Dubber Corporation Limited
Annual Report 2019

Plain-text annual report

Annual Report 30 June 2019 DUBBER CORPORATION LIMITED ABN 64 089 145 424 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS For personal use only Corporate Directory BOARD OF DIRECTORS SECURITIES EXCHANGE Peter Clare Non-Executive Chairman Steve McGovern Managing Director Peter Pawlowitsch Non-Executive Director Gerard Bongiorno Non-Executive Director Ian Hobson Company Secretary Dubber Corporation Limited shares are listed on the Australian Securities Exchange ASX Code: DUB PRINCIPAL PLACE OF BUSINESS AND REGISTERED OFFICE: Level 5, 2 Russell Street. Melbourne VIC 3000 Telephone: +61 3 8658 6111 Facsimile: +61 3 8080 6466 Website: www.dubber.net SHARE REGISTRY SOLICITOR Automic Registry Services (Automic Pty Ltd) Milcor Legal Solicitor Level 2, 267 St Georges Terrace Perth WA 6000 Telephone +61 8 9324 2099 Facsimile +61 8 9321 2337 AUDITOR BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 Level 1, 6 Thelma Street Nova Legal, West Perth WA 6005 BANKER Westpac Banking Corporation Limited 150 Collins Street Melbourne VIC 3000 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 1 For personal use only Chairman’s Letter Dear Shareholders The 2019 financial year has seen strong growth by Dubber from both a strategic and operational perspective. The Company’s key metrics showed impressive increases through the year. In the 12 months to 30 June 2019: Active users increased by 222% to 94,825 (2018: 29,405); • • Operating revenue grew from $1,502,734, to $5,547,540; a 269% increase; • • Partnering with telecommunication service providers increased by 179% to 106; Successful capital raisings in November 2018 and April 2019, totalling $27m. The Dubber Platform and business plan continues to: • Disrupt an existing hardware based, multi-billion dollar call recording industry with a highly scalable, Platform as a Service (PAAS) ‘Op-Ex’ model. Expand the use-case and revenue opportunities from mandated ‘always on’ compliance recording for every call, to transactional ‘On Demand’ recordings delivering customer insights and commercial benefit. Create a content rich data base from which users can release value. • • During the year, Dubber continued to engage with some of the largest global organisations: 1. IBM, one of the world’s largest multinational information technology company, is engaging with its large enterprise customers to implement the Dubber service leading to further commercial agreements; 2. The acquisition of BroadSoft by Cisco has created a substantial market opportunity. With Dubber’s recording platform and data capture service embedded into Cisco / BroadCloud, this has enabled the Company to procure telecommunications service providers as clients at an increasing rate. In addition, the last 12 months saw a strong uptake in potential third party integration partners, particularly in the analytics space. Third party integration is a cornerstone strategy for the Company as it adds value to the partner, whilst delivering revenue growth to Dubber. The capital raisings conducted throughout the year, are now funding Dubber to scale business resources in line with global growth opportunities. The Company is in a strong financial position to execute on those growth plans. Pleasingly, the additional team members presently added to Dubber leadership are already executing on those opportunities. On behalf of the Board, I would like to thank all staff and contractors for their contribution to the continuing growth and development of the Company. I would also like to thank our shareholders for their continued support. Yours faithfully, Peter Clare Chairman ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 2 For personal use only Highlights $5.54m Operating Revenue in 2019 ▲269% Increase in revenue 94,825 Users in 2019 ▲222% Increase in users 106 Telecommunication providers in 2019 ▲179% Increase in providers $19.6m Cash at bank at 30 June 2019 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 3 For personal use only REVIEW OF OPERATIONS • • • • • Increased active number of users by 222% to almost 95,000 (94,825); Increased operating revenue by 269% to $5.54m; Expanded global footprint of telecommunication providers by 179% to 106 Completed successful capital raisings in November 2018 ($5m) and April 2019 ($22m), allowing the Company to scale business resources in line with global growth opportunities; Cash at bank at 30 June 2019 was $19.6m. Throughout FY19, Dubber continued to focus on its strategy of driving end-user growth and associated revenues through its existing accounts while growing its global footprint throughout the year. MARKET POSITION SIGNIFICANTLY ENHANCED The Dubber Platform and business plan are designed to: • Disrupt the existing hardware-based, multi-billion-dollar call recording industry with a highly scalable, ‘Op-Ex’ model which could find its ultimate opportunity in the telecommunications carrier sector, as that is the source of all calls. Expand the use case and revenue opportunities from ‘always on’ compliance recording for every call, to a transactional ‘On Demand’ opportunity with unlimited benefits for every business. Release the value from calls via voice data capture/ transcription to provide access to Artificial Intelligence (AI) for every phone. • • During the year, the Company achieved a substantial increase in engagement in the following areas: • • • • • Telecommunication Service Providers globally Enterprise customers in Australia and North America Extension of Dubber’s opportunities via Cisco/BroadCloud Continued commercial progress via the IBM partnership Third-party requests for platform integrations ESTABLISHING CRITICAL MASS WITH PROVIDERS The Company continues to believe the development of its telecommunication service provider relationships is a key metric and indicator for the business. There remains significant long-term opportunities for Dubber to become the de facto market leader as the sector seeks a homogenous set of features and services across multiple networks. The Company believes that in partnering with a significant majority of telecommunications service providers globally in the future, it will help achieve significant market share and therefore consolidate a long-term defensible business model. At 30 June 2019, 43 telecommunication carriers are now being billed by Dubber, compared with 23 at 30 June 2018. A total of 106 have agreed to implement the Dubber Platform, up from 36 at the end of the previous financial year. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 4 For personal use only Over the coming years, Dubber expects its service to be available on multiple carrier networks within each of its existing relationships, with a notable expansion into mobile offerings. CONTINUED GROWTH IN END USERS During the year, the Company continued to grow active users from the agreements procured in the past few years, across Australia, Europe and North America. These active users represent customers who have taken the service predominately for compliance and regulatory reasons. As at 30 June 2019, there were 94,825 active users, representing annual growth of 222%. Dubber’s core strategy continues to be that of achieving scale via indirect channels. These channels are engaging Dubber directly with large enterprise customers in Australia and the USA who are seeking to capture and manage as many of their customer interactions, and thereby their data, as possible in order to determine market insights and create business productivity outcomes. The ability for large enterprises to go beyond contact centres and switch on recording and AI immediately - available from their service providers - for larger sections of their businesses, is a very compelling proposition. Dubber is well placed to provide these services and has been active in designing potential solutions with a number of large enterprise businesses that the Company believes will become “industry” references. Cisco/Broadcloud Dubber’s position as the recording platform embedded into Cisco/BroadCloud has enabled the Company to procure agreements with telecommunications service providers, for additional networks, at an increasing rate. Furthermore, the acquisition of BroadSoft by Cisco has created a substantial market opportunity in line with the release of new services announced by Cisco as part of its own Cloud/Voice strategy. The Company believes that this will form a fundamental part of its strategy and resourcing requirements for FY2020 given Cisco’s global sales channel and sales networks. IBM Dubber’s partnership with IBM continues to provide real commercial value both in terms of revenues and opportunities. The Company expects this to continue and grow during FY2020 in light of market conditions in the Enterprise sector. IBM showcased Dubber at an APAC sales event in Singapore during the year and Dubber featured at a commercial event surrounding the Melbourne Grand Prix. During the June quarter, IBM launched its Multi Zone Region Cloud strategy, again with Dubber as the go-to-market technology capable of capturing voice data on a large scale, thereby enhancing IBM services such as IBM Watson AI. IBM continues to engage with its large enterprise customers regarding implementations of the Dubber service on a ‘proof of value’ basis leading towards commercial agreements. Marketplace/Third-party integrations During the year, there has been a marked uptake in potential partnerships with third-party integration partners, particularly those companies in the analytics and AI space who are seeking content rich data with which to illustrate value to their customers. The Dubber Platform enables the capture of voice data, from the end user’s telecommunications ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 5 For personal use only provider, delivering an ‘open platform’, thereby enabling use of the data, with the end user’s consent. Third party integration partners/marketplace is a cornerstone strategy for which the Dubber Platform was originally designed since it enables added value to the partner, and their customers, while delivering revenue to Dubber. Therefore, the Company is confident that a stronger penetration of the ultimate addressable market will be seen in the next financial year. REVENUE GROWTH FOLLOWS USER GROWTH The Company continues to grow revenue with a 269% increase ($5.54m) in operating revenue for the 12 months to 30 June 2019, as shown in the graph below. Continued growth in user numbers at exponentially increasing rates across the financial year saw record uptake. Revenues from this user uptake is expected to continue into FY2020 in line with standard billing cycles and commercial terms. SET UP FOR SUCCESS IN FY 2020 AND BEYOND Dubber completed a $22m capital raising in April 2019, providing the Company with the capital to significantly scale up its operations to meet the growing demand for its services. The Company since then has focused on scaling its resources, notably, key personnel to capitalise on the following commercial opportunities: • Wholesale provision of services to telecommunications service providers o Additional sales personnel to take advantage of opportunities to procure more network agreements in Australia, North America and Europe o Account management personnel to assist with revenue/sales generation in Australia, North America and Europe • • Extension of the dubberconnect.com managed service o Account management personnel to assist with revenue/sales generation to meet opportunities in Australia Support and ‘sell through’ via channels such as IBM and Cisco/BroadSoft o The Company has added additional channel resources to expand the reach and sales velocity with both of these organisations • Development of end user AI applications/ integrations o Enabling third party integrations e.g. CRM systems/ trading platforms which have Dubber generated data at their core o Continued development of AI services targeted as value added services for telecommunications service providers. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 6 For personal use only OUTLOOK The Company’s continued focus is to: 1. 2. 3. Increase the service’s number of active users quarter on quarter; Increase revenue from users of the Dubber Platform; and Increase the global footprint across telecommunication service providers, thereby enabling the Company’s unique platform to demonstrate the value of capturing and analysing voice data on a global scale. In addition, the Company will be working with its partners to expand the market for call recording and AI services beyond the enterprise sector into mass market based on use cases, ‘Op-Ex’ affordability and the immediate availability via telephony networks. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 7 For personal use only Directors’ Report ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 8 For personal use only Directors’ Report Your directors present their report of Dubber Corporation Limited and its controlled entities (the Group) for the financial year ended 30 June 2019. DIRECTORS The names of the directors of the Company in office during the financial year and up to the date of this report are as follows: Steve McGovern Managing Director Peter Clare Non-Executive Chairman Peter Pawlowitsch Non-Executive Director Gerard Bongiorno Non-Executive Director Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. The particulars of the qualifications, experience and special responsibilities of each director are as follows: Mr Steve McGovern Managing Director Experience Mr McGovern is a founder of Dubber Pty Ltd. He has over 25 years’ experience in the fields of telecommunications, media sales, pay TV and regulatory. Mr McGovern has been a senior executive of several established companies, both domestically and internationally, which have been primarily associated with new and emerging markets and have required a strong sales and solutions focus. Interest in Shares and Options/Rights at the date of this report Directorships held in other listed entities in the past three years • • 7,747,328 ordinary shares held indirectly Linius Technologies Limited (April 2016 – present) Mr Peter Clare Experience Non-Executive Chairman Peter Clare was appointed Managing Director and Chief Executive Officer of RoZetta Institute in 2019. Peter is a highly experienced senior executive with an active interest in technology and innovation and has a number of private equity investments in fintech and other new technology businesses. A Director of Capital Markets Technologies (now RoZetta Ventures) since 2016, he also holds a number of non-executive director positions with CRC entities, private equity investments and independent companies. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 9 For personal use only He was previously Managing Director and Chief Executive Officer for Westpac in New Zealand and held Group Executive roles at Westpac, Commonwealth and St George banks in Australia, with responsibility for Strategy, Mergers and Acquisitions, Product, Operations, Technology, Property and Procurement. His background also includes Insolvency Accounting and Management Consulting. Peter’s qualifications include a BCom and MBA. He is a member of the Australian Institute of Company Directors, a Fellow of the Governance Institute of Australia, the Financial Services Institute of Australasia, and Certified Practicing Accountants Australia. • • • • • 765,000 ordinary shares held indirectly Scottish Pacific Group Limited (December 2014 – present) Change Financial Limited (April 2015 – August 2018) Reffind Limited (April 2015 – November 2016) Rubik Financial Limited (July 2016 – May 2017) Interest in Shares and options at the date of this report Directorships held in other listed entities in the past three years Mr Peter Pawlowitsch Non-Executive Director Experience Mr Pawlowitsch holds a Bachelor of Commerce from the University of Western Australia, is a current member of the Certified Practising Accountants of Australia, a Fellow of the Governance Institute of Australia and also holds a Master of Business Administration from Curtin University. These qualifications have underpinned more than fifteen years’ experience in the accounting profession and more recently in business management and the evaluation of businesses and projects. Interest in Shares and Options at the date of this report • 3,409,348 ordinary shares held indirectly Directorships held in other listed entities in the past three years • VRX Silica Limited (February 2010 – present) • Knosys Limited (March 2015 – present) • Novatti Group Limited (June 2015 – present) • • Rewardle Holdings Limited (May 2017 – January 2019) Family Zone Cyber Safety Limited (September 2019 – present) Mr Gerard Bongiorno Non-Executive Director Experience Mr Bongiorno is Principal and Co-CEO of Sapient Capital Partners, a merchant banking operation and has over 30 years of professional experience in capital raisings and corporate advisory. Prior to forming Sapient (formerly Otway Capital), Gerard was Head of Property Funds Management at Challenger Financial Services Group (CFG) ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 10 For personal use only and was Group Special Projects Manager at Village Roadshow. Earlier in his career he worked at KPMG in insolvency and corporate Finance. Gerard received his Bachelor Degree in Economics and Accounting from Monash University and the Program for Management development at Harvard Business School PMD75. Interest in Shares and options at the date of this report • 792,111 ordinary shares held indirectly Directorships held in other listed entities in the past three years Linius Technologies Limited (February 2017 – present) COMPANY SECRETARY Mr Ian Hobson, the Company Secretary since 17 October 2011 holds a Bachelor of Business degree and is a Chartered Accountant and Chartered Secretary. Mr Hobson provides company secretary services and corporate, management and accounting advice to a number of listed public companies. CORPORATE INFORMATION Corporate Structure Dubber Corporation Limited is a limited liability company that is incorporated and domiciled in Australia. Dubber Corporation Limited has prepared a consolidated financial report incorporating the entities that it controlled during the financial year as follows: Dubber Corporation Ltd Medulla Group Pty Ltd Dubber Pty Ltd Dubber Ltd (UK) Dubber USA Pty Ltd Dubber, Inc. Dubber Connect Australia Pty Ltd - - - - - - - parent entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity 100% owned controlled entity Principal Activities The principal continuing activities of Dubber Corporation Limited and its controlled entities consisted of provision of call recording and audio asset management in the cloud. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 11 For personal use only OPERATING AND FINANCIAL REVIEW Review of Operations A review of operations for the financial year and the results of those operations is contained within the review of operations preceding this report. Operating Results The loss from ordinary activities after providing for income tax amounted to $9,648,672 (2018: $11,319,101). Financial Position At 30 June 2019 the Group had net assets of $28,024,932 (2018: $10,900,058) and cash reserves of $19,618,245 (2018: $5,673,548). Dividends No dividends were paid or declared during the year. No recommendation for payment of dividends has been made. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs of the Company during the financial year are detailed in the review of operations. In the opinion of the directors, there were no other significant changes in the state of affairs of the Company that occurred during the financial year under review not otherwise disclosed in this report or in the financial statements. EVENTS SUBSEQUENT TO BALANCE DATE No matters or circumstances have arisen, since the end of the financial year, which significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent financial years, other than outlined in the review of operations preceding this report. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Group will continue to pursue its principal activity of rolling out and developing its cloud based call recording and audio asset management platform. MEETINGS OF DIRECTORS The numbers of meetings of directors held during the year and the numbers of meetings attended by each director were as follows: Mr Steve McGovern Mr Peter Clare Mr Peter Pawlowitsch Mr Gerard Bongiorno Directors' Meetings Number eligible to attend Number attended 9 9 9 9 9 9 9 8 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 12 For personal use only Remuneration Report ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 13 For personal use only REMUNERATION REPORT The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The following persons were directors of Dubber Corporation Limited during the financial year: Steve McGovern Managing Director Peter Clare Non-Executive Chairman Peter Pawlowitsch Non-Executive Director Gerard Bongiorno Non-Executive Director Other persons that fulfilled the role of a key management person during the year, are as follows: James Slaney General Manager Chris Jackson Chief Technology Officer Peter Curigliano Chief Financial Officer OVERVIEW OF REMUNERATION POLICIES The Board as a whole is responsible for considering remuneration policies and packages applicable both to directors and executives of the Consolidated Entity. Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the Consolidated Entity, including directors of the Company and other executives. Broadly, remuneration levels for key management personnel of the Company and of the Consolidated Entity are competitively set to attract and retain appropriately qualified and experienced directors and executives and reward the achievement of strategic objectives. The Board has not obtained independent advice at this time on the appropriateness of remuneration packages of both the Company and the Consolidated Entity. Remuneration packages consist of fixed remuneration including base salary, employer contributions to superannuation funds, cash bonuses and non-cash benefits. The Company has a variable remuneration package for directors, which involves Performance Rights. This plan allows directors to convert Performance Rights to fully paid ordinary shares for nil cash consideration, subject to performance based vesting conditions. A bonus of $150,000 was paid or accrued to Mr Steve McGovern (2018: $150,000). Mr McGovern’s bonuses are awarded for achieving key performance indicators as determined by the Board on a six-monthly basis. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 14 For personal use only Fixed remuneration Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicle), as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually by the Board through a process that considers individual, segment and overall performance of the Consolidated Entity. The Board has regard to remuneration levels external to the Consolidated Entity to ensure the directors’ and executives’ remuneration is competitive in the market place. Executive directors are employed full time and receive fixed remuneration in the form of salary and statutory superannuation or consultancy fees, commensurate with their required level of services. Non-Executive directors, unless otherwise specified by any non-executive and consultancy service agreement in place, receive a fixed monthly fee for their services. Where non-executive directors provide services materially outside their usual Board duties, they are remunerated on an agreed retainer or daily rate basis. Service agreements It is the Consolidated Entity’s policy that service agreements for key management personnel are unlimited in term but capable of termination on 3 months’ notice and that the Consolidated Entity retains the right to terminate the service agreements immediately, by making payment equal to 3 months’ pay in lieu of notice. The service agreement outlines the components of compensation paid to key management personnel but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed annually on a date as close as possible to 30 June of each year to take into account key management personnel’s performance. Certain key management personnel will be entitled to bonuses as the Board may decide in its absolute discretion from time to time. Non-Executive Directors Total remuneration for all non-executive directors, last voted upon by shareholders at the 2014 Annual General Meeting, is not to exceed $500,000 per annum and has been set at a level to enable the Company to attract and retain suitably qualified directors. The Company does not have any scheme relating to retirement benefits for non-executive directors. Relationship between the remuneration policy and Company performance The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. Two methods have been applied to achieve this aim, the first being a performance-based rights subject to performance based vesting conditions, and the second being the issue of options or shares to key management personnel to encourage the alignment of personal and shareholder interests. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 15 For personal use only Share-based payment arrangements Options The Company operates an Employee Share Option Plan (“ESOP”) for executives and senior employees of the Consolidated Entity. In accordance with the provisions of the ESOP, executives and senior employees may be granted options to purchase ordinary shares at an exercise price to be determined by the Board with regard to the market value of the shares when it resolves to offer the options. The options may only be granted to eligible persons after the Board considers the person’s seniority, position, length of service, record of employment, potential contribution and any other matters which the Board considers relevant. Each employee share option converts into one ordinary share of the Company on exercise. No amounts are paid or payable to the Company by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. The number of options granted is determined by the Board. To date, options granted under the ESOP expire within thirty-six months of their issue. The options are not exercisable until the vesting date provided the participant is an employee at the relevant vesting date. Shares The directors, at their discretion, may issue shares to participants under the Employee Share Plan (“ESP”) at any time, having regard to relevant considerations such as the participant’s past and potential contribution to the Company, and their period of employment with the Company. Directors of the Company, full-time employees and part-time employees of the Group who hold a salaried employment or office in the Group, are eligible to participate in the ESP. Plan shares may be issued at an issue price to be determined by the Board, which may be a nominal or nil issue price if so determined by the Board. The number of plan shares issued is determined by the Board. The plan shares are issued on the same terms as the fully paid ordinary shares of the Company and rank equally with all of the Company’s then existing shares. The Board may impose conditions in an offer of plan shares that must be satisfied (unless waived by the Board in its absolute discretion) before the plan shares to which the condition applies can be sold, transferred, assigned, charged or otherwise encumbered. Where a restriction condition in relation to plan shares is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board, the Company must, unless the restriction condition is waived by the Board: a) Where the plan shares were issued for no cash consideration, buy back the relevant plan shares within 12 months of the date the restriction condition was not satisfied (or became incapable of satisfaction) at a price equal to $0.0001 per share; or b) Where the shares were issued for cash consideration, use its best endeavours to buy back the relevant plan shares within 12 months of the date the restriction condition was not satisfied (or became incapable of satisfaction) at a price equal to the cash consideration paid by the participant for the plan shares. To date, plan shares offered under the ESP vest in three equal tranches on each of the three consecutive annual vesting dates. The shares are not issued to the participant until the vesting date provided the participant is an employee at the relevant vesting date. Loan Funded Shares Key personnel and Directors selected by the Board at its discretion will be offered the opportunity to participate in the Loan Funded Share Plan. Loan funded shares offered under the plan may be issued to the participant or purchased on- market, at the discretion of the Board. It is the Board’s present intention that loan funded shares will be issued to participants. Participants will acquire loan funded shares at market value as at the grant date using a loan provided by the Company. The loan will be interest-free and limited recourse in accordance with the loan terms and the plan rules. The plan rules require the loan to be repaid before a participant can sell their shares. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 16 For personal use only The Board has the discretion to impose such vesting conditions in relation to the loan funded shares as it deems appropriate. These may include conditions relating to continued employment or service, performance (of the participant or the Company) and the occurrence of specific events. A participant must not sell, transfer, encumber or otherwise deal with a loan funded share unless otherwise permitted under the plan or determined by the Board. The loan funded shares will not be quoted on ASX and, at the discretion of the Company, will be the subject of a “holding lock”, restricting the participant’s ability to trade the shares. Forfeiture conditions apply at all times while each participant holds loan funded shares, such that the participant will forfeit their interest in the loan funded shares where the participant is determined by the Board to: • • • be a leaver; be in breach of any terms of the loan; or fail to satisfy the vesting conditions. Participants will be invited to purchase shares using loan funds under a loan agreement with the Company. The loan must always be repaid if the participant wishes to benefit from the shares. Participants only benefit from growth in share price. The loan commences on the grant date and, subject to the Board’s discretion to permit the loan to continue for a further specified period, must be repaid by the earliest of the following: • • • • • • five years from the grant date; the date the participant ceases employment, engagement or directorship with the Company; the date the loan funded shares are forfeited; the date the Board determines any of the vesting conditions will not be satisfied; the date the Company is wound up; or the date, other than above, that the participant and the Company agree to in writing. The loan is interest-free and fee-free, and limited recourse. Limited recourse means the repayment amount will be the lesser of the outstanding loan value and the market value of the loan funded shares that were acquired using the loan. If the participant’s loan funded shares are of lower value than the loan balance at the time that they are required to repay the loan, that participant’s loan funded shares will be disposed of at market value and the proceeds applied in full satisfaction of the loan obligations. The participant may repay the loan before the repayment date. The loan must be repaid in full (or arrangements for the repayment of the loan entered into to the satisfaction of the Board), and the vesting conditions satisfied, before the loan funded shares can be disposed of. If dividends are paid by the Company on the participant’s loan funded shares, the Company will apply the after-tax value of the dividends to the repayment of the loan. When the loan is due for repayment, the Company may sell or buy-back some or all of the participant’s loan funded shares to satisfy the outstanding loan balance. The proceeds from any sale or buy-back of the loan funded shares will be applied to repay the outstanding loan balance and any excess funds after costs and expenses will be returned to the participant if they are entitled to them under the terms of the plan rules and the loan. To date, loan funded shares offered under the Loan Funded Share Plan vest in three equal tranches on each of the first, second and third anniversaries of the grant date, provided the participant has not ceased employment, engagement or directorship with the Company before the relevant vesting date. Performance Rights The Directors, at their discretion, may at any time invite eligible employees to participate in the Performance Rights Plan. The eligible participants under the plan are full time and part time employees (including Directors) of the Company and its related bodies corporate or any other person who is declared by the Board to be eligible to receive a grant of performance rights under the plan (eligible employees). Subject to Board approval, an eligible employee may nominate a nominee to receive the performance rights to be granted to the eligible employee. The plan is administered by the Directors, who have the power to: i. determine appropriate procedures for administration of the plan consistent with its terms; ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 17 For personal use only ii. iii. iv. resolve conclusively all questions of fact or interpretation in connection with the plan; delegate the exercise of any of its powers or discretions arising under the plan to any one or more persons for such period and on such conditions as the Board may determine; and suspend, amend or terminate the plan (subject to restrictions on amendments to the plan which reduce the rights of the participant in respect of any performance rights or shares already granted). Performance rights will be granted for nil cash consideration, unless the Board determines otherwise (which will be no more than a nominal amount). No amount will be payable on the exercise of performance rights under the plan. The plan does not set out a maximum number of shares that may be made issuable to any one person or company. The shares to be issued following the performance rights vesting conditions being satisfied, will be issued on the same terms as the fully paid, ordinary shares of the Company and will rank equally with all of the Company’s then existing shares. The Board may apply such further voluntary escrow on shares issued on conversion of performance rights as it shall determine appropriate. The performance rights granted under the plan will be subject to vesting conditions determined by the Board from time to time and expressed in a written offer made by the Company to the eligible employee which is subject to acceptance by the eligible employee within a specified period. The vesting conditions may include one or more of (i) service to the Company of a minimum period of time (ii) achievement of specific performance conditions by the participant and/or by the Company or (iii) such other performance conditions as the Board may determine and set out in the offer. The Board determines whether vesting conditions have been met. Performance rights will have an expiry date as the Board may determine in its absolute discretion and specify in the offer to the eligible employee. The vesting conditions of performance rights will have a milestone date as determined by the Board in its absolute discretion and will be specified in the offer to the eligible employee. The Board shall have discretion to extend a milestone date. Performance rights will not be listed for quotation. However, the Company will make application to ASX for official quotation of all shares issued on vesting of the performance rights within the period required by the Listing Rules. The Performance rights are not transferable unless the Board determines otherwise or the transfer is required by law and provided that the transfer complies with the Corporations Act. If a vesting condition of a performance right is not achieved by the earlier of the milestone date or the expiry date then the performance right will lapse. An unvested performance right will also lapse if the participant ceases to be an eligible employee for the purposes of the plan by reason of resignation, termination for poor performance or termination for cause (unless the Board determines otherwise). Under the plan, if the participant ceases to be an employee of the Company or of a related body corporate for any reason other than those reasons set out in the paragraph above, including (but not limited to) upon the retirement, total and permanent disability, redundancy, death of a participant or termination by agreement then in respect of those performance rights which have not satisfied the vesting condition but have not lapsed, then the participant shall be permitted to continue to hold those performance rights as if the participant was still an eligible employee except that any continuous service condition will be deemed to have been waived (unless the Board determines otherwise). If, in the opinion of the Board, a participant acts fraudulently or dishonestly, is in breach of his or her obligations to the Company and its related bodies corporate or has done an act which has brought the Company or any of its related bodies corporate into disrepute, or the Company becomes aware of a material misstatement or omission in the financial statements in relation to the Company Group, a participant is convicted of an offence in connection with the affairs of the Company Group or a participant has judgment entered against him in any civil proceedings in respect of the contravention of his duties at law in his capacity as an employee or officer of the Company Group, the Board will have the discretion to deem any performance rights to have lapsed. If in the opinion of the Board, performance rights vested as a result of the fraud, dishonesty or breach of obligations of either the participant or any other person and in the opinion of the Board, the performance rights would not have otherwise vested; or the Company is required by, or entitled under, law to reclaim an overpaid bonus or other amount from a participant, then the Board may determine (subject to applicable law) any treatment in relation to the performance rights or shares to comply with the law or to ensure no unfair benefit is obtained by the participant. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 18 For personal use only If there is a change of control event in relation to the Company prior to the conversion of the performance rights, then all remaining milestones will be deemed to have been achieved and each performance right will automatically and immediately convert into shares, however, if the number of shares to be issued as a result of the conversion of all performance rights due to a change in control event in relation to the Company is in excess of 10% of the total fully diluted share capital of the Company at the time of the conversion, then the number of performance rights to be converted will be prorated so that the aggregate number of shares issued upon conversion of all performance rights is equal to 10% of the entire fully diluted share capital of the Company. Change of control event means: i. ii. the occurrence of: a) the offeror under a takeover offer in respect of all shares announcing that it has achieved acceptances in respect of 50.1% or more of the Shares; and that takeover bid has become unconditional; or b) the announcement by the Company that: a) shareholders have at a Court convened meeting of shareholders voted in favour, by the necessary majority, of a proposed scheme of arrangement under which all shares are to be either (1) cancelled, or (2) transferred to a third party; and the Court, by order, approves the proposed scheme of arrangement. b) The Board may waive, amend or replace any vesting condition attaching to a performance right if the Board determines that the original vesting condition is no longer appropriate or applicable, provided that the interests of the relevant participant are not, in the opinion of the Board, materially prejudiced or advantaged relative to the position reasonably anticipated at the time of the grant. There are no participating rights or entitlements inherent in the performance rights and participants will not be entitled to participate in new issues of capital offered to shareholders during the currency of the performance rights. If the Company makes an issue of shares pro rata to existing shareholders there will be no adjustment to the number of shares which must be allocated on the exercise of a performance right. If the Company makes a bonus issue of shares or other securities to existing shareholders (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) the number of shares which must be allocated on the exercise of a performance right will be increased by the number of shares which the participant would have received if the performance right had vested before the record date for the bonus issue. To date, performance rights offered under the Performance Rights Plan have milestones with an expiry date set as the vesting conditions. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 19 For personal use only EMPLOYMENT DETAILS OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Steve McGovern Managing Director Agreement type: Executive Service Agreement (MD Agreement) Agreement commenced: 2 March 2015 Term of Agreement: No fixed term Remuneration: Annual salary of $240,000 plus statutory superannuation. Termination notice: During the first 6 months of the MD Agreement, the Company may terminate the agreement on 3 months’ notice, or by providing a cash payment in lieu of such notice equal to the salary payable for the remainder of the first 6 months of the MD Agreement (subject to the limitation of the Corporations Act and Listing Rules). After this, the Company may terminate the agreement on 3 months’ notice. Peter Clare Non-Executive Chairman Agreement type: Letter of appointment Agreement commenced: 1 December 2017 Term of Agreement: No fixed term Remuneration: Annual fee of $100,000 (inclusive of statutory superannuation) and reimbursement of all reasonable expenses incurred in performing the Non- Executive Chairman’s duties. Termination notice: None specified. Peter Pawlowitsch Non-Executive Director Agreement type: Letter of appointment Agreement commenced: 1 December 2014 Term of Agreement: No fixed term Remuneration: Termination notice: Annual fee of $100,000 plus statutory superannuation, plus reimbursement of all reasonable expenses incurred in performing the Non-Executive Director’s duties. In the event Mr Pawlowitsch is removed as a director by shareholders under the Corporations Act or Constitution, or is unable to perform his duties, he is entitled to receive a termination payment of 3 months’ worth of his director’s fee (subject to the limitation of the Corporations Act and Listing Rules). Gerard Bongiorno Non-Executive Director Agreement type: Letter of appointment Agreement commenced: 2 July 2017 Term of Agreement: No fixed term ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 20 For personal use only Remuneration: Annual fee of $75,000 (inclusive of statutory superannuation) plus reimbursement of all reasonable expenses incurred in performing the Non- Executive Director’s duties. Termination notice: None specified. James Slaney General Manager Agreement type: Executive Service Agreement (GM Agreement) Agreement commenced: 2 March 2015 Term of Agreement: Same terms as termination notice below Remuneration: Annual salary of $260,000 plus statutory superannuation. Termination notice: The Company may terminate the agreement on 3 months’ notice, or by providing a cash payment in lieu of such notice. Chris Jackson Chief Technology Officer Agreement type: Employment Agreement (CTO Agreement) Agreement commenced: 2 March 2015 Term of Agreement: No fixed term Remuneration: Annual salary of $200,000 plus statutory superannuation. Termination notice: Standard 5 week notice periods for termination apply to the CTO Agreement in accordance with statutory requirements. Peter Curigliano Chief Financial Officer Agreement type: Executive Service Agreement (CFO Agreement) Agreement commenced: 18 June 2018 Term of Agreement: No fixed term Remuneration: Annual salary of $220,000 plus statutory superannuation. Termination notice: The Company may terminate the agreement on 3 months’ notice, or by providing a cash payment in lieu of such notice. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 21 For personal use only DETAILS OF REMUNERATION FOR YEAR Details of the remuneration of each director and named executive officer of the Company, including their personally-related entities, during the year was as follows: Short Term Benefits Long Term Benefits Post-Employment Share Based Payments Year Salary and Fees Cash Bonus Annual & Long Service Leave Superannuation Options, Rights or Shares Total Remuneration consisting of options, rights or shares Remuneration based on performance Executive Directors: S McGovern Non-Executive Directors: P Clare P Pawlowitsch G Bongiorno Other Key Management Personnel: J Slaney C Jackson P Curigliano Total $ $ $ $ $ $ 2019 2018 240,000 240,000 a) 150,000 150,000 14,708 11,982 22,800 22,800 c) 25,640 244,360 453,148 669,142 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 107,125 58,333 100,000 100,000 75,000 75,000 - - - - - - b) 263,427 405,984 207,395 210,357 224,833 - 10,000 - - - - - 1,217,780 1,089,674 160,000 150,000 - - - - - - 11,314 18,191 1,857 6,018 15,648 - 43,527 36,191 2,375 5,542 9,500 9,500 - - 8,233 - 19,702 19,984 24,766 - 87,376 57,826 c) 107,014 79,017 - - c) 59,581 48,484 c) 12,820 122,180 17,738 - 38,010 - 216,514 142,892 109,500 109,500 134,581 123,484 305,794 546,355 246,693 236,359 303,257 - c) 260,803 494,041 1,769,486 1,827,732 % 6 37 49 55 - - 44 39 4 22 7 - 13 - 15 27 % 39 59 - - - - - - 7 22 - - - - 11 28 a) Mr McGovern received 50% of his bonus for the year (2018: 100%) and the remainder was paid subsequent to the end of the financial year; b) c) Includes rental assistance and allowances in relation to relocation to the UK (since December 2016) of $31,000 (2018: $186,984); Subject to achievement of milestone targets under the Performance Rights Plan or vesting dates under the Loan Funded Share Plan as detailed in the section titled ‘Compensation Securities Issued to Key Management Personnel’. Note: Mr A Di Pietrantonio has ceased to be a Key Management Personnel from 1 July 2018 as he has relocated to the USA and his position has evolved into a strategic partnership role. Therefore, he is not deemed to satisfy the requirements in accordance with the Corporations Act 2001. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 22 For personal use only COMPENSATION SECURITIES ISSUED TO KEY MANAGEMENT PERSONNEL Performance Rights: During the previous year the following performance rights were granted as performance linked incentives to executives. The performance rights were issued free of charge. Each performance right converts into one fully paid ordinary share in the Company for nil cash consideration, upon the achievement of the following performance milestones: • Milestone 1 – the Group achieving SaaS Revenue of $500,000 or more for at least two consecutive calendar months, by 31 December 2018. • Milestone 2 – the Group achieving SaaS Revenue of $1,000,000 or more for at least two consecutive calendar months, by 30 June 2019. Key Management Personnel Grant Date Number Granted Value per Right at Grant Date Last Convertible Date Number Converted during the year Balance at 30/06/19 Unconverted Milestone 1 S McGovern 29/11/17 750,000 $0.3600 31/12/18 750,000 J Slaney 29/11/17 375,000 $0.3600 31/12/18 375,000 Milestone 2 S McGovern 29/11/17 750,000 $0.3600 30/06/19 J Slaney 29/11/17 375,000 $0.3600 30/06/19 - - Total 2,250,000 1,125,000 - - - - - The performance rights convert on a one-for-one basis upon the satisfaction of milestones considered to be non-market factors. The performance rights were valued at the closing share price on the grant date. The conversion of the performance rights is dependent on the achievement of milestones. The value of the performance rights have been allocated over the expiry period of the milestones. At 30 June 2019, $38,460 is included in the remuneration table above (2018: $488,720). ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 23 For personal use only Loan Funded Shares: During the year the following loan funded shares were issued as part of the remuneration package of Directors appointed during the year. Key Management Personnel G Bongiorno Grant Date Number Granted Value per Loan Funded Share at Grant Date Vesting Date Number Vested during the year Balance at 30/06/19 Unvested Tranche 1 29/11/17 175,000 $0.2700 20/12/18 175,000 - Tranche 2 29/11/17 175,000 $0.2700 20/12/19 Tranche 3 29/11/17 175,000 $0.2700 20/12/20 - - 175,000 175,000 P Clare Tranche 1 01/12/17 200,000 $0.4176 30/01/19 200,000 - Tranche 2 01/12/17 200,000 $0.4176 30/01/20 Tranche 3 01/12/17 200,000 $0.4176 30/01/21 - - 200,000 200,000 Total 1,125,000 375,000 750,000 The issue of the loan funded shares to Mr Gerard Bongiorno was approved by shareholders at the 2017 annual general meeting held on 29 November 2017. The total value of the loan funded shares was $141,750. The fair value was determined using a Black-Scholes model with an underlying share price of $0.360, volatility of 100% and an interest rate of 2.09%. The value of the loan funded shares has been allocated over the vesting period of each tranche. At 30 June 2019, $59,581 (approximately 42% of the total value of the loan funded shares), assessed as vested is included in the remuneration table above. The issue of the loan funded shares to Mr Peter Clare was approved by shareholders at general meeting held on 30 January 2018. The total value of the loan funded shares was $250,560. The fair value was determined using a Black- Scholes model with an underlying share price of $0.555, volatility of 100% and an interest rate of 2.47%. The value of the loan funded shares has been allocated over the vesting period of each tranche. At 30 June 2019, $107,014 (approximately 43% of the total value of the loan funded shares), assessed as vested is included in the remuneration table above. Shares Issued to Key Management Personnel on Exercise of Compensation Options In the previous financial year (ended 30 June 2018), the Company issued 600,000 fully paid ordinary shares to Mr Peter Pawlowitsch and 250,000 fully paid ordinary shares to Mr Steve McGovern on the exercise of unlisted options exercisable at 40 cents each on or before 30 June 2018. The options were originally issued to directors and executives on 29 December 2015, upon the conversion of performance options (granted on 9 June 2015) when performance milestones were achieved. Remuneration Consultants The Board did not use the services of remuneration consultants during the year in determining the compensation for directors and executives. Voting and comments made at the Company’s 2018 annual general meeting (‘AGM”) At the 2018 AGM, 90% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 24 For personal use only Other Transactions with Key Management Personnel Telephony services totalling $2,442 (2018: $2,375) were provided by Canard Pty Ltd, a company associated with Mr Steve McGovern. Trade payables at 30 June 2019 include a balance of $832 (30 June 2018: $415) payable to Canard Pty Ltd. Intelligent Voice and 1300 MY SOLUTION are businesses associated with Mr Steve McGovern. The Group earned service fee income of $56,850 (2018: $43,655) from Intelligent Voice and $242,620 (2018: $263,308) from 1300 MY SOLUTION. During the financial year, $13,500 (2018: $30,000) was owed to Mr Peter Pawlowitsch’s consultancy company, Gyoen Pty Ltd for advisory services outside his usual Board duties. Other payables at 30 June 2019 included an accrual of $75,000 (30 June 2018: $50,000) for the cash bonus payable to Mr Steve McGovern for the period January to June 2019 included in the remuneration table above. Other receivables at 30 June 2019 includes an amount of $140,977 (30 June 2018: $140,977) receivable from the Medulla Group Pty Ltd vendors, including Mr Steve McGovern and Mr James Slaney. Amounts included in the remuneration table for Mr Gerard Bongiorno was paid to his consultancy company Otway Capital Consulting. All transactions are conducted on normal commercial terms and on an arm’s length basis. ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL Shareholdings The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Key Management Personnel Balance at Start of Year Received as Remuneration Options Exercised Acquired/ (disposed) Net Change Other Balance at End of Year S McGovern 5,944,696 P Clare 765,000 P Pawlowitsch 3,146,191 G Bongiorno 792,111 J Slaney 2,874,831 C Jackson 457,518 P Curigliano - Total 13,980,347 - - - - - - - - - - - - - - - - 1,052,632 750,000 7,747,328 - 263,157 - - (407,518) 40,500 - - - 765,000 3,409,348 792,111 375,000 3,249,831 - - 50,000 40,500 948,771 1,125,000 16,054,118 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 25 For personal use only Option Holdings The number of options over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Key Management Personnel Balance at Start of Year Received as Remuneration Options Exercised Options Expired Net Change Other Balance at End of Year S McGovern P Clare P Pawlowitsch G Bongiorno J Slaney C Jackson P Curigliano Total - - - - - - - - - - - - - 70,000 150,000 220,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 70,000 150,000 220,000 Performance Rights Holdings The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Key Management Personnel Balance at Start of Year Received as Remuneration Rights Expired Performance Rights Converted Net Change Other Balance at End of Year S McGovern 1,500,000 P Clare P Pawlowitsch G Bongiorno - - - J Slaney 750,000 C Jackson P Curigliano - - Total 2,250,000 - - - - - - - - (750,000) (750,000) - - - - - - (375,000) (375,000) - - - - (1,125,000) (1,125,000) - - - - - - - - - - - - - - - - This is the end of the audited remuneration report. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 26 For personal use only INDEMNIFYING OFFICERS OR AUDITORS Dubber Corporation Limited has paid premiums to insure directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of Dubber Corporation Limited, other than conduct involving a wilful breach of duty in relation to Dubber Corporation Limited. SHARE OPTIONS AND ORDINARY SHARES At the date of this report there were the following unissued ordinary shares for which options were outstanding: • • • • • 1,400,000 options expiring 31 December 2019, exercisable at 60 cents each; 2,000,000 options expiring 27 January 2020, exercisable at 80 cents each; 775,000 options expiring 31 March 2020, exercisable at 40 cents each; 2,000,000 options expiring 31 December 2020, exercisable at 80 cents each; and 1,120,000 options expiring 15 January 2022, exercisable at 38c each During the year the following options were granted: • 1,350,000 options expiring 15 January 2022, exercisable at 38c each During the year the following options were exercised: • • 2,175,000 options expiring 31 March 2019, exercised at $0.25 each 25,000 options expiring 15 January 2022, exercised at $0.38 each During the year 300,000 fully paid ordinary shares were issued under an employee share plan that was granted in a prior financial year. During the year 2,000,000 options exercisable at $0.60 each expired on 31 January 2019. During the year 100,000 options exercisable at $0.72 each expired on 31 March 2019. Since the end of the financial year, 55,000 and 125,000 options were exercised at $0.38 each on 23 July 2019 and 15 August 2019, respectively. No other options have been issued, exercised or expired. PERFORMANCE RIGHTS During the financial year, 1,500,000 performance rights were converted to fully paid ordinary shares on 1 April 2019 on the achievement of a milestone at 31 December 2018. 1,500,000 performance rights expired due to non-achievement of a milestone set for 30 June 2019. Since the end of the financial year, no other performance rights have been issued or expired, and no performance rights converted into fully paid ordinary shares. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of Court to bring proceedings on behalf of Dubber Corporation Limited or intervene in any proceedings to which Dubber Corporation Limited is a party for the purpose of taking responsibility on behalf of Dubber Corporation Limited for all or any part of those proceedings. Dubber Corporation Limited was not a party to any such proceedings during the year. ENVIRONMENTAL REGULATIONS The Group is not currently subject to any specific environmental regulation under Australian Commonwealth or State law. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 27 For personal use only NON-AUDIT SERVICES There were no amounts paid or payable to the auditor for non-audit services provided during the year by the auditor other than those outlined in Note 16 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporation Act 2001. The directors are of the opinion that the services as disclosed in Note 16 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration for the year ended 30 June 2019, as required under section 307C of the Corporations Act 2001, has been received and is included within the financial report. Signed in accordance with a resolution of the Board of Directors: Peter Clare Chairman Dated: 30 September 2019 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 28 For personal use only Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF DUBBER CORPORATION LIMITED As lead auditor of Dubber Corporation Limited for the year ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Dubber Corporation Limited and the entities it controlled during the period. Jarrad Prue Director BDO Audit (WA) Pty Ltd Perth, 30 September 2019 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. For personal use onlyCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue Expenses Note 2019 $ 2018 $ Service income 2 (a) Other revenue from ordinary activities 2 (b) 5,547,540 1,844,650 1,502,734 1,685,160 Salaries and related expenses (8,375,103) (6,349,655) Direct costs (4,262,002) (3,157,771) General and administration costs 2 (c) (2,688,417) (3,258,662) Finance costs (19,081) (121,921) Depreciation and amortisation (1,571,271) (1,569,784) Non-operating foreign exchange gains losses (124,988) (49,202) Loss before income tax expense (9,648,672) (11,319,101) Income tax expense 3 - - Loss after income tax expense for the year (9,648,672) (11,319,101) Other comprehensive loss Items that may be reclassified to profit or loss Foreign currency translation differences Other comprehensive loss for the year, net of tax (28,159) (28,159) (71,235) (71,235) Total comprehensive loss attributable to owners of Dubber Corporation Limited (9,676,831) (11,390,336) Loss per share attributable to the owners of Dubber Corporation Limited Basic loss per share Diluted loss per share 14 14 Cents Cents (6.22) (9.19) (6.22) (9.19) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 30 For personal use only CONSOLIDATED STATEMENT OF FINANCIAL POSITION Note 2019 $ 2018 $ ASSETS LIABILITIES EQUITY Current Assets Cash and cash equivalents 4 19,618,245 5,673,548 Trade and other receivables 5 6,768,088 1,396,564 Total Current Assets 26,386,333 7,070,112 Non-Current Assets Property, plant and equipment 6 108,914 81,497 Intangible assets 7 4,320,395 5,861,503 Total Non-Current Assets 4,429,309 5,943,000 Total Assets 30,815,642 13,013,112 Current Liabilities Trade and other payables 8 2,119,189 1,613,985 Provisions 9 671,521 499,069 Total Current Liabilities 2,790,710 2,113,054 Total Liabilities 2,790,710 2,113,054 NET ASSETS 28,024,932 10,900,058 Issued capital 11 71,592,844 44,871,437 Reserves 12 7,355,894 7,303,755 Accumulated losses 13 (50,923,806) (41,275,134) TOTAL EQUITY 28,024,932 10,900,058 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 31 For personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Capital Reserves Accumulated Losses Total $ $ $ $ 2019 Balance at 1 July 2018 44,871,437 7,303,755 (41,275,134) 10,900,058 Loss after income tax expense for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year - - - - (9,648,672) (9,648,672) (28,159) - (28,159) (28,159) (9,648,672) (9,676,831) Transactions with owners in their capacity as owners: Conversion of Performance Rights 540,000 (540,000) Securities issued during the year 27,553,570 Capital raising costs (1,372,164) - - Cost of share based payments - 620,299 - - - - - 27,553,570 (1,372,164) 620,299 Balance at 30 June 2019 71,592,843 7,355,895 (50,923,806) 28,024,932 2018 Balance at 1 July 2017 31,312,336 5,992,219 (29,956,033) 7,348,522 Loss after income tax expense for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year - - - - (11,319,101) (11,319,101) (71,235) - (71,235) (71,235) (11,319,101) (11,390,336) Transactions with owners in their capacity as owners: Securities issued during the year 14,532,751 Capital raising costs (1,339,650) - - Cost of share based payments 366,000 1,382,771 - - - 14,532,751 (1,339,650) 1,748,771 Balance at 30 June 2018 44,871,437 7,303,755 (41,275,134) 10,900,058 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 32 For personal use only CONSOLIDATED STATEMENT OF CASH FLOWS Cash flows from operating activities Note 2019 $ 2018 $ Receipts from customers 3,333,418 1,292,344 Payments to suppliers and employees (14,684,357) (11,927,918) Interest received 27,554 18,517 R&D tax offset refund and EMDG received 1,775,095 1,660,331 Interest and other finance costs paid (8,139) (162,789) Net cash outflows used in operating activities 20 (9,556,429) (9,119,515) Cash flows from investing activities Purchase of plant and equipment (61,490) (29,122) Payment of security bond and funds held in trust (2,480,109) (134,659) Net cash outflows used in investing activities (2,541,599) (163,781) Cash flows from financing activities Proceeds from issue of shares 27,553,570 14,532,751 Payment of share issue costs (1,509,379) (436,650) Proceeds from borrowings Repayment of borrowings - - 1,000,000 (1,000,000) Net cash provided by financing activities 26,044,191 14,096,101 Net increase in cash held 13,946,163 4,812,805 Cash and cash equivalents at the beginning of the year 5,673,548 857,777 Effect of exchange rate changes on cash (1,466) 2,966 Cash and cash equivalents at the end of the year 4 19,618,245 5,673,548 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 33 For personal use only Notes to the Consolidated Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation Dubber Corporation Limited (“Company” or “Parent Entity”) is a company limited by shares, incorporated and domiciled in Australia. These consolidated financial statements and notes represent those of Dubber Corporation Limited and controlled entities (“Group” or “Consolidated Entity”). The nature of the operations and principal activities of the Group are described in the Directors’ Report. The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. Dubber Corporation Limited is a for-profit entity for the purpose of preparing the financial statements. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions. The financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless otherwise stated. The financial reports have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The separate financial statements of the parent entity, Dubber Corporation Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. These financial statements are presented in Australian dollars, rounded to the nearest dollar. (b) Revenue recognition AASB 15 Revenue from Contracts with customers – Impact of Adoption The Group has adopted AASB 15 with a date of initial application of 1 July 2018. The Group has applied AASB 15 using the cumulative effect method and therefore the comparative information has not being restated and continues to be reported under AASB 118 Revenue. As a result of adoption of AASB 15, the Group has changed its accounting policy for revenue recognition as detailed below. Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over a service to a customer. Group revenues consists of service income, being monthly subscription fees from retail or reseller customers. The Group undertook a detailed review of its revenue contracts on transition date and the following areas have been identified as being impacted by the adoption of the new standard: ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 34 For personal use only Subscription service income Subscription service revenue is recognised and measured in the accounting period in which the services are provided based on the amount of the expected transaction price allocated to each performance obligation. The performance obligations are the provision of cloud-based call recording services (Dubber Platform) on a monthly basis; the provision of services represent a series of distinct services that are substantially the same with the same pattern of transfer to customer. The performance obligation is considered to be satisfied as control over the services are transferred to the customer, being the point at which the services are accessible to the customer. It is at this point which revenue is recognised. Interest Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. (c) Government grants/research and development tax incentives Grants from the government (such as research and development tax incentives) are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants received for the period prior to the acquisition of Dubber Pty Ltd was deducted from the carrying value of the Dubber intellectual property, with subsequent grants being recognised as other income. (d) Basis of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Dubber Corporation Limited (“Company” or “parent entity”) as at 30 June 2019 and the results of all subsidiaries for the year then ended. Dubber Corporation Limited and its subsidiaries together are referred to in these financial statements as the Group or the consolidated entity. Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group has control over an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to use its power to affect those returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the 'business combinations' accounting policy for further details. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 35 For personal use only Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non- controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. (e) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the full Board of Directors. (f) Foreign currency translation i. Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is the functional and presentation currency of Dubber Corporation Limited. ii. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities, denominated in foreign currencies, are recognised in profit or loss. iii. Foreign operations The assets and liabilities of foreign operations are translated to the functional currency as exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at exchange rates at the dates of the transactions. Foreign currency difference are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are recognised in other comprehensive income. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and are presented in the translation reserve in equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 36 For personal use only (g) Finance income Finance income comprises interest income earned on funds invested in bank accounts and call deposits. Interest is recognised on an accruals basis in the consolidated statement of profit or loss and other comprehensive income, using the effective interest method. (h) Income tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current 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 legally enforceable right of set-off exists, 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. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 37 For personal use only (i) Provisions Provisions are recognised when a Group 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 reliably measured. (j) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre- existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by- acquisition basis, the group recognises any non-controlling interest in the acquired asset either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquire over the fair value of the net identifiable assets acquired is recorded as goodwill, if those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (k) 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 short-term borrowings in current liabilities in the statement of financial position. (l) Trade receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 38 For personal use only (m) Financial instruments AASB 9 Financial Instruments – Impact of Adoption The Group has adopted AASB 9 with a date of initial application of 1 July 2018 and has elected not to restate its comparatives. As a result, the Group has changed its accounting policy for financial instruments as detailed below. Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risk and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Financial assets are classified according to their business model and the characteristics of their contractual cash flows and are initially measured at fair value adjusting for transaction costs (where applicable). Subsequent measurement of financial assets For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following four categories: Financial assets at amortised cost Financial assets at fair value through profit or loss (FVTPL) o o o Debt instruments at fair value through other comprehensive income (FVTOCI) o Equity instruments at FVTOCI Financial assets at amortised cost Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business model of ‘hold to collect’ contractual cash flows are accounted for at amortised cost using the effective interest method. The Group’s trade and other receivables fall into this category of financial instruments. Impairment The Group makes use of a simplified approach in accounting for trade and other receivables and records the loss allowance at the amount equal to the expected lifetime credit losses. In using this practical expedient, the Group uses its historical experience, external indicators and forward looking information to calculate the expected credit losses using a provision matrix. The Group considers a financial asset in default when contractual payment are 90 days are due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. The Group has determined that the application of AASB 9’s requirements at transition 1 July 2018 did not result in a material adjustment. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 39 For personal use only (n) Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value as indicated, less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis. Depreciation The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a straight-line basis over the asset's useful life to the Company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The estimated useful lives used for each class of depreciable assets are: Class of Fixed Asset Useful Life Furniture, Fixtures and Fittings Computer Equipment Computer Software 4 years 3 years 3 years The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of profit or loss and other comprehensive income. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. Property, plant and equipment is derecognised and removed from the statement of financial position on disposal or when no future economic benefits are expected. Gains and losses from derecognition are measured as the difference between the net disposal proceeds, if any, and the carrying amount and are recognised in the statement of profit or loss and other comprehensive income. Subsequent costs are included in the property, plant and equipment's carrying value or recognised as a separate asset when it is probable that future economic benefits associated with the item will be realised and the cost of the item can be measured reliably. All other repairs and maintenance are recognised in the statement of profit or loss and other comprehensive income. (o) Impairment of assets At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including, dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset's fair value less costs to sell ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 40 For personal use only and value in use, to the asset's carrying value. Any excess of the asset's carrying value over its recoverable amount is expensed to the statement of profit or loss and other comprehensive income. Where an impairment loss on a revalued asset is identified, this is debited against the revaluation surplus in respect of the same class of asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same class of asset. Non-financial assets, other than inventories, deferred tax assets, assets from employee benefits, investment properties, biological assets, and deferred acquisition costs, are assessed for any indication of impairment at the end of each reporting period. Any indication of impairment requires formal testing of impairment by comparing the carrying amount of the asset to an estimate of the recoverable amount of the asset. An impairment loss is calculated as the amount by which the carrying amount of the asset exceeds the recoverable amount of the asset. Intangible assets with an indefinite useful life and intangible assets not yet available for use are tested for impairment annually regardless of whether there is any indication of impairment. The recoverable amount is the greater of the asset's fair value less costs to sell and its value in use. The asset's value in use is calculated as the estimated future cash flows discounted to their present value using a pre-tax rate that reflects current market assessments of the time value of money and the risks associated with the asset. Assets that cannot be tested individually for impairment, are grouped together into the smallest group of assets that generates cash inflows (the asset's cash-generating unit). Impairment losses are recognised in the statement of profit or loss and other comprehensive income. Impairment losses are allocated first, to reduce the carrying amount of any goodwill allocated to cash-generating units, and then to other assets of the group on a pro-rata basis. Assets other than goodwill are assessed at the end of each reporting period to determine whether previously recognised impairment losses may no longer exist or may have decreased. Impairment losses recognised in prior periods for assets other than goodwill are reversed up to the carrying amounts that would have been determined had no impairment loss been recognised in prior periods. (p) 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. (q) 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 statement of financial position are shown inclusive of GST. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 41 For personal use only (r) 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. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. (s) Earnings per share i. Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the financial year. ii. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (t) Share-based payment transactions Employees of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services in exchange for equity instruments ("equity-settled transactions"). When the goods or services acquired in a share-based payment transaction do not qualify for recognition as assets, they are recognised as expenses. The cost of equity-settled transactions and the corresponding increase in equity is measured at the fair value of the goods or services acquired. Where the fair value of the goods or services received cannot be reliably estimated, the fair value is determined indirectly by the fair value of the equity instruments using the Black Scholes option valuation technique. Equity-settled transactions that vest after employees complete a specified period of service are recognised as services received during the vesting period with a corresponding increase in equity. (u) Intangible assets Intangible assets acquired as part of a business combination are brought in at fair value at acquisition. Intangible assets with finite useful life are amortised over a straight line basis in the profit or loss over the estimated useful life. Management had previously re-assessed the useful life of the platform from 10 years to 5 years, as they believe it is more reflective of the useful life. (v) Goodwill Goodwill is measured as described in note 1(k). Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 42 For personal use only events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which goodwill is monitored for internal management purposes, being the operating segments (Note 18). (w) Employee Provisions i. Short-term employee benefit obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled wholly within 12 months after the end of the reporting period are recognised in other liabilities in respect of employees' services rendered up to the end of the reporting period and are measured at amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. ii. Other long-term employee benefit obligations Liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the reporting period. They are recognised as part of the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees to the end of the reporting period. Consideration is given to expected future salaries and wages levels, experience of employee departures and periods of service. Expected future payments are discounted using national government corporate bond rates at the end of the reporting period with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Regardless of when settlement is expected to occur, liabilities for long service leave and annual leave are presented as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period. (x) Critical accounting estimates and judgements The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company. Key estimates - Impairment The Group tests annually whether the carrying value of goodwill and other intangibles exceed its recoverable amount to determine potential impairment requirements. The recoverable amount of goodwill and other intangibles has been calculated using a number of assumptions as disclosed in note 7. No impairment has been recognised in respect of intangibles at the end of the reporting period. Key judgements – Share-based payment transactions The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black-Scholes method. The related assumptions are detailed in Note 21. The accounting estimates ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 43 For personal use only and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Key Estimates – Dubber intellectual property The Dubber SaaS intangible was acquired as part of a business combination. The intangible asset was recognised at its fair value at the date of acquisition and is subsequently amortised on a straight-line based on the timing of projected cash flows of the intellectual property over its estimated useful life. The Group estimates the useful life of the asset is 5 years based on the technical obsolescence of such assets. However, the actual useful life may be shorter or longer than 5 years, depending on technical innovations and competitor actions. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. (y) New accounting standards and interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for period ended 30 June 2019. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. AASB 16 Leases IFRS 16 eliminates the operating and finance lease classifications for lessees currently accounted for under AASB 117 Leases. It instead requires an entity to bring most leases onto its statement of financial position in a similar way to how existing finance leases are treated under AASB 117. An entity will be required to recognise a lease liability and a right of use asset in its statement of financial position for most leases. There are some optional exemptions for leases with a period of 12 months or less and for low value leases. The application date of this standard is for annual reporting periods beginning on or after 1 January 2019. The Group is still in the process of fully assessing the impact on the Group’s financial results and position when it is first adopted for the year ending 30 June 2020 and it is not practicable to provide a reasonable financial estimate of the effect until the Group has completed a detailed review. (z) Parent entity financial information The financial information for the parent entity, Dubber Corporation Limited, disclosed in Note 22 has been prepared on the same basis as the consolidated financial statements. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 44 For personal use only 2. REVENUE AND EXPENSES FROM CONTINUING OPERATIONS (a) Service revenue (b) Other revenue Subscriptions Professional Services Total Interest Research and development tax incentive Export market development grant Rental income – sub lease Consolidated 2019 $ 2018 $ 5,478,230 69,310 5,547,540 27,554 1,708,038 67,058 42,000 1,502,734 - 1,502,734 24,829 1,660,331 - - (c) General and administration costs Total 1,844,650 1,685,160 Audit fees Accounting and tax advice fees Legal fees Occupancy costs Securities exchange and registry fees Travel costs Other administration 47,282 136,676 139,938 455,956 148,758 822,593 937,214 Total 2,688,417 46,457 133,730 106,162 602,190 115,101 762,387 1,492,635 3,258,662 3. INCOME TAX (a) Income tax expense Loss before income tax expense Tax at the Australian tax rate of 27.5% (2018: 27.5%) Tax effect of amounts not deductible (taxable) in calculating (9,648,672) (2,653,385) (11,319,101) (3,112,753) taxable income 48,624 72,077 Deferred tax asset not brought to account on temporary differences & tax losses 2,701,162 3,122,777 (b) Deferred tax assets Amounts recognised in equity Income tax expense Timing differences Tax losses - revenue Offset against Deferred Tax Liabilities Deferred Tax Assets not brought to account Amounts in equity 96,401 (96,401) - 334,902 7,754,321 8,089,223 (693,093) 7,396,130 217,846 82,101 (82,101) - 218,970 6,644,143 6,863,113 (1,062,706) 5,800,407 199,018 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 45 For personal use only Tax losses - capital Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions set out in note 1(i) occur. 526,750 8,140,727 526,750 6,526,175 Consolidated 2019 $ 2018 $ (c) Deferred tax liabilities Timing differences Offset by Deferred Tax Assets recognised Total (693,093) 693,093 - (1,062,706) 1,062,706 - There are no franking credits available to the Group. 4. CASH AND CASH EQUIVALENTS Consolidated 2019 $ 16,918,245 2,700,000 19,618,245 2018 $ 3,663,171 2,010,377 5,673,548 Cash at bank Cash on call deposit Total The cash on call deposit can be called back at any time by the company. The Company’s exposure to interest rate risk is outlined in Note 15. 5. TRADE AND OTHER RECEIVABLES Consolidated 2019 $ 2018 $ Current Trade receivables 3,211,353 Less: Provision for doubtful debt Receivable from Medulla Group Pty Ltd vendors GST recoverable Prepayments Deposits in trust Other receivables Total - 3,211,353 - 140,977 208,677 3,206,481 600 6,768,088 469,830 - 469,830 6,821 140,977 11,616 709,000 58,320 1,396,564 Prepayments includes cash amounts deposited in a trust account. These amounts are set aside to aid negotiation with the Groups suppliers. The cash can be called back at any time by the Company. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 46 For personal use only The acquisition of Medulla Group Pty Ltd (“Medulla”) was on a no liability basis. It was determined on reconciling the acquisition and liabilities paid of Medulla that the vendors of Medulla Group Pty Ltd owed Dubber Corporation Limited $140,977. Receipt of this amount is expected within 12 months of 30 June 2019. Trade and other receivables are all due within three months of this report. Information about credit and liquidity risk is outlined in Note 15. 6. PROPERTY, PLANT AND EQUIPMENT Consolidated 2019 $ 2018 $ Plant and equipment – at cost Less: Accumulated depreciation Net carrying amount 208,535 (99,621) 108,914 155,513 (74,016) 81,497 Reconciliation Reconciliation of the carrying amount for each class of property, plant and equipment between the beginning and the end of the current and previous financial year are set out below: Computer Equipment Furniture Total $ $ $ 2019 2018 Balance at the beginning of the year 61,240 20,257 81,497 Additions 47,543 10,038 57,581 Depreciation expense (20,260) (9,904) (30,164) Carrying amount at the end of the year 88,523 20,391 108,914 Balance at the beginning of the year 58,845 22,207 81,052 Additions 24,106 5,016 29,122 Depreciation expense (21,711) (6,966) (28,677) Carrying amount at the end of the year 61,240 20,257 81,497 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 47 For personal use only 7. INTANGIBLE ASSETS Dubber intellectual property – at cost Less: Accumulated amortisation Sub Total Goodwill Net carrying amount Reconciliation Balance at the beginning of the year Amortisation expense Net carrying amount at the end of the year Consolidated 2019 $ 2018 $ 8,483,031 (6,171,370) 2,311,661 2,008,734 4,320,395 5,861,503 (1,541,108) 4,320,395 8,483,031 (4,630,262) 3,852,769 2,008,734 5,861,503 7,402,610 (1,541,107) 5,861,503 The goodwill and other intangibles is attributable to Dubber’s strong position to continue to roll out its software platform and the expected cash flows to arise from the Company’s acquisition of Dubber Pty Ltd. Goodwill acquired through the business combination has been allocated to the Company’s only cash generating unit (‘CGU’) for impairment testing. The Board has determined the recoverable amount of the CGU by assessing the fair value less cost of disposal (FVLCOD) of the underlying assets. The method applied was the market approach based on the current market capitalisation (number of shares on issue multiplied by the quoted market price per share) of the Group on the Australian Securities Exchange (ASX). The recoverable value is therefore a Level 1 measurement based on observable inputs of publicly traded shares in an active market. The Board has not identified any reasonable possible changes in key assumptions that could cause the carrying amount of the CGU to exceed its recoverable amount. Any reasonable change to the volatility of the Company’s share price would not create an impairment. 8. TRADE AND OTHER PAYABLES Current Consolidated 2019 $ 2018 $ Trade payables 1,271,404 Payroll tax and other statutory liabilities Unearned revenue Other payables 581,291 44,879 247,184 702,099 601,136 109,218 201,532 Total 2,144,758 1,613,985 All payables are expected to be settled within 6 months. Risk management policies in regard to liquidity and currency risk are outlined in Note 15. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 48 For personal use only 9. PROVISIONS Current Consolidated 2019 $ 2018 $ Employee benefits 645,952 499,069 Employee benefits represent annual leave and long service leave entitlements of employees within the Group and is non-interest bearing. The entire obligation is presented as current, since the Group does not have a right to defer settlement. 10. LOANS AND BORROWINGS The Company did not enter into any loan agreements in the financial year ended 30 June 2019. In December 2017, the Company entered into a R&D tax prepayment loan agreement with R&D Capital Partners Pty Ltd for $1,000,000, repayable upon receipt of the tax refund from the Australian Taxation Office for the research and development tax incentive offset for the financial year ended 30 June 2017. Interest was fixed at 1.25% per month payable monthly. The loan was secured by a first ranking charge over the assets of the Company except the Dubber intellectual property, registered on the Personal Property Securities Register. The loan was fully repaid on 5 April 2018. 11. ISSUED CAPITAL Consolidated 2019 $ 2018 $ Issued and paid up capital 186,570,452 (2018: 140,079,435) Ordinary shares – fully paid 76,348,837 48,255,267 Share issue costs written off against share capital (4,755,994) (3,383,830) Total 71,592,843 44,871,437 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 49 For personal use only Movement in ordinary shares on issue 2019 Issue Price No. of Shares $ Balance at the beginning of the year - 140,079,435 44,871,437 Exercise of options – 25 October 2018 Issued for cash pursuant to placement – 28 November 2018 Exercise of options – 8 January 2019 Exercise of options – 8 February 2019 Exercise of options – 1 March 2019 Exercise of options – 8 March 2019 Exercise of options – 14 March 2019 Exercise of employee shares – 14 March 2019* Exercise of options – 21 March 2019 Exercise of options – 5 April 2019 Performance Rights allocated – 28 March 2019 Issued for cash pursuant to placement – 9 April 2019 Issued for cash pursuant to placement – 24 April 2019 Share issue costs $0.25 $0.38 $0.25 $0.25 $0.25 $0.25 $0.25 - $0.25 $0.38 - $0.75 $0.38 - 120,000 30,000 11,841,895 4,500,320 205,000 325,000 325,000 375,000 600,000 300,000 225,000 25,000 1,500,000 29,333,333 51,250 81,250 81,250 93,750 150,000 - 56,250 9,500 540,000 22,000,000 1,315,789 500,000 - (1,372,164) Balance at the end of the year 186,570,452 71,592,843 2018 Balance at the beginning of the year 96,186,100 31,312,336 Issued for cash pursuant to placement – 13 July 2017 Issued for cash pursuant to placement – 25 September 2017 Issued for cash pursuant to placement – 21 December 2017 Exercise of options expiring 31 January 2018 Exercise of options expiring 27 February 2018 Issued for cash pursuant to placement – 28 February 2018 $0.42 $0.35 $0.35 $0.25 $0.25 $0.35 Issued as employee incentives – 1 March 2018 $0.385 Issued as employee incentives – 1 March 2018 $0.45 476,191 200,000 20,000,000 7,000,000 17,143,572 6,000,251 1,370,000 600,000 1,428,572 600,000 300,000 342,500 150,000 500,000 231,000 135,000 Issue of loan funded shares - 1,125,000 - Exercise of options expiring 30 June 2018 $0.40 850,000 340,000 Share issue costs - (1,339,650) Balance at the end of the year 140,079,435 44,871,437 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 50 For personal use only Options At the end of the year, the following options over unissued ordinary shares were outstanding: Grant Date Expiry Date Exercise Price Number Under Option 16 November 2016 27 January 2020 22 December 2016 31 March 2020 20 December 2017 31 December 2019 20 December 2017 31 December 2020 15 January 2019 15 January 2022 Total Performance rights $0.80 $0.40 $0.60 $0.80 $0.38 2,000,000 850,000 2,000,000 2,000,000 1,325,000 8,175,000 Since the end of the year, the following performance rights were cancelled: Grant Date 29 November 2017 Expiry Date 30 June 2019 Number of Performance Rights 1,500,000 Capital risk management The group’s objectives when managing capital are to safeguard the ability to continue as a going concern, so that benefits to stakeholders and an optimum capital structure are maintained. In order to maintain or adjust the capital structure, the Company may return capital to shareholders, cancel capital, issue new shares or options or sell assets. 12. RESERVES Consolidated 2019 $ 2018 $ Option reserve Performance rights reserve Unvested share reserve Foreign currency reserve 4,318,394 3,004,038 135,000 (101,538) 4,130,797 3,151,754 94,582 (73,378) Total 7,355,894 7,303,755 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 51 For personal use only Option reserve The option reserve is used to accumulate amounts received on the issue of options and records items recognised as expenses on valuation of incentive based share options and loan funded shares. Movement in option reserve: Consolidated 2019 2018 $ $ Balance at the beginning of the year 4,130,797 3,022,382 Options issued as consideration for capital raising services - 903,000 Allocation of incentive based share options values over vesting period – employees 285,811 77,914 Allocation of incentive based loan funded shares values over vesting period – (98,214) 127,501 directors Balance at the end of the year 4,318,394 4,130,797 Performance rights reserve The performance rights reserve is used to record the value of performance rights issued as share based payments until the performance rights are converted into fully paid ordinary shares upon achievement of performance based milestones. Movement in performance rights reserve: Consolidated 2019 2018 $ $ Balance at the beginning of the year 3,151,754 2,663,034 Allocation of incentive share based payment over vesting period – directors and key Conversion of Performance Rights shares management 591,281 (540,000) Reversal of incentive share based payment – management performance shares cancelled upon milestones not being achieved by expiry date (198,997) 488,720 - - Balance at the beginning of the year 3,004,038 3,151,754 Unvested share reserve The unvested share reserve is used to record the value of shares formally offered and accepted as share based payments until the shares are issued on a future specified vesting date. Movement in unvested share reserve: Consolidated 2019 2018 $ $ Allocation of incentive share based payment over vesting period – employee shares 40,418 151,636 Balance at the beginning of the year 94,582 308,946 Shares issued on vesting date - (366,000) Balance at the end of the year 135,000 94,582 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 52 For personal use only Foreign currency reserve The foreign currency reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations. Movement in foreign currency reserve: Consolidated 2019 2018 $ $ Balance at the beginning of the year (73,378) (2,143) Currency translation differences (28,160) (71,235) Balance at the end of the year (101,538) (73,378) 13. ACCUMULATED LOSSES Consolidated 2019 2018 $ $ Balance at the beginning of the year (41,275,134) (29,956,033) Loss attributable to owners of Dubber Corporation Limited (9,648,672) (11,319,101) Balance at the end of the year (50,923,806) (41,275,134) 14. EARNINGS PER SHARE (EPS) The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Consolidated 2019 2018 $ $ Earnings attributable to the owners of Dubber Corporation Limited used to calculate EPS Loss for the year (9,648,672) (11,319,101) Weighted average number of ordinary shares used in the calculation of EPS Weighted average number of ordinary shares used as the denominator in calculating basic EPS No. No. 155,231,963 123,155,152 As the Company is in a loss position there is no diluted EPS calculated ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 53 For personal use only 15. FINANCIAL RISK MANAGEMENT Financial instruments consist mainly of deposits with banks and accounts receivable and payable. The totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements, are as follows: Weighted Average Note 2019 $ 2018 $ Interest Rate (%) Cash and cash equivalents Trade and other receivables 0.71 0.15 4 5 19,618,245 5,673,548 6,559,412 675,948 Total Financial Assets 26,177,657 6,349,496 Financial Assets Financial Liabilities Trade and other payables - 8 2,074,310 1,504,767 Total Financial Instruments 24,103,347 4,844,729 The carrying amounts of these financial instruments approximate their fair values. Financial Risk Management Policies Exposure to key financial risks is managed in accordance with the Group’s risk management policy with the objective to ensure that the financial risks inherent in technological activities and new business reviews are identified and then managed or kept as low as reasonably practicable. The main financial risks that arise in the normal course of business are market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Different methods are used to measure and manage these risk exposures. Liquidity risk is monitored through the ongoing review of available cash and future commitments for research expenditure. Exposure to liquidity risk is limited by anticipating liquidity shortages and ensures capital can be raise in advance of shortages. Interest rate risk is managed by limiting the amount interest bearing loans entered into by the Company. It is the Board's policy that no speculative trading in financial instruments be undertaken so as to limit expose to price risk. Primary responsibility for identification and control of financial risks rests with the Managing Director, under the authority of the Board. The Board is apprised of these risks from time to time and agrees any policies that may be undertaken to manage any of the risks identified. Details of the significant accounting policies and methods adopted, including criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each financial instrument are disclosed in Note 1 to the financial statements. The carrying values less the impairment allowance for receivables and payables are assumed to approximate fair values due to their short term nature. Cash and cash equivalents are subject to variable interest rates. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 54 For personal use only Specific Financial Risk Exposures and Management a) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Credit-impaired financial assets A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired include: o o o significant financial difficulty of the customer; a breach of contract; it is probable that the customer will enter bankruptcy or other financial reorganisation. Write-off policy The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and there is no realistic prospect of recovery. However, financial assets may still be subject to enforcement activities, taking into account legal advice where appropriate. Any recoveries made are recognised in the profit and loss. Trade receivables The Group has adopted the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of contracts and corresponding historical credit losses. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at 30 June 2019 was determined as follows for both trade receivables. As at 1 July 2018 (transition date of AASB 9), the expected credit loss was calculated as nil. In addition, no contract asset balances were recognised as at 1 July 2018. 30 June 2019 Expected loss rate More than 30 More than 60 Current days past due days past due Total 0% 0% 10% - Gross carrying amount – trade receivables 1,491,611 306,337 1,413,405 3,211,353 Loss allowance 0 0 0 0 Management have assessed the risk of collections for the amounts more than 60 days past due as low and therefore have not made an allowance in the year ended 30 June 2019. The Company believes that The Group’s credit risk on liquid funds is limited because the majority of cash and deposits is held with Westpac Banking Corporation, an AA3 credit rated bank. b) Liquidity risk Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash reserves to meet the ongoing operational requirements of the business. It is the Company’s policy to maintain sufficient funds in cash and cash equivalents. Furthermore, the Company monitors its ongoing research and development cash ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 55 For personal use only requirements and raises equity funding as and when appropriate to meet such planned requirements. The Company has undrawn financing facilities. Trade and other payables, the only financial liability of the Company, are due within 3 months. The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Cash flows realised from financial assets reflect management's expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates. Financial liability and financial asset maturity analysis Within 1 Year 1 to 5 Years Total Contractual Cash Flow 2019 $ 2018 $ 2019 2018 $ $ 2019 $ 2018 $ Financial assets – cash flows receivable Trade and other receivables 6,559,412 675,948 Total expected inflows 6,559,412 675,948 Financial liabilities due for payment realisable Trade and other payables 2,074,310 1,504,767 Total anticipated 2,074,310 1,504,767 outflows Net (outflow)/inflow on financial instruments 4,485,102 (828,819) - - - - - - - - - 6,559,412 675,948 6,559,412 675,948 2,074,310 1,504,767 2,074,310 1,504,767 - 4,485,102 (828,819) c) Market risk i. ii. Interest rate risk The Company’s cash-flow interest rate risk primarily arises from cash at bank and deposits subject to market bank rates. The Company does not have any borrowings or enter into hedges. An increase/(decrease) in interest rates by 0.5% during the whole of the respective periods would have led to an increase/(decrease) in losses of less than $100,000. Foreign currency risk The consolidated Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The consolidated Group is not exposed to any significant foreign currency risk. d) Fair value The Group does not have any financial instruments that are subject to recurring fair value measurements. Due to their short-term nature, the carrying amounts of the current receivables and current trade and other payables is assumed to approximate their fair value. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 56 For personal use only 16. AUDITORS’ REMUNERATION Consolidated 2019 $ 2018 $ Remuneration of the auditor of the Company, BDO Audit (WA) Pty Ltd, for: Taxation advice – BDO Corporate Tax (WA) Pty Ltd Audit services Total 47,282 14,235 61,517 46,457 11,985 58,442 17. CONTINGENT LIABILITIES The Consolidated entity has no material contingent liabilities as at reporting date (2018: Nil). 18. OPERATING SEGMENTS The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis that it has only one main operating segment, being the Dubber technology suite. All the Group’s activities are interrelated, and discrete financial information is reported to the Board of Directors as a single segment. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole. The accounting policies applied for internal purposes are consistent with those applied in the preparation of these financial statements. Corporate Technology $ $ Total $ Year ended 30 June 2019 Revenue Result (Loss) Total assets 1,794,087 5,598,103 7,392,190 (858,470) (8,790,202) (9,648,672) 16,399,326 14,416,316 30,815,642 Total liabilities (483,162) (2,307,548) (2,790,710) Acquisition of non-current assets Depreciation of non-current assets Intangible assets Amortisation - - - - 61,490 (30,164) 61,490 (30,164) 4,320,395 4,320,395 (1,541,107) (1,541,107) Year ended 30 June 2018 Revenue Result (Loss) Total assets 18,516 3,169,378 3,187,894 (2,375,203) (8,943,898) (11,319,101) 2,099,689 10,913,423 13,013,112 Total liabilities (404,762) (1,708,292) (2,113,054) Acquisition of non-current assets Depreciation of non-current assets Intangible assets Amortisation - - - - 29,122 (28,677) 29,122 (28,677) 5,861,503 5,861,503 (1,541,107) (1,541,107) ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 57 For personal use only 19. RELATED PARTY TRANSACTIONS Subsidiaries The consolidated financial statements include the financial statements of Dubber Corporation Limited and the subsidiaries listed in the following table: Equity Holding Country of Incorporation Class of Shares 2019 % Medulla Group Pty Ltd Dubber Pty Ltd Australia Australia Ordinary Ordinary Dubber Ltd England and Wales Ordinary Dubber USA Pty Ltd Australia Ordinary Dubber, Inc. United States of America Ordinary Dubber Connect Australia Pty Ltd Australia Ordinary 100 100 100 100 100 100 2018 % 100 100 100 100 100 0 Parent entity Dubber Corporation Limited is the ultimate Australian parent entity and ultimate parent of the Group. Key management personnel Refer to the Remuneration Report contained in the Directors' Report for details of the remuneration paid or payable to each member of Dubber Corporation Limited's key management personnel for the year ended 30 June 2019. The totals of remuneration paid to key management personnel of the Company during the year are as follows: Consolidated 2019 $ 2018 $ Short-term employee benefits 1,377,780 1,499,674 Long-term benefits Post-employment benefits Share-based payments 43,527 87,376 260,803 40,536 76,826 616,221 Total 1,769,486 2,233,257 Other Transactions with Key Management Personnel On 1 April 2019, the Company issued 1,500,000 fully paid ordinary shares to a company associated with Mr Steve McGovern, and 375,000 fully paid ordinary shares to Mr James Slaney following achievement of Milestone 1 in respect of Performance Rights (refer Note 21). Telephony services totaling $2,442 (2018: $2,375) were provided by Canard Pty Ltd, a company associated with Mr Steve McGovern. Trade payables at 30 June 2019 include a balance of $832 (30 June 2018: $415) payable to Canard Pty Ltd. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 58 For personal use only Intelligent Voice and 1300 MY SOLUTION are businesses associated with Mr Steve McGovern. The Group earned service fee income of $56,850 (2018: $43,655) from Intelligent Voice and $242,620 (2018: $263,308) from 1300 MY SOLUTION. Trade receivables at 30 June 2019 include balances of nil (30 Jun 2018: $5,185) due from Intelligent Voice and nil (30 June 2018: $22,162) due from 1300 MY SOLUTION. During the year, $13,500 (2018: $30,000) was invoiced to the Company by Mr Peter Pawlowitsch’s consultancy company, Gyoen Pty Ltd for advisory services outside his usual Board duties. Other payables at 30 June 2019 included an accrual of $75,000 (30 June 2018: 50,000) for the cash bonus payable to Mr Steve McGovern for the period January to June 2019 included in the remuneration table above. Other receivables at 30 June 2019 includes an amount of $140,977 (30 June 2018: $140,977) receivable from the Medulla Group Pty Ltd vendors, including Mr Steve McGovern and Mr James Slaney. Amounts included in the remuneration table for Mr Gerard Bongiorno were paid to his consultancy company Otway Capital Consulting. All transactions are conducted on normal commercial terms and on an arm’s length basis. Shares Issued to Key Management Personnel on Exercise of Compensation Options During the year ended 30 June 2018, the Company issued 600,000 fully paid ordinary shares to Mr Peter Pawlowitsch and 250,000 fully paid ordinary shares to Mr Steve McGovern on the exercise of unlisted options exercisable at 40 cents each on or before 30 June 2018. The options were originally issued to directors and executives on 29 December 2015, upon the conversion of performance options (granted on 9 June 2015) when performance milestones were achieved. No Compensation Options were issued in the year ended 30 June 2019. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 59 For personal use only 20. CASH FLOW INFORMATION Reconciliation of loss for the year to net cash flows from operating activities Consolidated 2019 $ 2018 $ Net loss for the year (9,648,672) (11,319,101) Non-cash flows in loss: Depreciation and amortisation 1,571,271 1,569,784 Share based payments Net exchange differences 620,299 (124,988) 845,771 (74,195) Changes in assets and liabilities: Increase in trade and other receivables (2,651,995) (Decrease)/Increase in trade and other payables Increase in provisions 505,204 172,452 (25,364) (282,593) 166,183 Net cash outflows from operating activities (9,556,429) (9,119,515) Non-cash financing and investing activities During the year ended 30 June 2018, the Company issued 2,000,000 options exercisable at $0.60 each on or before 31 December 2019 and 2,000,000 options exercisable at $0.80 each on or before 31 December 2020, as capital raising costs. The fair value of the options at the date of issue was $903,000. During the year ended 30 June 2018, 1,125,000 shares were issued as loan funded shares to Directors, with no physical exchange of funds occurring. There were no non-cash financing and investing activities in the year ended 30 June 2019. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 60 For personal use only 21. SHARE BASED PAYMENTS Value of share based payments in the financial statements Consolidated 2019 $ 2018 $ Expensed – directors and other key management personnel remuneration: Performance rights Loan funded shares Sub-total Expensed – other employees’ remuneration: Fully paid ordinary shares Employee options Sub-total Share based payments in capital raising costs: Unlisted options Total 51,281 166,595 217,876 60,333 342,090 402,423 - 620,298 488,720 127,501 616,221 151,636 77,914 229,550 903,000 1,748,771 Shares The Company formally offered the following shares to employees. The shares are not issued to the employees until the vesting date provided the employee is an employee of the Company at the relevant vesting date. 2019 Offer Date Vesting Date Balance 01/07/18 Offered 06/12/16 01/03/19 300,000 Total 300,000 2018 Offer Date Vesting Date Balance 01/07/17 Offered 22/05/15 01/03/18 700,000 06/12/16 01/03/18 325,000 06/12/16 01/03/19 325,000 Total 1,350,000 Ord FP Shares Issued (300,000) (300,000) Forfeited Balance 30/06/19 - - Ord FP Shares Issued Forfeited Balance 30/06/18 (600,000) (100,000) (300,000) (25,000) - - - - - (25,000) 300,000 (900,000) (150,000) 300,000 - - - - - - ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 61 For personal use only Options Set out below are the summaries of options granted as share based payments: 2019 Grant Date Expiry Date Exercise Price Defer Type Balance 01/07/18 Granted Exercised Expired or Forfeited Balance 30/06/19 30/06/15 31/03/19 31/03/16 31/03/19 16/11/16 27/01/19 16/11/16 27/01/20 22/12/16 31/03/20 20/12/17 31/12/19 20/12/17 15/01/19 31/12/20 15/01/22 $0.25 $0.72 $0.60 $0.80 $0.40 $0.60 $0.80 $0.38 1. 2,175,000 100,000 2,000,000 2,000,000 850,000 2. 3. # 2,000,000 - - - - - - (2,175,000) - (100,000) (2,000,000) (2,000,000) - - - - - # 2,000,000 - - 1,350,000 - (25,000) Number vested and exercisable - - - - - - - - - - - - 850,000 850,000 2,000,000 2,000,000 2,000,000 1,325,000 2,000,000 1,325,000 Total 11,125,000 1,350,000 (2,200,000) (4,100,000) 6,175,000 6,175,000 Weighted average exercise price $0.59 $0.38 $0.25 $0.68 $0.64 $0.64 2018 Grant Date Expiry Date Exercise Price Defer Type Balance 01/07/17 Granted Exercised Expired or Forfeited Balance 30/06/18 15/12/14 31/01/18 $0.25 27/02/15 27/02/18 $0.25 09/06/15 30/06/18 $0.40 1,370,000 600,000 2,700,000 30/06/15 31/03/19 $0.25 1. 2,250,000 31/03/16 31/03/19 $0.72 16/11/16 27/01/19 $0.60 100,000 2,000,000 16/11/16 27/01/20 $0.80 2. 2,000,000 - - - - - - - 20/12/17 31/12/19 $0.60 20/12/17 31/12/20 $0.80 - - # 2,000,000 # 2,000,000 (1,370,000) (600,000) - - (850,000) (1,850,000) Number vested and exercisable - - - - - - - - - - - - (75,000) 2,175,000 2,175,000 - - - - 100,000 100,000 2,000,000 2,000,000 2,000,000 - 2,000,000 2,000,000 - 2,000,000 2,000,000 Total 12,070,000 4,000,000 (2,820,000) (2,125,000) 11,125,000 8,875,000 Weighted average exercise price $0.45 $0.70 $0.30 $0.39 $0.59 $0.55 # - 4,000,000 options were issued as share placement underwriting fees and valued at $903,000. These options had no vesting conditions and were fully allocated as capital raising costs during the year ended 30 June 2018. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 62 For personal use only The various deferred vesting options listed above are subject to milestones or vesting dates which are listed below. Probability of achieving these milestones or vesting dates have been assessed at 100% unless otherwise stated. 1. Employee options vest and become exercisable on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 1 March 2016 - 750,000 options Vesting date 2: 1 March 2017 - 750,000 options Vesting date 3: 1 March 2018 - 750,000 options less 75,000 options cancelled during the year upon resignation of employee before vesting date 2. Unlisted options issued to Aesir Capital Pty Ltd, vesting upon the completion of a subsequent capital raising in the amount of $15,000,000 or more that is managed and facilitated by Aesir Capital Pty Ltd and completes within 15 months of the share placement that was completed on 14 December 2016. The Company considers it unlikely these options will vest and no value has been allocated during the year for this share based payment. 3. Employee options vest and become exercisable on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 1 March 2017 - 350,000 options Vesting date 2: 1 March 2018 - 350,000 options less 100,000 options cancelled during the year upon resignation of employee before vesting date Vesting date 3: 1 March 2019 - 350,000 options less 100,000 options cancelled during the year upon resignation of employee before vesting date The assessed fair values of the options was determined using a binomial option pricing model or Black-Scholes model, taking into account the exercise price, term of option, the share price at grant date and expected price volatility of the underling share, expected yield and the risk-free interest rate for the term of the option. For the options granted during the current and previous financial year, the inputs to the model used were: Grant date 20 December 2017 20 December 2017 15 January 2019 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Underlying share price ($) Option exercise price ($) - 100% 1.97% 2 $0.46 $0.60 - 100% 2.12% 3 $0.46 $0.80 - 100% 1.78% 3 $0.40 $0.38 Value of option ($) $0.2143 $0.2372 $0.2534 The weighted average remaining contractual life of share-based payment options that were outstanding as at 30 June 2019 was 1.12 years (2018: 1.40 years). The weighted average fair value of share-based payment options granted during the year was $0.2534 (2018: $0.2258) each. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 63 For personal use only Performance rights: Each performance right converts into one fully paid ordinary share for nil cash consideration, upon the achievement of performance based milestones. Set out below are the summaries of performance rights issued as share based payments: 2019 Type 1. 2. 2018 Type 1. 2. Grant Date Expiry Date Balance 01/07/18 Granted Converted Forfeited Balance 30/06/19 29/11/17 31/12/18 29/11/17 30/06/19 Grant Date Expiry Date Balance 01/07/17 29/11/17 31/12/18 29/11/17 30/06/19 - - - - - - 1,500,000 (1,500,000) - 1,500,000 - (1,500,000) 3,000,000 (1,500,000) (1,500,000) - - - Granted Converted Forfeited 1,500,000 1,500,000 3,000,000 - - - Balance 30/06/18 - - - 1,500,000 1,500,000 3,000,000 The weighted average remaining contractual life of performance shares outstanding at 30 June 2019 was nil years (2018: 0.75 years). The various performance shares listed above were subject to milestones which are listed below. 1. Performance rights – Milestone 1 Milestone: the Group achieving SaaS Revenue of $500,000 or more for at least two consecutive calendar months, by 31 December 2018. This milestone was achieved and the fully paid ordinary shares were issued on 1 April 2019. 2. Performance rights – Milestone 2 Milestone: the Group achieving SaaS Revenue of $1,000,000 or more for at least two consecutive calendar months, by 30 June 2019. This milestone was not achieved and hence the Rights were cancelled on 30 June 2019. Loan funded shares: Set out below is the summary of loan funded shares granted as share based payments: 2019 Grant Date Expiry Date Exercise Price Defer Type Balance 01/07/18 Granted Exercised Expired or Forfeited Balance 30/06/19 Number vested and exercisable 29/11/17 20/12/22 $0.360 1/12/17 30/1/23 $0.555 1. 2. Total 525,000 600,000 1,125,000 - - - - - - - - 525,000 175,000 600,000 200,000 - 1,125,000 375,000 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 64 For personal use only 2018 Grant Date Expiry Date Exercise Price Defer Type Balance 01/07/17 Granted Exercised Expired or Forfeited Balance 30/06/18 Number vested and exercisable 29/11/17 20/12/22 $0.360 01/12/17 30/01/23 $0.555 1. 2. Total - - 525,000 600,000 - 1,125,000 - - - - - 525,000 600,000 - 1,125,000 - - - The deferred loan funded shares are subject to vesting dates which are listed below. Probability of achieving these vesting dates have been assessed at 100% unless otherwise stated. 1. Loan funded shares vest on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 20 December 2018 - 175,000 loan funded shares Vesting date 2: 20 December 2019 - 175,000 loan funded shares Vesting date 3: 20 December 2020 - 175,000 loan funded shares 2. Loan funded shares vest on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 30 January 2019 - 200,000 loan funded shares Vesting date 2: 30 January 2020 - 200,000 loan funded shares Vesting date 3: 30 January 2021 - 200,000 loan funded shares The assessed fair values of the loan funded shares was determined using a Black-Scholes model, taking into account the exercise price, term of loan, the share price at grant date and expected price volatility of the underling share, expected yield and the risk-free interest rate for the term of the loan. For the loan funded shares granted, the inputs to the model used were: Grant date 29/11/2017 1/12/2017 Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of loan (years) Underlying share price ($) Loan exercise price ($) Value of loan funded share ($) - 100% 2.090% 5 $0.36 $0.36 $0.2700 - 100% 2.470% 5 $0.555 $0.555 $0.4176 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 65 For personal use only 22. PARENT ENTITY DISCLOSURES Summary Financial information The individual financial statements for the parent entity show the following aggregate amounts: Statement of financial position Equity 2019 $ 2018 $ Current assets Non-current assets 16,399,326 12,108,768 2,099,689 9,205,131 Total assets 28,508,094 11,304,820 Current liabilities Total liabilities 483,162 483,162 404,762 404,762 Net assets 28,024,932 10,900,058 Issued capital 70,462,765 44,871,437 Reserves 7,997,432 7,377,133 Accumulated losses (50,435,265) (41,348,512) Total equity 28,024,932 10,900,058 Loss for the year (9,676,831) (11,390,336) Total comprehensive loss (9,676,831) (11,390,336) The parent entity had no capital commitments or contingent liabilities at 30 June 2019 or 30 June 2018. 23. COMMITMENTS Operating lease commitments Non-cancellable operating leases contracted for but not recognised in the financial statements: Payable – minimum lease payments - Not later than one year - After one year but not more than five years Consolidated 2019 $ 2018 $ 434,861 1,822,164 2,257,025 164,515 55,464 219,979 Dubber Corporation Limited entered into a new lease for the Group’s principal place of business on Russell Street in Melbourne with an unrelated landlord which commenced on 1 May 2019. The initial term of the lease is five years, with an option to extend for a further term of five years. On each anniversary of the lease commencement date, the rent will be increased by a fixed rate of 3.75%. The Group had no capital commitments at 30 June 2019. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 66 For personal use only 24. EVENTS SUBSEQUENT TO YEAR END There are no matters or circumstances that have arisen since 30 June 2019 that have or may significantly affect the operations, results, or state of affairs of the Company in future financial years other than as follows. The financial report was authorised for issue on 30 September 2019 by the Board of Directors. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 67 For personal use only Directors’ Declaration ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 68 For personal use only Directors’ Declaration The directors of the Company declare that: 1. The financial statements and notes are in accordance with the Corporations Act 2001, and: a) comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and b) give a true and fair view of the financial position of the Company as at 30 June 2019 and of its performance for the financial year ended on that date. 2. The Managing Director and Chief Financial Officer have each declared that: a) b) c) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; the financial statements and notes for the financial year comply with the accounting standards; and the financial statements and notes for the financial year give a true and fair view. 3. In the opinion of the directors’ there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 4. Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. This declaration is made in accordance with a resolution of the Board of Directors. Peter Clare Chairman Dated: 30 September 2019 ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 69 For personal use only Independent Auditors Report ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 70 For personal use only Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT To the members of Dubber Corporation Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Dubber Corporation Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. For personal use onlyCarrying Value of Intangible Assets Key audit matter How the matter was addressed in our audit As detailed in Note 7 of the financial report, the Group Our procedures included, but were not limited to the has performed an impairment test for its Intangible following: Assets at 30 June 2019. (cid:127) Challenging the appropriateness of the The assessment of the carrying value of the Intangible Capitalised Market Approach (fair value less Assets is considered to be a key audit matter due to cost of disposal) valuation method used to the significance of the assets to the Group’s determine the fair value in accordance with consolidated financial position, and the assessment AASB 13 Fair Value Measurement; requires management to make significant judgements and estimates in determining the key assumptions used in the recoverable amount as disclosed in note 1(y). As set out in Note 7, management’s assessment of the recoverability is supported by a fair value less costs of disposal methodology. (cid:127) (cid:127) Assessing the carrying value of Dubber’s net assets with regard to the Group’s market capitalisation as at 30 June 2019; and Assessing the adequacy and completeness of the related disclosures in Note 1(y) and Note 7 to the financial report. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2019, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. For personal use onlyAuditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 13 to 25 of the directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Dubber Corporation Limited, for the year ended 30 June 2019, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Jarrad Prue Director Perth, 30 September 2019 For personal use onlyADDITIONAL SHAREHOLDER INFORMATION The following additional information is current as at 19 September 2019. CORPORATE GOVERNANCE: The company’s corporate governance statement is available on the company’s website at www.dubber.net/company- profile/. SUBSTANTIAL SHAREHOLDER: Holding ranges Holders Total units % issued share capital 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - 9,999,999,999 637 711 469 902 254 228,799 2,062,744 3,782,984 32,716,592 147,959,333 0.12% 1.10% 2.03% 17.52% 79.23% Total 2,973 186,750,452 100.00% There are 330 shareholders with less than a marketable parcel. VOTING RIGHTS Each fully paid ordinary share carries voting rights of one vote per share. ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 74 For personal use only THE TOP 20 HOLDERS OF ORDINARY SHARES ARE: POSITION HOLDER NAME UBS NOMINEES PTY LTD HOLDING 8,888,164 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 % IC 4.76% 4.15% 3.79% 3.41% 2.42% 2.41% 1.84% 1.58% 1.43% 1.35% 1.32% 1.26% 1.23% 1.22% 1.00% 0.97% 0.91% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 7,758,143 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 7,080,759 NATIONAL NOMINEES LIMITED STEVE MCGOVERN NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED DR DIETER ALBERT OTTO KLEIN VENN MILNER SUPERANNUATION PTY LTD PENELOPE SLANEY 6,360,818 4,516,124 4,496,332 3,437,017 2,950,000 2,674,831 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 2,518,572 2,460,072 2,350,000 2,300,000 2,282,830 1,860,000 1,802,632 1,700,000 ONE MANAGED INVESTMENT FUNDS LIMITED MRS LORIE MAI HO BOSTON FIRST CAPITAL PTY LTD ONE MANAGED INVESTMENT FUNDS LIMITED MR STUART JAMES HERCULES STEPHEN MCGOVERN MR JOSEPH CHARLES CAMUGLIA & MRS KIRSTEN INGRET CAMUGLIA MR JOSEPH BASTEN & MR THOMAS BASTEN 4SIGHT NOMINEES PTY LTD ONE MANAGED INVESTMENT FUNDS LIMITED 1,481,125 0.79% 1,428,572 1,386,847 0.77% 0.74% Total 69,732,838 37.34% Total issued capital - selected security class(es) 186,750,452 100.00% ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 75 For personal use only UNQUOTED EQUITY SECURITIES Number 2,175,000 775,000 Number of holders 8 4 1,145,000 27 2,000,000 2,000,000 2,000,000 1 1 1 Class Holders more than 20% Unlisted options exercisable at 25 cents expiring 31March 2019 Unlisted options exercisable at 40 cents expiring 31 March 2020 Unlisted options exercisable at 38 cents expiring 15 January 2022 Unlisted options exercisable at 80 cents expiring 31 January 2020 Unlisted options exercisable at 80 cents expiring 31 December 2020 Unlisted options exercisable at 60 cents expiring 31 December 2019 ESOP ESOP ESOP Aesir Capital Pty Ltd Mila Investment Co. Pty Ltd Mila Investment Co. Pty Ltd ANNUAL REPORT 2019 | DUBBER CORPORATION LIMITED ABN 64 089 145 424 REVIEW OF OPERATIONS 76 For personal use only 

Continue reading text version or see original annual report in PDF format above