Dubber Corporation Limited
Annual Report 2021

Plain-text annual report

DUBBER CORPORATION LIMITED ABN 64 089 145 424 Annual Report 30 JUNE 2021 Contents 01. End not knowing .......................................................................................................3 02. Corporate Directory ...............................................................................................5 03. Chairman’s Letter .....................................................................................................6 04. CEO & Operations Report .............................................................................10 05. Highlights .....................................................................................................................18 06. Our Strategy ..............................................................................................................19 07. Directors’ Report ....................................................................................................24 08. Remuneration Report .......................................................................................30 09. Notes to the Consolidated Financial Statements ................... 55 10. Directors’ Declaration ....................................................................................100 11. Independent Auditor’s Report ................................................................102 2 DUBBER.NETDUBBER ANNUAL REPORT 2021End not knowing Dubber is the Unified Conversational Recording (UCR) and AI platform chosen by the world’s leading communication service providers and delivered from their network. We create voice intelligence cloud services inside the leading communications networks and solutions globally - enabling government and business to unlock the potential of any - and every - conversation. Provisioned with a click, UCR enables voice data to be generated from every conversation - voice, video and text - and delivered to Dubber’s infinitely scalable Voice Intelligence Cloud. Recordings can be replayed and insights revealed through Dubber’s advanced artificial intelligence (AI), and natural language processing (NLP). We end not knowing 3 DUBBER ANNUAL REPORT 2021DUBBER.NETDubber Today FOUNDED 2011 ASX LISTED 200+ EMPLOYEES HQ MELBOURNE, NATIVE & CLOUD AUSTRALIA LEADER >200% MARKET CAP GROWTH ON PCP >160 SP GLOBALLY BILLIONS OF MINUTES RECORDED INDUSTRY LEADING AI & NLP API CONNECTIONS & PARTNER SHIPS “By 2025, 75% of conversations at work will be recorded and analyzed, enabling the discovery of added organizational value or risk.” GARTNER 4 DUBBER.NETDUBBER ANNUAL REPORT 2021Corporate Directory BOARD OF DIRECTORS SECURITIES EXCHANGE Peter Clare Non-Executive Chairman Steve McGovern CEO & Managing Director Peter Pawlowitsch 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 www.dubber.net SHARE REGISTRY SOLICITOR Automic Registry Services (Automic Pty Ltd) Milcor Legal Solicitor Level 2, 267 St Georges Terrace Perth WA 6000 Level 1, 6 Thelma Street Telephone: +61 8 9324 2099 West Perth WA 6005 AUDITOR BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008 5 DUBBER.NETDUBBER ANNUAL REPORT 2021 Chairman’s Letter 6 DUBBER.NETDUBBER ANNUAL REPORT 2021DEAR S HARE HO LDERS This time last year, we were acknowledging the global impacts of COVID-19. Dubber staff have proven to be resilient in adjusting to this new world as COVID continues to have profound implications for government, business and society as a whole. In light of these ongoing and challenging circumstances, and During the year the Company has continued to evolve on behalf of all the Directors, I would like to thank all our teams to become the global leader in native and cloud-based who have worked tirelessly through another year of disruption conversation recording and intelligence and our platform and dislocation. This same dislocation amongst our global customers continues to drive demand for greater visibility into every conversation for customer, people, compliance and revenue intelligence and is accelerating through organic growth, acquisitions and technology innovation. This growth and leadership is generating shareholder value and global industry recognition and relevance. insight. We remain focused on our mission to end not knowing It is remarkable to see what has been delivered by our teams by enabling every communications service provider to capture around the world, who work every day to ensure that compliant the data in every conversation and deliver crucial insights using and secure conversational recording happens inside the productive AI. world’s leading networks and applications. We’re pleased to announce that the Company delivered strong results in FY21. All of the Company’s key metrics showed strong increases throughout the year. In the 12 months to 30 June 2021: • More active users were added over the last 12 months A planned capital raising, undertaken in July 2021, provides significant financial contingency during these uncertain times as well as a strong foundation to support and enhance our global growth agenda. In addition, it enabled the business to evaluate acquisition opportunities, scale business resources around the world and close deals with Speik (and most recently Notiv). As we move through FY22 we are financially very well placed to build on our growth aspirations. than the entire history prior; • Active users increased by 118% to more than 420,000 (2020: 192,544); • Operating revenue grew from $9,649,834 to $20,337,310; up 111% ; • Number of billing telecommunication services providers increased by 27% to 105; • Completed the acquisition of UK-based call recording and PCI payments company Speik in December 2020, expanding the Company’s footprint in the compliant call recording space - and UK market. 7 DUBBER ANNUAL REPORT 2021DUBBER.NETA further capital raising undertaken in July 2021 provided a significant financial buffer and created a strong financial foundation from which we are resourced to execute our strategy. In addition, it enabled the business to evaluate growth opportunities, scale business resources around the world and close acquisition targets, such as that done for Speik - and most recently Notiv. As we move into the 2022 financial year, the Company is well placed to capitalise on the growth in demand for compliant conversational recording; AI-enriched insights from conversations and the continued shift to a new, work from anywhere workplace. Compliant data capture and use, security and trust Dubber has always intended to be the most insightful and trusted platform for conversational capture. Conversational data, enriched with AI and NLP, is at the heart of this. We are committed to ensuring that how we capture conversations - and how we hold the related data - is secure, used responsibly, transparently, and consistent with global compliance standards. We invest heavily to protect data on the Dubber platform and encourage our customers to adopt practices that help keep their accounts and data safe. We continue to review and enhance our data governance, as well as provide policies and education to guide Dubber employees on responsible data use whether that is in designing products, developing features for customers, or entering into partnerships. This year we enhanced our platform’s security infrastructure and laid the foundations for greater automation and an improved operating model for our security services. This included IdP and service provider SSO. Risk management As a high-growth company, managing risks and opportunities is critical to the execution of our strategy and maintaining the trust of all stakeholders. The Board takes this responsibility seriously, and Dubber has a risk management framework in place that includes regular updates to the Board. 8 DUBBER ANNUAL REPORT 2021DUBBER.NETDiversity and inclusion Conclusion At Dubber, diversity means acknowledging, appreciating, and celebrating all the many ways we are different, visible and not. It includes differences that relate to gender, age, culture, ethnicity, race, disability, family status, language, religion, sexual orientation, gender identity, as well as differences in background, skills, work styles, perspectives, and experiences. We are committed to developing our people and creating an adaptive, performance-enhancing culture. During FY21, we launched refreshed principles to guide our diversity and inclusion (D&I) goals and initiatives into the future. Looking ahead, we expect that digital transformation will continue to accelerate in our personal and business lives around the world. In lock-step with this immutable trend is the unbridled growth in demand for capturing the data in these business conversations, their insights and value generating opportunities ambivalent to the source of those conversations. Dubber is well-positioned to support its customers as they adapt to these new ways of working. Whether it be regular or mobile telephony, or one of the myriad of digital voice or video conferencing channels, demand for recording and analysing conversations will grow. On behalf of the Board, I would like to thank all staff, contractors, customers and suppliers for their resilience and determination during these challenging times. And a special thank you to our loyal shareholders for your support and encouragement on our journey to unleash the potential of every conversation. Yours faithfully, Peter Clare Non-Executive Chairman 9 DUBBER ANNUAL REPORT 2021DUBBER.NET CEO & Operations Report 10 DUBBER.NETDUBBER ANNUAL REPORT 2021WE LCO ME FY2021 has been a landmark period for Dubber. Dubber finished FY21 strongly and enters FY22 with momentum and confidence in our long-term strategy underpinned by three commercial philosophies: Today Dubber is globally recognized as the leader in UCR and AI - an essential part of any communications service delivered from within their networks through the Cloud. We came into the year with the goal of doubling the size of our business and have exceeded that across our key metrics notably being 25% ahead of our internal target for the company’s annualised recurring revenue (ARR). While we continued to pursue our longer-term strategy we were also able to focus on supporting our customers and partners’ immediate requirements during the year as they answered the need for a new way to work and communicate from anywhere. 1 2 3 Recording of every conversation - voice, video and text - should be available immediately, as a Service directly from the telephony network or unified communications solution. AI should be enabled for every carrier network and communications service with voice data centralized and managed securely and compliantly in the cloud. Hyper-scale UCR and AI is a source of advantage for Dubber, and its application will accelerate with the continued evolution of the Dubber Voice Intelligence Cloud. This fuels our business model with a competitive and economic advantage by enabling any conversation to be recorded from any source, and unified on one platform to provide integrated reporting, alerts, search and more. Major global trends underpin these three principles. These include the rapid evolution of the needs of major service providers to derive more value from the content on networks as core infrastructure is commoditized; accelerating demands for secure and compliant solutions; the rapid adoption of the cloud to answer the need for compliance, people, revenue and customer intelligence; and the increasing use of AI and NLP to enrich data and insights. One of our fundamental beliefs is that AI has a part to play as a standard feature of every call and conversation - supporting compliance and the overall performance of government and business in a post-pandemic world. Covid has accelerated these trends and the end of legacy call recording by driving the rapid proliferation of unified communications and new applications to connect dislocated employees and customers. The Dubber Platform and Voice Intelligence Cloud is the only one of its kind, built to operate the same way a service provider provisions its services instead of providing applications or hardware at an individual enterprise or business level. As a result, Dubber is presented either in the service provider’s brand or as Dubber products. The integration of the Dubber Platform at a network level underpins our strategy and commercial opportunity for the business. Once deployed, the Dubber Platform is invariably the only network call recording and data capture technology in a service provider network. The potential for the service to be terminated at any point in the future is low - as exemplified by the zero network churn Dubber in FY21. 11 DUBBER ANNUAL REPORT 2021DUBBER.NET SCALI NG BU S IN ES S OPER A T IONS The Company successfully completed a capital raising and share purchase plan in October and November 2020, totalling $45M (before costs), consolidating our financial footing with closing cash of $32,041,224. We continue to deploy this capital to grow our team and product leadership, which are essential to realising the potential of Foundation Partnerships. And, we continue to pursue attractive M&A opportunities globally. Execution of strategy: Notable Highlights CISCO FOU NDAT IO N PARTN E R AT&T FSI MICRO SO FT TEA MS , ZOOM , RIN GC ENTR AL The company announced Cisco as its first major Foundation Partner meaning that every subscription of Cisco Webex Calling and Unified Communications Manager (UCM) cloud includes Dubber as a standard feature. Dubber compliant call capture is available as a standard feature of Cisco for Webex Calling and UCM - availing any service provider using Cisco Broadsoft of the ability to offer Dubber to its customers. Dubber Foundation benefits Cisco and Dubber customers with a required capability as a standard feature while providing for the broader journey in which the content of calls can be transformed into rich, usable data for compliance, productivity, insights and customer engagement. Dubber launched compliant Unified Call Recording and Voice AI on 3 AT&T Networks: AT&T IP Toll-Free Network, AT&T Hosted Voice Service and Cisco Webex Calling with AT&T Business in the United States. AT&T serves more than 3 million businesses globally, including many Fortune 500 and enterprises across financial services, retail, healthcare, insurance and manufacturing sectors. AT&T IP Toll-Free is a SIP trunking service that delivers inbound toll-free calls to business customer locations over the entire AT&T network. Dubber’s partnership in EMEA deepened with the company securing major wins with significant financial institutions across the regions. Dubber anticipates this relationship continuing to strengthen in the coming quarters based on this success. The adoption of Unified Communications spanning calling, video, and messaging accelerated during Covid. Dubber remains the only company capable of unifying conversations from all sources in one Cloud service and platform, applying AI and NPL to deliver meaningful insights. Dubber announced and expanded major integrations with Microsoft Teams, Zoom and RingCentral. Dubber remains one of the only partners to achieve compliance call recording certification for Microsoft Teams. To be certified under the Microsoft program, companies are required to submit their solutions for rigorous third-party approved testing for quality assurance, performance within the Microsoft Azure environment, interoperability and compatibility with the Teams user experience, security and compliance, marketing and customer support. 12 DUBBER ANNUAL REPORT 2021DUBBER.NETTELSTRA OPTUS M&A DEEPENING & STRENGTHENING PARTNERSHIPS PRODUCT UPDATES Dubber continued to meet growing customer demand for Telstra TIPT, SIP Connect and Liberate services - and now Cisco Webex and Microsoft Teams. Dubber is now available on the Optus Loop services offering and anticipates launching new services with Optus in the near future. In addition, Dubber is the preferred UCR platform on Optus for Microsoft Teams, Cisco Webex and Cisco UCM-C. Together the company is engaged with a number of significant Australian enterprises. Dubber’s overall strategy is to grow organic Annualised Recurring Revenue (ARR) while augmenting that growth with strategic acquisitions where possible. Acquisitions must either add accretive and synergistic revenue or provide substantial product and technology capability, which will drive organic ARR growth. During FY21 we successfully completed the acquisition of Speik, significantly increasing our ARR, footprint in major UK mobile service providers - specifically the major provider, O2 - and, expanded our PCI compliance offerings. Dubber continued to deepen its technology partnerships with IBM and Amazon while expanding its global distribution relationships with Ingram and Cisco Commerce Web. We made significant investments in product development and technology in FY21, delivering new capabilities for service providers, government and businesses alike. We made enhancements that simplify the capture of all conversational content, focus on providing fast and accurate data, streamlined workflows, and deeper insights through advances in AI and NLP. These included: • New packages for general use by individuals, teams, and enterprises. And, new solutions to meet the specific requirements of compliance teams. • • • • • • Automatic language detection of the dominant language in a recording such that transcription, sentiment and tone use the dominant detected language IdP SSO & SP-SSO for Dubber accounts, simplifying security and access using a business’ identity provider Transcription cross-talk elimination to eliminate transcription errors due to cross talk and improvement of transcriptions when a caller is in a noisy environment Legal hold, protecting recordings from deletion (by user, by retention period, or accidental) to ensure recordings remain for future retrieval AI speaker and question detection enhancing the resulting transcription to be more conversational and readable Improved data management functionality for retention periods and exporting data 13 DUBBER ANNUAL REPORT 2021DUBBER.NET Outlook WE ENTER THE NEW FISCAL YEAR WITH A STRONG FOUNDATION FOR GROWTH: • • • • Continued deployment into tier-one communications services, including native integration of the world’s largest mobile networks The pipeline of orders via our existing partner networks and channels continues to grow. Through our Foundation Partner program, we anticipate having even greater access to subscribers with Dubber available on every end-point by default - and those Subscribers accessible by Dubber to upgrade them to more fully-featured solutions. The rapid evolution of our products - including pricing and packaging - driving consumption and AI-rich subscriptions Exponential growth in the need for voice data at a massive scale across the whole of government and business. And, for that data enriched with Dubber’s advanced AI and NLP technologies. • The expansion of our Foundation Partners - and the program itself - leading to Dubber’s presence as a pre-packed service within the service provider offering. • Our capacity to continue to scale the operating team in crucial revenue-generating roles. Dubber remains a sought after employer both in terms of its culture, product offering and growth potential. CONCLUSION The Company achieved many significant milestones in FY21 - particularly in securing secure footprints in major communications and services - which positively impact our long-term future. Our belief in Dubber and the need for UCR has never been stronger. UCR should be available as a ‘switch on’ feature as part of a communications service and AI capability, including transcription and data-driven insights. UCR will become a standard feature expectation as part of a communications service and embedded in every business’ daily activity. On behalf of the Dubber Board and leadership team, I’d like to acknowledge and thank all our team worldwide for their commitment, resilience, and hard work during FY21. And thanks to you, our partners, shareholders, customers for your continuing support of Dubber. “Voice data is one of the last great untapped resources for companies... By making data and insights from conversations more accessible, we unlock the potential to drive digital and customer experience transformation through voice. With the pandemic and acceleration of remote work, moving to network-centric and unified call recording has never been more important. Together with Dubber, we can help answer these customer needs on a global scale.” Rich Shaw, Vice President, Voice & Collaboration, AT&T Business 1 1 Source: https://www.dubber.net/dubber-news-announcements/att-business-supercharges-its-ip-toll-free-iptf-network-with-dubber-unified-call-recording-ucr-and-voice-ai/ 14 DUBBER ANNUAL REPORT 2021DUBBER.NETContinued growth in end users 450 ,0 00 400,0 00 350 ,0 00 300,0 00 250 ,0 00 2 00,000 150 ,0 00 100,0 00 50, 00 0 0 FY18 FY19 FY20 FY21 The 2021 financial year has shown substantial growth in all key metrics reflecting the scaling of business operations to match the global opportunities for the Company’s technology and business plan. The Company also continued to focus on laying the foundations for future success by engaging with leading global carriers and service providers in the knowledge that expansion of the global network footprint provides a large-scale addressable market. 15 DUBBER.NETDUBBER ANNUAL REPORT 2021FY21 Key Highlights Annualised Recurring Revenue (A UD $’000s ) ARR CAGR 148% Since FY18 REVENUE CAGR 94% Since FY18 USER CAGR 143% Since FY18 CHURN RATE 3.7% Since FY18 CASH AT BANK $32m EOFY21 40, 000 36, 000 32, 000 28, 000 24, 000 20, 000 16, 000 12, 000 8, 000 4, 000 0 FY18 FY19 FY20 FY21 FY18 FY19 FY20 FY21 A R $2.55m $8.22m $16.10m $39m REVENUE $3.18m $7.39m $11.84 $23.3m MC 59m 250m 235m 791m USERS 29,405 94,824 192,544 420,000+ S P CON TRA CT ED S P BI LL I NG 38 23 106 43 138 83 160 105 16 DUBBER ANNUAL REPORT 2021DUBBER.NET Telco Growth 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. 61% CAGR Since FY18 66% CAGR Since FY18 36 19 106 43 CONTRACTED BILLIN G 160 142 105 87 FY18 FY19 FY20 FY2 1 17 DUBBER ANNUAL REPORT 2021DUBBER.NET Highlights +111% INCREASE IN OPERATING REVENUE $9.64m $20.33m OPERATING REVENUE IN 2020 OPERATING REVENUE IN 2021 118% 192,544 USERS IN 2020 INCREASE IN USERS 420,000+ USERS IN 2021 16% 138 INCREASE IN SERVICE PROVIDERS 160 TELECOMMUNICATION PROVIDERS IN 2020 SERVICE PROVIDERS IN 2021 $32m CASH AT BANK AT 30 JUNE 2021 18 DUBBER ANNUAL REPORT 2021DUBBER.NETOur Strategy 19 DUBBER.NETDUBBER ANNUAL REPORT 2021This year we made significant progress on our core strategy to enable the world’s communications service and solution providers to extract value from every conversation on their networks and services. By making Dubber a native and feature-rich solution available to every customer, we unlock the potential of billions of connected end-points. Why Dubber Exists Our Purpose To improve the way the world communicates, listens and connects Our Mission To Dub every communications Our Vision To realise the potential of Conversational service in the world - voice, video, Data as a Service - unlocking the power of chat and more conversation data for government, service providers and businesses globally 1 Dubber on every network and communication solution globally AI on every phone and end-point fuelling the Voice Intelligence Cloud Answering customers’ needs for compelling and new differentiated services, creating recurring value from the content flowing on their networks and services Areas of investment • • • Best-in-class unified conversation caputure and AI- enrichment for communications services Robust technology to drive innovation at speed Expansion of sales, marketing and support globally 2 Win and serve efficiently with partners - direct & channel Create network effects with every end-point Areas of investment and user, creating incremental growth Answering customers needs for increasing recurring revenue, customer retention and differentiation • • Attract, inspire and retain world class talent Foundation Partner offerings and footprint • Optimise operational, product and financial structure 3 AI powered intelligence & insight Create more value for partners and customers than Areas of investment ever before through compliant UCR data, connections and integrations Answering customers needs for compliance, customer, revenue and people intelligence - enriched with AI • Advancing Dubber’s AI, NLP and digital signal processing leadership • Government and business needs for compliance, customer, people and revenue intelligence • New use cases leveraging data, AI, and NLP 20 DUBBER ANNUAL REPORT 2021DUBBER.NET Strategy Highlights Realising the potential of voice data as a service STRA T EGY #1 Dubber on every network and communications solution globally Our momentum with major service providers continued to accelerate globally including Cisco, AT&T, Verizon, Microsoft, 02, Telstra, Optus and more. We launched a first-of-a-kind global partner program - Dubber AI on every phone and end-point fuelling the Foundation - whereby a service provider includes Dubber as a Voice Intelligence Cloud core feature for every subscription. This enables providers of communications services to deploy UCR and AI for any content and end-point at a fraction of the cost of legacy solutions and with significant revenue and retention potential. Our first Foundation Partner has launched Dubber on its primary Webex Calling and Cisco UCM services. Dubber Foundation Dubber as a standard feature in every subscription The Pathway to revenue, retention & differentiation Simple & easy deployment Assisted & frictionless enablement of Dubber Go Co-partnering and Dubber investment to cross and upsell Significant recurring & new revenue “Customers worldwide are responding to increased regulatory and compliance obligations for their businesses. Embedding tools, like Dubber call recording, as a standard service that is available to Webex users, will help customers meet those requirements while enabling easy access to powerful advanced voice data services.” Lorrissa Horton, Vice President and General Manager of Webex Calling and Online. 21 Reduce CAPEX and OPEXImmediate differentiation and retentionConversation to richer solutions & significant ARR buildExpansion through AI-enriched data solutions and additional servicesDUBBER ANNUAL REPORT 2021DUBBER.NET STRA T E GY #2 Win and serve efficiently with partners – direct & channel Create network effects with every end-point and user, creating incremental growth We expanded our offerings and services across all the world’s major UC platforms including Cisco Webex Teams and Webex Calling, Microsoft Teams, Zoom, and RingCentral. Today we are the only truly UCR that is compliant, secure and infinitely scalable. New pricing and packaging - including the innovative Dubber Go solution offered to Foundation Partners - enables us to deliver fit-for-purpose solutions to governments and businesses of every size. Accelerating our revenue momentum Dubber has built a 4-layered network effect. The larger the company gets, the faster it grows. U P R A g n i s a e r c n I f o . o N e g a r e v A r e i r r a c r e p s r e s u g n i l l i B % Strategic & accretive M&A Immediate opportunity to broaden distribution footprint and accelerate new product development attracting more service providers and subscribers. Expand Dubber universe of solutions Continuously add new functionality. Address more and more conversational end-points, enhancing AI-enriched data sets. Foundation Partner Program Instantly “switch-on” customer base. Introduce end-user to universe of Dubber Solutions. Expand to new services and customers. Jun-17 Jun-17 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 s r e i r r a c f o . o N Significant & growing TAM* Accelerationg cloud adoption. Growth of distributed communications. Customer migration from legacy call recording solutions. STRA TE GY #3 AI powered intelligence & insights Create more value for partners and customers than ever before through compliant UCR data, connections and integrations Dubber continued to innovate, launching new features harnessing its AI leadership. These included features such as automatic language detection enabling Dubber to transcribe to the preferred language when two languages are being spoken. The successful acquisition of Speik added new networks and broadened our compliance offerings - especially for PCI Compliance. Speik joined Dubber with a long and successful seven-year track record with a number of UK service providers, including O2, the UK’s largest network. Speik immediately grew Dubber’s market-leading position in EMEA and contributed positively to Dubber’s overall ARR momentum with a profitable Statement of Financial Position. 22 DUBBER ANNUAL REPORT 2021DUBBER.NET How Dubber is used today The uses of Dubber are virtually endless. From the simple and easy ability to replay a conversation when you need it most through rich insights to fuel people, compliance, revenue and customer intelligence. Compliance Intelligence Revenue Intelligence Reduce the cost and risk of security and non-compliance through UCR with integrated and dedicated compliance storage and archiving. True AI, ML, and NLP automatically detect security, data loss, and compliance risks across video, voice, chat, and content in what is shared, shown, spoken, and typed. Dubber captures customer interactions across phone, web conferencing, and email. True AI understands what was said in these interactions, and delivers insights to help your team win more. Connected to Salesforce, businesses generate real-time accurate records of every conversation, accelerating sales productivity and effectiveness by improving training and coaching. Disputes can be resolved with certainty. People Intelligence Customer Intelligence Working from anywhere has reduced visibility into employee Transform customer experience through intelligence. See sentiment, wellbeing and performance. Dubber enables real- satisfaction and sentiment data in real-time and gain a vital time monitoring of all communication channels to maintain lens into what’s working and what isn’t. Resolve disputes faster performance and conduct standards and safeguard against based on what was said. Enhance customer data sets with an data loss. accurate record of conversations. Answering the needs of every government, business and individual CR UCIAL CONVE RSATIONS Jess uses call recordings to verify crucial conversations for order accuracy and dispute resolution CUSTO ME R EXPERI ENCE Jim sees every sales conversation and presentation in Salesforce, in real-time with customer and employee sentiment analysis BUSINESS PR ODUCTIVI TY Marcia captures team meetings and presentations to boost productivity and keep accurate records of what matters C OMPLIA NCE Jeff records all lenders calls for compliance, conducting real-time search and alerting on keywords C OA CH ING & T RA INING Cathy captures every conversation for coaching and performance management IT V OICE DATA M ANA GE ME NT Jon integrates all voice data for rapid reporting and enterprise surveillance, meeting compliance mandates 23 DUBBER ANNUAL REPORT 2021DUBBER.NETDirectors’ Report 24 DUBBER.NETDUBBER ANNUAL REPORT 2021Your directors present their report of Dubber Corporation Limited and its controlled entities (the Group) for the financial year ended 30 June 2021. Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Directors Steve McGovern Peter Clare Peter Pawlowitsch Gerard Bongiorno CEO & Managing Director Non-Executive Chairman Executive Director Non-Executive Director The particulars of the qualifications, experience and special responsibilities of each director are as follows: 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 • 9,836,242 ordinary shares held directly and indirectly • 3,070,215 ZEPOs held directly or indirectly Directorships held in other listed entities in the past three years • Linius Technologies Limited (April 2016 – present) MR PETER CLARE NON-EXECUTIVE CHAIRMAN Experience 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. He also holds a number of other non-executive director positions with independent companies/businesses. 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. Interest in Shares and Options/ Rights at the date of this report • 765,000 ordinary shares held indirectly • 89,053 ZEPOs held indirectly • 600,000 remuneration options held indirectly Directorships held in other listed entities in the past three years • Lynch Group Holdings Limited (February 2021 – present) 25 DUBBER ANNUAL REPORT 2021DUBBER.NET MR PETER PAWLOWITSCH EXECUTIVE DIRECTOR Experience Mr Pawlowitsch holds a Bachelor of Commerce from the University of Western Australia, is a current member of the Certified Practicing Accountants of Australia, a Fellow of the Governance Institute of Australia and 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/ Rights at the date of this report • 4,964,511 ordinary shares held indirectly • 1,617,703 ZEPOs 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) • 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) 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’s Degree in Economics and Accounting from Monash University and the Program for Management development at Harvard Business School PMD75. Interest in Shares and Options/ Rights at the date of this report • 796,723 ordinary shares held indirectly • 51,641 ZEPOs held indirectly • 300,000 remuneration options held indirectly Directorships held in other listed • Linius Technologies Limited (February 2017 – present) entities in the past three years 26 DUBBER ANNUAL REPORT 2021DUBBER.NET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 C OR PO RATE S TRUCT UR E 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. - parent entity - 100% owned controlled entity - 100% owned controlled entity - 100% owned controlled entity - 100% owned controlled entity - 100% owned controlled entity Dubber Connect Australia Pty Ltd - 100% owned controlled entity CallN Pty Ltd Aeriandi Ltd Voxygen Ltd - 100% owned controlled entity - 100% owned controlled entity - 100% owned controlled entity PRI NCIPA L AC TIV I TIES 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. 27 DUBBER.NETDUBBER ANNUAL REPORT 2021 Operating and Financial Review REVIEW OF OP ERATIONS A review of operations for the financial year and the results of those operations is contained within the review of operations preceding this report. OPERATIN G RESULTS The loss from ordinary activities after providing for income tax amounted to $31,697,438 (2020: $18,000,260). FINANCIAL P OSITION On 30 June 2021 the Group had net assets of $58,956,036 (2020: $25,546,379) and cash reserves of $32,041,224 (2020: $18,408,881). DIVIDENDS No dividends were paid or declared during the year. No recommendation for payment of dividends has been made. 28 DUBBER.NETDUBBER ANNUAL REPORT 2021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 reporting date In July 2021, the Company announced a $110,000,000 placement (before costs) to be completed in two (2) tranches. The first tranche was completed on 29 July 2021 and the second tranche was approved by shareholders at a general meeting on 2 September 2021. The Company completed the acquisition of AI Technology Company Notiv, by way of cash and equity for circa AU$6.6M on 20 September 2021. No other matters or circumstances have arisen since the end of the financial year. 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: DIRECTORS' MEETINGS Number eligible Number to attend attended Mr Steve McGovern Mr Peter Clare Mr Peter Pawlowitsch Mr Gerard Bongiorno 11 11 11 11 11 11 11 11 29 DUBBER ANNUAL REPORT 2021DUBBER.NETRemuneration Report 30 DUBBER.NETDUBBER ANNUAL REPORT 2021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 The following persons were directors of Dubber Corporation authority and responsibility for planning, directing Limited during the financial year: and controlling the activities of the entity, directly or indirectly, including all directors. Steve McGovern CEO & Managing Director Peter Clare Non-Executive Chairman Peter Pawlowitsch 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 Chief Operating Officer Peter Curigliano Chief Financial Officer Russell Evans Chief Revenue Officer 31 DUBBER ANNUAL REPORT 2021DUBBER.NET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 service agreements were entered into objectives while LTI’s focus on the authority and responsibility for with CEO & Managing Director, Mr delivery of strategic objectives and planning, directing and controlling Steve McGovern and Chief Operating the activities of the Company and Officer, Mr James Slaney. In addition, the Consolidated Entity, including the review resulted in a change of directors of the Company and other role for Mr Peter Pawlowitsch from executives. Broadly, remuneration levels for key management personnel of the Company and of the Consolidated Entity are competitively set to attract Non-Executive Directive to Executive Director - Commercial and Strategy, under a new executive service agreement. These new agreements became effective from 1 July 2020. and retain appropriately qualified and The following is what was in place experienced directors and executives during the 2021 financial year: and reward the achievement of strategic objectives. In the previous financial year and completed this year, the Board implemented an independent review of its remuneration policies to come into effect from 1 July 2020. The review also included recommendations on the design and operation of short term and long-term incentive plans for the Company’s executives. As a result of this review, new executive Remuneration packages can 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 short term incentives (STI) and long term incentives (LTI). STI’s incentives are broadly linked to the delivery of annual operational creation of sustainable shareholder value. STI’s and associated performance targets are set annually by the Board. LTI’s are set every three (3) years by the Board and are linked to the delivery of the Group’s business plan, subject to continued employment and achievement over the life of the Remuneration Policy. Mr Steve McGovern’s bonus plan was replaced by a new Employment Services Agreement (ESA) in FY21. Hence, no cash bonus was paid or accrued to Mr Steve McGovern in FY21 (2020: $150,000). Bonuses of $20,000 and $40,000 were paid to key management personnel Mr James Slaney and Mr Russell Evans in line with a determination by the Board and the achievement of sales targets respectively. (2020: $40,000 and $35,000 respectively) 32 DUBBER.NETDUBBER ANNUAL REPORT 2021FIXED REM UN ERA TI ON Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges RELATIONSHIP BETWEEN THE REMUNERATION AND C OMPANY PERFORMANCE related to employee benefits including motor vehicle), as well as The remuneration policy has been tailored to increase goal 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 marketplace. Executive directors are employed full time and receive fixed 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. Short term incentives and associated performance targets are to be set annually by the Board. For the 2020/21 financial year they are: remuneration in the form of salary and statutory superannuation • the 2021/2022 financial year budget for the business of or consultancy fees, commensurate with their required level of services. the Group shows that the business will have sustainable cash flows to cover budgeted operating costs for that year; 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 • • a positive personal scorecard’; and core business objectives (six or more) and product releases (six or more). are remunerated on an agreed retainer or daily rate basis. SERVI CE AG REE MENTS For the 2020/21 financial year, short term incentive remuneration is payable only by way of STI ZEPOs, subject to Shareholder approval where required. For subsequent years, short term It is the Consolidated Entity’s policy that service agreements incentive remuneration is payable at the executive’s election up to for key management personnel are unlimited in term but 100% in cash, with the balance in equity in the form of STI ZEPOs. 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. Long term incentives are to be set every three years by the Board and will be linked to delivery of the Group’s business plan, subject to continued employment, achievement over the life of the Remuneration Policy (ie within that three year period) with The service agreement outlines the components of performance targets over the next three years being: 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. recurring revenue targets; and targets for agreements in place for the deployment of the Dubber call recording service on telecommunication networks. Certain key management personnel will be entitled to bonuses as the Board may decide in its absolute discretion from time Long term incentive remuneration is payable in equity only in the form of LTI ZEPOS. to time. NON-E X ECUTI V E DIRECTO RS 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. 33 DUBBER ANNUAL REPORT 2021DUBBER.NETShare-based Payment OPTIO NS The Company operates an Employee Incentive Plan (“EIP”) for executives and employees of the Consolidated Entity. In accordance with the provisions of the EIP, executives and employees may be granted options (ZEPO or strike price) 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 right 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. Typically, options granted under the EIP 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. 34 DUBBER.NETDUBBER ANNUAL REPORT 2021SHAR ES 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: 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 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. 35 DUBBER ANNUAL REPORT 2021DUBBER.NETLOAN FU N DED SHA RES 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. 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. • • • • 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 Participants will be invited to purchase shares using loan funds repay the outstanding loan balance and any excess funds after under a loan agreement with the Company. The loan must costs and expenses will be returned to the participant if they are always be repaid if the participant wishes to benefit from the entitled to them under the terms of the plan rules and the loan. shares. Participants only benefit from growth in share price. The loan commences on the grant date and, subject to the Share Plan vest in three equal tranches on each of the first, Board’s discretion to permit the loan to continue for a further second and third anniversaries of the grant date, provided specified period, must be repaid by the earliest of the following: the participant has not ceased employment, engagement or To date, loan funded shares offered under the Loan Funded • • five years from the grant date; the date the participant ceases employment, engagement or directorship with the Company; directorship with the Company before the relevant vesting date. 36 DUBBER ANNUAL REPORT 2021DUBBER.NETPERFORMAN CE RIGHT S The Directors, at their discretion, may at any time invite eligible The performance rights granted under the plan will be subject employees to participate in the Performance Rights Plan. The to vesting conditions determined by the Board from time to eligible participants under the plan are full time and part time time and expressed in a written offer made by the Company employees (including Directors) of the Company and its related to the eligible employee which is subject to acceptance by bodies corporate or any other person who is declared by the the eligible employee within a specified period. The vesting Board to be eligible to receive a grant of performance rights conditions may include one or more of (i) service to the under the plan (eligible employees). Subject to Board approval, Company of a minimum period of time (ii) achievement of an eligible employee may nominate a nominee to receive the specific performance conditions by the participant and/or by performance rights to be granted to the eligible employee. the Company or (iii) such other performance conditions as 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; ii. resolve conclusively all questions of fact or interpretation in connection with the plan; iii. 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 iv. 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 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, The shares to be issued following the performance rights termination for poor performance or termination for cause vesting conditions being satisfied, will be issued on the same (unless the Board determines otherwise). 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. 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, 37 DUBBER ANNUAL REPORT 2021DUBBER.NETincluding (but not limited to) upon the retirement, total and Change of control event means: 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 i. 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 will be deemed to have been waived (unless the Board determines b) that takeover bid has become unconditional; or 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 ii. 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 in relation to the Company Group, a participant is convicted of b) the Court, by order, approves the proposed scheme of an offence in connection with the affairs of the Company Group arrangement. 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. 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 If in the opinion of the Board, performance rights vested as a advantaged relative to the position reasonably anticipated at the result of the fraud, dishonesty or breach of obligations of either time of the grant. 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 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. in relation to the performance rights or shares to comply If the Company makes an issue of shares pro rata to existing with the law or to ensure no unfair benefit is obtained by the shareholders there will be no adjustment to the number participant. of shares which must be allocated on the exercise of a If there is a change of control event in relation to the Company performance right. prior to the conversion of the performance rights, then all If the Company makes a bonus issue of shares or other remaining milestones will be deemed to have been achieved and securities to existing shareholders (other than an issue in lieu or each performance right will automatically and immediately convert in satisfaction of dividends or by way of dividend reinvestment) into shares, however, if the number of shares to be issued as a the number of shares which must be allocated on the exercise result of the conversion of all performance rights due to a change of a performance right will be increased by the number in control event in relation to the Company is in excess of 10% of shares which the participant would have received if the of the total fully diluted share capital of the Company at the time performance right had vested before the record date for the of the conversion, then the number of performance rights to be bonus issue. 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. To date, performance rights offered under the Performance Rights Plan have milestones with an expiry date set as the vesting conditions. 38 DUBBER ANNUAL REPORT 2021DUBBER.NET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 MCGO VE RN CEO & MANAGING DIRECTOR Agreement type: Executive Service Agreement Agreement commenced: 1 July 2020 Term of Agreement: Remuneration: Termination notice: 3 year minimum term to 30 June 2023, then rolling with 6 month termination notice Annual salary of $456,000 plus statutory superannuation. The Company may terminate the agreement on six months written notice. If notice of termination is given more than 6 months from the end of the initial term, then employment shall be deemed to be on the last day of the initial term. PETER CLAR E NON-EXECUTIVE C HAIRMAN Agreement type: Agreement commenced: Term of Agreement: Remuneration: Letter of appointment 1 December 2017 No fixed term Annual fee of $109,500 and reimbursement of all reasonable expenses incurred in performing the Non-Executive Chairman’s duties. Termination notice: None specified P E T E R P AWLOWI TSCH EXECUTIVE DIRECTOR Agreement type: Executive Service Agreement Agreement commenced: 1 July 2020 Term of Agreement: Remuneration: 3 year minimum term to 30 June 2023, then rolling with 6 month termination notice Annual fee of $144,658 plus statutory superannuation, plus reimbursement of all reasonable expenses incurred in performing the Executive Director’s duties. Termination notice: The Company may terminate the agreement on six months written notice. If notice of termination is given more than 6 months from the end of the initial term, then employment shall be deemed to be on the last day of the initial term. 39 DUBBER ANNUAL REPORT 2021DUBBER.NETGERA RD B ON GI ORNO NON-EXECUTIVE DIRECTOR Agreement type: Letter of appointment Agreement commenced: Term of Agreement: Remuneration: 2 July 2017 No fixed term 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 SLAN E Y CO -FO UNDER AND C HIEF OPERATING OFFICE R Agreement type: Executive Service Agreement Agreement commenced: 1 July 2020 Term of Agreement: Remuneration: Termination notice: 3 year minimum term to 30 June 2023, then rolling with 6 month termination notice Annual salary of $415,000 plus statutory superannuation. The Company may terminate the agreement on six months written notice. If notice of termination is given more than 6 months from the end of the initial term, then employment shall be deemed to be on the last day of the initial term. PETER CU RIG LI ANO CH IEF FINANCIAL OFFICER Agreement type: Executive Service Agreement Agreement commenced: Term of Agreement: Remuneration: Termination notice: 18 June 2018 No fixed term Annual salary of $220,000 plus statutory superannuation.. The Company may terminate the agreement on 3 months’ notice, or by providing a cash payment in lieu of such notice. RUSSE LL E VA NS CH IEF REVENUE OFFICER Agreement type: Service Agreement Agreement commenced: Term of Agreement: Remuneration: Termination notice: 6 May 2019 No fixed term Annual salary of $320,000 plus statutory superannuation. The Company may terminate the agreement on 3 months’ notice, or by providing a cash payment in lieu of such notice. 40 DUBBER ANNUAL REPORT 2021DUBBER.NET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 Year Salary and Cash Fees Bonus Long Term Benefits Annual & Long Service Leave Post-Employment Share Based Payments Superannuation Options, Total Remuneration Remuneration Rights or Shares consisting of based on options, rights performance or shares Executive Directors: S McGovern 2021 2020 $ 456,000 $ - $ $ $ $ 149,202 25,000 d) 3,153,715 3,783,917 240,000 150,000 23,556 22,800 - 436,356 P Pawlowitsch 2021 144,658 2020 100,000 Non-Executive Directors: P Clare G Bongiorno 2021 2020 2021 2020 109,500 109,500 75,000 75,000 Other Key Management Personnel: - - - - - - - - - - - - 13,743 d) 3,178,845 3,337,246 9,500 - 109,500 - - - - 176,911 286,411 a) 49,068 158,568 93,206 168,206 a) 26,367 101,367 J Slaney C Jackson (e) P Curigliano R Evans 2021 2020 2021 2020 2021 2020 2021 2020 405,000 20,000 104,798 25,000 d) 3,287,298 3,842,096 321,896 40,000 25,633 24,700 b) 600,000 1,012,229 - 208,587 217,901 215,905 - - - - - 3,808 17,662 12,924 - - - 19,816 c) 292,300 511,512 24,999 - 260,562 24,995 c) 134,670 388,494 320,000 40,000 13,955 30,400 435,110 839,465 320,000 35,000 8,647 31,825 c) 263,130 658,602 Total 2021 1,728,059 60,000 285,617 119,142 10,325,085 12,517,903 2020 1,590,888 225,000 74,568 133,636 1,365,535 3,389,627 % 83 - 95 - 62 31 55 26 86 59 - 56 - 35 52 40 83 40 % 83 34 24 - - - - - 86 4 - - - - 5 6 83 7 a) Subject to vesting dates under the Loan Funded Share Plan as detailed in the section titled ‘Compensation Securities Issued to Key Management Personnel’. b) Fully Paid Ordinary shares issued upon successful achievement of the business objectives of the Company’s long-term strategy. At the time of issue to Mr J Slaney, these shares were valued at $1.60 per share. c) Options and shares issued under the Company’s employee share and option plans. d) The share price for valuation purposes of ZEPOs at the date of shareholder approval or acceptance by the executive, was substantially higher than at the date of offer to the executives resulting in a higher value disclosed in the remuneration report than would have been otherwise. • • • The ZEPOs for Mr Steve McGovern at date of offer (1 July 2020) were valued at $0.941 & at date of shareholder approval (30 November 2020) - $1.659. Hence, deemed value of ZEPOs at offer date: $1,788,816 / reported value at reporting date: $3,153,715. The ZEPOs for Mr Peter Pawlowitsch at date of offer (1 July 2020) were valued at $0.941 & at date of shareholder approvals - 30 November 2020 and 23 July 2021 were $1.659 and $3.199 respectively. Hence, deemed value of ZEPOs at offer date: $1,155,871 / reported value at reporting date: $3,178,845. The ZEPOs for Mr James Slaney at date of offer (1 July 2020) were valued at $0.941 & at date of offer acceptance (8 June 2021) - $2.919. Hence, deemed value of ZEPOs at offer date: $1,059,728 / reported value at reporting date: $3,287,298. e) Mr C Jackson was not included in key management personnel in FY21. 41 DUBBER ANNUAL REPORT 2021DUBBER.NETCompensation Securities Issued to Key Management Personnel PERFORMAN CE RIGHT S No performance rights were issued for the year ended 30 June 2021 (2020: $0). LOAN F UNDE D SHA RES In FY18 the following loan funded shares were issued as part of the remuneration package of directors appointed during that year. Key Management Grant Date Personnel Number Granted Value per Loan Vesting Date Number Number Balance at Funded Share at Grant Date Vested during Vested in 30/06/21 the year Prior Years Unvested G Bongiorno Tranche 1 Tranche 2 Tranche 3 P Clare Tranche 1 Tranche 2 Tranche 3 Total 29/11/17 175,000 29/11/17 175,000 29/11/17 175,000 01/12/17 200,000 01/12/17 200,000 01/12/17 200,000 $0.27 $0.27 $0.27 $0.42 $0.42 $0.42 20/12/18 20/12/19 - - 175,000 175,000 20/12/20 175,000 - 30/01/19 30/01/20 - - 200,000 200,000 30/01/21 200,000 - 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 2021, $7,317 (approximately 5% 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 2021, $15,461 (approximately 6% of the total value of the loan funded shares), assessed as vested is included in the remuneration table above. 42 DUBBER ANNUAL REPORT 2021DUBBER.NET ADDIT IO N AL IN FORM ATION We aim to align our executive remuneration to our strategic and business objectives and the creation of shareholder wealth. The Group has continued to grow its operating revenue over the last financial year. As outlined in the operating and financial review, growth in revenue in particular annualised recurring revenue is a key focus of the Group. The table below shows measures of the group’s financial performance over the last five years as required by the Corporations Act 2001. These are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to KMPs and Directors. As a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded. The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below: Sales revenue EBITDA EBIT Profit after income tax 2021 $’000 20,337 (27,348) (30,393) (31,697) 2020 $’000 9,649 (15,691) (17,743) (18,000) 2019 $’000 5,547 (7,933) (9,629) (9,648) 2018 $’000 1,502 (9,640) (11,209) (11,319) The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: Share price at financial year end ($) Total dividends declared (cents per share) Basic loss per share (cents per share) 2021 3.09 - (13.25) 2020 1.13 - (9.30) 2019 1.34 - (6.22) 2018 0.42 - (9.19) 2017 $’000 510 (8,128) (9,691) (9,853) 2017 0.215 - (11.12) 43 DUBBER ANNUAL REPORT 2021DUBBER.NET REMU N ER A TIO N CONS U LTA NT S During the year the Board implemented an independent review of its remuneration policies to come into effect from 1 July 2020. The new policies and framework were finalised and applied retrospectively from 1 July 2020, and furthermore were disclosed to shareholders in a Notice of Meeting released to the share market on 23 October 2020 for the approval of the equity component of the related parties. VOT IN G A ND CO MM ENTS MADE AT THE CO MPA NY’S 202 0 A NN UA L GENERA L MEETI NG (‘AG M”) OTHE R T RAN S ACTI ONS WITH KEY MAN A GEMENT PERSON NE L At the 2020 AGM, 98% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Telephony services totalling $2,297 (2020: $2,150) were provided by Canard Pty Ltd, a company associated with Mr Steve McGovern. Trade payables at 30 June 2021 include a balance of $1,161 (30 June 2020: $193) 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 $65,815 (2020: $57,943) from Intelligent Voice and $119,036 (2020: $168,269) from 1300 MY SOLUTION. Trade receivables at 30 June 2021 include balances of nil (30 June 2020: nil) due from Intelligent Voice and 1300 MY SOLUTION. During the financial year, advisory services of $0 (2020: $42,750) were provided by Mr Peter Pawlowitsch’s consultancy company, Gyoen Pty Ltd for services outside his usual Board duties. Trade payables at 30 June 2021 include a balance of $0 (30 June 2020: $4,125) payable to Gyoen Pty Ltd. Services totalling $10,000 (2020: $Nil) were provided by Bassplay Pty Ltd, a company associated with Mr Peter Curigliano. Other receivables at 30 June 2021 includes an amount of $100,977 (30 June 2020: $140,977) receivable from the Medulla Group Pty Ltd vendors, including Mr Steve McGovern and Mr James Slaney. All transactions are conducted on normal commercial terms and on an arm’s length basis. This concludes the remuneration report, which has been audited. 44 DUBBER ANNUAL REPORT 2021DUBBER.NETAdditional Disclosures Relating to Key Management Personnel SHAR EH OLDIN GS 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 Received as Options Acquired/ Net Balance start of Year Remuneration Exercised disposed Change at End of S McGovern P Clare P Pawlowitsch G Bongiorno J Slaney P Curigliano R Evans Total 7,747,328 765,000 3,409,348 792,111 3,624,831 190,500 16,500 - - - - - - 100,000* - - - - - 167,500 - 833,333 - 833,333 - - 9,090 - 16,545,618 100,000 167,500 1,675,756 Other Year - - - - - - - - 8,580,661 765,000 4,242,681 792,111 3,624,831 367,090 116,500 18,488,874 *FPO shares issued as a part of an employment contract. OPTION HOLDI NGS 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 Balance at Received as Options Options Net Balance at Number Unvested Management Start of Year Remuneration Exercised Expired Change end of Year vested and Personnel S McGovern P Clare P Pawlowitsch G Bongiorno J Slaney P Curigliano R Evans Total - - - - - 4,325,796 696,988 2,339,532 356,253 3,431,456 - - - - - 167,500 150,000 317,500 - (167,500) 500,000 - 11,650,025 (167,500) Other exercisable - - - - - - - - 4,325,796 696,988 2,339,532 356,253 3,431,456 - 1,000,000 3,325,796 7,953 654,426 4,612 689,035 1,685,106 351,641 1,000,000 2,431,456 - - 650,000 400,000 250,000 11,800,025 3,066,991 8,733,034 - - - - - - - - Terms and conditions of the share based payment arrangements: 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 financial year, the inputs to the model used were: Grant date Number of options Vesting date Total value ($) 30 November 2020 5,452,051 8 June 2021 3,431,456 1 July 2020 1,213,277 30/6/21, 15/8/21 & 30/6/23 30/6/21, 15/8/21 & 30/6/23 30/6/21, 30/6/22 & 30/6/23 $9,044,952 $10,016,420 $3,881,273 Expense recognised in FY21 ($) $3,962,346 (2020: $ -) $3,287,298 (2020: $ -) $2,370,214 (2020: $ -) Exercise Price Fair Value Per Option Expected life of options (years) $ - $1.659 3 $ - $2.919 3 $ - $3.199 3 45 DUBBER ANNUAL REPORT 2021DUBBER.NET Grant date Number of options Vesting date Total value ($) 24 March 2021 153,241 30/6/21, 30/6/22, 30/6/23 & 30/6/24 $490,218 24 March 2021 24 March 2021 300,000 30/6/24 300,000 30/6/24 $607,800 $593,100 Expense recognised in FY21 ($) $102,013 (2020: $ -) $49,886 (2020: $ -) $48,680 (2020: $ -) Exercise Price Fair Value Per Option Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Expected life of options (years) Grant date Number of options Vesting date Total value ($) $ - $3.199 - - - 3 3 $1.75 $2.026 - 75% 0.13% 3 3 $1.75 $1.977 - 75% 0.13% 3 3 24 March 2021 13 May 2020 13 May 2021 300,000 30/6/24 $569,700 250,000 13/5/21 $199,300 250,000 13/5/22 $451,000 Expense recognised in FY21 ($) $46,759 (2020: $ -) $199,300 (2020: $ -) $59,310 (2020: $ -) Exercise Price Fair Value Per Option Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) $1.75 $1.899 - 75% 0.13% 3 100% 0.10% 3 5,452,051 ZEPOs granted to Executive Directors as of 30 November 2020 Director Stephen McGovern Peter Pawlowitsch Total 2020 ZEPOs 1,000,000 250,000 1,250,000 $1.165 $0.7972 - 100% 0.25% 3 100% 0.25% 3 STI ZEPOs 255,581 67,404 322,985 $2.64 $1.804 - 100% 0.10% 3 100% 0.10% 3 LTI ZEPOs 3,707,215 808,851 3,879,066 3,431,456 ZEPOs granted to Co-Founder and Chief Operating Officer, James Slaney as of 8 June 2021 2020 ZEPOs 1,000,000 STI ZEPOs 187,035 LTI ZEPOs 2,244,421 Vesting conditions for the above are as follows: 2020 ZEPOS The 2020 ZEPO shall vest on 30 June 2021 if the holder remains in continued employment with the Company until 30 June 2021. STI ZEPOS The STI ZEPOS shall vest on the date that the 2021/2022 financial year budget for the business of the Group is approved by the Board and that budget shows that the business will have sufficient cash from cash at bank and budgeted operating revenue to sustain budgeted operating costs for that year. 46 DUBBER ANNUAL REPORT 2021DUBBER.NET Subject to achievement of the sustainable cash flow condition above: i. If the holder receives a positive “Personal Scorecard” (scorecard to be determined by agreement between the Company and the Executive) for the financial year ended 30 June 2021 from the Board for performance over the previous 12 months, 50% of the STI ZEPOS shall vest. ii. If, by 30 June 2021, the Group has achieved 8 or more core business objectives and/or product releases (to be determined by agreement between the Company and the Executive) then the following proportion of the remaining 50% of the STI ZEPOS shall vest, namely achieving: (A) 8 core business objectives and/or product releases - 20% (B) 9-40% (C) 10 -60% (D) 11 - 80%, and (E) 12 or more - 100% LTI ZEPOS If the holder remains in continued employment with the Company until 30 June 2023, the LTI ZEPOS shall vest as follows: i. Recurring revenue (50% of LTI ZEPOs). The following proportions of LTI ZEPOs shall vest where recurring revenue for the Group by 30 June 2023 is: (A) at or above $40 million but less than $60 million: 33% at $40 million with a straight-line pro rata vesting up to 60%; (B) at or above $60 million but less than $80 million: 60% at $60 million with a straight-line pro rata vesting up to 100%; and (C) at or above $80 million: 100%. Recurring revenue means operating revenue of the Group for any month multiplied by 12 exclusive of one off revenue fees such as connection fees and any R&D or other grant revenue ii. Agreements for deployments into telecommunication networks (50% of LTI ZEPOs). The following proportions of LTI ZEPOS shall vest where, by 30 June 2023, the Group has agreements in place for the deployment of the Dubber call recording service on to telecommunication service provider networks (whether or not yet active): (A) at least 170 but less than 185: 33% at 170 with a straight-line pro rata vesting up to 60%; (B) at least 185 but less than 200: 60% at 185 with a straight-line pro rata vesting up to 100%; and (C) at or above 200: 100%. 1,213,277 ZEPOs granted to Executive Director Mr Peter Pawlowitsch as of 1 July 2020 Vesting If the holder remains an employee of the Company as at the relevant date, the Options shall vest as follows: i. one-third of the Options (rounded up to the nearest whole number) shall vest on 30 June 2021; ii. a further one-third of the Options (rounded up to the nearest whole number) shall vest on 30 June 2022; and iii. the remaining Options shall vest on 30 June 2023. 47 DUBBER ANNUAL REPORT 2021DUBBER.NET 153,241 ZEPOs granted to Non-Executive Directors Mr Peter Clare and Mr Gerard Bongiorno as of 24 March 2021 Director Mr Peter Clare Mr Gerard Bongiorno Total ZEPOs 96,988 56,253 153,241 Vesting If the holder remains as a director of the Company as at the relevant date or in certain cases of prior departure the Board exercises its discretion otherwise in accordance with the 2020 Plan, the ZEPOS shall vest as follows: i. 8.2% of the aggregate number of ZEPOs (rounded down to the nearest whole number) shall vest on 30 June 2021; ii. 30.6% of the aggregate number of ZEPOS (rounded down to the nearest whole number) shall vest on 30 June 2022; iii. 30.6% of the aggregate number of ZEPOs (rounded down to the nearest whole number) shall vest on 30 June 2023; and iv. the balance shall vest on 30 June 2024. 900,000 Remuneration Options granted to Non-Executive Directors Mr Peter Clare and Mr Gerard Bongiorno as of 24 March 2021 Director Mr Peter Clare Mr Gerard Bongiorno Total Remuneration 600,000 300,000 900,000 The Options shall vest on 30 June 2024 if the holder remains as a director of the Company as at that date, or in certain cases of prior departure if the Board exercises its discretion otherwise in accordance with the 2020 Plan, as follows: i. one-third of the Options shall vest if the price of Shares traded on ASX has achieved $3.00 or more on a 20-day volume-weighted average price (20-day VWAP) basis before that date; ii. a further one-third of the Options shall vest if the price of Shares traded on ASX has achieved $4.00 or more on a 20- day VWAP basis before that date; and iii. the remaining Options shall vest if the price of Shares traded on ASX has achieved $5.00 or more on a 20-day VWAP basis before that date. 250,000 Yearly tenure options granted as of 13 May 2020 and 13 May 2021 to Chief Revenue Officer Mr Russell Evans Vesting period is 12 months SHAR E S The assessed fair value of the shares was determined using share price at grant date. For the shares granted during the current financial year, the inputs to the model used were: Grant date Number of options Vesting date Expense recognised in FY21 ($) Fair Value Per Share 1 December 2020 100,000 12/5/21 $176,500 $1.765 48 DUBBER ANNUAL REPORT 2021DUBBER.NETINDEM NI FYI NG OFFIC ER S OR AUD ITO RS 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 OP TIONS AND ORD INAR Y S H ARES At the date of this report there were the following unissued ordinary shares for which options were outstanding: During the year the following options were granted: During the year the following options were exercised: • • • • • • • • • • • • • • • • • • • 345,000 options expiring 15 January 2022, exercisable at $0.38 each 60,000 options expiring 20 September 2022, exercisable at $1.25 each 150,000 options expiring 20 September 2022, exercisable at $0.75 each 945,000 options expiring 22 March 2023, exercisable at $0.75 each 1,387,035 STI ZEPOs expiring 30 June 2023 3,879,066 LTI ZEPOs expiring 30 June 2025 414,665 ZEPOs expiring 31 January 2024 439,136 options expiring 31 January 2024, exercisable at $1.80 each 75,000 options expiring 31 January 2024, exercisable at $1.68 each 50,000 options expiring 30 November 2023, exercisable at $1.21 each 100,000 options expiring 31 May 2024, exercisable at $1.60 each 100,000 ZEPOs expiring 31 May 2024 140,676 ZEPOs expiring 31 July 2024 900,000 options expiring 31 July 2024, exercisable at $1.75 each 4,535,083 ZEPOs expiring 30 June 2025 250,000 options expiring 12 May 2024, exercisable at $1.165 each 250,000 options expiring 12 May 2025, exercisable at $2.64 each 100,000 ZEPOs expiring 6 August 2023 100,000 ZEPOs expiring 6 August 2024 • • • • • • 1,250,000 ZEPOs expiring 30 June 2023 322,985 STI ZEPOs expiring 30 June 2023 3,879,066 LTI ZEPOs expiring 30 June 2025 840,825 ZEPOs expiring 31 January 2024 433,272 options expiring 31 January 2024, exercisable at $1.80 each 75,000 options expiring 31 January 2024, exercisable at $1.68 each • • • • • • • 335,500 options expiring 15 January 2022, exercised at $0.38 each 70,000 options expiring 20 September 2022, exercised at $1.25 each 2,000,000 options expiring 31 December 2020, exercised at $0.80 each 275,000 options expiring 22 March 2023, exercised at $0.75 each 360,000 ZEPOs expiring 22 March 2023 121,971 ZEPOs expiring 31 January 2024 1,111 options expiring 31 January 2024, exercised at $1.80 each Since the end of the financial year, the following securities were exercised: → → → 110,290 options at $0.38 each 265,000 options at $0.75 each 2,967,846 ZEPOs 49 DUBBER ANNUAL REPORT 2021DUBBER.NET PROC EEDING S ON BEHA LF O F T HE COMP AN Y 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. EN VIRO N ME N TAL RE G U LAT ION S The Group is not currently subject to any specific environmental regulation under Australian Commonwealth or State law. NON- AU DIT S E RVI CES 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 17 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 17 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. AUD IT OR ’S IN DE PEN DENC E DECLA RA TION The auditor’s independence declaration for the year ended 30 June 2021, 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: 29 October 2021 50 DUBBER ANNUAL REPORT 2021DUBBER.NET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 DEAN JUST TO THE DIRECTORS OF DUBBER CORPORATION LIMITED As lead auditor of Dubber Corporation Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been: 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 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in DECLARATION OF INDEPENDENCE BY DEAN JUST TO THE DIRECTORS OF DUBBER CORPORATION LIMITED 2. No contraventions of any applicable code of professional conduct in relation to the audit. relation to the audit; and As lead auditor of Dubber Corporation Limited for the year ended 30 June 2021, I declare that, to the This declaration is in respect of Dubber Corporation Limited and the entities it controlled during the best of my knowledge and belief, there have been: period. 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. Dean Just Director BDO Audit (WA) Pty Ltd Perth, 29 October 2021 Dean Just Director BDO Audit (WA) Pty Ltd Perth, 29 October 2021 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. 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. CONS OLIDATE D S TAT EMENT O F P RO FIT OR LOSS AND OT HER COM PR EH ENSI V E I NCO M E Revenue Service income Other revenue from ordinary activities Expenses Salaries and related expenses Employee share based payments Direct costs General and administration costs Finance costs Depreciation and amortisation Non-operating foreign exchange gains losses Loss before income tax expense Income tax benefit Loss after income tax expense for the year 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 Total comprehensive loss attributable to owners of Dubber Corporation Limited Loss per share attributable to the owners of Dubber Corporation Limited Basic loss per share Note 2 (a) 2 (b) 2021 $ 2020 $ 20,337,310 9,649,834 2,922,774 2,194,392 (22,146,099) (13,217,848) 22 (13,842,177) (4,412,032) (10,341,788) (6,598,407) 2 (c) (4,278,125) (3,307,808) (1,461,481) (148,836) (3,045,586) (2,051,129) (124,315) (108,426) (31,979,487) (18,000,260) 282,049 - (31,697,438) (18,000,260) 922,674 922,674 (26,428) (26,428) (30,774,764) (18,026,688) 15 Cents (13.25) Cents (9.30) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 52 DUBBER ANNUAL REPORT 2021DUBBER.NETCONS OLIDA TED STAT EMENT O F F I NANC IAL POSITION Note 2021 $ 2020 $ ASSETS Current Assets Cash and cash equivalents Trade and other receivables Sundry debtors Total Current Assets Non-Current Assets Property, plant and equipment Rights of use asset Intangible assets Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Deferred consideration Lease liability Provisions Contract liabilities Total Current Liabilities Non-Current Liabilities Lease liability Provisions Contract liabilities Deferred Tax Liabilities Total Non-Current Liabilities Total Liabilities NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY 4 5 6 8 7 9 25 8 10 11 8 10 11 3 12 13 14 32,041,224 18,408,881 22,793,739 10,346,912 536,132 106,067 55,371,095 28,861,860 735,186 241,582 1,966,496 2,102,360 42,261,910 4,137,010 44,963,592 6,480,952 100,334,687 35,342,812 11,597,258 5,323,337 16,031,836 597,929 1,206,597 5,382,217 116,381 560,630 763,974 632,623 34,815,837 7,396,945 2,006,421 1,915,789 402,663 575,260 3,578,468 300,910 182,789 - 6,562,813 2,399,488 41,378,650 9,796,433 58,956,036 25,546,379 136,947,992 85,666,948 22,288,545 8,803,497 (100,280,501) (68,924,066) 58,956,036 25,546,379 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 53 DUBBER ANNUAL REPORT 2021DUBBER.NETCONS OLIDATE D S TAT EMENT O F CH A NG ES IN E QU ITY Issued Capital Reserves Accumulated Losses $ $ $ Total $ 2021 Balance at 1 July 2020 85,666,948 8,803,497 (68,924,066) 25,546,379 Loss after income tax expense for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Securities issued during the year Capital raising costs - - - 52,501,896 (2,159,652) - (31,697,438) (31,697,438) 922,674 922,674 - - - 922,674 (31,697,438) (30,774,764) - - 52,501,896 (2,159,652) Cost of share based payments 938,800 12,562,374 341,003 13,842,177 Balance at 30 June 2021 136,947,992 22,288,545 (100,280,501) 58,956,036 2020 Balance at 1 July 2019 71,592,843 7,355,895 (50,923,806) 28,024,932 Loss after income tax expense for the year Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Securities issued during the year Capital raising costs Cost of share-based payments Balance at 30 June 2020 - - - 11,606,592 (470,487) 2,938,000 85,666,948 - (18,000,260) (18,000,260) (26,428) (26,428) - - 1,474,030 8,803,497 - (26,428) (18,000,260) (18,026,688) - - - 11,606,592 (470,487) 4,412,030 (68,924,066) 25,546,379 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 54 DUBBER ANNUAL REPORT 2021DUBBER.NETCONS OLIDATE D S TAT EMENT O F CA S H FLOWS Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Government grants received Interest and other finance costs paid Note 2021 $ 2020 $ 20,276,426 5,575,307 (40,831,154) (20,377,768) 262,620 2,856,422 (10,087) 70,115 2,052,459 (4,758) Net cash outflows used in operating activities 22 (17,445,773) (12,684,645) Cash flows from investing activities Payments for business acquisition Purchase of plant and equipment Payment of security bond and funds held in trust Return of security bond and funds held in trust Net cash provided by / (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Repayment of combined debt conversion loan Repayment of loans Proceeds from borrowings Principle elements of lease liability Net cash provided by financing activities Net increase / (decrease) in cash held Cash and cash equivalents at the beginning of the year Effect of exchange rate changes on cash (12,347,859) (250,292) (1,500,000) 1,514,364 (12,583,787) 48,027,123 (2,404,642) 40,000 (1,908,799) 516,230 67,316 (127,166) (17,317) 1,536,923 1,459,756 10,757,495 (488,510) - - - (618,641) (189,071) 43,651,271 13,621,711 18,408,881 10,632 10,079,914 (1,144,976) 19,618,245 (64,388) Cash and cash equivalents at the end of the year 4 32,041,224 18,408,881 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 55 DUBBER ANNUAL REPORT 2021DUBBER.NETNotes to the Consolidated Financial Statements 1. Summary of Significant Accounting Policies 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. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. 56 DUBBER ANNUAL REPORT 2021DUBBER.NETThe following Accounting Standards and Interpretations are most relevant to the consolidated entity: Conceptual Framework for Financial Reporting (Conceptual Framework) The consolidated entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not had a material impact on the consolidated entity’s financial statements. These financial statements are presented in Australian dollars, rounded to the nearest dollar. RIGHTS OF USE A SSETS A right-of-use asset is recognised at the commencement date of a lease. The right-of- use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except were included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. LEASE LIABILITIES A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. REVENUE RECOGNITION 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. 57 DUBBER ANNUAL REPORT 2021DUBBER.NETS UBS CRIPTI ON S ER VI CE INC OME 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. Provision of services relating to establishment and configuration is not distinct from the platform usage (i.e. call recording services) as the customer cannot benefit from on the establishment and configuration alone and hence are regarded as one performance that is satisfied over time. I NT ER EST Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. 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. The Company qualified for Jobkeeper and Cash Flow Boost that are Federal and State Government initiatives to support businesses through the COVID-19 pandemic. Amounts under these initiatives were received by the Company and are expected to continue into FY21. BASIS OF CONSOLIDATION S UB S ID IARI ES The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Dubber Corporation Limited (“Company” or “parent entity”) as at 30 June 2021 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 58 DUBBER ANNUAL REPORT 2021DUBBER.NET 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. CONTRACT LIABILITIES Contract liabilities represent the consolidated entity’s obligation to transfer services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the services to the customer. FAIR VALUE MEASUREMENT When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 59 DUBBER ANNUAL REPORT 2021DUBBER.NET 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. FOREIGN CURRENCY TRANSLATION • • • Functional and presentation currency The consolidated financial statements are presented in Australian dollars, which is the functional and presentation currency of Dubber Corporation Limited. 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. 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 is 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. FINANCE INCOME Finance income comprises interest income earned on funds invested in bank accounts and call deposits. Interest is recognised on an accrual basis in the consolidated statement of profit or loss and other comprehensive income, using the effective interest method. 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. 60 DUBBER ANNUAL REPORT 2021DUBBER.NET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 setoff 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 setoff 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. 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. 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. 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. 61 DUBBER ANNUAL REPORT 2021DUBBER.NET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. FINANCIAL INSTRUMENTS 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) Debt instruments at fair value through other comprehensive income (FVTOCI) 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. 62 DUBBER ANNUAL REPORT 2021DUBBER.NET 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 straightline 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 Furniture, Fixtures and Fittings Computer Equipment Computer Software Useful Life 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. 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, 63 DUBBER ANNUAL REPORT 2021DUBBER.NETassociates or jointly controlled entities deemed to be out of preacquisition 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 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. Nonfinancial 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 cashgenerating 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. 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. 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. 64 DUBBER ANNUAL REPORT 2021DUBBER.NET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. EARNINGS PER SHARE 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. CURRENT AND NON-CURRENT CLASSIFICATION Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. SHARE-BASED PAYMENT TRANSACTIONS Employees of the Company receive remuneration in the form of sharebased payment transactions, whereby employees render services in exchange for equity instruments (“equitysettled transactions”). When the goods or services acquired in a sharebased payment transaction do not qualify for recognition as assets, they are recognised as expenses. The cost of equitysettled 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. Equitysettled 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. 65 DUBBER ANNUAL REPORT 2021DUBBER.NET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. Customer relationships Customer relationships acquired as part of a business combination are recognised separately from goodwill. The customer relationships are carried at fair value at the date of acquisition less accumulated amortisation and any impairment losses. These are amortised over on a straight line basis over the period of their expected benefit, being their finite life of 7 years. Technology The technology acquired in a business combination for proprietary software solutions are recognised separately from goodwill. This technology is carried at fair value at the date of acquisition less accumulated amortisation and any impairment losses. Technology related assets are amortised over on a straight line basis over the period of their expected benefit, being their finite life of 7 years. Management’s assessment of intangible assets acquired via the acquisition of Speik during the financial year, have a useful life of 7 years. Goodwill is measured as described in Business combination policy. 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 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 20). GOODWILL EMPLOYEE PROVISIONS 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. 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 66 DUBBER ANNUAL REPORT 2021DUBBER.NET 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. BUSINESS COMBINATIONS The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre- existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition- date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. PARENT ENTITY FINANCIAL INFORMATION The financial information for the parent entity, Dubber Corporation Limited, disclosed in Note 24 has been prepared on the same basis as the consolidated financial statements. 67 DUBBER ANNUAL REPORT 2021DUBBER.NET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. Carrying value of goodwill 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. 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 a binomial option pricing and black scholes method. The related assumptions are detailed in Note 23. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the company based on known information. This consideration extends to the nature of the services offered, customers, supply chain, staffing and geographic regions in which the company operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the company unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. 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, historical collection rates and credit rating of counterparty. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. Contingent consideration The Group has estimated these amounts based on management’s best judgement as to the actual expected outcome for this component. The amount was management’s estimate of the final consideration payable. The fair value of the contingent consideration was estimated by calculating the present value of the future expected cash flows. Refer to Note 16(d) for further details regarding estimates applied to value the contingent consideration. 68 DUBBER ANNUAL REPORT 2021DUBBER.NETFair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non- strategic assets that have been abandoned or sold will be written off or written down. The following key judgements have been applied in relation to: Revenue from contracts with customers The Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from contracts with customers: • The Group determined that revenue from its software service is to be recognised over time because the customer simultaneously receives and consumes the benefits provided by the Group. • The Group has determined that it is the principal in its agreements with its customers because it has control over the service before delivering it to the customer, it is primarily responsible for fulfilling the promise to deliver the service, and it is responsible for establishing the price for the service to be delivered. • When recognising revenue from contracts with customers, the Group determines that it is probable that the Group will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. This is determined based upon the credit worthiness of the customer and the Group makes reference to credit ratings, historical payment default rate and financial capacity to meet obligations in determining this judgements. Deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it probable that future taxable amounts will be available to utilise those temporary differences and losses. 69 DUBBER ANNUAL REPORT 2021DUBBER.NET Fair value of net assets assumed in a business combination Estimates and judgements were made in determining the fair value of assets acquired and liabilities assumed in a business combination. Assets and liabilities which judgement were made in determining fair value were: Assets: Trade and other Receivables, Other assets, Property plant and equipment and intangible assets. Liabilities: Unearned revenue and provisions For the year ended 30 June 2021, the Group has finalised the acquisition of Speik in accordance with the provisions of AASB 3 Business Combinations. Refer to Note 25 for further details. 70 DUBBER ANNUAL REPORT 2021DUBBER.NET2. Revenue and Expenses from Continuing Operations Consolidated (a) Service revenue* Subscriptions Professional services Total (b) Other revenue Interest Research and development tax incentive Export market development grant Jobkeeper / cash flow boost Rental income – sub lease Total (c) General and administration costs Audit fees Accounting and tax advice fees Legal fees Securities exchange and registry fees Rent Travel costs Corporate affairs Insurances Other administration Total 2021 $ 20,267,029 70,281 20,337,310 262,620 1,814,234 100,000 742,500 3,420 2,922,774 81,458 292,163 868,529 229,822 214,216 258,997 263,804 224,073 1,845,063 4,278,125 2020 $ 9,624,752 25,082 9,649,834 70,115 1,632,459 150,000 270,000 71,818 2,194,392 44,792 195,813 396,630 129,910 256,758 710,539 318,208 120,890 1,134,268 3,307,808 * Disaggregation of revenue from contracts with customer Revenue is recognised when or as the Group transfers services to a customer at the amount to which the group expects to be entitled over time. Dubber as one performance obligation for the provision of subscriptions services transferred over time. For the financial year ended 30 June 2021, revenue recognised was $20,267,029 (2020: $9,624,752). Disaggregation of revenue by geographical regions is as disclosed in Note 20 - Operating Segment. 71 DUBBER ANNUAL REPORT 2021DUBBER.NET3. Income Tax (a) Income tax expense Loss before income tax expense Consolidated 2021 $ 2020 $ (31,979,486) (18,000,260) Prima facie tax payable on profit from ordinary activities before income tax at 25% (2020: 27.5%) (7,942,080) (4,950,072) Tax Effect of: Tax effect of amounts not deductible (taxable) in calculating taxable income Tax rate differential Tax losses and temporary differences not recognised Income tax expense (b) Deferred tax assets Unrecognised deferred tax asset balances: Timing differences Tax losses - revenue Deferred tax assets Offset against deferred tax liabilities Net deferred tax assets Amounts in equity Tax losses - capital Deferred tax assets not brought to account (c) Deferred tax liabilities Recognised deferred tax liability balances: Timing differences - intangibles Deferred tax liabilities brought to account Unrecognised deferred tax liability balances: Timing differences Deferred tax liabilities Offset by deferred tax assets Deferred tax liabilities brought to account There are no franking credits available to the Group. 4,408,318 1,575,334 708,115 - 2,825,647 3,374,738 - - 1,156,835 1,100,730 12,652,090 9,558,540 13,808,925 10,659,271 (972,231) (882,814) 12,836,695 9,776,456 236,509 187,617 478,864 526,750 13,552,067 10,490,824 (3,578,468) (3,578,468) - - (972,231) (882,814) (972,231) (882,814) 972,231 882,814 - - 72 DUBBER ANNUAL REPORT 2021DUBBER.NET4. Cash and Cash Equivalents Cash at bank Cash on call deposit Total Consolidated 2021 $ 2020 $ 12,041,224 8,408,881 20,000,000 10,000,000 32,041,224 18,408,881 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 16. 5. Trade and Other Receivables Current Trade receivables Less: Provision for doubtful debt Receivable from Medulla Group Pty Ltd vendors Other debtors Prepayments Deposits in trust Other receivables Total Consolidated 2021 $ 2020 $ 16,211,208 8,560,372 - (187,279) 16,211,208 8,373,093 100,977 208,103 4,588,603 140,977 79,064 65,667 1,684,248 1,687,511 600 600 22,793,739 10,346,912 Deposits in trust includes cash amounts deposited in a trust account. These amounts are set aside to facilitate negotiations with the Groups suppliers. The cash can be recalled at any time by the Company. Prepayments include invoices for fixed price development work to be conducted over 12 months from April 2021. The cost of this work is being expensed over the course of the development work and in line with its expected completion date. 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 $100,977. Receipt of this amount is expected within 12 months of 30 June 2021. Trade and other receivables are all due within three months of this report. Information about credit and liquidity risk is outlined in Note 16. 73 DUBBER ANNUAL REPORT 2021DUBBER.NET 6. Property, Plant and Equipment Consolidated 2021 $ 31,295 2020 $ - 1,449,830 320,773 (782,132) (133,109) 667,698 33,159 (29,272) 3,887 65,063 (32,756) 32,307 735,186 187,664 33,159 (23,801) 9,358 61,942 (17,383) 44,559 241,582 Sub-total Sub-total Sub-total Fitout - at cost Plant and equipment – at cost Less: Accumulated depreciation Furniture Less: Accumulated depreciation Office Equipment Less: Accumulated depreciation Net carrying amount RE CON CILIATIO N 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 Computer Equipment Furniture Fitout Total $ $ $ 2021 Balance at the beginning of the year Additions through business combinations Additions / (write-offs) Depreciation expense Carrying amount at the end of the year 2020 Balance at the beginning of the year Additions Depreciation expense Carrying amount at the end of the year 187,664 342,880 295,542 (158,388) 667,698 88,523 158,720 (59,579) 187,664 44,559 9,358 - 3,121 - - $ - - $ 241,581 342,880 31,295 329,958 (15,373) (5,471) - (179,232) 32,307 3,887 31,295 735,186 10,428 43,937 9,963 4,682 (9,806) (5,288) 44,559 9,358 108,914 207,339 (74,671) 241,582 74 DUBBER ANNUAL REPORT 2021DUBBER.NET7. Intangible Assets Dubber intellectual property – at cost Less: Accumulated amortisation Acquired customer relationships At cost Foreign exchange movement Less: Accumulated amortisation Acquired technology At cost Foreign exchange movement Less: Accumulated amortisation Opening goodwill Acquired goodwill (Note 25) Foreign exchange movement Consolidated 2021 $ 2020 $ 8,483,031 8,483,031 (8,483,031) (7,712,477) Sub-total - 770,554 Sub-total 10,145,162 391,321 (783,536) 9,752,947 9,446,293 364,364 (729,560) Sub-total 9,081,097 - - - - - - - - Total 18,834,044 770,554 3,366,456 2,008,734 19,316,332 1,357,722 745,078 - Sub-total 23,427,866 3,366,456 Net carrying amount at the end of the year 42,261,910 4,137,010 Reconciliation Balance at the beginning of the year Acquired goodwill (Note 25) Exchange difference on acquired goodwill Acquired through business combination (customer relationships and technology) Amortisation expense Net carrying amount at the end of the year 4,137,010 4,320,395 19,316,332 1,357,722 745,078 20,347,141 - - (2,283,651) (1,541,107) 42,261,910 4,137,010 75 DUBBER ANNUAL REPORT 2021DUBBER.NET Impairment testing Goodwill acquired through business combinations have been allocated to the following cash-generating units: Europe Rest of world Total Consolidated 2021 $’000 20,061,410 2020 $’000 - 3,366,456 3,366,456 23,427,868 3,366,456 The recoverable amount of the consolidated entity’s goodwill has been determined by a value-in-use calculation using a discounted cash flow model, based on a 12-month projection period approved by management and extrapolated for a further 4 years using a steady rate, together with a terminal value. Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. Europe The following key assumptions were used in the discounted cash flow model: - - - - 14% pre-tax discount rate; 10% per annum average projected revenue growth rate; 76% gross margin 2% terminal growth rate per annum Rest of world The following key assumptions were used in the discounted cash flow model: - - - - 13% pre-tax discount rate; 60% in year one rising to 25% per annum year on year from FY2023; 35% gross margin (increasing 3% year on year from FY2023) 2.5% terminal growth rate per annum Management has determined the values assigned to each of the above key assumptions as follows: The discount rate of 13% and 14% pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital, the risk-free rate and the volatility of the share price relative to market movements. ASSUMPTION APPROACH USED TO DETERMINE VALUES Revenue growth Average annual growth rate over the five-year forecast based on past performance and management's expectations of market development. Budgeted gross margin Based on past performance and management’s expectations for the future. Other operating costs Fixed costs of the CGUs, which do not vary significantly with sales growth. Management forecasts these costs based on the current structure of the business, adjusting for inflationary increases but not reflecting any future restructurings or cost saving measures. Terminal growth rate This is the weighted average growth rate used to extrapolate cash flows beyond the budgeted period. Post-tax discount rate Reflect specific risks relating to the relevant segments in which they operate. Management believes that other reasonable changes in the key assumptions on which the recoverable amount of goodwill is based, would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount. 76 DUBBER ANNUAL REPORT 2021DUBBER.NET 8. Leases (i) Amounts recognised in the consolidated statement of financial position shows the following amounts relating to leases: Right of use assets Office space Accumulated amortisation Total Lease liabilities Current Non-current Total Consolidated 2021 $ 2020 $ 3,019,200 2,545,890 (1,052,704) (443,530) 1,966,496 2,102,360 2021 $ 2020 $ 597,929 560,630 2,006,421 1,915,789 2,604,350 2,476,419 Additions to the rights of use assets during the 2021 financial year were $473,310 (2020: $2,545,890). (ii) Amounts recognised in the consolidated of profit or loss and other comprehensive income. Depreciation charge of right of use assets Interest expense The total cash outflow for leases in 2021 was $618,641 (2020: $189,071). 9. Trade and Other Payables Current Trade payables Payroll tax and other statutory liabilities Other payables Total 2021 $ 611,334 136,876 2020 $ 443,530 119,599 Consolidated 2021 $ 2020 $ 4,507,714 2,476,386 5,933,328 2,712,199 1,156,216 134,752 11,597,258 5,323,337 All payables are expected to be settled within 6 months. Risk management policies in regard to liquidity and currency risk are outlined in Note 16. 77 DUBBER ANNUAL REPORT 2021DUBBER.NET 10. Provisions Current Employee benefits Non-Current Employee benefits Total Consolidated 2021 $ 2020 $ 1,206,597 763,974 402,663 1,609,260 300,910 1,064,884 Employee benefits represent annual leave and long service leave entitlements of employees within the Group and is non-interest bearing. 11. Contract Liabilities Current Non-current Total contract liabilities Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Opening balance Additions on acquisition (Note 25) Payments received in advance Transfers to revenue – performance obligations satisfied Total Unsatisfied performance obligations Consolidated 2021 $ 5,382,218 575,260 5,957,478 2020 $ 632,623 182,789 815,412 Consolidated 2021 $ 2020 $ 815,412 3,577,545 5,046,808 (3,482,288) 5,957,477 - - 992,956 (177,544) 815,412 The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $5,957,478 as at 30 June 2021 ($815,412 as at 30 June 2020). These are expected to be recognised as revenue in future periods ranging from 6 – 44 months with the majority to be recognised in the next 24 months. 12. Issued Capital Issued and paid up capital 256,200,395 (2020: 207,722,566) Ordinary shares – fully paid Share issue costs written off against share capital Total Consolidated 2021 $ 2020 $ 144,339,770 90,899,074 (7,391,778) 136,947,992 (5,232,126) 85,666,948 78 DUBBER ANNUAL REPORT 2021DUBBER.NETMOVE ME N T I N O RDI NARY SHA RES O N ISSUE 2021 Balance at the beginning of the year Issued pursuant to a placement Issued pursuant to a share purchase plan Issued on exercise of options Issued on exercise of options Issued on exercise of options Issued on exercise of options Issued on acquisition Issued on acquisition Issued on acquisition Issued to directors pursuant to shareholder approval Issued on exercise of options Issued pursuant to an employee share plan Issued on exercise of ZEPOs Share issue costs Balance at the end of the year 2020 Balance at the beginning of the year Exercise of options – 23 July 2019 Exercise of options – 15 August 2019 Shares issued under employee share plan – 23 September 2019 Shares issued under employee share plan – 23 September 2019 Shares issued under employee share plan – 23 September 2019 Exercise of options – 30 September 2019 Exercise of options – 30 September 2019 Exercise of options – 30 September 2019 Exercise of options – 16 October 2019 Exercise of options – 6 December 2019 Exercise of options – 6 December 2019 Exercise of options – 11 December 2019 Exercise of options – 18 December 2019 Exercise of options – 19 March 2020 Exercise of options – 26 March 2020 Exercise of options – 27 March 2020 Exercise of options – 11 June 2020 Exercise of options -16 June 2020 Exercise of options – 23 June 2020 Issued for cash pursuant to placement – 6 April 2020 Issued on acquisition (Note 24) Share issue costs Balance at the end of the year Issue Price No. of Shares $ - $1.10 $1.10 $0.38 $0.75 $1.25 $1.80 $1.069 $1.725 $1.685 $0.60 $0.80 $ - $ - - - $0.38 $0.38 $1.46 $1.60 $0.46 $0.38 $0.40 $0.60 $0.40 $0.38 $0.60 $0.38 $0.38 $0.38 $0.40 $0.40 $0.75 $0.38 $0.38 $0.60 $1.69 - 207,722,566 85,666,948 31,818,182 35,000,000 9,090,669 9,999,783 335,500 275,000 70,000 1,111 105,599 2,441,533 91,598 1,666,666 2,000,000 100,000 481,971 127,490 206,250 87,500 2,000 112,886 4,211,644 154,342 1,000,000 1,600,000 311,500 627,300 - (2,159,651) 256,200,395 136,947,992 186,570,452 71,592,843 55,000 125,000 1,000,000 895,000 100,000 25,000 75,000 600,000 150,000 70,000 1,400,000 150,000 25,000 14,210 225,000 300,000 70,000 50,000 20,000 15,003,333 799,571 - 20,900 47,500 1,460,000 1,432,000 46,000 9,500 30,000 360,000 60,000 26,600 840,000 57,000 9,500 5,400 90,000 120,000 52,500 19,000 7,600 9,001,995 854,741 (476,131) 207,722,566 85,666,948 79 DUBBER ANNUAL REPORT 2021DUBBER.NETOPTIONS At the end of the year, the following options over unissued ordinary shares were outstanding: Grant Date 15-Jan-19 23-Sep-19 23-Sep-19 31-Mar-20 30-Nov-20 30-Nov-20 30-Nov-20 03-May-21 03-May-21 03-May-21 Total Expiry Date Exercise Price Number Under 15-Jan-22 20-Sep-22 20-Sep-22 22-Mar-23 30-Jun-21 30-Jun-23 30-Jun-25 31-Jan-24 31-Jan-24 31-Jan-24 $0.38 $1.25 $0.75 $0.75 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 CAPITA L RISK MANAGEM ENT 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. 13. Reserves Option reserve Performance rights reserve Unvested share reserve Foreign currency reserve Total Consolidated 2021 $ 18,830,803 2,663,035 - 794,708 22,288,546 Option 455,290 70,000 150,000 1,210,000 1,250,000 322,985 3,879,066 718,854 432,161 75,000 8,563,356 2020 $ 5,792,426 3,004,038 135,000 (127,967) 8,803,497 80 DUBBER ANNUAL REPORT 2021DUBBER.NETOPTION R ES ERV E 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: Balance at the beginning of the year Consolidated 2021 $ 2020 $ 5,792,426 4,318,394 Allocation of incentive-based share options values over vesting period – employees and key management personnel 6,435,700 1,398,597 Allocation of incentive-based options values over vesting period – directors 6,579,899 - Allocation of incentive-based loan funded shares values over vesting period – directors 22,779 75,435 Balance at the end of the year 18,830,803 5,792,426 PERFORM A N CE RI GHT S R ESER V E 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 Balance at the beginning of the year Reversal of incentive share based payment – management performance shares cancelled upon milestones not being achieved by expiry date Balance at the end of the year UN VE STE D S HARE RESERV E 2021 $ 2020 $ 3,004,038 3,004,038 (341,003) - 2,663,035 3,004,038 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 Balance at the beginning of the year Allocation of incentive share based payment over vesting period – employee shares Shares issued on vesting date Balance at the end of the year 2021 $ 2020 $ 135,000 135,000 - (135,000) - - - 135,000 81 DUBBER ANNUAL REPORT 2021DUBBER.NET FORE IGN C URRENCY RES ERV E 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: Balance at the beginning of the year Currency translation differences Balance at the end of the year 14. Accumulated Losses Balance at the beginning of the year Transfer of cancelled performance rights Loss attributable to owners of Dubber Corporation Limited Balance at the end of the year 15. Earnings per Share (EPS) Consolidated 2021 $ (127,966) 922,674 794,708 Consolidated 2021 $ (68,924,066) 341,003 (31,697,438) (100,280,501) 2020 $ (101,538) (26,428) (127,966) 2020 $ (50,923,806) - (18,000,260) (68,924,066) The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows: Consolidated 2021 $ 2020 $ Earnings attributable to the owners of Dubber Corporation Limited used to calculate EPS Loss for the year (31,697,438) (18,000,260) 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. 239,175,682 No. 193,598,343 As the consolidated entity is in a loss position there is no diluted EPS calculated. 82 DUBBER ANNUAL REPORT 2021DUBBER.NET 16. 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 Interest Rate (%) 2021 2020 Note Financial Assets Cash and cash equivalents 0.9 1.2 Trade and other receivables (incl. sundry debtors) Total Financial Assets Financial Liabilities Trade and other payables Lease liability Deferred consideration Total Financial Liabilities - - - - - - - - 4 5 9 8 25 The carrying amounts of these financial instruments approximate their fair values. Consolidated 2021 $ 2020 $ 32,041,224 18,408,881 23,329,871 10,452,979 55,371,095 28,861,860 11,597,258 5,323,337 2,604,351 2,476,419 16,031,835 116,381 30,233,444 7,916,137 83 DUBBER ANNUAL REPORT 2021DUBBER.NETFIN AN CIAL RIS K M ANAGEM ENT PO L I CIE S 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 raised in advance of shortages. Interest rate risk is managed by limiting the amount of interest-bearing loans entered into by the Company. It is the Board’s policy that no speculative trading in financial instruments be undertaken to limit exposure 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. SPE CIF IC FI NA NCI A L RIS K EXPO S U R ES AND MAN AG EMENT 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: • • • 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 or 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. 84 DUBBER ANNUAL REPORT 2021DUBBER.NETOn that basis, the loss allowance as at 30 June 2021 was determined as follows for both trade receivables. Expected loss rate 0% past due 0% past due 2.7% - Current More than 30 days More than 60 days Total Gross carrying amount – trade receivables 5,176,965 279,939 10,754,304 16,211,208 Loss allowance 0 0 290,366 0 The consolidated entity has a credit risk exposure with a major Australian customer, which as at 30 June 2021 owed the consolidat- ed entity $10,858,038 (67% of trade receivables) (2020: $6,400,848 (75% of trade receivables)). No impairment was made as at 30 June 2021 as the customer is considered a rating of AA and Dubber is confident that these receivables are collectable and are active in the management and reduction of these overdue amounts. Subsequent to the year end, Dubber received $1,881,000 to begin extinguishment of the oldest debt. A payment plan was also renegotiated to pay down the remainder of the debt every quarter over the next 18 months. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Loss allowance as at 30 June 2020 was determined as follows for both trade receivables. Expected loss rate Gross carrying amount – trade receivables Loss allowance 0% 1,717,828 0 past due 0% 66,103 0 past due 2.7% - 6,776,442 8,560,372 187,279 187,279 Current More than 30 days More than 60 days Total Management have assessed the risk of collections for the amounts more than 60 days past due as low, however had decided to make a conservative loss allowance in the year ended 30 June 2020 as shown in the above table. The Company believes that The Group’s credit risk on liquid funds is limited because the majority of cash and deposits are held with Westpac Banking Corporation and National Australia Bank, both AA3 credit rated banks. 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 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. 85 DUBBER ANNUAL REPORT 2021DUBBER.NETFIN ANCIA L LI ABI LIT Y AND F IN AN C I A L ASSET MATURITY ANALYSI S Within 1 Year 1 to 5 Years Total Contractual Cash 2021 2020 2021 2020 2021 $ $ $ $ $ Flow 2020 $ Financial assets – cash flows receivable Trade and other receivables 16,511,722 10,387,312 2,229,545 Total expected inflows 16,511,722 10,387,312 2,229,545 Financial liabilities due for payment realisable Trade and other payables 11,597,258 5,323,337 - Lease liability 597,929 737,743 2,006,421 Total anticipated outflows 12,195,187 6,061,080 2,006,421 - - - - 18,741,267 10,387,312 18,741,267 10,387,312 11,597,258 5,323,337 2,604,350 2,909,440 14,201,608 8,232,777 Net (outflow)/inflow on financial instruments 4,316,535 4,326,232 223,124 4,539,659 2,154,535 c) Market risk i. i. Interest rate risk The Company’s cashflow 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 carrying amount of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars British pounds Assets 2021 $’000 2020 $’000 1,519 7,199 908 608 8,718 1,516 Liabilities 2021 $’000 2020 $’000 160 557 717 73 66 139 The consolidated entity had net assets denominated in foreign currencies of $8,001,000 (assets of $8,718,000 less liabilities of $717,000) as at 30 June 2021 (2020: $1,377,000 (assets of $1,516,000 less liabilities of $139,000). Based on this exposure, had the Australian dollar weakened by 10%/strengthened by 5% (2020: weakened by 10%/strengthened by 5%) against these foreign currencies with all other variables held constant, the consolidated entity’s profit before tax for the year would have been $160,000 lower/$98,000 higher (2020: $137,000 lower/$68,000 higher) and equity would have been $2.9m lower/$1.7m higher (2020: $2.5m lower/$1.2m higher). 86 DUBBER ANNUAL REPORT 2021DUBBER.NET The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 6 months each year and the spot rate at each reporting date. The actual foreign exchange loss for the year ended 30 June 2021 was $124,315 (2020: loss of $108,426). d) Fair value measurement The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e. not derived from market data) The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur. The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below: 30 June 2021 Financial Assets Total Financial Assets Financial Liabilities Deferred consideration Total Financial Liabilities 30 June 2020 Financial Assets Total Financial Assets Financial Liabilities Deferred consideration Total Financial Liabilities Level 1 Level 2 Level 3 Total - - - - - - - - 16,031,836 16,031,836 16,031,836 16,031,836 Level 1 Level 2 Level 3 Total - - - - - - - - 116,381 116,381 116,381 116,381 Assets and liabilities held for sale are measured at fair value on a non-recurring basis. There were no transfers between levels during the financial year. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the financial year are set out below: Consolidated Balance at 1 July 2019 Additions – CallN Pty Ltd (1 June 2020) Balance at 30 June 2020 Balance at 1 July 2020 Final settlement on acquisition of CallN Pty Ltd Additions – Speik (22 December 2020) Finance costs on unwinding of deferred consideration – 30 June 2021 Foreign exchange rate restatement – 30 June 2021 Balance at 30 June 2021 Deferred Consideration - 116,381 116,381 116,381 (116,381) Total - 116,381 116,381 116,381 (116,381) 14,387,878 14,387,878 1,068,381 575,577 1,068,381 575,577 16,031,836 16,031,836 87 DUBBER ANNUAL REPORT 2021DUBBER.NET The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Deferred consideration Unobservable inputs Sensitivity Revenue 5% change would increase/decrease fair value by $1.06m Valuation techniques for fair value measurements categorised within level 3 Deferred consideration is based on Speik’s budgeted revenue targets for FY22 with a multiplication factor applied. Refer to Note 25 for full business combination disclosure. The fair values of the deferred consideration have been determined based on present values and the discount rates were adjusted for counterparty or own credit that is expected to settled as of July 2022. 17. Auditors’ Remuneration Remuneration of the auditor of the Company, BDO Audit (WA) Pty Ltd, for: Audit services Taxation advice – BDO Corporate Tax (WA) Pty Ltd Advisory services – BDO Reward (WA) Pty Ltd Advisory Services – BDO Corporate Finance (WA) Pty Ltd Total 18. Contingent Liabilities Consolidated 2021 $ 74,926 26,601 - 85,338 186,865 2020 $ 54,850 12,103 23,750 - 90,703 The Consolidated entity has no material contingent liabilities as at reporting date (2020: Nil). 19. Commitments The Consolidated entity has no material commitments as at reporting date (2020: Nil). 20. Operating Segments Identification of reportable 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. Up to 22 December 2020, the Group managed primarily on the basis that it had only one main operating segment, being the Dubber technology suite. Accordingly, all significant operating decisions were based upon analysis of the Group as one segment. For the prior financial year ended 30 June 2020, the financial results from the operating segment was equivalent to the financial statements of the Group as a whole. Due to the acquisition of Speik Ltd during the year, the Board now segments the business into geographical regions of the world to effectively review its operations and allocate resources according to opportunities in a total addressable market. The group has three main operating segments, specifically for the provision of subscriptions services in Europe, United States of America (‘Americas’) and Rest of World. 88 DUBBER ANNUAL REPORT 2021DUBBER.NET Intersegment transactions An internally determined transfer price is set for all inter-segment sales. This price is based on what would be realised in the event that the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation. Corporate charges are recognised in Other segment which contains the treasury and oversight functions of the group. Intersegment receivables, payables and loans Where an asset is used across multiple segments, the asset is allocated to the segment that receives majority economic value from that asset. Segment assets are clearly identifiable on the basis of their nature and physical location. Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Segment liabilities includes trade and other payables. Unallocated items Any items noted below as ‘Other’ are not allocated to operating segments as they are not considered part of the core operations of any segment in particular. Major customers Revenues of $4,051,991 (2020: $4,497,626) are derived from a single external customer, representing 20% of the total services revenue. These revenues are attributed to the ‘Rest of World’ geographical segment. The Group aggregates two or more operating segments into a single reportable segment when the Group has assessed and determined the aggregated operating segments share economical and geographical characteristics, such as the type of customers for the Group’s services and similar expected growth rates and regulatory environment accounting policies applied for internal purposes are consistent with those applied in the preparation of these financial statements. Year ended 30 June 2021 Segment income Services income Other revenue Segment expenses Direct costs Operating expenses Share based payments Europe Americas Rest of world Other $ $ $ 10,730,904 3,560,515 171 10,731,075 3,560,515 6,045,891 2,922,604 8,968,495 2,906,965 1,918,019 5,516,804 $ - - - - Total $ 20,337,310 2,922,774 23,260,084 10,341,788 5,750,133 3,568,891 15,649,767 1,579,748 26,548,540 - - - 13,842,177 13,842,177 8,657,098 5,486,910 21,166,572 15,421,925 50,732,504 EBITDA 2,073,977 (1,926,395) (12,198,077) (15,421,925) (27,472,420) Depreciation and amortisation 1,549,723 50,704 Finance costs 77,390 12,992 1,445,159 1,371,099 1,627,113 63,696 2,816,258 - - - 3,045,586 1,461,481 4,507,067 Loss before income tax 446,864 (1,990,091) (15,014,335) (15,421,925) (31,979,486) Segment assets Segment liabilities 47,487,566 1,950,431 50,896,690 - 100,334,687 10,618,580 1,047,421 29,712,650 36,868,986 903,010 21,184,040 - - 41,378,650 58,956,037 89 DUBBER ANNUAL REPORT 2021DUBBER.NET21. Related Party Transactions SUBSIDIA RIE S The consolidated financial statements include the financial statements of Dubber Corporation Limited and the subsidiaries listed in the following table: Medulla Group Pty Ltd Dubber Pty Ltd Dubber Ltd Dubber USA Pty Ltd Dubber, Inc. Dubber Connect Australia Pty Ltd CallN Pty Ltd Aeriandi Ltd Voxygen Ltd PAREN T ENTITY Country of Incorporation Class of Shares 2021 (%) 2020 (%) Equity Holding Australia Australia England and Wales Australia United States of America Australia Australia England England Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - Dubber Corporation Limited is the ultimate Australian parent entity and ultimate parent of the Group. KEY MA NAG EMENT P ER S ONN EL 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 2021. The totals of remuneration paid to key management personnel of the Company during the year are as follows: Consolidated Short-term employee benefits Long-term benefits Post-employment benefits Share-based payments Total 2021 $ 1,788,059 285,618 119,141 10,325,085 12,517,903 2020 $ 1,815,888 74,569 133,636 1,365,535 3,389,628 OT HER T RA NS ACT I ONS WITH KE Y MANAG EME NT PERSONN EL Telephony services totalling $2,297 (2020: $2,150) were provided by Canard Pty Ltd, a company associated with Mr Steve McGovern. Trade payables at 30 June 2021 include a balance of $1,161 (30 June 2020: $193) 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 $65,815 (2020: $57,943) from Intelligent Voice and $119,036 (2020: $168,269) from 1300 MY SOLUTION. Trade receivables at 30 June 2021 include balances of $0.00 (30 Jun 2020: $0.00) due from Intelligent Voice and 1300 MY SOLUTION. During the year $0.00 (2020: $42,750) was invoiced to the Company by Mr Peter Pawlowitsch’s consultancy company, Gyoen Pty Ltd for advisory services outside his usual Board duties. Trade payables at 30 June 2020 include a balance of nil (30 June 2020: $4,125) payable to Gyoen Pty Ltd. Services totalling $10,000 (2020: $Nil) were provided by Bassplay Pty Ltd, a company associated with Mr Peter Curigliano. Other receivables at 30 June 2021 includes an amount of $100,977 (30 June 2020: $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 and likewise, amounts included for Mr Peter Clare were paid to his consultancy company Shared Runway Pty Ltd. All transactions are conducted on normal commercial terms and on an arm’s length basis. No Compensation Options were issued to related parties in the year ended 30 June 2021. 90 DUBBER ANNUAL REPORT 2021DUBBER.NET22. Cash Flow Information Reconciliation of loss for the year to net cash flows from operating activities Net loss for the year Non-cash flows in loss: Depreciation and amortisation Share based payments Net exchange differences Changes in assets and liabilities: Increase in trade and other receivables Decrease/(Increase) in trade and other payables Increase in provisions Net cash outflows from operating activities Consolidated 2021 $ 2020 $ (31,697,438) (18,000,260) 3,045,586 13,842,177 (124,315) 4,306,514 (6,273,921) (544,376) (17,445,773) 2,051,129 4,412,032 (108,426) 4,996,381 (5,497,489) (538,012) (12,684,645) NON- CA SH FI NA NCING A ND I N VE S T IN G ACTIVITIE S (i) 2,533,131 fully paid ordinary shares were issued as the first instalment for the acquisition of Speik in December 2020 and March 2021. (ii)105,599 fully paid ordinary shares were issued in July 2020 to complete the acquisition of CallN Pty Ltd. In 2020, 799,571 fully paid ordinary shares were issued as the first instalment for the acquisition of CallN Pty Ltd. 23. Share Based Payments VALU E OF SHARE BASED PAY M E NT S IN THE FINAN CIAL STATEMENTS Consolidated Expensed – directors and other key management personnel remuneration: Employee options Fully paid ordinary shares Loan funded shares Sub-total Expensed – other employees’ and consultants: Fully paid ordinary shares Employee options Sub-total Total 2021 $ 10,125,806 176,500 22,779 10,325,085 - 3,517,092 3,517,092 13,842,177 2020 $ 176,130 832,000 75,435 1,083,565 2,106,000 1,222,467 3,328,467 4,412,032 91 DUBBER ANNUAL REPORT 2021DUBBER.NET SHAR ES The Company formally offered the following fully paid ordinary shares to employees; 2021 Offer Date Vesting Date Balance 01/07/20 Offered FPO Shares Issued Forfeited Balance 30/06/21 12/05/21 - - 100,000 100,000 100,000 100,000 - - - - 01/12/20 Total 2020 Offer Date Vesting Date Balance 01/07/19 Offered Ord FP Shares Forfeited Balance 30/06/20 23/09/19 23/09/19 Total OPTIO NS - - 895,000 895,000 Issued 895,000 895,000 - - - - Set out below are the summaries of options granted as share based payments: 2021 Grant Date 20/12/17 15/01/19 20/09/19 20/09/19 31/03/20 31/03/20 30/11/20 30/11/20 30/11/20 03/05/21 03/05/21 03/05/21 Total Expiry Date Exercise Defer Balance Granted Exercised Expired Balance Number vested Price Type 01/07/20 or 30/06/21 and exercisable 31/12/20 $0.80 15/01/22 $0.38 20/09/22 $1.25 20/09/22 $0.75 22/03/23 $0.75 22/03/23 $0.00 30/06/21 $0.00 30/06/23 $0.00 30/06/25 $0.00 31/01/24 $0.00 31/01/24 $1.80 31/01/24 $1.68 2,000,000 790,790 140,000 150,000 1,485,000 360,000 Forfeited - - - - - - (2,000,000) (335,500) (70,000) - - - - - - - 455,290 455,290 70,000 70,000 150,000 150,000 (275,000) - 1,210,000 1,210,000 (360,000) - - - - - - - - - 1,250,000 322,985 3,879,066 - - - 840,825 (121,971) 433,272 (1,111) 75,000 - - 1,250,000 1,250,000 - 322,985 - 3,879,066 - - - 718,854 432,161 75,000 - - 718 854 432,161 75,000 4,925,790 6,801,148 3,163,582 - 8,563,356 3,642,451 Weighted average exercise price $0.67 $0.13 $0.64 - $0.26 $0.50 92 DUBBER ANNUAL REPORT 2021DUBBER.NET2020 Grant Date 22/12/16 20/12/17 20/12/17 15/01/19 20/09/19 20/09/19 31/03/20 31/03/20 Total Expiry Date Exercise Defer Balance Granted Exercised Expired or Balance Price Type 01/07/18 Forfeited 30/06/19 (750,000) (100,000) 31/03/20 $0.40 1 31/12/19 $0.60 31/12/20 $0.80 15/01/22 $0.38 20/09/22 $1.25 20/09/22 $0.75 22/03/23 $0.75 22/03/23 $0.00 850,000 2,000,000 2,000,000 1,325,000 - - - - - - - - 140,000 150,000 (2,000,000) - (534,210) - - 1,555,000 (70,000) 360,000 - Number vested and exercisable - - - - 2,000,000 2,000,000 790,790 140,000 150,000 790,790 140,000 150,000 1,485,000 1,485,000 360,000 360,000 - - - - - - - 6,175,000 2,205,000 (3,354,210) (100,000) 4,925,790 4,925,790 Weighted average exercise price $0.59 $0.66 $0.51 $0.40 $0.67 $0.67 The various deferred vesting options listed above are subject to milestones or vesting dates which are listed below. Probability of achieving these milestones or vesting dates have been assessed at 100% unless otherwise stated. 1. Employee options vest and become exercisable on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 1 March 2017 - 350,000 options Vesting date 2: 1 March 2018 - 350,000 options less 100,000 options cancelled during the FY2019 upon resignation of employee before vesting date Vesting date 3: 1 March 2019 - 350,000 options less 100,000 options cancelled during the FY2019 upon resignation of employee before vesting date The assessed fair values of the options were determined using a binomial option pricing model or Black-Scholes model, taking into account the exercise price, term of option, the share price at grant date and expected price volatility of the underling share, expected yield and the risk-free interest rate for the term of the option. For the options granted during the current and previous financial year, the inputs to the model used were: 1 Dec 20201 3 May 20212 3 May 20213 8 June 20214 1 June 20204 Grant date Number of options Number of shares Vesting date - 100,000 12 May 2021 840,825 - various Expense recognised in FY21 ($) $176,500 $2,279,574 Exercise price ($) Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Fair value per option/ share Expected life of options (years) 0.00 - N/A N/A 1.77 3 0.00 - N/A N/A 2.77 3 508,272 250,000 600,000 - various $412,477 1.68 - 1.8 - 100% 0.10% - - various various $540,805 $284,236 1.216 – 1.6 - 100% 0.14% 1.22 - 100% 0.10% 1.88-1.91 1.2 - 2.8 0.87 - 1.37 3 3 3 1. Shares granted to the Chief Revenue Officer on 1 Decemeber 2020 based on continued employment through to vesting date. 2. 840,825 options granted - 815,825 vested immediately with the remaining 25,000 subject to continuous employment to relevant vesting date as per offer letter. 3. 508,272 options granted as of 3 May 2021 subject to continuos employment to relevant vesting date. 4. 250,000 options issued on 8 June 2020 and 600,000 options issued to 1 June 2020 to an employee based on continous employment at vesting date. Grant date Number of options Vesting date 30 November 2020 5,452,051 8 June 2021 3,431,456 1 July 2020 1,213,277 30/6/21, 15/8/21 & 30/6/23 30/6/21, 15/8/21 & 30/6/23 30/6/21, 30/6/22 & 30/6/23 Expense recognised in FY21 ($) $3,962,346 (2020: $ -) $3,287,298 (2020: $ -) $2,370,214 (2020: $ -) Exercise Price Fair Value Per Option Expected life of options (years) $ - $1.659 3 $ - $2.919 3 $ - $3.199 3 93 DUBBER ANNUAL REPORT 2021DUBBER.NET Grant date Number of options Vesting date 24 March 2021 153,241 30/6/21, 30/6/22, 30/6/23 & 30/6/24 24 March 2021 24 March 2021 300,000 30/6/24 300,000 30/6/24 Expense recognised in FY21 ($) $102,013 (2020: $ -) $49,886 (2020: $ -) $48,680 (2020: $ -) Exercise Price Fair Value Per Option Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Expected life of options (years) Grant date Number of options Vesting date $ - $3.199 - - - 3 3 $1.75 $2.026 - 75% 0.13% 3 3 $1.75 $1.977 - 75% 0.13% 3 3 24 March 2021 13 May 2020 13 May 2021 300,000 30/6/24 250,000 13/5/21 250,000 13/5/22 Expense recognised in FY21 ($) $46,759 (2020: $ -) $199,300 (2020: $ -) $59,310 (2020: $ -) Exercise Price Fair Value Per Option Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) Expected volatility (%) Risk-free interest rate (%) Expected life of options (years) $1.75 $1.899 - 75% 0.13% 3 100% 0.10% 3 5,452,051 ZEPOs granted to Executive Directors as of 30 November 2020 Director Mr Stephen McGovern Mr Peter Pawlowitsch Total 2020 ZEPOs 1,000,000 250,000 1,250,000 $1.165 $0.7972 - 100% 0.25% 3 100% 0.25% 3 STI ZEPOs 255,581 67,404 322,985 $2.64 $1.804 - 100% 0.10% 3 100% 0.10% 3 LTI ZEPOs 3,707,215 808,851 3,879,066 3,431,456 ZEPOs granted to Co-Founder and Chief Operating Officer, Mr James Slaney as of 8 June 2021 2020 ZEPOs 1,000,000 STI ZEPOs 187,035 LTI ZEPOs 2,244,421 Vesting conditions for the above are as follows: 2020 ZEPOS The 2020 ZEPO shall vest on 30 June 2021 if the holder remains in continued employment with the Company until 30 June 2021. STI ZEPOS The STI ZEPOS shall vest on the date that the 2021/2022 financial year budget for the business of the Group is approved by the Board and that budget shows that the business will have sufficient cash from cash at bank and budgeted operating revenue to sustain budgeted operating costs for that year. Subject to achievement of the sustainable cash flow condition above: i. If the holder receives a positive “Personal Scorecard” (scorecard to be determined by agreement between the Company and the Executive) for the financial year ended 30 June 2021 from the Board for performance over the previous 12 months, 50% of the STI ZEPOS shall vest. 94 DUBBER ANNUAL REPORT 2021DUBBER.NETii. If, by 30 June 2021, the Group has achieved 8 or more core business objectives and/or product releases (to be determined by agreement between the Company and the Executive) then the following proportion of the remaining 50% of the STI ZEPOS shall vest, namely achieving: (A) 8 core business objectives and/or product releases - 20% (B) 9-40% (C) 10 -60% (D) 11 - 80%, and (E) 12 or more - 100% Subject to achievement of the sustainable cash flow condition above: i. If the holder receives a positive “Personal Scorecard” (scorecard to be determined by agreement between the Company and the Executive) for the financial year ended 30 June 2021 from the Board for performance over the previous 12 months, 50% of the STI ZEPOS shall vest. ii. If, by 30 June 2021, the Group has achieved 8 or more core business objectives and/or product releases (to be determined by agreement between the Company and the Executive) then the following proportion of the remaining 50% of the STI ZEPOS shall vest, namely achieving: (A) 8 core business objectives and/or product releases - 20% (B) 9-40% (C) 10 -60% (D) 11 - 80%, and (E) 12 or more - 100% LTI ZEPOS If the holder remains in continued employment with the Company until 30 June 2023, the LTI ZEPOS shall vest as follows: i. Recurring revenue (50% of LTI ZEPOs). The following proportions of LTI ZEPOs shall vest where recurring revenue for the Group by 30 June 2023 is: (A) at or above $40 million but less than $60 million: 33% at $40 million with a straight-line pro rata vesting up to 60%; (B) at or above $60 million but less than $80 million: 60% at $60 million with a straight-line pro rata vesting up to 100%; and (C) at or above $80 million: 100%. Recurring revenue means operating revenue of the Group for any month multiplied by 12 exclusive of one off revenue fees such as connection fees and any R&D or other grant revenue. ii. Agreements for deployments into telecommunication networks (50% of LTI ZEPOs). The following proportions of LTI ZEPOS shall vest where, by 30 June 2023, the Group has agreements in place for the deployment of the Dubber call recording service on to telecommunication service provider networks (whether or not yet active): (A) at least 170 but less than 185: 33% at 170 with a straight-line pro rata vesting up to 60%; (B) at least 185 but less than 200: 60% at 185 with a straight-line pro rata vesting up to 100%; and (C) at or above 200: 100%. 95 DUBBER ANNUAL REPORT 2021DUBBER.NET 1,213,277 ZEPOs granted to Executive Director Mr Peter Pawlowitsch as of 1 July 2020 Vesting If the holder remains an employee of the Company as at the relevant date, the Options shall vest as follows: i. one-third of the Options (rounded up to the nearest whole number) shall vest on 30 June 2021; ii. a further one-third of the Options (rounded up to the nearest whole number) shall vest on 30 June 2022; and iii. the remaining Options shall vest on 30 June 2023. 153,241 ZEPOs granted to Non-Executive Directors Mr Peter Clare and Mr Gerard Bongiorno as of 24 March 2021 Director Mr Peter Clare Mr Gerard Bongiorno Total ZEPOs 96,988 56,253 153,241 Vesting If the holder remains as a director of the Company as at the relevant date or in certain cases of prior departure the Board exercises its discretion otherwise in accordance with the 2020 Plan, the ZEPOS shall vest as follows: i. 8.2% of the aggregate number of ZEPOs (rounded down to the nearest whole number) shall vest on 30 June 2021; ii. 30.6% of the aggregate number of ZEPOS (rounded down to the nearest whole number) shall vest on 30 June 2022; iii. 30.6% of the aggregate number of ZEPOs (rounded down to the nearest whole number) shall vest on 30 June 2023; and iv. the balance shall vest on 30 June 2024. 900,000 Remuneration Options granted to Non-Executive Directors Mr Peter Clare and Mr Gerard Bongiorno as of 24 March 2021 Director Mr Peter Clare Mr Gerard Bongiorno Total Remuneration 600,000 300,000 900,000 The Options shall vest on 30 June 2024 if the holder remains as a director of the Company as at that date, or in certain cases of prior departure if the Board exercises its discretion otherwise in accordance with the 2020 Plan, as follows: i. one-third of the Options shall vest if the price of Shares traded on ASX has achieved $3.00 or more on a 20-day volume-weighted average price (20-day VWAP) basis before that date; ii. a further one-third of the Options shall vest if the price of Shares traded on ASX has achieved $4.00 or more on a 20- day VWAP basis before that date; and iii. the remaining Options shall vest if the price of Shares traded on ASX has achieved $5.00 or more on a 20-day VWAP basis before that date. 250,000 Yearly tenure options granted as of 13 May 2020 and 13 May 2021 to Chief Revenue Officer Mr Russell Evans Vesting period is 12 months The weighted average remaining contractual life of share-based payment options that were outstanding as at 30 June 2021 was 2 years (2020: 1.6 years). The weighted average fair value of share-based payment options granted during the year was $0.13 (2020: $0.66) each. 96 DUBBER ANNUAL REPORT 2021DUBBER.NET PERFORMAN CE RIGHT S There were no performance rights issued in the year ended 30 June 2021 (30 June 2020: Nil). LOAN FU N DED SHA RES Set out below is the summary of loan funded shares granted as share based payments: 2021 Grant Date 29/11/17 1/12/17 Total 2020 Grant Date 29/11/17 1/12/17 Total Expiry Date Exercise Defer Type Balance Granted Exercised Expired or Balance Number Price 01/07/20 Forfeited 30/06/21 vested and 20/12/22 $0.36 30/1/23 $0.56 1 2 525,000 600,000 1,125,000 - - - - - - exercisable - - - 525,000 525,000 600,000 600,000 1,125,000 1,125,000 Expiry Date Exercise Defer Type Balance Granted Exercised Expired or Balance Number Price 01/07/19 Forfeited 30/06/20 vested and 20/12/22 $0.36 30/1/23 $0.56 1 2 525,000 600,000 1,125,000 - - - - - - exercisable - - - 525,000 350,000 600,000 400,000 1,125,000 750,000 The deferred loan funded shares are subject to vesting dates which are listed below. Probability of achieving these vesting dates have been assessed at 100% unless otherwise stated. 1. Loan funded shares vest on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 20 December 2018 - 175,000 loan funded shares Vesting date 2: 20 December 2019 - 175,000 loan funded shares Vesting date 3: 20 December 2020 - 175,000 loan funded shares 2. Loan funded shares vest on the following dates provided the employee is an employee of the Company at the relevant vesting date: Vesting date 1: 30 January 2019 - 200,000 loan funded shares Vesting date 2: 30 January 2020 - 200,000 loan funded shares Vesting date 3: 30 January 2021 - 200,000 loan funded shares The assessed fair values of the loan funded shares was determined using a Black-Scholes model, taking into account the exercise price, term of loan, the share price at grant date and expected price volatility of the underling share, expected yield and the risk-free interest rate for the term of the loan. For the loan funded shares granted, the inputs to the model used were: Grant date Dividend yield (%) Expected volatility (%) Risk-free interest rate (%) Expected life of loan (years) Underlying share price ($) Loan exercise price ($) Value of loan funded share ($) 29/11/2017 - 100% 2.09% 5 $0.36 $0.36 $0.2700 1/12/2017 - 100% 2.47% 5 $0.555 $0.555 $0.4176 97 DUBBER ANNUAL REPORT 2021DUBBER.NET24. Parent Entity Disclosures SUMMAR Y F IN ANCI AL INF ORM A T I O N The individual financial statements for the parent entity show the following aggregate amounts: Statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Loss for the year Total comprehensive loss 2021 ($) 23,996,568 92,986,318 116,982,886 1,156,144 1,579,585 2,735,729 114,247,157 131,169,286 21,467,471 (38,389,600) 114,247,157 (16,058,990) (16,058,990) 2020 ($) 2,459,317 26,206,631 28,665,948 1,144,894 1,974,675 3,119,569 25,546,379 84,227,772 8,905,097 (67,586,490) 25,546,379 (5,192,216) (5,192,216) The parent entity had no capital commitments or contingent liabilities at 30 June 2021 or 30 June 2020. 25. Business Combinations On 22 December 2020, Dubber Corporation Limited, entered into an agreement to acquire 100% of the ordinary shares of Voxygen Ltd and Aeriandi Ltd, collectively known as Speik for the total consideration of cash and FPO shares in Dubber Corporation Limited to the value of $31,596,358. The acquired business, Speik Ltd, coupled with Dubber services contributed revenues of $7,210,187 and net profit after tax of $545,189, which is included in the consolidated statement of profit or loss and other comprehensive income from date of acquisition as of 22 December 2020 to 30 June 2021. If the acquisition had occurred on 1 July 2020, consolidated pro-forma revenue and profit for the year ended 30 June 2021 would have been circa $13.2M and $595k respectively. These amounts have been calculated using the subsidiary’s results and adjusting them for the additional depreciation and amortisation that would have been charged assuming the fair value adjustment to property, plant and equipment and intangi- ble assets had been applied from 1 July 2020, together with the consequential tax effects. The values identified in relation to the acquisition of Speik are accounted as final, as at 30 June 2021. 98 DUBBER ANNUAL REPORT 2021DUBBER.NETThe assets and liabilities recognised as a result of the acquisition are as follows: Cash and cash equivalents Trade and other receivables Prepayments Plant and equipment Intangibles 1 Total assets Payroll liabilities Statutory liabilities Trade and other payables Loans Lease liabilities Contract liabilities Deferred Tax Liabilities Total liabilities Net assets acquired Goodwill 2 Acquisition date fair value of the total consideration Representing: Cash paid to vendor 2,533,131 fully paid ordinary shares in Dubber Corporation Ltd issued to vendor Value of cash and fully paid ordinary shares in Dubber Corporation Ltd to be issued as deferred consideration to the vendor Total purchase consideration Acquisition costs expensed to profit or loss Key Acquisition Terms: Fair value $’000 326 4,303 560 373 19,591 25,153 (42) (1,418) (2,107) (1,918) (87) (3,578) (3,722) 12,873 12,280 19,316 31,596 12,842 4,366 14,388 31,596 1,403 • Dubber has acquired all of the issued share capital of Aeriandi and its wholly owned subsidiary Voxygen, both UK companies. These companies own and operate the Speik business. • • The aggregate consideration is approx. £17.8 million (AUD $31.5 million) based on known and estimated numbers (see below). Payable in cash and/or shares, as elected by the selling shareholders, with a 5% reduction if taken in cash. Initial consideration of £10.1 million (A$17.9 million) was paid at completion, with £7.9 million paid in cash and loan notes (see below) (£1.07 million of which was paid to satisfy commercial loan debt of Aeriandi) and the balance, representing 22% of the initial consideration, to be satisfied by way of the issue of 2,441,533 Dubber fully paid ordinary shares at a deemed issued price of A$1.60. Initial consideration will be adjusted on customary terms post-completion for movement in targeted working capital. • Deferred consideration is based on Speik’s budgeted revenue targets for FY22 with a multiplication factor applied with each input as above representing a separate revenue stream. While the amount is unknown as at the completion date, based on Speik management forecasts for the relevant period, the earn out consideration if the EBITDA target is achieved would be £10.3 million (A$18.3 million at the present-day AUD/GBP exchange rate). If the forecasts are exceeded, the cash component of the earn-out will be capped in any event at approx. £8.8 million while the share component, which represents approx. 23% of the aggregate earn-out payment is not capped. The issue price of earn-out shares will be determined by the 30-day VWAP prior to the end of the earn-out period. Refer to note 16(d) for additional details on the fair value measurement policy applied to deferred consideration. 1. Intangibles acquired as part of the business combination included customer relationships and technology. The fair value of the acquired customer relationship related intangible assets was determined with reference to an income approach from the excess earnings valuation methodology. This required key assumptions to be made around revenue projections, annual attrition factor and contributory asset charges. The fair value of the acquired technology based intangible assets was determined with reference to the replacement cost valuation methodology. This required assumptions to be made for developing the existing technology split by various models and around market participant adjustment. 2. The goodwill is attributable to the expectation of new customer contracts and relationships, the potential future technology and to the assembled workforce of the acquired business. It will not be deductible for tax purposes. 99 DUBBER ANNUAL REPORT 2021DUBBER.NET 26. Events Subsequent to Year End The Company successfully completed a capital raise of AU$110,000,000 (before costs) at a price of AU$2.95 per share in July 2021. The placement was completed in 2 tranches, with the first tranche completed on 29 July 2021 for 33,086,809 shares and the 2nd tranche of 4,201,327 approved by shareholders at an EGM on 2 September 2021. The Company completed the acquisition of AI Technology Company Notiv, by way of cash and equity for circa AU$6.6M on 20 September 2021. Information not disclosed as not yet available At the time the financial statements were authorised for issue, the Group had not yet completed the accounting for the acquisition of Notiv. There are no further matters or circumstances that have arisen since 30 June 2021 that have or may significantly affect the operations, results or state of affairs of the Company in future financial years. The financial report was authorised for issue on 29 October 2021 by the Board of Directors. 100 DUBBER ANNUAL REPORT 2021DUBBER.NETDirectors’ Declaration 101 DUBBER.NETDUBBER ANNUAL REPORT 2021DIRE CT ORS ’ DE CLAR AT IO N The directors of the Company declare that: 1. The financial statements and notes are in accordance with the Corporations Act 2001, and: i. comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and ii. give a true and fair view of the financial position of the Company as at 30 June 2021 and of its performance for the financial year ended on that date. 2. The Managing Director and Chief Financial Officer have each declared that: i. the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; ii. the financial statements and notes for the financial year comply with the accounting standards; and iii. 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: 29 October 2021 102 DUBBER ANNUAL REPORT 2021DUBBER.NET Independent Auditors Report 103 DUBBER.NETDUBBER ANNUAL REPORT 2021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 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 To the members of Dubber Corporation Limited Report on the Audit of the Financial Report Opinion INDEPENDENT AUDITOR'S REPORT 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 2021, the To the members of Dubber Corporation Limited 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’ Report on the Audit of the Financial Report declaration. Opinion In our opinion the accompanying financial report of the Group, is in accordance with the Corporations We have audited the financial report of Dubber Corporation Limited (the Company) and its subsidiaries Act 2001, including: (the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its (i) consolidated statement of profit or loss and other comprehensive income, the consolidated statement financial performance for the year ended on that date; and of changes in equity and the consolidated statement of cash flows for the year then ended, and notes Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) to the financial report, including a summary of significant accounting policies and the directors’ declaration. Basis for opinion In our opinion the accompanying financial report of the Group, is in accordance with the Corporations We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Act 2001, including: 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 (i) Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s financial performance for the year ended on that date; and APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other Basis for opinion ethical responsibilities in accordance with the Code. We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under We confirm that the independence declaration required by the Corporations Act 2001, which has been those standards are further described in the Auditor’s responsibilities for the audit of the Financial given to the directors of the Company, would be in the same terms if given to the directors as at the Report section of our report. We are independent of the Group in accordance with the Corporations time of this auditor’s report. Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) for our opinion. 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. 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. 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. 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. Accounting for the acquisition of Speik Ltd Key audit matter How the matter was addressed in our audit As disclosed in Note 25 of the financial report, the Our audit procedures included, but were not limited to Group completed the acquisition of the business of the following: Speik Ltd on 22 December 2020. • Reviewing the business sale agreement to The acquisition was accounted for in accordance with understand the key terms and conditions, and AASB 3 Business Combinations and was deemed to be a confirming our understanding of the transaction key audit matter given the acquisition was material to with management; the Group and involved significant judgements made by management, including the estimation of the fair value of assets acquired, liabilities assumed and determination of the amount of purchase • Agreeing the acquisition date to the date at which the Group obtained control over the business assets and liabilities; consideration, which included deferred consideration. • Assessing the estimation of the deferred Notes 1 and 25 of the financial report disclose the accounting policy for business combinations and the significant judgements and estimates made. consideration by challenging the key assumptions including discount rate and achievement of future revenue targets; • Assessing the competency and objectivity of the independent expert to which management has engaged to assess the fair value of specified assets acquired as part of the acquisition; • Evaluating the assumptions and methodology in management's expert’s determination of the fair value of assets and liabilities acquired; and • Assessing the adequacy of the related disclosures in Notes 1 and 25 of the financial report. Revenue recognition Key audit matter How the matter was addressed in our audit The Group recognises revenue in accordance with Our audit procedures included but were no limited to AASB 15 Revenue from Contracts with Customers the following: (‘AASB 15’). • Challenging management’s assessment of the There are complexities and judgements associated with performance obligations promised to customers interpreting key revenue contracts entered into by the within a contract; Group against the requirements of the accounting standard. • Obtaining and reviewing a sample of contracts, considering the terms and conditions, performance This area is a key audit matter due to: obligations of these arrangements and assessing • • the significance of revenue to the financial report; the accounting treatment under AASB 15; and revenue being one of the key drivers to the Group’s performance. • Assessing and challenging management’s position on certain contracts against the criteria for revenue recognition in particular relating to probability of collection of consideration which it is entitled to; • Performing analytical procedures to understand movements and trends in revenue for comparisons against expectations; • Agreeing, for a sample of revenue transactions, the amounts recorded by the Group to supporting documentation to confirm the existence and accuracy of the revenue recognised and to consider whether the transaction was recorded in the correct period; • Agreeing a sample of debtor balances outstanding at 30 June 2021 to corroborating evidence including customer confirmations; • Performing cut-off procedures to ensure that all revenue was captured in the appropriate financial year; and • Assessing the adequacy of the relevant disclosures in Note 1 and Note 2 within 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 2021, 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. 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 31 to 44 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Dubber Corporation Limited, for the year ended 30 June 2021, 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 Dean Just Director Perth, 29 October 2021 ADDIT IO N AL S HAREHO LDER I NF O RM ATION The following additional information is current as at 27 October 2021. CORPORA TE G OV ERNA NCE: The company’s corporate governance statement is available on the company’s website at: www.dubber.net/investors/investor-centre SUBST A NTI AL S HAREHOLDER: Holding ranges Holders Total units % issued share capital above 0 up to and including 1,000 above 1,000 up to and including 5,000 above 5,000 up to and including 10,000 above 10,000 up to and including 100,000 above 100,000 Totals 4,725 4,792 1,490 1,935 317 2,333,069 12,166,973 11,296,287 55,096,156 216,637,080 13,259 297,529,565 0.78% 4.09% 3.80% 18.52% 72.81% 100.00% There are 690 shareholders with less than a marketable parcel. VOT ING RIG HTS Each fully paid ordinary share carries voting rights of one vote per share. 109 DUBBER ANNUAL REPORT 2021DUBBER.NETTOP 20 HO LDE RS OF ORDINAR Y S H ARES Position Holder Name J P MORGAN NOMINEES AUSTRALIA PTY LIMITED UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED STEVE MCGOVERN NOMINEES PTY LTD NATIONAL NOMINEES LIMITED MR ROBERT KLEIN "BNP PARIBAS NOMINEES PTY LTD " "PENELOPE SLANEY " VENN MILNER SUPERANNUATION PTY LTD BOSTON FIRST CAPITAL PTY LTD MOSCH PTY LTD "ONE MANAGED INVESTMENT FUNDS LIMITED " MR STUART JAMES HERCULES "ONE MANAGED INVESTMENT FUNDS LIMITED " STEPHEN MCGOVERN "MILA INVESTMENT CO PTY LTD " "BAY 88 PTY LTD " 1 2 3 4 5 6 7 8 9 10 11 12 13 14 14 15 16 17 18 19 20 Holding 35,725,028 18,821,133 17,072,821 7,222,478 6,605,038 6,443,140 3,583,432 3,563,191 % IC 12.01% 6.33% 5.74% 2.43% 2.22% 2.17% 1.20% 1.20% 3,077,103 1.03% 3,068,939 2,577,289 2,509,524 2,223,535 1,950,000 1,950,000 1,802,632 1,660,000 1.03% 0.87% 0.84% 0.75% 0.66% 0.66% 0.61% 0.56% 1,550,000 0.52% "ONE MANAGED INVESTMENT FUNDS LIMITED 1,528,947 0.51% " MR DENIS EDWARD ALAN WILKINS 4SIGHT NOMINEES PTY LTD Total Total issued capital - selected security class(es) 1,490,000 1,428,572 125,852,802 297,529,565 0.50% 0.48% 42.30% 100.00% 110 DUBBER ANNUAL REPORT 2021DUBBER.NETUN QU OTED EQ UITY S ECURIT I E S Number 345,000 60,000 150,000 945,000 1,387,035 3,879,066 414,665 439,136 75,000 50,000 100,000 100,000 140,676 900,000 4,535,083 250,000 250,000 100,000 100,000 Number of holders Class Holder 7 6 1 31 2 2 25 21 1 1 1 1 2 2 4 1 1 1 1 Unlisted options exercisable at $0.38 expiring 15 January 2022 Unlisted options exercisable at $1.25 expiring 20 September 2022 Unlisted options exercisable at $0.75 expiring 20 September 2022 Unlisted options exercisable at $0.75 expiring 22 March 2023 Unlisted ZEPOs expiring 30 June 2023 Unlisted ZEPOs expiring 30 June 2025 Unlisted ZEPOs expiring 31 January 2024 Unlisted options exercisable at $1.80 expiring 31 January 2024 Unlisted options exercisable at $1.68 expiring 31 January 2024 Unlisted options exercisable at $1.21 expiring 30 November 2023 Unlisted options exercisable at $1.60 expiring 31 May 2024 Unlisted ZEPOs expiring 31 May 2024 Unlisted ZEPOs expiring 31 July 2024 Unlisted options exercisable at $1.75 expiring 31 July 2024 Unlisted ZEPOs expiring 30 June 2025 Unlisted options exercisable at $1.165 expiring 12 May 2024 Unlisted options exercisable at $2.64 expiring 12 May 2025 Unlisted ZEPOs expiring 6 August 2023 Unlisted ZEPOs expiring 6 August 2024 ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP ESOP 111 DUBBER ANNUAL REPORT 2021DUBBER.NETGet in touch ↗ North America Australia United Kingdom ATLAN TA M ELB OURNE LONDON 3280 Peachtree Rd NE Floor 6, Level 5, 2 Russell Street, Atlanta, GA 30305, Melbourne, 3000, USA DALLA S Level 12, Suite 1200, 2828 N Harwood St, Dallas, TX 75201, USA Australia S YDNEY 5 Martin Place, Sydney, 2000, Australia 8 Devonshire Square, Spitalfields, London, EC2M 4PL, UK 

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