accounting policies are consistent with the previous period unless otherwise stated. (a) Basis of preparation The financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets and financial instruments for which the fair value basis of accounting has been applied. (b) Income Tax The income tax expense for the period is the tax payable on the current period s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. SeaChange Technology Holdings Pty Ltd and its wholly-owned Australian controlled entity, Shark Shield Pty Ltd, have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Companies within the group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to qualifying expenditure (eg the Research and Development Tax Incentive regime in Australia or other investment allowances). The group accounts for such allowances as other income.

12 12 Notes to the Financial Statements For the year ended 30 June 2016 Schedule 5 (c) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. (d) Property, Plant and Equipment (PPE) Property, plant and equipment are carried at cost, independent or directors' valuation. All assets, excluding freehold land and buildings, are depreciated over their useful lives to the company. Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in shareholders equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the assets charged to the income statement and depreciation based on the asset s original cost is transferred from the revaluation reserve to retained earnings. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset s employment and subsequent disposal. The expected net cash flows have not been discounted in determining recoverable amounts. (e) Intangibles and Impairment Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Patents and trademarks Patents and trademarks are recognised as intangible assets at cost of acquisition and are considered to have an indefinite useful life. The costs of renewing patents and trademarks are expensed as incurred.

13 13 Notes to the Financial Statements For the year ended 30 June 2016 Schedule 5 Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and are tested annually for impairment if events or changes in circumstances indicate that they might be impaired. (f) Employee Benefits Provision is made for the company's liability for employee benefits arising from services rendered by employees to balance date. Employee benefits have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. (g) Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reasonably measured. Provisions recognised represent the best estimate of the amounts required to settle the obligation at reporting date. (h) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. (g) Revenue and Other Income Revenue is measured at the value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. For this purpose, deferred consideration is not discounted to present values when recognising revenue. Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Dividend revenue is recognised when the right to receive a dividend has been established. Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions.

14 14 All revenue is stated net of the amount of goods and services tax (GST). Notes to the Financial Statements For the year ended 30 June 2016 Schedule 5 (h) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. Cash flows are presented in the cash flow statement on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows. (i) Trade and Other Receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. (j) Trade and Other Payables Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the company during the reporting period, which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

15 15 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 2. REVENUE Revenue from operating activities Sales of goods 1,261,817 1,141,355 Other revenue Government grants 32, ,671 R&D Tax Incentive 44,435 46,379 Other - 3,070 Other income 77, ,120 Interest Total revenue 1,339,353 1,335,961 NOTE 3. EXPENSES (a) Staff and consultants expense includes: Directors remuneration Executives 329, ,304 Non-executives 125,000 31, , ,554 Executive directors 2015 remuneration includes their 2014 remuneration of $202,899 that was carried over and expensed in (b) Net loss on write-off of property, plant and equipment: Plant - 11,163 Furniture & fixtures - 6,161 Office equipment ,067

16 16 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 3. EXPENSES (continued) (c) Depreciation & Amortisation Furniture & fittings Office equipment 1, Total depreciation 1,795 1,085 (d) Finance Costs Interest income (202) (486) Interest expense banks 33,563 49,766 Interest expense other 5,015 17,700 38,375 66,980 NOTE 4. INCOME TAX (a) Income tax expense The income tax for the financial year differs from the amount calculated on the profit. The differences are reconciled as follows: Profit / (loss) before income tax (681,134) (586,756) Income tax 30% (204,340) (176,027) Tax effect of permanent differences: Other items treated as permanent differences 39,358 43,882 Tax losses not booked 164, ,145 Income tax attributable to operating profit - - (b) Tax losses Unused tax losses for which no deferred tax asset has been recognised 7,650,982 7,101,044 Potential tax 30% 2,295,295 2,130,313

17 17 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 5. CASH AND CASH EQUIVALENTS Cash at bank 40,589 13,658 Reconciliation to cash flow statement Cash and cash equivalents (above) 40,589 13,658 Bank overdraft (Note 12) (71,345) (79,017) Balances per statement of cash flows (30,756) (65,359) NOTE 6. TRADE AND OTHER RECEIVABLES - Current Trade receivables 34,828 76,422 Provision for impairment ,828 76,422 Other debtors ,129 76,718 NOTE 7. INVENTORIES Finished goods 182, ,739 NOTE 8. OTHER ASSETS - Current Deposits for inventory orders 204, ,589 Prepayments 18, , ,589

18 18 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 9. PROPERTY, PLANT AND EQUIPMENT Furniture and fittings 3,316 3,316 Less: Accumulated depreciation (1,031) (368) 2,285 2,948 Office equipment 5,787 1,533 Less: Accumulated depreciation (1,849) (717) 3, Tooling 26,308 - Less: Accumulated depreciation Net book amount 32,531 3,764 Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. Carrying Carrying amount at amount at 1 July 2015 Additions Disposals Depreciation 30 June 2016 Furniture and fittings 2, (663) 2,285 Office equipment 816 4,254 - (1,132) 3,938 Tooling - 26, ,308 Total 3,764 30,562 - (1,795) 32,531 NOTE 10. INTANGIBLES Licences, patents, trademarks 139, ,590 Development costs, FREEDOM+ Surf 482,276 70, , ,063

19 19 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 11. TRADE AND OTHER PAYABLES Accounts payable 305, ,343 Sundry creditors and accrued expenses 121,876 12, , ,301 NOTE 12. BORROWINGS Secured: Bank overdraft 71,345 79,017 Total secured borrowings 71,345 79,017 Unsecured: Credit cards 7,807 11,120 Loans from related parties 175, ,215 Other loans 49, ,380 Total unsecured borrowings 232, , , ,732 The bank overdraft is with ANZ and has a limit of $80,000 secured by a first ranking charge over all present and after acquired property of the company and its Australian subsidiary. Events occurring after the reporting period The company has obtained approval for a finance facility with the Commonwealth Bank of Australia that includes a trade finance facility of $700,000 plus $US218,000 and a business loan of $80,000 repayable over 5 years. The facility is secured by way of: a first ranking charge over all present and after acquired property of the company and its Australian subsidiary; an EFIC guarantee for the $US218,000, if drawn down; and personal guarantees from Lindsay Lyon and Amanda Wilson. NOTE 13. PROVISIONS - Current Employee entitlements 8,998 3,966

20 20 Notes to the Financial Statements For the year ended 30 June 2016 Schedule $ $ NOTE 14. OTHER LIABILITIES - Current Unearned revenue FREEDOM+Surf sales in advance 62,712 - NOTE 15. CONTRIBUTED EQUITY Share capital Shares Shares Ordinary shares 165, ,351 9,604,934 8,209,954 Movements in ordinary share capital Number of shares $ Opening balance 1 July ,351 8,209,954 Share $20 per share 3,000 60,000 Share $30 per share 28, ,040 Share $33 per share ,000 Share issues: Rights $40 per share 10, ,440 Directors fees owing settled in $20 per share 2,625 52,500 Balance at 30 June ,196 9,604,934 Ordinary shares entitle the holder to participate in dividends and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person, or by proxy, is entitled to one vote and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. Events occurring after the reporting period The company has undertaken further share capital raisings subsequent to 30 June At the date of this report, $258,750 in share capital has been contributed by existing shareholders including $58,750 in directors fees owing settled in shares.

21 21 Notes to the Financial Statements For the year ended 30 June 2016 Schedule 5 NOTE 16. Operating leases COMMITMENTS FOR EXPENDITURE Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: $ $ Within 1 year 28,020 26,347 Later than 1 year but not later than 5 years 7,131 35,151 Commitments not recognised in the financial statements 35,151 61,498 Operating lease expense 26,347 27,340 NOTE 17. CONTINGENT ASSETS AND CONTINGENT LIABILITIES The company has no contingent assets or contingent liabilities. NOTE 18. CASH FLOW INFORMATION Reconciliation of profit after income tax to net cash inflow from operating activities Profit / (loss) after income tax (681,134) (586,756) Non-cash flows in profit Depreciation and amortisation 1,795 1,085 Interest income (202) (486) Net (gain) loss on sale of non-current assets - 18,067 Directors fees settled in shares 52,500 17,500 Change in operating assets and liabilities (Increase)/decrease in trade debtors 41,594 (33,623) (Increase)/decrease in inventories (62,662) 118,298 (Increase)/decrease in other operating assets 46,086 (259,260) Increase/(decrease) in trade creditors (223,073) 311,997 Increase in other operating liabilities 168,318 5,141 Increase in other provisions 5,032 3,966 Net cash inflow (outflow) from operating activities (651,746) (404,071)

22 22 Directors Declaration For the year ended 30 June 2016 Schedule 6 The directors have determined that the company is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies described in Note 1 to the financial statements. In the directors opinion: (a) the consolidated financial statements and notes set out on Schedules 1-5 give a true and fair view of the company s financial position as at 30 June 2016 and of its performance for the financial year ended on that date in accordance with the accounting policies described in Note 1 to the financial statements; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the directors. Lindsay Lyon Managing Director Alan Broome AM Chairman Sydney 20 March 2018

23 23 Independent Audit Report

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