DMX Corporation Limited and Controlled Entities Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2017 Note Consol

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11 Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2017 Note Consolidated 2017 Consolidated Revenue 3 1,814,949 1,711,808 Other income 4 8,785 84,169 Cost of goods sold (397,422) (381,185) Administration expenses (104,843) (112,625) Consulting and professional services fees (134,869) (211,521) Depreciation expense (19,589) (18,482) Employee expenses (876,505) (1,039,011) Finance expenses (13,483) (77) Marketing and promotions expenses (30,628) (26,251) Occupancy expenses (144,460) (139,784) Impairment expenses - (647,396) Profit / (Loss) before income tax expense 101,935 (780,355) Income tax benefit / (expense) 7 (79,333) (35,294) Profit / (Loss) from continuing operations 22,602 (815,649) Other comprehensive income 24,871 - Total comprehensive income/(loss) for the year 47,473 (815,649) Basic earnings per share (148.90) Diluted earnings per share (148.90) The statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes to the financial statements Annual Report Page 10

12 Statement of Financial Position as at 30 June 2017 Consolidated Note 2017 Consolidated Current assets Cash and cash equivalents 8 1,482, ,548 Trade and other receivables 9 165, ,188 Inventory 10 86,288 99,198 Other assets 11 21,349 46,526 Other financial assets Total current assets 1,756,260 1,186,460 Non-current assets Other financial assets ,778 49,737 Plant and equipment 13 53,436 58,095 Intangible assets 14 1,273,535 1,273,535 Deferred tax assets 7 81, ,331 Total non-current assets 1,516,746 1,542,698 Total assets 3,273,006 2,729,158 Current liabilities Trade and other payables , ,355 Other liabilities , ,458 Financial liabilities ,823 - Employee entitlements 57,686 39,773 Total current liabilities 1,390,245 1,103,586 Non-current liabilities Employee entitlements 15,574 10,861 Total non-current liabilities 15,574 10,861 Total liabilities 1,405,819 1,114,447 Net assets 1,867,187 1,614,711 Equity Contributed equity 18 20,975,230 20,818,030 Reserves 24,871 - Other equity 17 75,352 - Accumulated losses (19,208,266) (19,203,319) Total equity 1,867,187 1,614,711 The statement of financial position should be read in conjunction with the accompanying notes to the financial statements Annual Report Page 11

13 Statement of Changes in Equity for the year ended 30 June 2017 Consolidated Note Contributed equity Accumulated losses Reserves Other Equity Balance at 1 July ,644,000 (18,387,670) - - 2,256,330 Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: Total equity - (815,649) - - ( ) Share issue , ,844 Share issue costs 18 (13,814) (13,814) Balance 30 June 20,818,030 (19,203,319) - - 1,614,711 Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: - 22,602 24,871-47,473 Conversion of convertible notes , ,200 Share issue costs Equity component of convertible notes ,352 75,352 Other adjustments - (27,549) - - (27,549) Balance 30 June ,975,030 (19,208,266) 24,871 75,352 1,867,187 The statement of changes in equity should be read in conjunction with the accompanying notes to the financial statements Annual Report Page 12

14 Statement of Cash Flows for the year ended 30 June 2017 Note Consolidated 2017 Consolidated Cash flows from operating activities Receipts from customers 1,935,098 1,841,962 Payments to suppliers & employees (1,818,162) (2,101,687) Dividends received 3,390 - Interest received 20,697 16,197 Interest and other finance costs paid (503) (77) Net cash inflow/(outflow) from operating activities ,520 (243,605) Cash flows from investing activities Acquisition of plant and equipment (14,930) (36,001) Payments for share investments (33,170) - Proceeds from sale of share investments - 527,680 Purchase of The Chocolate Pot - (40,755) Purchase of Nina s Chocolates - - Net cash inflow/(outflow) from investing activities (48,100) 450,924 Cash flows from financing activities New share Issued (net of share issue costs) - 174,030 Receipts from issue of convertible notes 475,000 - Unclaimed dividend funds paid - - Net cash inflow/(outflow) from financing activities 475, ,030 Net increase/(decrease) in cash and cash equivalents 567, ,349 Cash and cash equivalents at beginning of financial year 915, ,199 Cash and cash equivalents at end of the financial year 8 1,482, ,548 The statement of cash flows should be read in conjunction with the accompanying notes to the financial statements Annual Report Page 13

15 Notes to the Financial Statements for the year ended 30 June 2017 Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of accounting This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act The entity is a for-profit entity for financial reporting purposes under Australian Accounting Standards. The consolidated financial statements of the DMX Corporation Ltd group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The financial report is presented in Australian currency. The financial report was authorised for issue by the Directors on 6 Sepember The directors have the power to amend and reissue the financial report. Historical cost convention This financial report has been prepared under the historical cost convention, except for financial assets held for trading which are carried at fair value. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial report are disclosed in note 2. Principles of consolidation The consolidated financial reports incorporate the assets and liabilities of all subsidiaries of DMX Corporation Limited ( company or parent entity ) as at 30 June 2017 and the results of all subsidiaries for the year then ended. DMX Corporation Limited and its subsidiaries together are referred to in this financial report as the consolidated entity or 'group'. Subsidiaries are all those entities over which the consolidated entity has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between the company and the company s subsidiaries are eliminated. Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Minority interests in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income and statement of financial position of the consolidated entity. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the group s activities as described below. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. Revenue for the group s main types of revenue is recognised on the following basis: Sales revenue Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods Annual Report Page 14

16 Service revenue Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable. Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. Interest revenue Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. Income tax The income tax expense (benefit) for the year comprises current income tax expense (benefit) and deferred tax expense (benefit). The income tax expense or benefit for the period is the tax payable on the current year 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 where applicable. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted. 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. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. DMX Corporation Limited has implemented the tax consolidation legislation effective 5 May 2014, with the head entity of the tax consolidated group being DMX Corporation Limited. Entities within the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the group allocation approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognised the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity 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 Australian Taxation Office (ATO). In this case it is recognised as part of the cost of 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 ATO is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the ATO, are presented as operating cash flows. Cash and cash equivalents 2017 Annual Report Page 15

17 For statement of cash flows presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less, or that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Inventory Raw materials and packaging, and 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. Trade receivables All trade debtors are recognised at the amounts receivable, as they are due for settlement by no more than 60 days. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. An allowance for impairment of receivables is raised when some doubt as to collection exists. Property, plant and equipment Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised in profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis or diminishing value over the asset s useful life to the consolidated group commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Motor vehicles 15% White goods and air conditioning 30% Manufacturing equipment 30% Furniture & Fixtures 10% Plant & Equipment The Chocolate Pot 30% Office Equipment 10% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are recognised in profit or loss when the item is derecognised. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. Intangible assets Goodwill on acquisition of subsidiaries is included in intangible assets. Identifiable intangible assets acquired during the purchase of Nina s Chocolates include customer lists, recipes and the brand name. Intangible assets have an indefinite useful life and are not amortised but are tested for impairment annually, or more frequently if events or changes in circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of intangible assets relating to the entity sold. 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 Annual Report Page 16

18 financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans are carried at their principal amounts, which represent the present value of future cash flows associated with servicing the debt. Interest is accrued over the period it becomes due and is recorded as part of current payables. Finance costs Finance costs are recognised as expenses in the period in which they are incurred, except finance costs in relation to qualifying assets which are capitalised. Employee benefits Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised as other payables and provisions in respect of employees services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave is recognised in provisions and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2017 reporting periods. The Directors are unable to assess the full impact of these new accounting standards already enacted and old interpretations as the nature of the company s investments going forward is not certain Annual Report Page 17

19 Note 2. Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience, best available current information obtained within the group and externally, and other factors, including expectations of future events that may have a financial impact on the consolidated entity and that are believed to be reasonable under the circumstances. Key estimates The consolidated entity makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. In the opinion of the Directors, there are no significant estimates and assumptions. Impairment general The Group assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. Refer to Note14 for further details of these assumptions. Key judgements Recognition of deferred tax assets for carried forward tax losses. The Group assesses the likelihood that future taxable profits will be available against which the benefit of the carried forward tax losses can be realised. Refer to Note7 for further details of the carried forward tax losses. Note 3. Revenue 2017 From continuing operations: Sale of goods 1,692,218 1,661,736 Interest revenue 20,697 16,197 Dividend revenue 3,390 - Management fee revenue 23,706 7,351 Performance fee revenue 47,191 26,121 Other revenue 27, ,814,949 1,711,808 Note 4. Other income 2017 Realised gain/(loss) on other financial assets - 65,992 Other income 8,785 18,177 8,785 84,169 Note 5. Expenses 2017 Loss before income tax includes the following specific expenses: Finance costs expensed other parties Contributions to defined contribution superannuation plans 74,352 78,364 Operating lease payments 123, ,915 Unwinding of discount on convertible note 12, Annual Report Page 18

20 Note 6. Remuneration of auditors During the year the following fees were paid or payable for services provided by Nexia Sydney Partnership, the auditor of the company, and its related practices: Audit services - Audit or review of the financial report 29,700 33,100 Other services ,750 Total 29,700 51,850 Note 7. Income tax balances 2017 The components of tax (expense) / income comprise: Current tax - - Deferred tax 79,333 35,294 79,333 35,294 Numerical reconciliation of income tax benefit to prima facie tax payable: Prima facia tax expense (benefit) at the Australian tax rate of 27.5% (: 30%) 28,032 (234,166) Add tax effect of: Deferred tax assets not recognised relating to capital tax loss - 194,219 Permanent differences 3,787 75,241 Changes in tax rates 1,796 Recoupment of prior year tax losses 45,718 - Income tax (benefit) / expense 79,333 35,294 Tax losses: Unused capital tax losses for which no deferred tax asset has been recognised 647, ,396 Potential tax 27.5% (: 30%) 178, ,219 The unused tax losses have been recognised as a deferred tax asset in It is expected that the Group will continue to generate taxable income in the future. Deferred tax balances: The balance comprises temporary differences attributable to: Provisions for employee benefits 26,979 20,946 Accrued expenses 10,917 7,110 Black-hole expenditure 33,001 44,717 Convertible notes (17,152) - Unrealised gains on financial assets (6,788) - Prepayments (2,493) (2,261) Tax losses 37,533 90,819 81, ,331 Current tax assets: Balance at the beginning of the year - - Less: tax paid - - Add: current year tax payable - - Balance at the end of the year Annual Report Page 19

21 Note 8. Current Assets Cash and cash equivalents 2017 Cash at bank 932, ,250 Cash at deposit 550, ,071 Cash on hand Cash and cash equivalent per the statement of cash flows: 1,482, ,548 Note 9. Current assets Trade and other receivables 2017 Trade receivables 85,638 86,655 Management fee receivable DMX Capital Partners 15,552 - Performance fee receivable DMX Capital Partners 55,140 28,733 Other receivables 9,325 9, , ,188 Note 10. Current Assets - Inventory 2017 Raw materials and packaging at cost 48,018 60,653 Finished goods at cost 38,270 38,545 86,288 99,198 Note 11. Current Assets - Other assets 2017 Rental bonds 12,282 12,282 Prepayments DMX Corporation - 26,705 Prepayments Nina s Chocolates 6,479 5,313 Prepayments DMX Asset Management 2,588 2,226 21,349 46,526 Note 12. Other financial assets 2017 Current assets - Listed ordinary shares designated at fair value through the profit and loss - - Non-current assets - Investment in DMX Capital Partners available-for-sale 107,778 49, ,778 49, Annual Report Page 20

22 Note 13. Non-current assets - Plant & Equipment 2017 Motor Vehicles - at cost 25,000 25,000 Less: Accumulated Depreciation 9,647 6,938 Carrying Value at end of year 15,353 18,062 White Goods and Air Conditioning - at cost 43,323 42,537 Less: Accumulated Depreciation 42,748 41,274 Carrying Value at end of year 575 1,263 Manufacturing Equipment - at cost 230, ,137 Less: Accumulated Depreciation 199, ,218 Carrying Value at end of year 31,220 35,919 Furniture, Fixtures& Office Equipment - at cost 7,121 3,263 Less: Accumulated Depreciation Carrying Value at end of year 6,288 2,851 Total Plant and Equipment 305, ,937 Less: Accumulated Depreciation 252, ,842 Carrying Value at end of year 53,436 58,095 The movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year: 2017 Motor Vehicles White Goods and Air Conditioning Manufacturing Equipment Furniture, Fixtures& Office Equipment Total Carrying Value at 1 July 18,062 1,263 35,919 2,851 58,095 Additions ,155 3,859 14,800 Depreciation Charge 2,709 1,474 14, ,459 Carrying Value at 30 June , ,220 6,288 53,436 Note 14. Non-current assets - Intangible Assets 2017 Recipes, trademarks, customer lists and brand name cost 1,920,931 1,920,931 Accumulated Impairments (647,936) (647,396) Net Carrying Amount 1,273,535 1,273,535 Reconciliation of movement in the year: Balance at beginning of the year 1,273,535 1,895,176 Additions - 25,755 Impairment - (647,396) Carrying value at end of the year 1,273,535 1,273,535 The recipes, trademarks, customer lists and brand name (the intangible assets) arose on the acquisition of Nina s Chocolates during the year Annual Report Page 21

23 The group tests whether the intangible assets has suffered any impairment on an annual basis. The recoverable amount of a cash generating unit (CGU) is determined based on value-in-use calculations which require the use of assumptions. The calculations use cash flow projections based on financial budgets approved by management covering a four-year period. Cash flows beyond the four-year period are extrapolated using the estimated long term growth rate of the CPI target The following assumptions were used in the value-in-use calculations: Revenue (% annual growth rate) 7% 7% Long-term growth rate (%) 5% 5% Pre-tax discount rate (%) 20% 20% Management has determined the values assigned to each of the above key assumptions as follows: Assumption Revenue growth Long-term growth rate Pre-tax discount rate Approach used to determine values Average annual growth rate over the four-year forecast period; based on management s expectations of market development and capitalising on the up-side identified in the Nina s acquisition. This is the growth rate used to extrapolate cash flows beyond the budget period. The rate is consistent with long-term CPI targets. The pre-tax discount rate of 20% reflects management s estimate of the time value of money and the weighted average cost of capital for similar entities, adjusted for the specific risks associated with Nina s. The directors have made judgements and estimates in respect of impairment testing of the intangible assets. Should these judgements and estimates not occur the resulting carrying amount of intangible assets may decrease. There are no reasonably possible changes in key assumptions on which management has based its determination of the unit s recoverable amount that would cause the unit s carrying amount to exceed its recoverable amount. Note 15. Current liabilities trade and other payables 2017 Trade payables and accruals 113, ,337 GST payable 40,967 31,018 Note 16. Current liabilities Other Liabilities , ,355 Unclaimed dividends and capital returns declared in prior years 922, ,458 Note 17. Current liabilities Financial Liabilities 2017 Convertible notes 255,823 - The convertible notes were issued to a number of parties during the current financial year. The convertible notes have a maturity date of 4 years after the agreement and can be redeemed 200 per share (post consolidation). There are no coupon payments and also no interest on the notes. An effective interest rate of 7% (which is the group s estimated incremental borrowing rate) was utilised to determine the liability and equity components. An equity component of 75,352 was determined using the inputs described. At maturity, if the convertible notes have not been converted to shares in DMX Corporation Limited, then the face value of the convertible note will be repaid to the note holder Annual Report Page 22

24 Note 18. Equity contributed Shares Shares Ordinary shares fully paid 2,787,170 2,787,170 20,846,923 20,818,030 Movements in ordinary share capital details Date No. of shares Issue price Balance at 30 June 2,787, ,818,030 Share consolidation (500:1) - (2,781,595) - - Conversion of convertible notes 20 January ,200 Share issue costs Balance 30 June ,361 3, ,975,230 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. Note 19. Dividends No dividends were declared or paid during or since the end of financial year ended 30 June 2017 (: Nil). Franking credits 2017 Franking credits available for subsequent financial years based on a tax rate of 27.5% (: 30%) Unclaimed dividends and capital returns 19,442 21,209 As announced to the ASX on 10 July 2013, surplus funds held in the company s dividend account by the previous share registry have been transferred back to the company. In total the company had 922, in funds (dividends and capital gains) which were to be paid to shareholders during 2010, 2011 and 2012 but were not paid as a consequence of the shareholder not cashing its cheque or the bank account details recorded were incorrect. Since the date of attempted payment and the end of the 2014 financial year 3, has been paid to shareholders. If no further claims are made the company will need to pay the New South Wales State Revenue 891, on or before 31 October In addition, there is an amount of 30,583.32, which is composed of amounts of, less than 100 which the company can keep but retain as a liability in perpetuity or until a valid claim is made. Even though this amount will not be payable until 2018, they are considered to be current liabilities as the liability must be paid out immediately a valid claim is made on the company Annual Report Page 23

25 Note 20. Parent entity disclosures The following sets out certain disclosures in relation to the parent entity, DMX Corporation Limited: 2017 Assets Current assets 1,058, ,062 Total assets 3,536,003 3,071,049 Liabilities Current Liabilities (1,217,708) (967,415) Total Liabilities (1,217,708) (967,415) Equity Issued capital 21,050,482 20,817,930 Accumulated losses (18,756,871) (18,714,296) Reserves 24,684 - Total equity 2,318,295 2,103,634 Loss after income tax for the year (166,238) (149,104) Other comprehensive income 24,684 - Total comprehensive loss (141,554) (149,104) The parent entity has not made any guarantees in relation to the debts of its subsidiaries, has no contingent liabilities and has no contractual commitments for the acquisition of property, plant and equipment at year-end. Note 21. Financial instruments Financial risk management objectives The consolidated entity s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. During the years ended 30 June 2017 and 30 June, the consolidated entity did not use any derivative financial instruments. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, other price risks, and ageing analysis for credit risk. Price risk The consolidated entity and parent entity are exposed to price risk in its equity market instruments. Interest rate risk The consolidated entity did not have any exposure to interest rate risk for the years ended 30 June 2017 and 30 June. Credit risk Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit and obtains guarantees where appropriate to mitigate credit risk. Repayment schedules including substantial deposits are required on larger contract revenue items. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements. The consolidated entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the consolidated entity. Liquidity risk The consolidated entity manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities Annual Report Page 24

26 Capital risk management The consolidated entity s objectives when managing capital is to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Fair values Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The following tables detail the consolidated entity s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other that quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability Level 1 Investments in listed entities Investment in unlisted entities ,801 76,801 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Investments in listed entities Investment in unlisted entities ,737 49, ,737 49,737 The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair value due to their short-term nature. Valuation techniques for fair value measurements categorised within level 2 and level 3 Unquoted investments in 2017 relate to the purchase of the investment in DMX Capital Partners (DMXCP) the shares were issued on 1 July DMXCP was incorporated on 6 January 2015 as an unlisted public investment company. DMXCP s assets are listed securities and cash at bank. These are valued monthly by the manager. The net asset value per share is considered the fair value. Note 22. Key management personnel disclosures Directors The following persons were directors of DMX Corporation Limited during the financial year: Roger Collison Executive Chairman Appointed 6 August 2012 John Welsh Non-Executive Director Appointed 27 November 2012 Michael Haddad Non-Executive Director Appointed 28 February 2013 Other key management personnel There were no other key management personnel during the year Annual Report Page 25

27 Key management remuneration 2017 Short-term benefits 80,391 71,167 Post-employment benefits - 2,723 Share-based payments - - Shareholding 80,391 73,890 The number of shares in the parent entity held during the financial year by each director, including their personally related parties, is set out below: Balance at start of year Share Consolidation Purchases Disposals Balance at end of year Roger Collison 840,196 (838,516) - 4 1,676 John Walsh 214,880 (214,450) Michael Haddad 214,187 (213,759) Note a share consolidation of 500:1 occurred during the year ended 30 June Option holding There were no options on issue for the year ended 30 June 2017 (: Nil). Note 23. Related party transactions Receivables from and payables to related parties Under the terms of the Management Agreement between DMX Asset Management Limited and DMX Capital Partners Limited, DMX Asset Management Limited is entitled to receive a performance fee of 15% of any gain in the gross asset value per share of DMX Capital Partners (after provision for tax, but excluding any provision for performance fee for that period and ignoring any buy/sell spread) in excess of the period end 90-day BBSW for the period. The performance fee is also payable on any Shares redeemed throughout the financial year. Total receivables from DMX Capital Partners at year end were 70,692 (: 36,838); the receivables were not past due. Apart from those listed above, there were no other receivables from or payables to related parties at the reporting date (: Nil). There were also no commitments or guarantees made to any related parties. Transactions with related parties Cavendish House, a related party of Mr R Collison, sold plant and equipment, the Cavendish House website and the registered brand name and design for nil (: 15,000) to Nina s Chocolates Pty Ltd during the year. The website, registered brand name and design have been fully impaired, the impairment charge during the year was nil (: 10,455). Apart from those listed above, there were no other transactions with related parties during the period which have not been eliminated on consolidation. Loans to/from related parties There are no loans to or from related parties at the reporting date. No interest was charged by the Company on amounts advanced. There were no other loans to or from related parties during the year and there were no loans to or from related parties at year end. Terms and conditions Other than the above, all transactions were made on normal commercial terms and conditions and at market rates Annual Report Page 26

28 Note 24. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1: Subsidiary Country of incorporation 2017 Nina s Chocolates Pty Ltd Australia DMX Asset Management Pty Ltd Australia Note 25. Capital and leasing commitments Operating Lease Commitments 2017 Non-cancellable operating leases contracted for but not recognised in the financial statements: Not later than 12 months 131, ,356 Later than one year but less than five years 108, ,069 Total 240, ,425 The leases are of premises for manufacturing and retail at Gymea, NSW and Kirrawee, NSW. Both leases are in their final renewal option at reporting date, and there are no remaining renewal options or purchase options under the existing leases. There are no contingent rent payments due under the lease agreements. Capital Expenditure Commitments There are no commitments for expenditure as at reporting date. Note 26. Reconciliation of profit after income tax to net cash flows from operating activities 2017 Profit / (Loss) after income tax expense attributable to members 22,602 (815,649) Depreciation expense 19,589 18,482 Impairment expense - 647,396 Realised gain on other financial assets - (65,992) Other non-cash items (14,569) 1,490 Change in operating assets and liabilities: (Increase) / decrease in trade and other receivables (40,467) (47,137) (Increase) / decrease in inventories 12,910 2,348 (Increase) / decrease in other assets 25,177 (34,244) (Increase) / decrease in deferred tax assets and income taxes payable 79,334 35,294 Increase / (decrease) in trade and other payables 12,923 13,330 Increase / (decrease) in employee benefits 23,021 1,077 Net cash inflow / (outflow) from operating activities 140,520 (243,605) Note 27. Earnings per share 2017 Profit/(Loss) after income tax 22,602 (815,649) Weighted average number of ordinary shares used in calculating basic earnings per share 5,574 5,478 Shares under option Unissued ordinary shares of DMX Corporation Limited under option at the date of this report are nil Annual Report Page 27

29 Note 28. Events occurring after balance date No matters or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the consolidated entity s operations in future financial years, the results of those operations in future financial years, or the consolidated entity s state of affairs in future financial years Annual Report Page 28

30 Directors Declaration In the directors opinion: a) the financial statements and notes set out on pages 11 to 28 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; 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. c) The attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the international Accounting Standards Board as described in note 1 to the financial statements. This declaration is made in accordance with a resolution of the directors. Roger Collison Executive Chairman Dated this 6 September 2017 Sydney 2017 Annual Report Page 29

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