Announcement PDF Annual Report 2024 Inside this report Img: Clem Onojeghuo 04 Chair’s Letter 06 Chief Executive Officer’s Letter 15 Corporate Directory 16 Directors’ Report 37 Auditor’s Independence Declaration 38 Condensed Consolidated Financial Statements 38 Statement of profit or loss and other comprehensive income 39 Statement of financial position 40 Statement of changes in equity 41 Statement of cash flows 43 Notes to the Financial Statements 89 Consolidated Entity Disclosure Statement 90 Directors’ Declaration 92 Independent Auditor’s Report to the Members of Vinyl Group Ltd 96 Shareholder Information Chair’s Letter “ Dear Shareholders, We now have growing revenues and units that generate positive cash flows in our portfolio. These, along with improved results from our existing brands, will help move the overall group to our goal of being at a breakeven level or better during the 2026 financial year. On behalf of the Board, it is a pleasure to present this year’s Vinyl Group’s annual report. This year has been transformational and that has set the foundation for the future. Our Company has grown from a single product line during the 2023 financial year to multiple product lines and an established brand business in 2024. The addition of The Brag Media continued the growth started in the previous year and is still going strong in the current financial year. A big contributor to this change has been the fantastic support by our shareholders who have enabled our vision to become a reality and their trust in the leadership team as we continue to deliver on their growth plan. The Company is executing on being the one place for creators, businesses and fans to create, connect and collect. The pace has accelerated as we increase our capabilities organically through our development and marketing teams, but taken further by identifying established businesses, technologies or capabilities that can be acquired to deliver results faster. We enter this years with a great outlook and a clear path for execution and delivery for our customers, our shareholders and our staff to deliver on our vision. Our team is growing and so is the depth of talent to deliver on our businesses and identify the new opportunities for the future. We have exciting progress on all of our product lines for the coming year. The recent addition of Mediaweek keeps our momentum going by adding further capabilities in our media and events business. Linda Jenkinson Independent, non-Executive Chair Sincerely, The #1 network for musicians 4 Chief Executive Officer’s Letter “ Dear Shareholders, Let’s Talk About Tech Expanding Horizons with Serenade A Final Note of Gratitude As I reflect on this past year at Vinyl Group, I’m filled with both pride and excitement for the path we’ve carved out together. This year has been a pivotal time for our company—one marked by strategic positive actions, significant growth, and continual innovation. I want to take a moment to personally thank each of you for your continued trust and support as we work towards building something truly remarkable. Today I’d like to focus on the exciting strides we’ve made in tech over the past year.. With our recently announced acquisition of Serenade, we bring web3 and blockchain technology in-house and with physical products aimed at super fans. We couldn’t be more excited about the potential of Serenade, to roll out their products not just online and at concerts but also at sporting events and other entertainment verticals. We believe this addition opens up exciting opportunities for us to expand into new markets and verticals, further diversifying our revenue streams. As always, I want to extend my heartfelt thanks to each of you for your unwavering trust and support. My team and I are incredibly grateful for the opportunity to build something truly special, and we’re energised by the road ahead. Jaxsta data is now utilised across every Vinyl Group brand, from driving the navigation system of Vinyl.com, to adding credits to your Vampr profile, or even when you click an artist’s name in a Rolling Stone article. We’ve also invested in Jaxsta, which included a full rebuild of the front and backend, with operational costs expected to dramatically reduce as a result of these changes. A new pricing structure for API customers is set to improve margins, and a self-service billing system is being rolled out to streamline customer onboarding. The combined Jaxsta and Vampr offering saw revenue grow by 49% in FY24 to $807K, reinforcing the value of this strategic investment. Strategic Focus and Growth Our recent media acquisitions have become the driving force behind Vinyl Group’s revenue. These acquisitions have given us the capacity to continue innovating within our tech platforms—where the potential for material revenue growth and margin improvement is vast. After acquiring The Brag Media, we took a close look at above-the-line costs across all our brands, enabling us to pursue a strategy focused on improving margins and outgrowing our relatively fixed cost base. There were some quick wins with the Mediaweek acquisition and upcoming Funkified acquisition, both of which are complementary and added to the revenues and improved margins of our media business. Nevertheless this strategy also combines organic growth from our tech platforms. Vampr and Vinyl.com also continue to receive monthly updates, and we’re regularly sharing these improvements with investors via our investor hub at investors.vinyl.group. Vinyl.com is the fastest growing brand in our portfolio, experiencing growth in average check-out sizes and daily orders, with a current quarter annual revenue run rate of $1.4M. Additionally, we’re testing an e-commerce SDK on our Brag websites that allows music fans to purchase vinyl records directly from any new website that integrates the tool—another exciting development that we believe will have a big impact. The current group revenue run rate as of publication is $10.8M. 6 Thank you once again for being a part of this journey. Warm regards, Looking Ahead In the coming year, while we will remain open to acquisition opportunities that align with our strategy, our primary focus will shift toward maximising the potential of our current brands. Our goal is to continue optimising operations, growing revenues across the group, and working towards achieving cash flow positivity. Josh Simons Chief Executive Officer It’s an exciting time for Vinyl Group. With many of the pieces in place, our focus for the next 12 months will be to double down on continual optimisation, drive revenue growth, and build lasting value for shareholders. 7 Australia’s biggest youth publisher Official music credits Revenues FY’23 vs FY’24 Revenue Breakdown FY’24 Operating Cash Flows FY’23 vs FY’24 The ultimate music fan experience Proudly #1 in readership, the most trusted source of industry news for media, marketing and advertising professionals Vinyl known as Jaxsta Limited) | Annual Report 2024 Corporate Directory VinylGroup GroupLtd Ltd(Formerly Corporate Condensed Directory Consolidated (Formerly known as JaxstaFinancial Limited) Statements Corporate directory 30 June 2024 Directors Linda Jenkinson - Chair Robert Kenneth Gaunt Ben Katovsky Steve Gledden Joshua Simons Company secretary Jorge Nigaglioni Notice of annual general meeting The details of the Annual General Meeting of Vinyl Group Ltd are: Location: 11 Wilson St South Yarra VIC 3141 Date and time: 1:00 pm on Thursday 29 November 2024 Registered office and principal place 11 Wilson Street of business South Yarra VIC 3141 Share register Automatic Pty Limited Level 2, Canning Highway Perth WA 6000 Phone: 02 9698 5414 Auditor UHY Haines Norton Chartered Accountants (UHY) Level 9, 1 York Street Sydney NSW 2000 Stock exchange listing Vinyl Group Ltd shares are listed on the Australian Securities Exchange (ASX code: VNL) (Formerly known as Jaxsta Limited, ASX code: JXT) Website www.vinyl.com Corporate Governance Statement The Directors and management are committed to conducting the business of Vinyl Group Ltd in an ethical manner and in accordance with the highest standards of corporate governance. Vinyl Group Ltd has adopted and has substantially complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) ('Recommendations') to the extent appropriate to the size and nature of its operations. The Group’s Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement and Corporate Governance Compliance Manual can be found on the Group’s website at https://investors.vinyl.group/info Bringing magic to music fans who are hungry for more 2 14 15 Vinyl known as Jaxsta Limited) | Annual Report 2024 VinylGroup GroupLtd Ltd(Formerly Directors’ Report (Formerly known as Jaxsta Limited) Condensed Consolidated Financial Statements Directors' report 30 June 2024 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Vinyl Group Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2024. Directors The following persons were Directors of Vinyl Group Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Linda Group Jenkinson Non-Executive Director and Chair Vinyl Ltd Robert Kenneth ('Ken') GauntLimited) Non-Executive Director (Formerly known as Jaxsta Directors' report Ben Katovsky Non-Executive Director Vinyl Group Ltd 30 June 2024 (Formerly known as Jaxsta Limited) Steve Gledden Non-Executive Director Directors' report Joshua Simons (appointed 16 May 2024) Executive Director and CEO 30 June 2024 Principal activities During the financial year the principal continuing activities of the Group continued evolving as part of creating an end-to-end eco-system for creators, rightsholders, fans and brands. It still consisted of providing tech solutions that connect and give Principal activities credit tothe thefinancial creatoryear economy. Through ecommerce, socialofnetwork platforms andevolving a proprietary database of official credits, During the principal continuing activities the Group continued as part of creating an end-to-end the transformative products connect andfans empower all participants of the music ecosystem. additionally added media and eco-system for creators, rightsholders, and brands. It still consisted of providing techWe solutions that connect and give eventstocapabilities bring all target customers into line. credit the creatortoeconomy. Through ecommerce, social network platforms and a proprietary database of official credits, the transformative products connect and empower all participants of the music ecosystem. We additionally added media and events capabilities to bring all target customers into line. Vinyl Group Ltd (Formerly known as Jaxsta Limited) | Annual Report 2024 Our brands are all interconnected, enhancing both the benefit of each service but also expanding the reach for our Directors’ Report customers. We have promotion of Vampr and Jaxsta profiles in our articles, trends in the music world including key works being sold through Vinyl Group Ltd Vinyl.com and a close tie in to brands who use all of these tools to be connected to youth culture. (Formerly known as Jaxsta Limited) Dividends Directors' report There were no dividends paid, recommended or declared during the current or previous financial year. 30 June 2024 Review of operations The loss for the Group after providing for income tax amounted to $16,885,566 (30 June 2023: $12,507,071). For the financial year ended 30 June 2024, the Group focused on accelerating its goal to have all the products in its ecosystem grow, by utilising a combination of development and acquisition in order to achieve these results faster than in previous years. This strategy will bridge both the product market gap and the cost gap as it can accelerate revenues faster and look to leverage 4 its cost structure more effectively in the future periods. This was evidenced as outlined below: ● Proving the ability to scale faster through its consumer focused Vinyl.com offering, which returned faster revenue growth than the other organic properties. Its first December holiday period sales established the brand and set the path to grow that brand in more markets and products in the future. ● Acquired The Brag Media to enter the media and event space and cross link this to its other properties. Part of the acquisition was also setting the stage to grow the existing business faster and run a leaner operation. The Company embarked in a deep integration analysis which resulted in changes to the business to allow it to grow profitably in the future. ● The Company increased its sales of Jaxsta and Vampr subscriptions during the year as it integrated both brands and continued its push in to the B2B side with its new Boutique offering and further works matching services. ● The Company also streamlined its operations reducing its fixed cost structure at the beginning of the financial year. ● This culminated in record-breaking revenue of $4,970,575 for the Company, a significant increase from $582,209 achieved in the previous year. The biggest impact was the addition of The Brag Media which contributed revenues of $3,132,036 during the year, but we also had a great increase from our Vinyl.com offering which contributed revenues of $1,031,122 during the year. Our Jaxsta and Vampr subscription and API services also grew, contributing a further $806,563 in revenues which included having Vampr for a full year's worth of trading. The strategy for the Company continues on the tenets laid out above whilst prioritising revenue growth in all its product lines whilst focusing on leveraging its operations to reduce costs through synergies and streamline the rollout of new solutions internally or through acquisitions that fit into its eco-system. The business strategy for the year ahead comprise three key elements: (1) Expand our reach and scale of our Media business, as evidenced by our acquisition of the assets of Mediaweek in September of this year; (2) Take Vinyl.com further through the addition of new markets and products. A key part of this aspect is strong investment in digital marketing and a focus on margin enhancement as we bring this product line to a higher level of activity; (3) Invest strongly into our Vampr marketing efforts to return spend to pre-acquisition levels in order to attain the 2022-2023 growth rates in subscribers and active users as we look to aggressively pursue Creator growth; (4) Complete the Jaxsta rebuild to significantly lower operating costs related to systems architecture and cloud costs; and (5) Continue to streamline operations by leveraging the resources from our combined lines and deploy systems that enhance our capabilities. The Group's focus encompasses revenue growth, ongoing enhancements to net operating cash flows, and the expansion of its user base. Our brands are all interconnected, enhancing both the benefit of each service but also expanding the reach for our customers. We have promotion of Vampr and Jaxsta profiles in3 our articles, trends in the music world including key works being sold through Vinyl.com and aenhancing close tie inboth to brands who use all ofservice these tools to be connected youthfor culture. Our brands are all interconnected, the benefit of each but also expanding thetoreach our customers. We have promotion of Vampr and Jaxsta profiles in our articles, trends in the music world including key works Dividends being sold through Vinyl.com and a close tie in to brands who use all of these tools to be connected to youth culture. There were no dividends paid, recommended or declared during the current or previous financial year. Dividends There were no dividends paid, recommended or declared during 16 the current or previous financial year. 5 17 VinylGroup GroupLtd Ltd(Formerly known as Jaxsta Limited) | Annual Report 2024 Vinyl (Formerly known as Jaxsta Limited) Directors’ Report Directors' report 30 June 2024 Key financial matters ● Raw Material and Consumable expenses totalled $3,246,567 which represents an increase compared to $40,580 in the prior year. This increase is directly attributable to the increase in Vinyl.com turnover and the costs of The Brag Media sales during the five months to June 2024. ● Employee benefits expense of $3,742,389 (30 June 2023: $3,081,318) includes a non-cash component of $383,833 (30 June 2023: $550,037) to record share-based compensation expenses. The increase year on year was a result of decreased expenditure in our team in the first half of the year, the use of external professionals for specific tasks and the addition of The Brag Media team in February 2024. ● Product development expenses totalled $1,111,881 which represents an increase compared to $844,370 in the prior year. This increase was due to higher data costs and higher costs of software platforms to accommodate our growing portfolio of solutions. Our group’s IT infrastructure costs remain high but consistent to last year awaiting the completion of the Jaxsta platform refactor. ● Professional expenses totalled $1,590,860 which represents an increase compared to $544,997 in the prior year. This increase was due to the use of external professionals for key projects and roles such as product marketing and development to accelerate our deployment time. We also incurred higher legal costs as part of work on acquisitions and transactions. ● Cash and cash equivalents at 30 June 2024 of $4,132,383 (30 June 2023: $2,966,748). The Company’s loss of $16,885,566 includes $7,338,299 of Fair value loss on financial liabilities and finance costs of $1,079,824 which are mostly from the Songtradr convertible notes. The fair value increase relates to the increase in the Company’s share price from $0.057 at 30 June 2023 to the price of $0.100 at 30 June 2024. Songtradr converted Tranche #1 on 13 September 2023 reducing short term debt by $1,774,597 in exchange for 84,504,631 ordinary shares, and converted a portion of Tranche #2 in May 2024 reducing debt by a further $1,629,351 in exchange for 77,588,162 ordinary shares, leaving only Tranche #2 and its principal of $1,370,649 for movement in the coming periods. The remaining portion of the Songtradr Tranche #2 note has increased in fair value from 30 June 2023 to 30 June 2024 by $4,981,975. The Company recognised an impairment to goodwill on the Vampr CGU for $1,812,205 to reflect a slower growth plan than originally estimated as part of delaying the increased investment in digital marketing from FY24 to FY25 to accommodate investment into the Vinyl.com platform and refactor of the Jaxsta platform. The Management team remains bullish on the outlook for Vampr. The remaining operating loss after removing the fair value measurement, finance costs and impairment for goodwill described above is $6,655,239 (30 June 2023: $3,873,313), an increase of 72%, which reflects the increased costs of bringing in The Brag Media in February 2024, spending on integration and working through the seasonal low period. The Company completed cost cutting measures at The Brag Media in June to streamline operations and invest in more growth opportunities. Additional capital raising activities were undertaken during the period resulting in the receipt of cash of $13,790,385, comprising an debt and equity placement of $11,000,000 (at a price of $0.04482 per share) in January 2024, which had its debt component ratified by shareholders and converted to equity in April 2024 and the institutional portion of an Entitlements Offer which saw an equity placement of $2,790,385 (at a price of $0.098 per share) in June 2024. These capital raises, in combination with continued savings initiatives allowed the Group to acquire The Brag Media, fund product development and sales and marketing activities, and put the Group in a strong cash position as at 30 June 2024. As a result of the net loss for the year, net operating cash outflows, and the deficiency in working capital as at 30 June 2024, there is a material uncertainty as to whether the Group can continue as a going concern. The Directors consider that the Group will continue as a going concern, as explained in note 2 to the financial statements. Development update Vinyl Group continued enhancing its online official music metadata platform during the year. Key initiatives included the rollout of the Works data matching functionality, the automated reports functionality for Business and Enterprise customers that includes Repertoire, Awards and Certification and Custom Playlist reports. Vinyl Vinyl Group Group Ltd Ltd (Formerly known as Jaxsta Limited) | Annual Report 2024 (Formerly known Directors’ Reportas Jaxsta Limited) Directors' report 30 June 2024 The Company also built the Vinyl.com platform as a way to reach consumers in a unique platform aimed at fixing the discovery problem. The initial Record of the Day launch in March 2023 was aimed at working out initial customer feedback before the launch of the full catalogue in May 2023. The Vampr acquisition was completed on 1 June 2023 and the development work on that platform continued post acquisition in FY24 as outlined below. Business strategies and prospects for future years ● Enhance the Creator market value proposition with the combined power of Vampr and Jaxsta. ● Focus on building the Vinyl.com brand and grow the Vinyl.com community. ● Connect the consumer and creator communities to promote more opportunities for creators to commercialise their creations and for consumers to have a better link to their favourite creatives. ● Continued integration of products to the media events and properties. In order to achieve the near-term goals for the segment, the development focus for FY2025 is to: ● Further integration of Vampr Pro and Jaxsta Creator into a single platform, including looking beyond the individual creator level; ● continue enhancements of the Vinyl.com platform to establish a loyal growing community of collectors and experts; ● accelerate the reach of Business and Enterprise potential customers and grow the recurring membership base; and ● continue to grow our reach in both visitor and active users throughout all of our properties to grow the healthy media and advertising business established. The Group is reliant on the licensing contracts for both its media mastheads and its data partners who provide the official data upon which the credits platform is based. These two items remain key in the continued commercial rollout in FY2025. Significant changes in the state of affairs Change in name On 5 December 2023, the Group announced a change in its name to Vinyl Group Ltd (ASX code: VNL). Changes in share on issue On 13 September 2023, the Group converted Tranche #1 of the Songtradr convertible note into ordinary shares, reducing $1,774,597 in debt at the pre set price of 2.1 cents, resulting in the issue of 84,504,631 ordinary shares. On 29 December 2023, the Group also converted the Rickert convertible note from the Vampr acquisition into ordinary shares, reducing $413,459 in debt at the pre set price of 5.0 cents, resulting in the issue of 8,497,554 ordinary shares. Change of auditors On 16 January 2024, the Company appointed UHY Haines Norton Chartered Accountants (UHY) as the auditor in accordance with ASX Listing Rule 3.16.3. Acquisitions On 21 December 2023, the Group announced it had entered into an agreement to purchase Australia's largest youth publisher The Brag Media, subject to completion which had not been met by 31 December 2023. On 31 January 2024 the Company had confirmation of all deliverables been satisfied and successfully completed the acquisition. The purchase price was $7,865,085 including goodwill of $7,698,081. Further details of the acquisition are contained in the annual report that follows. The Group also entered into an $11 million placement and debt facility provided by WiseTech Global (ASX:WTC) Founder and CEO Richard White on 30 January 2024. The facility is a combination of debt and equity, with a placement of $4,044,587 at a price of 4.482 cents for an issue of 90,240,674 ordinary shares, and a debt component of $6,955,413. The Company then obtained shareholder approval to convert this debt component at a price of 4.482 cents per share which resulted in the further issue of 155,185,475 ordinary shares. There were no other significant changes in the state of affairs of the Group during the financial year. 6 7 18 19 Vinyl Group GroupLtd Ltd(Formerly known as Jaxsta Limited) | Annual Report 2024 Vinyl (Formerly known as Jaxsta Limited) Directors’ Report Directors' report VinylGroup GroupLtd Ltd(Formerly known as Jaxsta Limited) | Annual Report 2024 Vinyl (Formerly known as Jaxsta Limited) Directors’ Report Directors' report Matters subsequent to the end of the financial year On 10 July 2024, the Company issued 26,787,540 ordinary shares at $0.098 cents per share as part of its Entitlements Offer. Information on Directors Name: Title: Qualifications: 30 June 2024 On 15 July 2024, the Company converted a portion of tranche 2 of the Songtradr convertible note into ordinary shares, reducing $309,052 in principal and interest at the conversion price of $0.021, resulting in the issue of 14,716,754 ordinary shares. This also allows Songtradr to exercise a further 14,716,754 options into ordinary shares at the exercise price of $0.021 before their expiry on 30 June 2025. 30 June 2024 Experience and expertise: On 4 September 2024 the Group completed the acquisition of Mediaweek which is a leading media trade publication. The Group paid $479,140 in cash and an additional $500,000 in the form of 5,178,624 ordinary shares of the Company. Mediaweek will grow the Group's trade media offering alongside The Music Network and Variety Australia. Linda is an experienced company director, sitting on three boards, Medadvisor and Staker Translations. She’s received a number of awards including EY Master Entrepreneur of the Year New Zealand, World Class New Zealander and is a Top 100 Most Influential Women in San Francisco. On 26 September 2024 the Group announced it had entered into a binding Heads of Agreement to purchase Funkified Pty Ltd for $1,800,000 in cash, $200,000 in the form of equity to be priced at completion and a further $500,000 in equity upon successful delivery of $500,000 in EBITDA in the first year since completion. The Group expects to complete the transaction before 31 December 2024. The cash portion will be paid in two equal tranches of $650,000, the first at the Completion Date and the second no later than six months after the Completion Date, with a further $500,000 deposited into an escrow account as security for 12 months from the Completion Date. Prior to her entrepreneurial career, Linda was a Partner at A.T. Kearney in the Global Financial Services practice where she worked with some of the world’s largest financial institutions. On 30 September 2024 the Group announced the completion of the acquisition of the assets of Serenade Sound in exchange for $800,000 in the form of 8,214,274 ordinary shares of the Company and a further $1,500,000 in shares will be paid to the shareholders of Serenade, contingent on the combined business of Vinyl.com and Serenade achieving a minimum revenue target of $4,000,000 and Earnings Before Interest and Taxes (EBIT) of $500,000 in the 12 months following the Completion Date. As at the date of signing this report the business combination accounting for the purchase of The Brag Media is incomplete. The Group expects the key identifiable assets and liabilities of the acquisition to relate to intangible assets to be allocated and reduce the amount attributed to Goodwill. No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of those operations in subsequent financial years have been discussed where appropriate in the operating and financial review Linda holds a Master of Business Administration from The Wharton School, University of Pennsylvania in Finance and a Bachelor of Business Studies from Massey University in Data Processing and Accounting & Finance. She qualified for her New Zealand CPA (ACA). Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Medadvisor Limited and Straker Translations Ltd Air New Zealand Limited, Fleetpartners Group Ltd, PureProfile Ltd Member of Remuneration and Nomination Committee None 14,500,000 options over ordinary shares Name: Title: Experience and expertise: Robert Kenneth ('Ken') Gaunt Non-Executive Director Zimbabwean born Ken Gaunt is a successful entrepreneur and investor with over 31 years of experience in sales management, corporate advisory and early-stage business development. After emigrating to Australia from Cape Town in 1997, Ken co-founded and was the managing director of Electronic Banking Solutions Pty Ltd which he grew into Australia’s largest independent ATM operator. After guiding that company through a successful mer